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As filed with the Securities and Exchange Commission on June 27, 1996
Registration No. 333-2546
SECURITIES AND EXCHANGE COMMISSION
AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
REGENCY REALTY CORPORATION
(Exact name of registrant as specified in its charter)
Florida 59-3191743
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
(904) 356-7000
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Martin E. Stein, Jr.,
President and Chief Executive Officer
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
(904) 356-7000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Charles E. Commander III
Linda Y. Kelso
Foley & Lardner
200 Laura Street
Jacksonville, Florida 32202
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check
the following box. [_]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box.
[X]
If this Form is filed to register additional securities for an
Offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
Calculation of Registration Fee
Proposed Proposed
Title of each maximum maximum
class of offering aggregate Amount of
securities to Amount to be price per offering regis-
be registered registered unit price tration fee
Common Stock,
$0.01 par
value $250,000,000 (1) $250,000,000 $86,206.90
(1) The proposed maximum offering price per unit will be determined from
time to time by the Registrant in connection with the issuance by the
Registrant of the securities registered hereunder.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION - DATED JUNE 27, 1996
Regency Realty Corporation
Common Stock
Regency Realty Corporation (the "Company"), may offer from time to time,
shares ("Shares") of the Company's common stock, par value $0.01 per share
("Common Stock"), at an aggregate offering price not to exceed U.S.
$250,000,000 (or the equivalent in foreign currencies or currency units),
in amounts, at prices and on terms to be determined at the time of sale.
The number of any Shares offered pursuant to this Prospectus will be set
forth in an accompanying supplement to this Prospectus (a "Prospectus
Supplement"), together with the terms of the offering of such Shares and
the initial price and the net proceeds to the Company from the sale
thereof.
The Company's Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "REG." Any Common Stock offered pursuant to a
Prospectus Supplement will be listed on such exchange, subject to official
notice of issuance.
The Company may sell Shares directly or through agents, underwriters or
dealers designated from time to time. If any agents, underwriters, or
dealers are involved in the sale of the Shares, the names of such agents,
underwriters, or dealers and any applicable commissions or discounts and
the net proceeds to the Company from such sale will be set forth in the
applicable Prospectus Supplement.
This Prospectus may not be used to consummate sales of Shares unless
accompanied by a Prospectus Supplement.
See "Risk Factors" on pages 1 through 3 for a discussion of certain
material factors which should be considered in connection with an
investment in the Shares offered hereby.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL
THESE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is ________, 1996.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NYSE, IN THE OVER-
THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THE OFFERING, CERTAIN UNDERWRITERS (AND SELLING
GROUP MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE
COMMON STOCK ON THE NYSE IN ACCORDANCE WITH RULE 10b-6A OF THE SECURITIES
EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports and other
information concerning the Company may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following regional offices of the Commission: New York Office, Seven
World Trade Center, 13th Floor, New York, New York 10048 and Chicago
Office, Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may also be obtained
from the public reference section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. The Commission also
maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants, including the
Company, that file electronically with the Commission. The address of
such Web site is http://www.sec.gov. In addition, the Company's Common
Stock is listed on the NYSE and similar information concerning the Company
can be inspected and copied at the offices of the NYSE, 20 Broad Street,
New York, New York 10005.
This Prospectus does not contain all the information set forth in the
Registration Statement and exhibits thereto which the Company has filed
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"), to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are hereby incorporated in this Prospectus by
reference, except as superseded or modified herein:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1995, including the Company's definitive proxy statement
for its 1996 annual meeting of shareholders, to the extent
specifically incorporated by reference therein.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996.
3. The Company's Current Report on Form 8-K filed with the Commission on
May 3, 1996.
4. The description of Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on
August 30, 1993, and declared effective on October 29, 1993, including
portions of the Company's Registration Statement on Form S-11 (No. 33-
67258) incorporated by reference therein.
Each document filed by the Company subsequent to the date of this
Prospectus pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act and prior to the termination of the offering of the Shares shall be
deemed to be incorporated in this Prospectus by reference and to be a part
hereof from the date of the filing of such document. Any statement
contained in a document incorporated by reference shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any subsequently filed incorporated
document or in an accompanying Prospectus Supplement modifies or
supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon written or oral request of any such
person, a copy of any document described above that has been incorporated
in this Prospectus by reference and not delivered with this Prospectus or
any preliminary Prospectus distributed in connection with the offering of
the Shares, other than exhibits to such document referred to above unless
such exhibits are specifically incorporated by reference herein. Requests
should be directed to Ms. Brenda Paradise, the Company's Director of
Shareholder Relations, 121 West Forsyth Street, Suite 200, Jacksonville,
Florida 32202 (telephone: (904) 356-7000).
RISK FACTORS
Prospective investors should carefully consider the following
information in conjunction with the other information contained in this
Prospectus and the applicable Prospectus Supplement before purchasing
Shares.
Significant Reliance on Major Tenants
As of June 1, 1996, approximately 12.7%, 9.2% and 6.7% of the aggregate
GLA owned by the Company was leased to Publix, Wal-Mart and Winn-Dixie,
respectively, and annualized rental revenues, including percentage rent,
from these tenants represented approximately 9.5%, 4.4% and 4.5%,
respectively, of the rental revenues from the properties owned by the
Company as of that date. The Company could be adversely affected in the
event of the bankruptcy or insolvency of, or a downturn in the business
of, any of such tenants, or in the event that any of such tenants does not
renew its leases as they expire or renews at lower rental rates. Vacated
anchor space not only would reduce rental revenues if not retenanted at
the same rental rates but also could adversely affect the entire shopping
center because of the loss of the departed anchor tenant's customer
drawing power. Loss of customer drawing power also can occur through the
exercise of the right that most anchors have to vacate and prevent
retenanting by paying rent for the balance of the lease term, or the
departure of an anchor tenant that owns its own property.
Tenants may seek the protection of the bankruptcy laws, which could
result in the rejection and termination of their leases and thereby cause
a reduction in the cash flow available for distribution by the Company.
Such reduction could be material if a major tenant files bankruptcy.
General Risks Relating to Real Estate Investments
Value of Real Estate Dependent on Numerous Factors. Real property
investments are subject to varying degrees of risk. Real estate values
are affected by a number of factors, including changes in the general
economic climate, local conditions (such as an oversupply of space or a
reduction in demand for real estate in an area), the quality and
philosophy of management, competition from other available space, and the
ability of the owner to provide adequate maintenance and insurance and to
control variable operating costs. Shopping centers, in particular, may be
affected by changing perceptions of retailers or shoppers regarding the
safety, convenience and attractiveness of the shopping center and by the
overall climate for the retail industry generally. Income from suburban
office properties has been affected by the current supply of suburban
office space. Real estate values are also affected by such factors as
government regulations, interest rate levels, the availability of
financing and potential liability under, and changes in, environmental,
zoning, tax and other laws. As substantially all of the Company's income
is derived from rental income from real property, the Company's income and
cash flow would be adversely affected if a significant number of the
Company's tenants were unable to meet their obligations to the Company, or
if the Company were unable to lease on economically favorable terms a
significant amount of space in its properties. In the event of default by
a tenant, the Company may experience delays in enforcing, and incur
substantial costs to enforce, its rights as landlord.
Equity real estate investments are relatively illiquid and therefore
may tend to limit the ability of the Company to react promptly in response
to changes in economic or other conditions. In addition, certain
significant expenditures associated with each equity investment (such as
mortgage payments, real estate taxes and maintenance costs) are generally
not reduced when circumstances cause a reduction in income from the
investment.
Difficulties and Costs Associated with Renting Unleased and Vacated
Space. The ability of the Company to rent unleased or vacated space will
be affected by many factors, including certain covenants restricting the
use of other space at a property found in certain leases with shopping
center tenants. Of the existing leases for the Company's properties,
leases covering approximately 245,461 square feet, 350,714 square feet and
556,579 square feet (representing approximately 5.7%, 8.2% and 13.0%,
respectively, of the Company-owned GLA), will expire in the remainder of
1996, 1997 and 1998, respectively. If the Company is able to relet
vacated space, there is no assurance that rental rates will be equal to or
in excess of current rental rates. In addition, the Company may incur
substantial costs in obtaining new tenants, including leasing commissions
and tenant improvements.
Restrictions on, and Risks of, Unsuccessful Development Activities.
The Company intends to selectively pursue development activities as
opportunities arise. Such development activities generally require
various government and other approvals, the receipt of which cannot be
assured. The Company will incur risks associated with any such
development activities. These risks include the risk that development
opportunities explored by the Company may be abandoned; the risk that
construction costs of a project may exceed original estimates, possibly
making the project unprofitable; lack of cash flow during the construction
period; and the risk that occupancy rates and rents at a completed project
will not be sufficient to make the project profitable. In case of an
unsuccessful development project, the Company's loss could exceed its
investment in the project. Also, there are competitors seeking properties
for development, some of which may have greater resources than the
Company.
Adverse Effect of Market Interest Rates on Common Stock Prices
One of the factors that may influence the trading price of the
Company's Common Stock is the annual dividend rate on the Common Stock as
a percentage of its market price. An increase in market interest rates
may lead purchasers of Shares to demand a higher annual dividend rate,
which could adversely affect the market price of the Common Stock and the
Company's ability to raise additional equity in the public markets.
Uncertainty of Availability of Refinancing
The Company does not expect to generate sufficient funds from
operations to make balloon principal payments when due on its
indebtedness. There can be no assurance that the Company will be able to
refinance such indebtedness or to otherwise obtain funds to make such
payments by selling assets or raising equity. An inability to make such
balloon payments when due could cause the mortgage lenders to foreclose on
the properties securing such indebtedness, which would have a material
adverse effect on the Company. In addition, interest rates and other
terms on any loans obtained to refinance such indebtedness may be less
favorable than the rates on the current indebtedness.
Federal Income Tax Considerations
There are a number of issues associated with an investment in a REIT
that are related to the federal income tax laws, including, but not
limited to, the consequences of failing to continue to qualify as a REIT.
See "Federal Income Tax Considerations."
Anti-Takeover Effect of Ownership Limit, Staggered Board, Preferred Stock,
Florida Business Corporation Act and of Certain Other Matters
Ownership of more than 7% of the outstanding capital stock by any
single individual has been restricted for the purpose of maintaining the
Company's qualification as a REIT, with certain exceptions. See "Capital
Stock--Restrictions on Ownership." This 7% limitation may discourage a
change in control of the Company and may also (i) deter tender offers for
the capital stock, which offers may be attractive to the shareholders, or
(ii) limit the opportunity for shareholders to receive a premium for their
capital stock that might otherwise exist if an investor attempted to
assemble a block in excess of 7% of the outstanding capital stock or to
effect a change in control of the Company. Additionally, the division of
the Company's Board of Directors into three classes with staggered
three-year terms may have the effect of deterring certain potential
acquisitions of the Company because control of the Company's Board of
Directors could not be obtained at a single annual meeting of
shareholders.
The Company's Articles of Incorporation authorize the Board of
Directors to issue up to 10,000,000 shares of Preferred Stock and to
establish the preferences and rights of any shares issued. The issuance
of Preferred Stock could have the effect of delaying or preventing a
change in control of the Company even if a change in control were in the
shareholders' interest. The provisions of the Florida Business
Corporation Act regarding control share acquisitions and affiliated
transactions could deter potential acquisitions of the Company by
preventing the acquiring party from voting the Common Stock it acquires or
consummating a merger or other extraordinary corporate transaction without
the approval of the disinterested shareholders. In addition, the
acceleration of awards and exercisability of options under the Company's
Long-Term Omnibus Plan for key employees upon a change in control of the
Company could deter potential acquisitions by making them more costly.
Potential Environmental Liability
Under various Federal, state and local laws, ordinances and
regulations, an owner or manager of real estate may be liable for the
costs of removal or remediation of certain hazardous or toxic substances
on or in such property. Such laws often impose such liability without
regard to whether the owner knew of, or was responsible for, the presence
of such hazardous or toxic substances. The cost of any required
remediation and the owner's liability therefor could exceed the value of
the property and/or the aggregate assets of the owner. The presence of
such substances, or the failure to properly remediate such substances, may
adversely affect the owner's ability to sell or rent such property or
borrow using such property as collateral.
THE COMPANY
The Company is a Florida-based, fully-integrated, self-administered and
self-managed REIT which owns, manages and develops community and
neighborhood shopping centers. The Company's primary focus is grocery
anchored community and neighborhood shopping centers in the southeastern
United States.
As of June 1, 1996, the Company owns and operates 35 neighborhood and
community shopping centers totalling approximately 4.0 million square feet
and 4 suburban office complexes totalling approximately 298,000 square
feet, located in Florida (74.8% of GLA), Alabama (12.3%), Georgia (8.5%)
and Mississippi (4.4%). The Company also manages and leases approximately
1.1 million square feet of properties for third parties and performs
ancillary third party services (including tenant representation, site
selection and construction management) on a selective basis.
The Company's executive offices are located at 121 West Forsyth Street,
Suite 200, Jacksonville, Florida 32202, and its telephone number is (904)
356-7000. The Company operates additional offices in Ft. Lauderdale,
Tampa and Stuart, Florida and in Atlanta, Georgia.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the
net proceeds from the sale of the Shares will be used for general
corporate purposes, which may include the repayment of outstanding
indebtedness, the acquisition of shopping centers as suitable
opportunities arise, the expansion and improvement of certain properties
in the Company's portfolio and payment of development costs for new
centers. The Company will not receive any proceeds from the sale of
Shares by selling security holders.
CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, par value $0.01 per share, 10,000,000 shares of
Special Common Stock, par value $0.01 per share, and 10,000,000 shares of
Preferred Stock, par value $0.01 per share. The summary description of
the Company's capital stock set forth herein does not purport to be
complete and is qualified in its entirety by reference to the Company's
Amended and Restated Articles of Incorporation (the "Articles"). As of
June 1, 1996, 6,848,699 shares of the Company's Common Stock, 2,500,000
shares of the Company's Class B non-voting Common Stock (constituting a
class of the Special Common Stock) and 1,916 shares of the Company's
Series A Preferred Stock were issued and outstanding.
Restrictions on Ownership
For the Company to qualify as a REIT under the Internal Revenue Code of
1986 (the "Code"), not more than 50% in value of its outstanding capital
stock 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, its stock must be beneficially owned (without reference
to attribution rules) by 100 or more persons during at least 335 days in a
taxable year of 12 months or during a proportionate part of a shorter
taxable year, and certain other requirements must be satisfied (see
"Federal Income Tax Considerations-Requirements for Qualification").
To assure that five or fewer individuals do not Beneficially Own (as
defined in the Company's Articles of Incorporation to include ownership
through the application of certain stock attribution provisions of the
Code) more than 50% in value of the Company's outstanding capital stock,
the Company's Articles provide that, subject to certain exceptions, no
individual may own, or be deemed to own (by virtue of certain of the
attribution provisions of the Code), more than 7% by value (the "Ownership
Limit") of the Company's outstanding capital stock. Certain existing
holders specified in the Articles and those to whom Beneficial Ownership
of their capital stock is attributed, whose Beneficial Ownership of
capital stock exceeds the Ownership Limit ("Existing Holders"), may
continue to own such percentage by value of outstanding capital stock (the
"Existing Holder Limit") and may increase their respective Existing Holder
Limits through benefit plans of the Company, dividend reinvestment plans,
additional asset sales or capital contributions to the Company or
acquisitions from other Existing Holders, but may not acquire additional
shares from such sources such that the five largest Beneficial Owners of
capital stock hold more than 49.5% by value of the outstanding capital
stock, and in any event may not increase their respective Existing Holder
Limits through acquisition of capital stock from any other sources. In
addition, because rent from a related tenant (any tenant 10% of which is
owned, directly or constructively, by the REIT) is not qualifying rent for
purposes of the gross income tests under the Code (see "Federal Income Tax
Considerations-Requirements for Qualification-Income Tests"), the Articles
provide that no Related Tenant Owner (a constructive owner of stock in the
Company who owns, directly or indirectly, a 10% interest in any tenant of
the Company) may own, or constructively own by virtue of certain of the
attribution provisions of the Code (which differ from the attribution
provisions applied to determine Beneficial Ownership), more than 9.8% by
value of the outstanding capital stock of the Company (the "Related Tenant
Limit"). The Board of Directors may waive the Ownership Limit, the
Existing Holder Limit and the Related Tenant Limit if evidence
satisfactory to the Board of Directors and the Company's tax counsel is
presented that such ownership will not then or in the future jeopardize
the Company's status as a REIT. As a condition of such waiver, the Board
of Directors may require opinions of counsel satisfactory to it and/or an
undertaking from the applicant with respect to preserving the REIT status
of the Company.
If shares of capital stock in excess of the applicable Ownership Limit,
Existing Holder Limit, or Related Tenant Limit, or shares which would
cause the REIT to be beneficially owned by fewer than 100 persons (without
application of the attribution rules) or would result in the Company being
"closely held" within the meaning of Section 856(h) of the Code, are
issued or transferred to any person or retained by any person after
becoming a Related Tenant Owner, such issuance, transfer, or retention
shall be null and void to the intended holder, and the intended holder
will have no rights to the stock. Capital stock transferred, proposed to
be transferred, or retained in excess of the Ownership Limit, the Existing
Holder Limit, or the Related Tenant Limit or which would otherwise
jeopardize the Company's REIT status ("excess shares") will be deemed held
in trust on behalf of and for the benefit of the Company. The Board of
Directors will, within six months after receiving notice of such actual or
proposed transfer, either (i) direct the holder of such shares to sell all
shares held in trust for the Company for cash in such manner as the Board
of Directors directs, or (ii) redeem such shares for a price equal to the
lesser of (a) the price paid by the holder from whom shares are being
redeemed and (b) the average of the last reported sales prices on the NYSE
of the relevant class of capital stock on the 10 trading days immediately
preceding the date fixed for redemption by the Board of Directors, or if
such class of capital stock is not then traded on the NYSE, the average of
the last reported sales prices of such class of capital stock (or, if
sales prices are not reported, the average of the closing bid and asked
prices) on the 10 trading days immediately preceding the relevant date as
reported on any exchange or quotation system over which such class of
capital stock may be traded, or if such class of capital stock is not then
traded over any exchange or quotation system, then the price determined in
good faith by the Board of Directors of the Company as the fair market
value of such class of capital stock on the relevant date. If the Board
of Directors directs the intended holder to sell the shares, the holder
shall receive such proceeds as the trustee for the Company and pay the
Company out of the proceeds of such sale all expenses incurred by the
Company in connection with such sale, plus any remaining amount of such
proceeds that exceeds the amount originally paid by the intended holder
for such shares. The intended holder shall not be entitled to
distributions, voting rights or any other benefits with respect to such
excess shares except the amounts described above. Any dividend or
distribution paid to an intended holder on excess shares pursuant to the
Company's Articles of Incorporation must be repaid to the Company upon
demand.
All certificates representing capital stock will bear a legend
referring to the restrictions described above. The transfer restrictions
described above shall not preclude the settlement of any transaction
entered through the facilities of the NYSE.
The Articles provide that every shareholder of record of more than 5%
of the outstanding capital stock and every Actual Owner (as defined in the
Articles) of more than 5% of the outstanding capital stock held by a
nominee must give written notice to the Company of information specified
in the Articles within 30 days after December 31 of each year. In
addition, each Beneficial Owner of capital stock and each person who holds
capital stock for a Beneficial Owner must provide to the Company such
information as the Company may request, in good faith, in order to
determine the Company's status as a REIT.
The ownership limitations described above may have the effect of
precluding acquisition of control of the Company by a third party even if
the Board of Directors determines that maintenance of REIT status is no
longer in the best interests of the Company. The Board of Directors has
the right to revoke the REIT status of the Company if the Board of
Directors determines that it is no longer in the best interest of the
Company to attempt to qualify, or to continue to qualify, as a REIT. In
the event of such revocation, the ownership limitations in the Articles
will remain in effect. Any change in the ownership limitations would
require an amendment to the Articles.
Staggered Board of Directors
The Company's Articles and Bylaws divide the Board of Directors into
three classes of directors, with each class constituting approximately
one-third of the total number of directors and with classes serving
staggered three-year terms. The classification of directors will have the
effect of making it more difficult for shareholders to change the
composition of the Board of Directors. The Company believes, however,
that the longer time required to elect a majority of a classified Board of
Directors will help to insure continuity and stability of the Company's
management and policies.
The classification provisions could also have the effect of
discouraging a third party from accumulating large blocks of the Company's
stock or attempting to obtain control of the Company, even though such an
attempt might be beneficial to the Company and its shareholders.
Accordingly, shareholders could be deprived of certain opportunities to
sell their shares of capital stock at a higher market price than might
otherwise be the case.
Advance Notice Provisions for Shareholder Nominations and Shareholder
Proposals
The Bylaws establish an advance notice procedure for shareholders to
make nominations of candidates for election as directors or to bring other
business before any meeting of shareholders of the Company. Any
shareholder nomination or proposal for action at an upcoming shareholder
meeting must be delivered to the Company no later than the deadline for
submitting shareholder proposals pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934. The presiding officer at any shareholder
meeting is not required to recognize any proposal or nomination which did
not comply with such deadline.
The purpose of requiring shareholders to give the Company advance
notice of nominations and other business is to afford the Board of
Directors a meaningful opportunity to consider the qualifications of the
proposed nominees or the advisability of the other proposed business and,
to the extent deemed necessary or desirable by the Board of Directors, to
inform shareholders and make recommendations about such qualifications or
business, as well as to provide a more orderly procedure for conducting
meetings of shareholders. Although the Bylaws do not give the Board of
Directors any power to disapprove timely shareholder nominations for the
election of directors or proposals for action, they may have the effect of
precluding a contest for the election of directors or the consideration of
shareholder proposals if the proper procedures are not followed, and of
discouraging or deterring the third party from conducting a solicitation
of proxies to elect its own slate of directors or to approve its own
proposal.
Certain Provisions of Florida Law
The Company is subject to several anti-takeover provisions under
Florida law that apply to a public corporation organized under Florida law
unless the corporation has elected to opt out of such provisions in its
Articles of Incorporation or (depending on the provision in question) its
Bylaws. The Company has not elected to opt out of these provisions. The
Florida Business Corporation Act (the "Florida Act") contains a provision
that prohibits the voting of shares in a publicly held Florida corporation
which are acquired in a "control share acquisition" unless the Board of
Directors approves the control share acquisition or the holders of a
majority of the corporation's voting shares (exclusive of shares held by
officers of the corporation, inside directors or the acquiring party)
approve the granting of voting rights as to the shares acquired in the
control share acquisition. A control share acquisition is defined as an
acquisition that immediately thereafter entitles the acquiring party to
vote in the election of directors within each of the following ranges of
voting power: (i) one-fifth or more but less than one-third of such voting
power, (ii) one-third or more but less than a majority of such voting
power and (iii) a majority or more of such voting power.
The Florida Act also contains an "affiliated transaction" provision
that prohibits a publicly-held Florida corporation from engaging in a
broad range of business combinations or other extraordinary corporate
transactions with an "interested shareholder" unless (i) the transaction
is approved by a majority of disinterested directors before the person
becomes an interested shareholder, (ii) the interested shareholder has
owned at least 80% of the Company's outstanding voting shares for at least
five years, or (iii) the transaction is approved by the holders of
two-thirds of the Company's voting shares other than those owned by the
interested shareholder. An interested shareholder is defined as a person
who, together with affiliates and associates, beneficially owns (as
defined in Section 607.0901(1)(e), Florida Statutes) more than 10% of the
Company's outstanding voting shares.
Limitation of Liability of Directors
The Florida Business Corporation Act provides that a director will not
be personally liable for monetary damages to the Company or any other
person except for liability for breach of such person's duties as a
director involving (1) a violation of criminal law (unless the director
reasonably believed his or her conduct was lawful or had no reasonable
cause to believe that it was unlawful), (2) a transaction from which the
director derived an improper personal benefit, or (3) an unlawful dividend
or stock redemption. However, equitable remedies such as an injunction or
rescission continue to be available against directors who breach their
duty of care as directors.
Indemnification Agreements
The Company has entered into indemnification agreements with each of
the Company's officers and directors. The indemnification agreements
require, among other things, that the Company indemnify its officers and
directors to the fullest extent permitted by law, and advance to the
officers and directors all related expenses, subject to reimbursement if
it is subsequently determined that indemnification is not permitted. The
Company must also indemnify and advance all expenses incurred by officers
and directors seeking to enforce their rights under the indemnification
agreements.
DESCRIPTION OF COMMON STOCK
Common Stock
The holders of the Company's Common Stock are entitled to one vote per
share on all matters voted on by shareholders, including elections of
directors, and, except as otherwise required by law or provided in any
resolution adopted by the Board of Directors with respect to any series of
Preferred Stock establishing the powers, designations, preferences and
relative, participating, option or other special rights of such series,
the holders of Common Stock exclusively possess all voting power. The
Articles do not provide for cumulative voting in the election of
directors. Subject to any preferential rights of any outstanding series
of Preferred Stock, the holders of Common Stock are entitled to such
dividends as may be declared from time to time by the Board of Directors
from funds legally available therefor, and upon liquidation are entitled
to receive pro rata all assets of the Company available for distribution
to such holders. All shares of Common Stock offered hereby, upon issuance
against full payment of the purchase price therefor, will be fully paid
and nonassessable and the holders thereof will not have preemptive rights.
The Company's Common Stock is listed on the NYSE under the symbol "REG."
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock is First Union
National Bank of North Carolina.
Special Common Stock
Under the Company's Articles, the Board of Directors is authorized,
without further shareholder action, to provide for the issuance of up to
10 million shares of Special Common Stock from time to time in one or more
classes or series. The Special Common Stock will bear dividends in such
amounts as the Board of Directors may determine with respect to each class
or series. All such dividends must be pari passu with dividends on the
Common Stock. Upon the dissolution of the Company, the Special Common
Stock will participate pari passu with the Common Stock in liquidating
distributions. Shares of Special Common Stock will have one vote per
share and vote together with the holders of Common Stock (and not
separately as a class except where otherwise required by law), unless the
Board of Directors creates classes or series with more limited voting
rights or without voting rights. The Board will have the right to
determine whether shares of Special Common Stock may be converted into
shares of any other class or series or be redeemed, and, if so, the
conversion or redemption price and the terms and conditions of conversion
or redemption, and to determine such other rights as may be allowed by
law. Holders of Special Common Stock will not be entitled, as a matter of
right, to preemptive rights. As all Special Common Stock is expected to
be closely held, it is anticipated that most classes or series would be
convertible into Common Stock for liquidity purposes. The Shares to which
this Prospectus relates do not include any Special Common Stock.
The Company has outstanding as of the date of this Prospectus 2,500,000
shares of a non-voting class of Special Common Stock in the form of Class
B Common Stock, which were issued in a private placement to an
institutional investor. The Class B Common Stock receives dividends pari
passu with the Common Stock at a rate equivalent to 1.03 times the Common
Stock dividend rate and participates pari passu with the Common Stock in
any liquidation of the Company. Beginning December 20, 1998, 1/6th of the
Class B Common Stock originally issued may be converted into Common Stock
at the election of the holder during any three-month period, but the
holder may not at any time be the beneficial owner of more than 4.9% of
the outstanding Common Stock. Accelerated conversion may take place in
the event of certain extraordinary occurrences, including certain changes
in senior management. A total of 2,975,468 shares of Common Stock are
issuable upon conversion of the Class B Common Stock.
Preferred Stock
Under the Company's Articles, the Board of Directors is authorized,
without further shareholder action, to provide for the issuance of up to
10,000,000 shares of Preferred Stock, par value $0.01 per share. The
Preferred Stock authorized by the Articles may be issued, from time to
time, in one or more series in such amounts and with such designations,
powers, preferences or other rights, qualifications, limitations and
restrictions as may be fixed by the Board of Directors. Under certain
circumstances, the issuance of Preferred Stock could have the effect of
delaying, deferring or preventing a change of control of the Company and
may adversely affect the voting and other rights of the holders of Common
Stock.
The Company has 1,916 shares of Preferred Stock outstanding as of June
15, 1996 in the form of Series A 8% Cumulative Convertible Preferred Stock
(the "Series A Preferred Stock"), all of which are held by a single
investor. The Series A Preferred Stock bears cumulative preferential
dividends at the rate of $80 per share and has a liquidation preference of
$1,000 per share. On each six-month anniversary of the issue date, the
holder has the right to convert to Common Stock up to 25% of the number of
shares of Series A Preferred Stock originally issued. The maximum number
of shares of Common Stock issuable upon conversion of the 1,916 shares of
Series A Preferred Stock outstanding is 127,752 shares of Common Stock.
The Series A Preferred Stock will convert mandatorily at specified
intervals to Common Stock at a conversion price of $20.50 if the average
closing price of the Common Stock reaches $20.50 on five consecutive
business days.
PLAN OF DISTRIBUTION
The Shares may be sold in or outside the United States through
underwriters or dealers, directly to one or more purchasers, or through
agents. The Prospectus Supplement with respect to the Shares will set
forth the terms of the offering of the Shares, including the name or names
of any underwriters, dealers or agents, the purchase price of the Shares
and the proceeds to the Company from such sale, any delayed delivery
arrangements, any underwriting discounts and other items constituting
underwriters' compensation, the public offering price, and any discounts
or concessions allowed or reallowed or paid to dealers.
If underwriters are used in the sale of the Shares, the Shares may be
acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The Shares may be offered to the public
either through underwriting syndicates represented by one or more managing
underwriters or directly by one or more firms acting as underwriters. The
underwriter(s) with respect to a particular underwritten offering of
Shares will be named in the Prospectus Supplement relating to such
offering, and if an underwriting syndicate is used, the managing
underwriter(s) will be set forth on the cover of such Prospectus
Supplement. Unless otherwise set forth in the Prospectus Supplement
relating thereto, the obligations of the underwriters or agents to
purchase the Shares will be subject to conditions precedent, and the
underwriters will be obligated to purchase all the Shares if any are
purchased. The public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
If dealers are utilized in the sale of Shares with respect to which
this Prospectus is delivered, such Shares will be sold to the dealers as
principals. The dealers may then resell such Shares to the public at
varying prices to be determined by such dealers at the time of resale.
The names of the dealers and the terms of the transaction will be set
forth in the Prospectus Supplement relating thereto.
Shares may be sold directly by the Company or through agents designated
by the Company from time to time at fixed prices, which may be changed, or
at varying prices determined at the time of sale. Any agent involved in
the offer or sale of the Shares with respect to which this Prospectus is
delivered will be named, and any commissions payable by the Company to
such agent will be set forth, in the Prospectus Supplement relating
thereto. Unless otherwise indicated in the Prospectus Supplement, any
such agent will be acting on a best efforts basis for the period of its
appointment.
In connection with the sale of the Shares, underwriters or agents may
receive compensation from the Company or from purchasers of Shares for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters, agents and dealers participating in the
distribution of the Shares may be deemed to be underwriters and any
discounts or commissions received by them from the Company and any profit
on the resale of the Shares by them may be deemed to be underwriting
discounts or commissions under the Securities Act.
If so indicated in the Prospectus Supplement, the Company will
authorize agents, underwriters, or dealers to solicit offers from certain
types of institutions to purchase Shares from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date
in the future. Such contracts will be subject only to those conditions
set forth in the Prospectus Supplement, and the Prospectus Supplement will
set forth the commission payable for solicitation of such contracts.
Agents, dealers, and underwriters may be entitled under agreements
entered into with the Company to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act,
or to contribution with respect to payments that such agents, dealers or
underwriters may be required to make with respect thereto. Agents,
dealers and underwriters may be customers of, engage in transactions with,
or perform services for the Company in the ordinary course of business.
The Common Stock currently trades on the NYSE, and any Shares offered
hereby will be listed on the NYSE, subject to an official notice of
issuance.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain federal income tax
considerations that may be relevant to a prospective holder of Shares.
Foley & Lardner, which has acted as tax counsel to the Company in
connection with the formation of the Company and the Company's election to
be taxed as a REIT, has reviewed the following discussion and is of the
opinion that it fairly summarizes the federal income tax considerations
that are likely to be material to a holder of Shares. This discussion and
such opinion are based on current law. As used in this section, the term
"Company" refers to the Company and all qualified subsidiaries (a
wholly-owned subsidiary which is not treated as a separate entity for
federal income tax purposes) but excludes Regency Realty Group, Inc. and
its subsidiaries (the "Management Company") (which is treated as a
separate entity for federal income tax purposes, although its results are
consolidated with those of the Company for financial reporting purposes).
This summary does not discuss all aspects of taxation that may be
relevant to particular holders of Shares in light of the terms of the
Shares acquired by them or their own personal investments or tax
circumstances, or to certain types of holders (including insurance
companies, tax-exempt organizations, financial institutions or
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) subject to special treatment under the
federal income tax laws. This summary does not give a detailed discussion
of any state, local, or foreign tax considerations. This summary is
qualified in its entirety by the applicable Code provisions, rules and
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as of the date hereof and all of which are
subject to change (which change may apply retroactively). Certain federal
income tax considerations relevant to the holders of Shares will be
provided in the applicable Prospectus Supplement.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT THE APPLICABLE
PROSPECTUS SUPPLEMENT AS WELL AS HIS OR HER OWN TAX ADVISOR REGARDING THE
SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP AND
SALE OF SHARES IN AN ENTITY ELECTING TO BE TAXED AS A REAL ESTATE
INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER
TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
General
The Company made an election to be taxed as a REIT under Sections 856
through 860 of the Code commencing with its taxable year ending December
31, 1993. The Company believes that it has been organized and operated in
such a manner as to qualify for taxation as a REIT under the Code for such
taxable year and all subsequent taxable years to date, and the Company
intends to continue to operate in such a manner in the future. However,
no assurance can be given that the Company will operate in a manner so as
to qualify or remain qualified as a REIT.
The following sets forth only a summary of the material aspects of the
Code sections that govern the federal income tax treatment of a REIT and
its shareholders.
It is the opinion of Foley & Lardner that the Company has been
organized in conformity with the requirements for qualification and
taxation as a REIT commencing with the Company's taxable year that ended
December 31, 1993 and for all subsequent taxable years to date, and its
method of operation will enable it to continue to be taxed as a REIT. It
must be emphasized that this opinion is based on various assumptions and
is conditioned upon certain representations made by the Company as to
factual matters including, but not limited to, those set forth below in
this discussion of "Federal Income Tax Considerations," those concerning
its business and properties, and certain matters relating to the Company's
manner of operation. Foley & Lardner is not aware of any facts or
circumstances that are inconsistent with these representations and
assumptions. The qualification and taxation as a REIT depends upon the
Company's ability to meet, through actual annual operating results, the
various income, asset, distribution, stock ownership and other tests
discussed below, the results of which will not be reviewed by nor be under
the control of Foley & Lardner. Accordingly, no assurance can be given
that the actual results of the Company's operation for any particular
taxable year will satisfy such requirements. For a discussion of the tax
consequences of failure to qualify as a real estate investment trust, see
"Federal Income Tax Considerations - Failure to Qualify."
Taxation of the Company
As a REIT, the Company generally is not subject to federal corporate
income tax on its 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 an investment in a corporation. However, the Company will be subject
to federal income tax in the following circumstances. First, the Company
will be taxed at regular corporate rates on any undistributed REIT taxable
income, including undistributed net capital gains. Second, under certain
circumstances, the Company may be subject to the "corporate alternative
minimum tax" on its items of tax preference. Third, if the Company has
(i) net income from the sale or other disposition of "foreclosure
property" (which is, in general, property acquired by the Company by
foreclosure or otherwise on default on a loan secured by the property)
which is held primarily for sale to customers in the ordinary course of
business or (ii) other non-qualifying net income from foreclosure
property, it will be subject to tax on such income at the highest
corporate rate. Fourth, if the Company has net income from "prohibited
transactions" (which 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), such income will be subject to
a 100% tax. Fifth, if the Company should fail to satisfy the 75% gross
income test or the 95% gross income test (as discussed below), and has
nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on the net
income attributable to the greater of the amount by which the Company
fails the 75% or 95% test, multiplied by a fraction intended to reflect
the Company's profitability. Sixth, if the Company should fail to
distribute during each calendar year at least the sum of (i) 85% of its
REIT ordinary income for such year, (ii) 95% of its REIT capital gain net
income for such year, and (iii) any undistributed taxable income from
prior years, it will be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. Seventh, if
during the 10-year period beginning on the first day of the first taxable
year for which the Company qualified as a REIT (the "Recognition Period"),
the Company recognizes gain on the disposition of any asset held by the
Company as of the beginning of such Recognition Period, then, to the
extent of the excess of (a) the fair market value of such asset as of the
beginning of such Recognition Period over (b) the Company's adjusted basis
in such asset as of the beginning of such Recognition Period (the
"Built-in Gain"), such gain will be subject to tax at the highest regular
corporate rate. Because the Company initially acquired its properties in
connection with its initial public offering in fully taxable transactions,
it is not anticipated that the Company will own any assets with
substantial Built-in Gain. Eighth, if the Company acquires any asset from
a C corporation (i.e., generally a corporation subject to full
corporate-level tax) in a transaction in which the basis of the asset in
the Company's hands is determined by reference to the basis of the asset
(or any other property) in the hands of the C corporation, and the Company
recognizes gain on the disposition of such asset during the Recognition
Period beginning on the date on which such asset was acquired by the
Company, then, to the extent of the Built-in Gain, such gain will be
subject to tax at the highest regular corporate rate. The result
described above with respect to the recognition of Built-in Gain during
the Recognition Period assumes the Company will make an election in
accordance with Notice 88-19 issued by the Internal Revenue Service. In
addition, the Management Company is taxed on its income at regular
corporate rates.
Requirements for Qualification
A REIT is defined in the Code as a corporation, trust or association:
(1) which is managed by one or more trustees or directors; (2) the
Beneficial Ownership of which is evidenced by transferable shares or by
transferable certificates of beneficial interest; (3) which would be
taxable as a domestic corporation, but for Sections 856 through 859 of the
Code; (4) which is neither a financial institution nor an insurance
company subject to certain provisions of the Code; (5) the beneficial
ownership of which is held by 100 or more persons (determined without
reference to any rules of attribution); (6) not more than 50% in value of
the outstanding stock of which is owned during the last half of each
taxable year, directly or indirectly, by or for five or fewer individuals
(as defined in the Code to include certain entities); and (7) which meets
certain income and asset tests described below. Conditions (1) to (4),
inclusive, must be met during the entire taxable year and condition (5)
must be met during at least 335 days of a taxable year of 12 months, or
during a proportionate part of a taxable year of less than 12 months. The
Company has previously issued sufficient shares to allow it to satisfy
conditions (5) and (6). The Company's Articles of Incorporation provide
restrictions regarding the transfer of its shares which are intended to
assist the Company in continuing to satisfy the stock ownership
requirements described in (5) and (6) above.
Section 856(i) of the Code provides that a corporation, 100% of whose
stock is held by a REIT at all times during the corporation's existence,
is a "qualified REIT subsidiary." A qualified REIT subsidiary is not
treated as a separate corporation, and all assets, liabilities and items
of income, deduction and credit of a qualified REIT subsidiary are treated
as assets, liabilities and such items (as the case may be) of the REIT.
Thus, in applying the requirements described herein, the Company's
qualified REIT subsidiaries will be ignored, and all assets, liabilities
and items of income, deduction and credit of such subsidiaries will be
treated as assets, liabilities and items of the Company. The Company has
not, however, sought or received a ruling from the Internal Revenue
Service that any of the Company's subsidiaries is a "qualified REIT
subsidiary." The Company currently owns all of its properties (other than
Village Commons, a 10% interest in which is held through the Management
Company) either directly, or indirectly, through qualified REIT
subsidiaries. All of the properties (other than Village Commons) which
are not owned directly by qualified REIT subsidiaries of the Company are
held by property partnerships, the interests in which are currently owned
by these qualified REIT subsidiaries.
In the case of a REIT which is a partner in a partnership either
directly or indirectly through a qualified REIT subsidiary, Treasury
Regulations provide that the REIT will be deemed to own its proportionate
share of the assets of the partnership and will be deemed to be entitled
to the income of the partnership attributable to such share. In addition,
the character of the assets and gross income of the partnership will
retain the same character in the hands of the REIT for purposes of Section
856 of the Code, including satisfying the gross income tests and asset
tests. Thus, the Company's proportionate share of the assets, liabilities
and items of income of the property partnerships through which the Company
owns many of its properties ("Property Partnerships") (other than Village
Commons, a 10% interest in which is held through the Management Company),
is treated as assets, liabilities and items of income of the Company for
purposes of applying the requirements described below.
Income Tests. In order for the Company to maintain its qualification
as a REIT, it must satisfy three gross income requirements annually.
First, at least 75% of the Company's 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" and, in
certain circumstances, "interest," or from certain types of temporary
investments.
Second, at least 95% of the Company's gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived
from real estate investments and from dividends, interest and gain from
the sale or disposition of stock or securities or from any combination of
the foregoing.
Third, short-term gain from the sale or other disposition of stock or
securities, gain from prohibited transactions and gain on the sale or
other disposition of real property held for fewer than four years (apart
from involuntary conversions and sales of foreclosure property) must
represent less than 30% of the Company's gross income (including gross
income from prohibited transactions) for each taxable year.
Rents received by the Company qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only
if the following conditions are met. First, the amount of rent must not
be based in whole or in part on the income or profits derived by any
person from such property, although 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. The Company does not anticipate charging rent for any
portion of any property that is based in whole or in part on the income or
profits of any person (except by reason of being based on a percentage of
receipts for sales, which is permitted by the Code). 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 (i) the Company
directly or constructively owns a 10% or greater interest in such tenant
or (ii) any direct or constructive shareholder of the Company, directly or
constructively owning a 10% or greater interest in such tenant (a "Related
Tenant Owner"), directly or constructively owns 10% or more by value of
the Company. The Company does not anticipate receiving rents from such a
tenant other than in connection with a cash flow support agreement entered
into as part of the Company's acquisition of University Marketplace.
Constructive ownership is determined under the attribution rules of
Section 318 of the Code, as modified by Section 856(d)(5) of the Code.
Additionally, pursuant to the Articles of Incorporation, Related Tenant
Owners are prohibited from acquiring constructive ownership of more than
9.8% by value of the Company. Third, rent attributable to personal
property leased in connection with a lease of real property will not
qualify if it is greater than 15% of the total rent received under the
lease. Fourth, the Company generally must not operate or manage the
property or furnish or render services to the tenants of such property,
other than through an independent contractor from whom the Company derives
no income. The independent contractor requirement, however, does not
apply to the extent services performed by the Company are "usually or
customarily rendered" in connection with the rental of space for occupancy
and are not otherwise considered "rendered to the occupant." It is
possible that the Company will provide certain services with respect to
the properties that are intended to comply with the "usually or
customarily rendered" requirement. To the extent that the performance of
any services provided by the Company would cause amounts received from its
tenants to be excluded from rents from real property, the Company will
hire independent contractors from whom the Company derives no income to
perform such services.
The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount
depends 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 "interest" solely by reason of being based on a fixed percentage
or percentages of receipts or sales.
The Management Company receives fees in consideration of the
performance of management and administrative services with respect to
properties that are not owned by the Company. Distributions received by
the Company from the Management Company of its earnings do not qualify
under the 75% gross income test. The Company believes that the aggregate
amount of the distributions from the Management Company together with all
other non-qualifying income in any taxable year will not cause the Company
to exceed the limits on non-qualifying income under the 75%, 95% and 30%
gross income tests.
The Company believes that it has satisfied the 75% and 95% gross income
tests for taxable years ended prior to the date of this Prospectus and
intends to operate in such a manner so as to satisfy such tests in the
future. If the Company fails to satisfy one or both of the 75% or 95%
gross income tests for any taxable year, it may nevertheless qualify as a
REIT for such year if it is entitled to relief under certain provisions of
the Code. These relief provisions generally will be available if the
Company's failure to meet such tests was due to reasonable cause and not
due to willful neglect, the Company attaches a schedule of the sources of
its income to its federal income tax return, and any incorrect information
on the schedule was not due to fraud with intent to evade tax. It is not
possible to state whether in all circumstances the Company would be
entitled to the benefit of those relief provisions. As discussed above,
even if those relief provisions apply, a tax would be imposed with respect
to the excess net income.
Asset Tests. The Company, at the close of each quarter of its taxable
year, must also satisfy three tests relating to the nature of its assets.
First, at least 75% of the value of the Company's total assets must be
represented by real estate assets (including (i) its allocable share of
real estate assets which are held by the Property Partnerships or which
are held by "qualified REIT subsidiaries" of the Company and (ii) stock or
debt instruments held for not more than one year purchased with the
proceeds of a stock offering or long-term (at least five years) debt
offering of the Company), cash, cash items and government securities.
Second, not more than 25% of the value of the Company's total assets may
be represented by securities other than those in the 75% asset class.
Third, of the investments included in the 25% asset class, the value of
any one issuer's securities owned by the Company may not exceed (at the
end of the quarter in which any of such securities are acquired) 5% of the
value of the Company's total assets and (subject to limited exceptions)
the Company may not own more than 10% of any one issuer's outstanding
voting securities.
The Company owns 100% of the non-voting preferred stock and 5% of the
voting common stock of the Management Company. The Company represents
that the value of the stock of the Management Company held by the Company
did not exceed, at the date that the Company acquired the Management
Company and for any applicable quarter prior to the date of this
Prospectus, 5% of the total value of the Company's assets. No independent
appraisals will be obtained to support the Company's estimate of value,
however, and Foley & Lardner, in issuing its opinion on the Company's
qualification as a REIT, is relying on the Company's representation as to
the limited value of the stock interest in the Management Company.
Although the Company plans to take steps to ensure that it will continue
to satisfy the 5% value test for any subsequent quarter with respect to
which retesting is to occur, there can be no assurance that such steps
will always be successful or will not require a reduction in the Company's
overall interest in the Management Company. See "Federal Income Tax
Considerations-Failure to Qualify."
Annual Distribution Requirements. The Company, in order to qualify as
a REIT, is required to distribute dividends (other than capital gains
dividends) to its shareholders in an amount at least equal to: (A) the sum
of (i) 95% of the Company's "REIT taxable income" (computed without regard
to the dividends paid deduction and the Company's net capital gain) and
(ii) 95% of the net income (after tax), if any, from foreclosure property;
minus (B) the sum of certain items of non-cash income. In addition, if,
during its Recognition Period, the Company disposes of any asset with
Built-in Gain, the Company will be required, pursuant to Treasury
Regulations which have not yet been promulgated, to distribute at least
95% of the Built-in Gain (after tax), if any, recognized on the
disposition of such asset. Such distribution must be paid in the taxable
year to which it relates, or in the following taxable year if declared
before the Company timely files its tax return for such prior year and if
paid on or before the first regular dividend payment date after such
declaration. To the extent that the Company does not distribute all of
its net capital gain or distributes at least 95%, but less than 100%, of
its "REIT taxable income," as adjusted, it will be subject to tax thereon
at regular ordinary and capital gains corporate tax rates. Furthermore,
if the Company should fail to distribute during each calendar year at
least the sum of (i) 85% of its REIT ordinary income for such year, (ii)
95% of its REIT capital gain income for such year and (iii) any
undistributed taxable income from prior periods, the Company will be
subject to a 4% excise tax on the excess of such required distribution
over the amounts actually distributed.
The Company intends to make timely distributions sufficient to satisfy
this annual distribution requirement in the future. It is possible that
the Company, from time to time, may not have sufficient cash or other
liquid assets to meet the 95% distribution requirement due to timing
differences between the actual receipt of income and the actual payment of
deductible expenses and the inclusion of such income and deduction of such
expenses in arriving at the taxable income of the Company, or if the
amount of nondeductible expenses such as principal amortization or capital
expenditures exceeds the amount of noncash deductions. In the event that
such timing differences occur, in order to meet the 95% distribution
requirement, the Company may find it necessary to arrange for short-term,
or possibly long-term, borrowings to permit the payment of required
dividends or to pay dividends in the form of taxable stock dividends.
Under certain circumstances, the Company may be able to rectify a
failure to meet the distribution requirement for a certain year by paying
"deficiency dividends" to shareholders in a later year, which may be
included in the Company's deduction for dividends paid for the earlier
year. Thus, the Company may be able to avoid being taxed on amounts
distributed as deficiency dividends; however, the Company will be required
to pay to the Internal Revenue Service interest based upon the amount of
any deduction taken for deficiency dividends.
Failure to Qualify
If the Company fails to qualify for taxation as a REIT in any taxable
year, and the relief provisions do not apply, the Company will be subject
to tax (including any applicable corporate alternative minimum tax) on its
taxable income at regular corporate rates. Such a failure could have an
adverse effect on the market value and marketability of the Shares.
Distributions to shareholders in any year in which the Company fails to
qualify will not be deductible by the Company nor will they be required to
be made. In such event, to the extent of current and accumulated earnings
and profits, all distributions to shareholders will be taxable as ordinary
income, and, subject to certain limitations of the Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, the Company will
also be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is not
possible to state whether the Company would be entitled to such statutory
relief.
Taxation of Taxable Domestic Shareholders
As long as the Company qualifies as a REIT, distributions made to its
taxable domestic shareholders out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will result in
ordinary income. Corporate shareholders will not be entitled to the
dividends received deduction. Distributions that are designated as
capital gains dividends will be taxed as long-term capital gains (to the
extent they do not exceed the Company's actual net capital gain for the
taxable year) without regard to the period for which the shareholder has
held its stock. However, corporate shareholders may be required to treat
up to 20% of certain capital gains dividends as ordinary income.
Distributions in excess of current and accumulated earnings and profits
will not be taxable to the extent that they do not exceed the adjusted
basis of the shareholder's shares, but rather will reduce a shareholder's
adjusted basis in such shares. To the extent that such distributions
exceed the adjusted basis of a shareholder's shares, they will be included
in income as long-term capital gain (or short-term capital gain if the
shares have been held for one year or less), assuming the shares are a
capital asset in the hands of the shareholder. In addition, any dividend
declared by the Company in October, November or December of any year
payable to a shareholder of record on a specific date in any such month
shall be treated as both paid by the Company and received by the
shareholder on December 31 of such year, provided that the dividend is
actually paid by the Company during January of the following calendar
year.
Shareholders may not include any net operating losses or capital losses
of the Company in their individual income tax returns. In general, any
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 a long-term capital loss to the extent
distributions from the Company on such shares were required to be treated
by such shareholder as long-term capital gain.
Backup Withholding
The Company will report to its domestic shareholders and to the
Internal Revenue Service the amount of dividends paid during each calendar
year, and the amount of tax withheld, if any. Under the backup
withholding rules, a shareholder may be subject to backup withholding at
the rate of 31% with respect to dividends paid unless such shareholder (a)
is a corporation or another form of entity exempt from backup withholding
and, when required, demonstrates this fact, or (b) provides a taxpayer
identification number, certifies to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the
backup withholding rules. A shareholder that does not provide the Company
with a correct taxpayer identification number may also be subject to
penalties imposed by the Internal Revenue Service. Any amount paid as
backup withholding will be creditable against the shareholder's income tax
liability. In addition, the Company may be required to withhold a portion
of capital gain distributions to any shareholders who fail to certify
their non-foreign status to the Company. See "--Taxation of Foreign
Shareholders."
Taxation of Tax-Exempt Shareholders
In Revenue Ruling 66-106, 1966-1 C.B. 151, the Internal Revenue Service
ruled that amounts distributed by a REIT to a tax-exempt employees'
pension trust did not constitute "unrelated business taxable income"
("UBTI"). Revenue rulings are interpretive in nature and subject to
revocation or modification by the Internal Revenue Service. Based upon
Revenue Ruling 66-106 and the analysis therein, distributions to
tax-exempt shareholders should not constitute UBTI where (a) the
shareholder has not financed the acquisition of its shares with
"acquisition indebtedness" within the meaning of the Code, and (b) the
shares are not used by the shareholder in an unrelated trade or business.
Under the Omnibus Budget Reconciliation Act of 1993, certain pension
trusts holding more than 10% by value of a REIT at any time during a
taxable year are treated as having UBTI which bears the same ratio to the
aggregate dividends paid (or treated as paid) by the REIT to such trust as
(i) the gross income of the REIT (less any direct expenses related
thereto) which would be treated as UBTI if the REIT were a pension trust,
bears to (ii) the gross income of the REIT (less any direct expenses
related thereto), but only if such ratio is at least 5%. This rule for
UBTI only applies to pension trusts investing in a REIT which would have
been considered "closely held" under Section 542(a)(2) of the Code, had
such section not been amended by the Omnibus Budget Reconciliation Act of
1993. In addition, the rule only applies where at least one pension trust
holds more than 25% by value of the REIT or where one or more pension
trusts (each owning more than 10% by value of the REIT) hold in aggregate
more than 50% by value of the REIT.
Taxation of Foreign Shareholders
The rules governing United States federal income taxation of
nonresident alien individuals, foreign corporations, foreign partnerships
and other foreign shareholders (collectively, "Non-U.S. Shareholders") are
complex and no attempt will be made herein to provide more than a summary
of such rules. 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 on Common Stock that are not attributable to gain from
sales or exchanges of United States real property interests and not
designated by the Company as capital gains dividends will be treated as
dividends of ordinary income to the extent that they are made out of
current or accumulated earnings and profits of the Company. Such
distributions ordinarily will be subject to a withholding tax equal to 30%
of the gross amount of the distribution, subject to reduction or
elimination under any applicable tax treaty. However, if income from the
investment in the shares is treated as "effectively connected" with the
Non-U.S. Shareholder's conduct of a United States trade or business, the
Non-U.S. Shareholder generally will be subject to federal income tax at
graduated rates, in the same manner as U.S. shareholders are taxed with
respect to such dividends (and also may be subject to the 30% branch
profits tax if the shareholder is a foreign corporation). The Company
expects to withhold United States income tax at the rate of 30% on the
gross amount of any such dividends made to a Non-U.S. Shareholder unless
(i) a lower treaty rate applies and the required form evidencing
eligibility for that reduced rate is filed with the Company or (ii) the
Non-U.S. Shareholder files an Internal Revenue Service Form 4224 with the
Company claiming that the distribution is "effectively connected" income.
Distributions in excess of current and accumulated earnings and profits of
the Company will not be taxable 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 gain from the sale or disposition of his shares in the
Company, as described below. If it cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the entire amount of the
distribution is subject to withholding. However, amounts thus withheld
are refundable if it is subsequently determined that such distribution
was, in fact, in excess of current and accumulated earnings and profits of
the Company.
For any year in which the Company qualifies as a REIT, distributions on
Shares that are attributable to gain from sales or exchanges by the
Company of a United States real property interest will be taxed to a
Non-U.S. Shareholder as a result of the provisions of Section 897 of the
Code. Under Section 897, these distributions are taxed as if such gain
were "effectively connected" with a United States business. Thus,
Non-U.S. Shareholders would be taxed at the normal capital gain rates
applicable to U.S. shareholders (subject to the applicable alternative
minimum tax and a special alternative minimum tax for nonresident alien
individuals). Also, distributions subject to Section 897 of the Code may
be subject to a 30% branch profits tax in the hands of a foreign corporate
shareholder not entitled to treaty relief or exemption. The Company is
required by applicable Treasury Regulations to withhold 35% of any
distribution to a Non-U.S. Shareholder that could be designated by the
Company as a capital gain dividend. This amount is creditable against the
Non-U.S. Shareholder's federal income tax liability.
Gain recognized by a Non-U.S. Shareholder upon a sale of Shares
generally will not be taxed under Section 897 of the Code if the Company
is a "domestically controlled REIT," defined generally as a REIT in which
at all times during a specified testing period less than 50% of the value
of the REIT's stock was held directly or indirectly by foreign persons.
It is currently anticipated that the Company will be a "domestically
controlled REIT," and therefore the sale by a Non-U.S. Shareholder of
Shares generally will not be subject to federal income taxation. However,
gain on such a sale will be taxable to a Non-U.S. Shareholder if (i) the
investment is effectively connected with the Non-U.S. Shareholder's United
States 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 (ii) 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 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. If the gain on the sale were subject to
taxation because the Company did not qualify as a "domestically controlled
REIT," the Non-U.S. Shareholder would be subject to the same treatment as
U.S. shareholders with respect to such gain (subject to the applicable
alternative minimum tax and a special alternative minimum tax in the case
of nonresident alien individuals).
Any Shares owned by a decedent who is a nonresident alien will be
included in his or her gross estate for federal estate tax purposes.
Other Tax Consequences
Some of the Company's investments are through the Property
Partnerships. These partnerships may involve special tax risks. Such
risks include possible challenge by the Internal Revenue Service of
allocations of income and expense items, which could affect the
computation of taxable income of the Company, and the status of the
Property Partnerships as partnerships (as opposed to associations taxable
as corporations) for income tax purposes that may not constitute
"qualified REIT subsidiaries" under the Code. In the opinion of Foley &
Lardner, which is based on (i) analysis of the partnership agreements for
each Property Partnership, and (ii) the representations of the Company
that such agreements fully reflect all amendments and modifications to
such agreements as of the date of this Prospectus, the partnership
allocations of income and expense items for the Property Partnerships (in
which the Company owns a 100% interest) and Village Commons (in which the
Management Company owns a 10% interest) have substantial economic effect
under Section 704(b) of the Code and the Treasury Regulations thereunder,
and each of the Property Partnerships will be treated for federal income
tax purposes as either a partnership or a qualified REIT subsidiary under
the Code. See "- Requirements for Qualification." If any of the Property
Partnerships were treated as an association, it would be taxable as a
corporation. In such a situation, because the Company's ownership
interest exceeds 10% of each partnership's voting interests for all the
Property Partnerships (except for the Village Commons partnership), the
Company would cease to qualify as a REIT. Furthermore, even if the
Company did not own more than 10% of the voting interests of any
partnership, if one of the Property Partnerships were an association
taxable as a corporation, and not a qualified REIT subsidiary, and the
value of the Company's interest in such partnership exceeded 5% of the
value of the Company's assets, the Company would cease to qualify as a
REIT. Finally, even if the Company's partnership interests did not cause
the Company to own more than 10% of the voting securities of an issuer or
cause the Company to have more than 5% of the value of its assets invested
in the securities of a single issuer, if one or more Property Partnerships
were associations taxable as corporations, and not qualified REIT
subsidiaries, distributions from such partnerships to the Company would be
treated as dividends, which are not taken into account in satisfying the
75% gross income test described above and which could therefore make it
more difficult for the Company to meet the 75% asset test described above.
In addition, in such a situation, the interest in any of the Property
Partnerships held by the Company would not qualify as a "real estate
asset," which could make it more difficult for the Company to meet the 75%
asset test described above. Finally, in such a situation the Company
would not be able to deduct its share of losses generated by the
partnerships in computing its taxable income. See "- Taxation of the
Company" and "- Failure to Qualify" above for a discussion of the effect
of the Company's failure to meet such tests for a taxable year.
The Company and its shareholders may be subject to state or local
taxation in various state or local jurisdictions, including those in which
it or they transact business or reside. The state and local tax treatment
of the Company and its shareholders may not conform to the federal income
tax consequences discussed above. Consequently, prospective shareholders
should consult their own tax advisors regarding the effect of state and
local tax laws on an investment in the Company.
ERISA CONSIDERATIONS
The following is a summary of material considerations arising under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
the prohibited transactions provisions of Section 4975 of the Code that
may be relevant to a prospective purchaser. This discussion does not
purport to deal with all aspects of ERISA or Section 4975 of the Code that
may be relevant to particular shareholders (including plans subject to
Title I of ERISA, other retirement plans and Individual Retirement
Accounts ("IRA's") subject to the prohibited transaction provisions of
Section 4975 of the Code, and governmental plans or church plans that are
exempt from ERISA and Section 4975 of the Code but that may be subject to
the prohibited transaction provisions of Section 503 of the Code and to
state law requirements) in light of their particular circumstances.
A FIDUCIARY MAKING THE DECISION TO INVEST IN SHARES ON BEHALF OF A
PROSPECTIVE PURCHASER WHICH IS AN EMPLOYEE BENEFIT PLAN, A TAX QUALIFIED
RETIREMENT PLAN, OR AN IRA IS ADVISED TO CONSULT ITS OWN LEGAL ADVISOR
REGARDING THE SPECIFIC CONSIDERATIONS ARISING UNDER ERISA, SECTIONS 4975
AND 503 OF THE CODE, AND STATE LAW WITH RESPECT TO THE PURCHASE,
OWNERSHIP, OR SALE OF THE SHARES BY SUCH PLAN OR IRA.
Employee Benefit Plans, Tax Qualified Retirement Plans and IRA's
Each fiduciary of a pension, profit sharing, or other employee benefit
plan subject to Title I of ERISA (an "ERISA Plan") should carefully
consider whether an investment in the Shares is consistent with his
fiduciary responsibilities under ERISA. The fiduciary must make its own
determination as to whether an investment in the Shares (i) is permissible
under the documents governing the ERISA Plan, (ii) is appropriate for the
ERISA Plan under the general fiduciary standards of investment prudence
and diversification, taking into account the overall investment policy of
the ERISA Plan and the composition of the ERISA Plan's investment
portfolio, and (iii) would result in a nonexempt prohibited transaction
under ERISA and the Code.
The fiduciary of an IRA or of a qualified retirement plan not subject
to Title I of ERISA because it is a governmental or church plan or because
it does not cover common law employees (a "Non-ERISA Plan") should
consider that such an IRA or Non-ERISA Plan may only make investments that
are authorized by the appropriate governing documents and under applicable
state law. The fiduciary should also consider the applicable prohibited
transaction rules of Sections 4975 and 503 of the Code.
Status of the REIT
The following section discusses certain principles that apply in
determining whether the fiduciary requirements of ERISA and the prohibited
transaction provisions of ERISA and the Code apply to an entity because
one or more investors in the entity's equity interests is an ERISA Plan or
is a Non-ERISA Plan or IRA subject to Section 4975 of the Code. An ERISA
Plan fiduciary should also consider the relevance of these principles to
ERISA's prohibition on improper delegation of control over or
responsibility for "plan assets" and ERISA's imposition of co-fiduciary
liability on a fiduciary who participates in, permits (by action or
inaction) the occurrence of, or fails to remedy a known breach by another
fiduciary.
Under the Department of Labor regulations as to what constitutes assets
of an employee benefit plan (the "DOL Regulations"), if an ERISA Plan
acquires an equity interest in an entity, which interest is neither a
"publicly offered security" nor a security issued by an investment company
registered under the Investment Company Act of 1940, as amended, the ERISA
Plan assets would include, for purposes of the fiduciary responsibility
provisions of ERISA, both the equity interest and an undivided interest in
each of the entity's underlying assets unless certain specified exceptions
apply. The DOL Regulations define a publicly offered security as a
security that is "widely held," "freely transferable," and either part of
a class of securities registered under the Securities Exchange Act of
1934, or sold pursuant to an effective registration statement under the
Securities Act (provided the securities are registered under the
Securities Exchange Act of 1934 within 120 days after the end of the
fiscal year of the issuer during which the offering occurred). The equity
Shares offered hereby will be sold in an offering registered under the
Securities Act and are or are expected to be registered under the
Securities Exchange Act of 1934.
The DOL Regulations provide that a security is "widely held" only if it
is part of a class of securities that is owned by 100 or more investors
independent of the issuer and of one another. A security will not fail to
be "widely held" because the number of independent investors falls below
100 as a result of events beyond the issuer's control. The Common Stock
is "widely held."
The DOL Regulations provide that whether a security is "freely
transferable" is a factual question to be determined on the basis of all
relevant facts and circumstances. The DOL Regulations further provide
that when a security is part of an offering in which the minimum
investment is $10,000 or less, as is the case with this offering, certain
restrictions ordinarily will not, alone or in combination, affect the
finding that such securities are freely transferable. The Company
believes that restrictions imposed under the Articles of Incorporation on
the transfer of its capital stock are limited to the restrictions on
transfers generally permitted under the DOL Regulations and are not likely
to result in the failure of its capital stock to be "freely transferable."
The DOL Regulations only establish a presumption in favor of the finding
of free transferability, and, therefore, no assurance can be given that
the Department of Labor and the U.S. Treasury Department will not reach a
contrary conclusion.
Assuming that no facts and circumstances exist that restrict
transferability of such Shares other than as described in this Prospectus
and that such Shares will be registered under the Securities Exchange Act
of 1934, Foley & Lardner has rendered an opinion that under the DOL
Regulations, the Shares will be publicly offered securities and that the
assets of the Company will not be deemed to be "plan assets" of any ERISA
Plan, IRA or Non-ERISA Plan that invests in the Shares.
LEGAL MATTERS
The validity of the shares of Common Stock to which this Prospectus
relates and certain tax matters described under "Federal Income Tax
Considerations" and "ERISA Considerations" will be passed upon for the
Company by Foley & Lardner, Jacksonville, Florida. Attorneys with Foley &
Lardner representing the Company with respect to this offering
beneficially owned approximately 3,000 shares of Common Stock as of the
date of this Prospectus.
EXPERTS
The consolidated financial statements and schedule of Regency Realty
Corporation as of December 31, 1995 and 1994, and for the years ended
December 31, 1995 and 1994 and the period from inception (July 9, 1993) to
December 31, 1993, and the combined financial statements of the Regency
Properties for the period from January 1, 1993 to November 5, 1993, have
been incorporated by reference herein and in the registration statement in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. To the
extent that KPMG Peat Marwick LLP audits and reports on consolidated
financial statements of Regency Realty Corporation issued at future dates,
and consents to the use of their report thereon, such consolidated
financial statements also will be incorporated by reference in the
registration statement in reliance upon their report and said authority.
No dealer, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus in connection with the offer made by
this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by
the Company or by any of the Underwriters. This Prospectus does not
constitute an offer to sell or the solicitation of any offer to buy
securities other than the shares of Common Stock offered by this
Prospectus, nor shall it constitute an offer to sell or a
solicitation of any offer to buy the shares of Common Stock by
anyone in any jurisdiction in which such offer or solicitation is
not authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it
is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create an implication that the information
contained herein is correct as of any time subsequent to the date
hereof.
TABLE OF CONTENTS
Page
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 4
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Description of Common Stock . . . . . . . . . . . . . . . . . . . 8
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . 9
Federal Income Tax Considerations . . . . . . . . . . . . . . . . 11
ERISA Considerations . . . . . . . . . . . . . . . . . . . . . . 21
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Regency Realty
Corporation
_____________
PROSPECTUS
_____________
Common Stock
_______________, 1996
PART II
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the approximate amount of fees and
expenses payable by the Registrant in connection with the issuance and
distribution of the securities registered hereby.
Securities and Exchange Commission
Registration Fee $ 86,207.00
NASD Fee $ 12,282.00*
Exchange Listing Fee $ 28,000.00*
Printing and Delivery $120,000.00*
Legal Fees and Expenses $100,000.00*
Accounting Fees and Expenses $ 30,000.00*
Blue Sky Fees and Expenses $ 10,000.00*
Road Show $ 50,000.00*
Miscellaneous $ 38,511.00*
----------
Total $475,000.00*
==========
____________________
* Estimated.
Item 15. Indemnification of Directors and Officers.
The Florida Business Corporation Act (the "Florida Act") permits a
Florida corporation to indemnify a present or former director or officer
of the corporation (and certain other persons serving at the request of
the corporation in related capacities) for liabilities, including legal
expenses, arising by reason of service in such capacity if such person
shall have acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and in any
criminal proceeding if such person had no reasonable cause to believe his
conduct was unlawful. However, in the case of actions brought by or in the
right of the corporation, no indemnification may be made with respect to
any matter as to which such director or officer shall have been adjudged
liable, except in certain limited circumstances.
Article X of the Registrant's Bylaws provides that the Registrant shall
indemnify directors and executive officers to the fullest extent now or
hereafter permitted by the Florida Act. In addition, the Registrant has
entered into Indemnification Agreements with its directors and executive
officers in which the Registrant has agreed to indemnify such persons to
the fullest extent now or hereafter permitted by the Florida Act.
Item 16. Exhibits.
*5. Opinion of Foley & Lardner as to the legality of the
securities to be issued
8. Opinion of Foley & Lardner as to tax aspects of the
offering
23A. Consent of Foley & Lardner (included in Opinion filed as
Exhibit 8)
23B. Consent of KPMG Peat Marwick LLP
24. Power of Attorney relating to subsequent amendments
(included on the signature page of this Registration
Statement filed with the Commission on March 21, 1996)
________________
* To be supplied by amendment.
Item 17. Undertakings
In the event that Shares are sold in an underwritten offering, the
undersigned Registrant hereby undertakes to provide to the Underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters
to permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that,
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement.
(2) For purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment that contains a form of
Prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
provided, however, that paragraphs (1) and (2) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d)
of the Securities Exchange Act of 1934 that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Jacksonville, State of Florida,
on June 26, 1996.
REGENCY REALTY CORPORATION
By: /s/ Martin E. Stein, Jr.
Martin E. Stein, Jr., President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: June 26, 1996 */s/ Joan W. Stein
Joan W. Stein, Chairman of the Board
Date: June 26, 1996 /s/ Martin E. Stein, Jr.
Martin E. Stein, Jr., President, Chief
Executive Officer and Director
Date: June 26, 1996 /s/ Bruce M. Johnson
Bruce M. Johnson, Executive Vice
President of Finance and Principal
Financial Officer
Date: June 26, 1996 /s/ J. Christian Leavitt
J. Christian Leavitt, Vice President of
Accounting and Principal Accounting
Officer
Date: June 26, 1996 */s/ Robert L. Stein
Robert L. Stein, Director
Date: June 26, 1996 */s/ Edward L. Baker
Edward L. Baker, Director
Date: June 26, 1996 */s/ A. R. Carpenter
A.R. Carpenter, Director
Date: June 26, 1996 */s/ J. Dix Druce, Jr.
J. Dix Druce, Jr., Director
Date: June __, 1996
Albert Ernest, Jr., Director
Date: June 26, 1996 */s/ Douglas S. Luke
Douglas S. Luke, Director
*By J. Christian Leavitt, as Attorney-in-Fact
EXHIBIT INDEX
Sequential
Page No.
*5. Opinion of Foley & Lardner as to the legality
of the securities to be issued
8. Opinion of Foley & Lardner as to tax aspects
of the offering
23A. Consent of Foley & Lardner (included in
Opinion filed as Exhibit 8)
23B. Consent of KPMG Peat Marwick LLP
24. Power of Attorney relating to subsequent
amendments (included on the
signature page of this Registration Statement
filed with the Commission on March 21, 1996).
__________________
* To be supplied by amendment.
Exhibit 8
Foley & Lardner
The Greenleaf Building
200 Laura Street
Jacksonville, FL 32202-3527
June 27, 1996
Regency Realty Corporation
121 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
Re: Registration Statement on Form S-3
Registration No. 333-2546
Gentlemen:
This opinion is being furnished in connection with the Registration
Statement on Form S-3 of Regency Realty Corporation (the "Company"), under
the Securities Act of 1933, as amended, for the registration of shares of
common stock, par value $0.01 in an amount of up to $250,000,000 (the
"Shares"). The Registration Statement filed March 21, 1996, as amended by
Amendment No. 1 filed concurrently herewith, is referred to herein as the
"Registration Statement."
Defined terms used herein shall have the same meanings given to them
as in the Registration Statement.
As counsel for the Company, we have reviewed and are familiar with
the following:
(a) Amended and Restated Articles of Incorporation of the Company as
amended to date and filed in the Office of the Secretary of State of
Florida;
(b) Bylaws of the Company; and
(c) The Partnership Agreement for each of the Property Partnerships;
and
(d) Such other documents, Company records, and matters of law as we
deemed to be pertinent.
We have assumed that the documents that we reviewed were duly
executed and true and correct copies of such documents as in effect on the
date of such review. We have also relied upon the representations of
Robert L. Miller, Jr. set forth in the Officer's Certificate executed by
him on the date of this opinion. We are unaware of any facts or
circumstances that are contrary or inconsistent with any representations
and assumptions relied upon by us in rendering this opinion.
Based on the foregoing, it is our opinion that:
1. The Company has been duly incorporated and is validly existing
and in good standing under the laws of the State of Florida.
2. Commencing with its taxable year ended December 31, 1993, the
Company has been organized and operated in conformity with the
requirements for qualification and taxation as a "real estate investment
trust" under the Code, and your method of operation enables you to
continue to meet the requirements for taxation as a real estate investment
trust under the Code.
3. The Property Partnerships constitute either partnerships for
federal income tax purposes or "qualified REIT subsidiaries" within the
meaning of Section 856(i) of the Code and, consequently the Company will
be deemed to directly own the assets of the Property Partnerships pursuant
to Sections 856 and 7701(a)(2)-(3) of the Code, the regulations
promulgated thereunder and case law.
4. The statements of federal income tax matters and consequences
described under "Tax Considerations" in the Registration Statement are
correct.
5. The statement regarding the assets of the Company not being
"plan assets" set forth under "ERISA Considerations" in the Registration
Statement is correct.
This opinion is based upon various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which
are subject to change either prospectively or retroactively. Also, any
variation or difference in the facts from those set forth in the
Registration Statement may affect the conclusion stated herein.
This opinion is furnished to you solely for use in connection with
the Registration Statement. We hereby consent to the filing of this
opinion as an Exhibit to the Registration Statement and to the use of our
name under the captions "Legal Matters," "Federal Income Tax
Considerations" and "ERISA Considerations" in the Prospectus. In giving
this consent we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules or regulations of the Securities Exchange
Commission promulgated thereunder.
FOLEY & LARDNER
Exhibit 23B
Accountants' Consent
The Board of Directors
Regency Realty Corporation:
We consent to the use of our reports incorporated herein by reference and
to the reference to our firm under the heading "Experts" in the
prospectus.
KPMG Peat Marwick LLP
Certified Public Accountants
Jacksonville, Florida
June 26, 1996