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Filed pursuant to Rule 424(b)(5)
Registration File No. 333-277877
PROSPECTUS SUPPLEMENT
(To Prospectus datedMarch 21, 2024)
Maximum of 19,088,864 Shares in Primary Offering
Maximum of 5,949,560 Shares Pursuant to Dividend Reinvestment Plan
6.00% Series F Cumulative Redeemable Preferred Stock
(Liquidation Preference $25.00 Per Share)
We are offering a maximum of19,088,864 shares of our 6.00% Series F Cumulative
Redeemable Preferred Stock, par value $0.001 per share (the "Series F
Preferred Stock"), on a "reasonable best efforts" basis through our affiliated
dealer manager, GladstoneSecurities, LLC ("Gladstone Securities") pursuant to
a Dealer Manager Agreement, as amended from time to time (as so amended, the
"Dealer Manager Agreement"), at a public offering price of $25.00 per share,
and up to 5,949,560shares of Series F Preferred Stock pursuant to a dividend
reinvestment plan at a price of $22.75 per share to those holders of the
Series F Preferred Stock who participate in such dividend reinvestment plan.
We reserve the right to reallocate sharesbetween the primary offering and the
offering pursuant to the dividend reinvestment plan in our sole discretion.
This prospectus supplement supersedes and replaces the prospectus supplement
dated February 9, 2023 (which superseded and replacedthe prospectus supplement
dated February 20, 2020 (the "Original Prospectus Supplement")) (the "Prior
Prospectus Supplement"), pursuant to which we offered a maximum of 19,329,859
shares of Series F Preferred Stock in aprimary offering and up to 5,975,410
shares of Series F Preferred Stock pursuant to a dividend reinvestment plan.
As of the date of this prospectus supplement, 911,136 shares of Series F
Preferred Stock were sold in the aggregate in the primaryoffering under the
Original Prospectus Supplement and the Prior Prospectus Supplement, and 50,440
shares of Series F Preferred Stock were sold in the aggregate pursuant to the
dividend reinvestment plan under the Original Prospectus Supplement andthe
Prior Prospectus Supplement.
The primary offering of the Series F Preferred Stock under this prospectus
supplement will terminate on the date (the"Termination Date") that is the
earlier of (1) June 1, 2025 (unless earlier terminated or extended by our
Board of Directors) and (2) the date on which all shares of Series F Preferred
Stock offered in the primary offeringare sold. The offering period for the
dividend reinvestment plan under this prospectus supplement will terminate on
the earlier of (1) the issuance of all shares of Series F Preferred Stock
under the dividend reinvestment plan and (2) thelisting of the Series F
Preferred Stock on the Nasdaq Global Select Market ("Nasdaq") or another
national securities exchange.
We intend to paymonthly cash dividends on the Series F Preferred Stock at an
annual rate of 6.00% of the $25.00 liquidation preference, or $1.50 per share
per year. Subject to certain limitations, holders of the Series F Preferred
Stock will have the option totender their shares of Series F Preferred Stock
for redemption for cash commencing on the date of original issuance (or, if
after the date of original issuance our Board of Directors suspends the
redemption program of the holders of the Series FPreferred Stock, on the date
our Board of Directors reinstates such program) following the tenth calendar
day of such holder's request that we redeem shares of the Series F Preferred
Stock, or if such tenth calendar day is not a business day,on the next
succeeding business day, and terminating on the earlier of the date upon which
our Board of Directors, by resolution, suspends or terminates the optional
redemption right of the holders of Series F Preferred Stock or the date on
whichthe Series F Preferred Stock is listed on Nasdaq or another national
securities exchange. The redemption price per share of Series F Preferred
Stock will be equal to $22.50 in cash with no annual limit; provided, that our
obligation to redeem sharesat the option of a holder of Series F Preferred
Stock is limited to the extent that our Board of Directors determines, in its
sole and absolute discretion, that we do not have sufficient funds available
to fund any such redemption or we arerestricted by applicable law from making
such redemption. Our obligation to redeem shares at the option of a holder of
Series F Preferred Stock is further limited to the extent our Board of
Directors suspends or terminates the optional redemptionright after delivery
of a holder's request that we redeem shares but prior to the corresponding
redemption date.
Our Board of Directors may suspend or terminate the
optional redemption right of holders of Series F Preferred Stock atany time,
for any reason or no reason, in its sole and absolute discretion.
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Except in limited circumstances to preserve our status as a real estate
investment trust ("REIT"),we, at our option, may not redeem shares of the
Series F Preferred Stock prior to the later of (1) the one year anniversary of
the Termination Date and (2) June 1, 2024. After such date, we may, at our
sole option, redeem the sharesat a redemption price of $25.00 per share, plus
an amount equal to any accumulated and unpaid dividends to, but excluding, the
date of redemption.
TheSeries F Preferred Stock will rank
pari passu
with our 6.625% Series E Cumulative Redeemable Preferred Stock, par value
$0.001 per share (the "Series E Preferred Stock"), and our 6.00% Series G
Cumulative Term Preferred Stock, parvalue $0.001 per share (the "Series G
Preferred Stock"), and senior to our common stock with respect to payment of
dividends and distribution of amounts on liquidation, dissolution and winding
up. Holders of the Series F Preferred Stockgenerally will have no voting
rights.
There is currently no public market for shares of the Series F Preferred
Stock. We intend to apply to list theSeries F Preferred Stock on Nasdaq or
another national securities exchange within one calendar year of the
Termination Date, however, there can be no assurance that a listing will be
achieved in such timeframe, or at all. We do not expect a publicmarket to
develop before the shares are listed on Nasdaq or another national securities
exchange, if at all.
We believe that we qualify, and have electedto be taxed, as a REIT for federal
income tax purposes. To assist us in complying with certain federal income tax
requirements applicable to REITs, among other purposes, our charter contains
certain restrictions relating to the ownership andtransfer of our capital
stock, including an ownership limit of 9.8% of the outstanding shares of our
capital stock by any person. See "Certain Provisions of Maryland Law and of
Our Charter and Bylaws--Restrictions on Ownership andTransfer" in the
accompanying prospectus for more information about these restrictions.
Investing in shares of our Series F Preferred Stockinvolves substantial risks
that are described in the "
Risk Factors
" sections beginning
on page S-12 of this
prospectus supplement, on page 7 ofthe accompanying prospectus and discussed
in our
Annual Report on Form
10-K
for the year ended December
31, 2023
, and other reports and information that we file from time to time with the
Securities and Exchange Commission (the "
SEC
"), which are incorporated by reference intothis prospectus supplement and the
accompanying prospectus.
Neither the SEC nor any state securities commission has approved or
disapproved ofthese securities or determined if this prospectus supplement or
the accompanying prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
Per Share Maximum Offering(1)
Public offering price(2) $ 25.00 $ 477,221,600
Public offering price, dividend reinvestment plan(2) $ 22.75 $ 135,352,490
Selling commissions(3)(4) $ 1.50 $ 28,633,296
Dealer manager fee(3)(4) $ 0.75 $ 14,316,648
Proceeds, before expenses, to us $ 22.75 $ 569,624,146
(1) Assumes that all shares of Series F Preferred Stock offered in the
primary offering and pursuant to thedividend reinvestment plan are sold.
(2) We reserve the right to reallocate shares of the Series F Preferred
Stock between the primary offering and thedividend reinvestment plan.
(3) The maximum selling commissions and the dealer manager fee will equal 6.0% and 3.0%, respectively, of aggregategross proceeds
in the primary offering. Each is payable to our dealer manager. We or our affiliates also may provide permissible forms of
non-cash
compensation to registered representatives of our dealermanager and to broker-dealers that are members of the Financial Industry
Regulatory Authority ("FINRA") and authorized by our dealer manager to sell shares of the Series F Preferred Stock, which we
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refer to as participating broker-dealers.
The value of such items will be
considered underwriting compensation in
connection with the offering, and the
corresponding payments of our dealermanager
fee will be reduced by the aggregate
value of such items. The combined selling
commissions, dealer manager fee and such
non-cash
compensation will not exceed 10.0% of the aggregate gross proceeds ofthis offering, which
is referred to as FINRA's 10.0% cap. Our dealer manager will repay to us any excess
payments made to our dealer manager over FINRA's 10.0% cap if the offering is terminated
prior to obtaining the maximum offeringproceeds. See "Plan of Distribution" in this
prospectus supplement. The selling commissions and the dealer manager fee may be reduced
or eliminated with regard to shares sold to or for the account of certain categories of
purchasers. Noselling commissions or dealer manager fee will be paid on shares sold under
the dividend reinvestment plan. See "Plan of Distribution" in this prospectus supplement.
(4) Our dealer manager may reallow all or a portion of its selling commissions
attributable to participatingbroker-dealers. In addition, our dealer manager also
may reallow a portion of its dealer manager fee earned on the proceeds raised
by a participating broker-dealer, to such participating broker-dealer as a
non-accountable
marketing or due diligence allowance. The
amount of the reallowance to any participating
broker-dealer will be determined by the
dealer manager in its sole discretion.
The dealer manager is not required to sell any specific number of shares or
dollar amount of Series F Preferred Stock, but will use its"reasonable best
efforts" to sell the shares offered. There will be a minimum permitted
purchase of $5,000, or 200 shares of the Series F Preferred Stock, but
purchases of less than $5,000 may be made in our discretion in consultation
withour dealer manager. We may terminate this offering at any time, or may
offer pursuant to a new registration statement, including a
follow-on
registration statement.
We will sell shares of the Series F Preferred Stock through The Depository
Trust Company ("DTC") settlement ("DTCSettlement") or, under special
circumstances, through Direct Registration System settlement ("DRS
Settlement"). See "Plan of Distribution" in this prospectus supplement for a
description of these settlement methods.
Gladstone Securities, LLC
as Dealer Manager
Thedate of this prospectus supplement is May 1, 2024
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TABLE OF CONTENTS
Prospectus Supplement
ABOUT THIS PROSPECTUS SUPPLEMENT S-1
FORWARD-LOOKING STATEMENTS S-2
PROSPECTUS SUPPLEMENT SUMMARY S-4
RISK FACTORS S-12
ESTIMATED USE OF PROCEEDS S-21
DESCRIPTION OF THE SERIES F PREFERRED STOCK S-23
DIVIDEND REINVESTMENT PLAN S-31
ADDITIONAL MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS S-34
CERTAIN ERISA CONSIDERATIONS S-36
PLAN OF DISTRIBUTION S-40
LEGAL MATTERS S-44
EXPERTS S-44
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE S-45
WHERE YOU CAN FIND MORE INFORMATION S-45
Prospectus
ABOUT THIS PROSPECTUS 1
FORWARD-LOOKING STATEMENTS 2
PROSPECTUS SUMMARY 4
RISK FACTORS 7
USE OF PROCEEDS 8
DESCRIPTION OF CAPITAL STOCK 9
DESCRIPTION OF DEBT SECURITIES 20
DESCRIPTION OF DEPOSITARY SHARES 27
DESCRIPTION OF SUBSCRIPTION RIGHTS 30
BOOK ENTRY PROCEDURES AND SETTLEMENT 31
CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER ANDBYLAWS 32
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS 38
PLAN OF DISTRIBUTION 62
LEGAL MATTERS 66
EXPERTS 66
WHERE YOU CAN FIND MORE INFORMATION 66
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE 67
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ABOUT THIS PROSPECTUS SUPPLEMENT
This document is presented in two parts. The first part is comprised of this
prospectus supplement, which describes the specific terms of thisoffering of
Series F Preferred Stock and certain other matters relating to us. The second
part, the accompanying prospectus, contains more general information, some of
which does not apply to this offering, regarding securities that we may
offerfrom time to time. To the extent that the information contained in this
prospectus supplement differs or varies from the information contained in the
accompanying prospectus or documents that we previously filed with the SEC,
the information in thisprospectus supplement will supersede such information.
This prospectus supplement is part of a registration statement on Form
S-3
(Registration
No. 333-277877)
that we have filed with the SEC relating to the securities offered hereby.
This prospectus supplement does not contain all of theinformation that we have
included in the registration statement and the accompanying exhibits and
schedules thereto in accordance with the rules and regulations of the SEC, and
we refer you to such omitted information. It is important for you toread and
consider all of the information contained in this prospectus supplement and
the accompanying prospectus before making your investment decision. You should
also read and consider the additional information incorporated by reference
into thisprospectus supplement and the accompanying prospectus. See "Where You
Can Find More Information" in this prospectus supplement.
The distribution of this prospectus supplement and the accompanying prospectus
and this offering of the securities may be restricted by law incertain
jurisdictions. This prospectus supplement is not an offer to sell or a
solicitation of an offer to buy shares of our Series F Preferred Stock in any
jurisdiction where such offer or any sale would be unlawful. Persons who come
intopossession of this prospectus supplement and the accompanying prospectus
should inform themselves of and observe any such restrictions.
We have not authorized any dealer, salesperson or other person to give any
information or to make any representation other than thosecontained in this
prospectus supplement, the accompanying prospectus, and any information
incorporated by reference herein. You must not rely upon any information or
representation not contained or incorporated by reference in this
prospectussupplement, the accompanying prospectus, and any information
incorporated by reference herein. This prospectus supplement and the
accompanying prospectus do not constitute an offer to sell or the solicitation
of an offer to buy any securities otherthan the registered securities to which
they relate, nor does this prospectus supplement or the accompanying
prospectus constitute an offer to sell or the solicitation of an offer to buy
securities in any jurisdiction to any person to whom it isunlawful to make
such offer or solicitation in such jurisdiction. You should not assume that
the information contained in this prospectus supplement and the accompanying
prospectus is accurate on any date subsequent to the date set forth on
itsfront cover or that any information we have incorporated by reference is
correct on any date subsequent to the date of the document incorporated by
reference, even though this prospectus supplement and the accompanying
prospectus are delivered orsecurities are sold on a later date.
The shares of Series F Preferred Stock do not represent a deposit or
obligation of, and are notguaranteed or endorsed by, any bank or other insured
depository institution, and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government
agency.
S-1
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FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus, including the
documents incorporated by reference into this prospectus supplementand the
accompanying prospectus, contain "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").Forward-looking
statements provide our current expectations or forecasts of future events and
are not statements of historical fact. These forward-looking statements
include information about possible or assumed future events, including, among
otherthings, discussion and analysis of our business, financial condition,
results of operations, our strategic plans and objectives, and other matters.
Words such as "anticipates," "expects," "intends," "plans,""will," "should,"
"believes," "seeks," "estimates," "may," "provided," "future," "could,"
"would," "growth," "if,""possible," "potential" and "likely" and variations of
these words and similar expressions are intended to identify forward-looking
statements. These statements are not guarantees of future performance and are
subjectto risks, uncertainties and other factors, some of which are beyond our
control, are difficult to predict and/or could cause actual results to differ
materially from those expressed or forecasted in the forward-looking
statements. Statementsregarding the following subjects, among others, are
forward-looking by their nature:
. future
re-leasing
efforts;
. our business and financing strategy;
. our ability to continue to implement our business plan;
. pending and future transactions;
. our projected operating results and anticipated acquisitions;
. our ability to obtain future financing arrangements;
. estimates relating to our future distributions;
. our understanding of our competition and our ability to compete effectively;
. future market and industry trends;
. future interest and insurance rates;
. estimates of our future operating expenses, including payments to our Adviser (as defined herein) under
the termsof our investment advisory agreement with our Adviser, as amended from time to time (including
the Seventh Amended and Restated Investment Advisory Agreement dated January 10, 2023 and the Eighth Amended
and Restated Investment AdvisoryAgreement dated July 11, 2023) (together, the "Advisory Agreement");
. the impact of technology on our operations and business, including the risk of cyber-attacks,
cyber-liability orpotential liability for breaches of our privacy or information security systems;
. projected cash requirements, including capital expenditures;
. ability to raise proceeds from this offering; and
. future use of the proceeds of this offering, if any, our credit facility, mortgage
notes payable, future stockofferings and other future capital resources, if any.
Forward-looking statements involve inherent uncertainty and mayultimately
prove to be incorrect or false. You are cautioned to not place undue reliance
on forward-looking statements. Except as otherwise may be required by law, we
undertake no obligation to update or revise forward-looking statements to
reflectchanged assumptions, the occurrence of unanticipated events or actual
operating results. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various
factors, including, but not limitedto:
. the failure of our tenants and borrowers to pay rent or make mortgage payments;
S-2
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. our inability to renew leases, lease vacant space or
re-lease
space asleases expire;
. a failure of net leases to result in fair market lease rates over time;
. illiquidity of certain of our real estate investments;
. our real estate investments have a limited number of tenants and are
concentrated in a limited number ofindustries, which subjects us
to an increased risk of significant loss if any one of these tenants
is unable to pay or if particular industries experience downturns;
. our incurrence of significant costs related to government regulation and private litigation over environmentalmatters;
. general volatility in the capital markets, economic conditions, and the value of our equity securities;
. our inability to sustain the payment of distributions at current levels;
. restrictions on our borrowings and the risks associated with leverage, including our debt service obligations;
. interest rate fluctuations;
. inadvisable investment or management decisions made by our Adviser, on whom the success of our performancedepends;
. conflicts of interest with our Adviser and other affiliates;
. our failure to maintain our qualification as a REIT, and risks relating to changing laws that affect REITs;
. our redemption of Operating Partnership Units ("OP Units"), which may result in the issuance
of a largenumber of new shares of our common stock and/or force us to expend significant cash;
. limitations on our ability to pay distributions pursuant to the requirements of Maryland law; and
. cybersecurity threats and cyber incidents, which may cause a disruption to our operations, or the operations ofbusinesses
in which we invest, a compromise or corruption of our confidential information and/or damage to our business relationships.
This list of risks and uncertainties is only a summary of some of the most
important factors to us and is not intended to be exhaustive. Youshould
carefully review the risks and information contained in, or incorporated by
reference into, this prospectus supplement and the accompanying prospectus,
including, without limitation, the "Risk Factors" incorporated by
referenceherein from our Annual Report on Form
10-K
for the year ended December 31, 2023, and other reports and information that
we file with the SEC from time to time. New factors may also emerge from time
totime that could materially and adversely affect us.
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PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights selected information contained in or incorporated by
reference in this prospectus supplement and the accompanyingprospectus. This
summary is not complete and may not contain all of the information that may be
important to you in deciding whether to invest in shares of our Series F
Preferred Stock. To understand this offering fully prior to making an
investmentdecision, you should carefully read this prospectus supplement,
including the "Risk Factors" sections beginning on page
S-12
of this prospectus supplement, the accompanying prospectus, our
Annual Report on Form
10-K
for the year ended December 31, 2023
, and other reports and information that we file from time to time with the
SEC, which are incorporated by reference into this prospectus supplementand
the accompanying prospectus, and the documents incorporated by reference
herein and therein, including the financial statements and notes to those
financial statements.
Unless the context otherwise requires or indicates, each reference in this
prospectus supplement and the accompanying prospectus to (i)"we," "our," "us"
and the "Company" means Gladstone Commercial Corporation, a Maryland
corporation, and its consolidated subsidiaries, (ii) "Operating Partnership"
means Gladstone Commercial LimitedPartnership, a wholly-owned, consolidated
subsidiary of the Company and a Delaware limited partnership, (iii) "Adviser"
means Gladstone Management Corporation, the external adviser of the Company
and a Delaware corporation, and (iv)"Administrator" means Gladstone
Administration, LLC, the external administrator of the Company and a Delaware
limited liability company. The term "you" refers to a prospective investor.
The Company
We are anexternally-advised REIT that was incorporated under the General
Corporation Law of the State of Maryland on February 14, 2003. We have elected
to be taxed as a REIT for federal income tax purposes. We focus on acquiring,
owning, and managingprimarily industrial and office properties. Our shares of
common stock, par value $0.001 per share, our Series E Preferred Stock, and
our Series G Preferred Stock, trade on the Nasdaq under the trading symbols
"GOOD," "GOODN" and"GOODO," respectively. Our senior common stock, par value
$0.001 per share ("Senior Common Stock"), and our Series F Preferred Stock,
are not listed or traded on any exchange or automated quotation system.
Our properties are geographically diversified and our tenants cover a broad
cross section of business sectors and range in size from small tovery large
private and public companies, many of which are corporations that do not have
publicly-rated debt. We have historically entered into, and intend in the
future to enter into, purchase agreements for real estate having net leases
with termsof approximately seven to 15 years with
built-in
rental rate increases. Under a net lease, the tenant is required to pay most
or all operating, maintenance, repair and insurance costs and real estate
taxeswith respect to the leased property.
We actively communicate with buyout funds, real estate brokers and other third
parties to locateproperties for potential acquisition or to provide mortgage
financing in an effort to build our portfolio. We target secondary growth
markets that possess favorable economic growth trends, diversified industries,
and growing population andemployment.
We conduct substantially all of our business activities through an Umbrella
Partnership Real Estate Investment Truststructure, by which all of our
properties are held, directly or indirectly, by the Operating Partnership. We
control the sole general partner of the Operating Partnership and currently
own, directly or indirectly, approximately 99.2% of the commonOP Units. We
have in the past issued, and may in the future issue, OP Units in connection
with the acquisition of commercial real estate, and thereby potentially expand
the number of limited partners of the Operating Partnership. Limited
partnerswho hold limited partnership units in our Operating Partnership for at
least one year will generally be entitled to cause us to redeem these units
for cash or, at our election, shares of our common stock on a
one-for-one
basis.
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Our Adviser is an affiliate of ours and a registered investment adviser under
the InvestmentAdvisers Act of 1940, as amended. Our Adviser is responsible for
managing our business on a daily basis and identifying and making acquisitions
and dispositions that it believes satisfy our investment criteria.
Our executive offices are located at 1521 Westbranch Drive, Suite 100, McLean,
Virginia 22102, and our telephone number is (703)
287-5800.
Our website address is www.GladstoneCommercial.com. However, the information
located on, or accessible from, our website is not, and shall not be deemed to
be, a part of this prospectus supplement, theaccompanying prospectus or any
free writing prospectus or incorporated into any other filings that we make
with the SEC.
S-5
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The Offering
Issuer Gladstone Commercial Corporation
Securities Offered Maximum of 25,038,424 shares of Series F Preferred Stock, consisting of a primary
offering of up to 19,088,864 shares of Series F Preferred Stock through our dealer
manager on a "reasonable best efforts" basis and up to 5,949,560shares of our
Series F Preferred Stock to be issued pursuant to the dividend reinvestment plan.
As of the date of this prospectus supplement, 911,136 shares of Series F Preferred Stock were sold in
the aggregate in the primary offering under the Original Prospectus Supplement and the Prior Prospectus
Supplementand 50,440 shares of Series F Preferred Stock were sold in the aggregate pursuant to the
dividend reinvestment plan under the Original Prospectus Supplement and the Prior Prospectus Supplement.
Series F Preferred Stock to be Outstanding after the Offering 26,000,000 shares of Series F Preferred Stock, assuming the
maximum offering of 19,088,864 shares of Series F Preferred Stock
in the primary offering and 5,949,560 shares of Series F Preferred
Stock issued pursuant to the dividend reinvestmentplan.
Term of the Offerings The offering of the Series F Preferred Stock will terminate on the date
that is the earlier of (1) June 1, 2025 (unless earlier terminated
or extended by our Board of Directors) or (2) the date on which all
shares offered in theprimary offering are sold. We anticipate having a
bi-monthly
closing cycle for the offering, with closings occurring on or
about the first and third Thursday of each calendar month.
The offering period for the dividend reinvestment plan may extend beyond the Termination
Date and will terminate on the earlier of (1) the issuance of all shares of
Series F Preferred Stock under the dividendreinvestment plan and (2) the listing
of the Series F Preferred Stock on Nasdaq or another national securities exchange.
We reserve the right to terminate the primary offering and the offering
pursuant to the dividend reinvestment plan at any time in our sole discretion.
Minimum Investment There will be a minimum permitted purchase of $5,000, or 200 shares of the Series F Preferred Stock, but
purchases of less than $5,000 may be made in our discretion in consultation with our dealer manager.
Estimated Use of Proceeds Assuming that (1) we sell all 19,088,864 shares offered in the offering
and (2) issue no shares pursuant to the dividend reinvestment plan, we
estimate that our net proceeds from this offering will be approximately
$422.3 millionafter deducting estimated offering expenses, including
the maximum selling commissions and the dealer manager fee, payable by
us of approximately $54.9 million. We intend to use the proceeds from
this offering to repay existing indebtedness,fund future acquisitions and
for other general corporate purposes. See "Estimated Use of Proceeds."
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Dividends Holders of Series F Preferred Stock will be entitled to preferential
cumulative cash dividends on the Series F Preferred Stock at a rate
of 6.00% per annum of the $25.00 per share liquidation preference
(equivalent to $1.50 per annum per share).When, as and if authorized
by our Board of Directors and declared by us, dividends on the
Series F Preferred Stock will be payable monthly in arrears, on or
about the fifth day of each month for dividends accrued the previous
month or such laterdate as our Board of Directors may designate.
Dividends will accrue and be paid on the basis of a
360-day
year consisting of twelve
30-day
months. If a share of the Series F PreferredStock is issued prior to the record
date for a dividend period in which such share is issued, dividends on such
share will accrue and be cumulative from (but excluding) the last day of the most
recent dividend period for which dividends have beenpaid or, if no dividends
have been paid, from the date of issuance. If a share of the Series F Preferred
Stock is issued after the record date for the dividend period in which
such share is issued, dividends on such share will accrue and becumulative
from the beginning of the first dividend period commencing after its issuance.
Dividends on the Series F Preferred Stock will accrue whether or not (1) the payment of such dividends is restricted by law or any
agreement to which we are a party, (2) we have earnings, (3) there arefunds legally available for the payment of such dividends
and (4) such dividends are authorized and declared. Accrued but unpaid dividends on the Series F Preferred Stock will not
bear interest. Our Board of Directors will have ultimatediscretion to determine the amount and timing of these distributions.
Ranking The Series F Preferred Stock will rank, with respect to dividend rights and rights upon our liquidation,
winding-up
or dissolution:
. senior to all classes or series of our common stock and senior common stock
and any future class or series of ourcapital stock expressly designated
as ranking junior to the Series F Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up;
. on parity with the Series E Preferred Stock and Series G Preferred Stock
and any future class or series of ourcapital stock expressly designated
as ranking on parity with the Series F Preferred Stock with respect to
dividend rights and rights upon liquidation, dissolution or winding up;
. junior to any future class or series of our capital stock expressly
designated as ranking senior to the Series FPreferred Stock
with respect to dividend rights or rights upon liquidation, dissolution
or winding up, none of which exists on the date hereof; and
. junior to all of our existing and future indebtedness.
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Dividend Reinvestment Plan We are offering up to 5,949,560 shares of Series F Preferred
Stock under the dividend reinvestment plan, which are not
included in the 19,088,864 shares being sold in the primary
offering. Each registered holder of at least one full share
ofSeries F Preferred Stock will be automatically enrolled in
our dividend reinvestment plan by Computershare, Inc. (the
"Transfer Agent"), the dividend reinvestment plan agent, unless
the stockholder opts out of the dividend reinvestmentplan.
Accordingly, if our Board of Directors authorizes, and we
declare in accordance with the method set out by the Transfer
Agent, a cash dividend, then we will automatically issue shares
of Series F Preferred Stock to holders of Series FPreferred
Stock in lieu of paying the dividend to such holders in cash.
The number of additional shares of Series F Preferred Stock
to be credited to each participant's account will be determined
by dividing the dollar amount of thedistribution by $22.75.
Holders of Series F Preferred Stock who receive distributions in the form of
additional shares of Series F Preferred Stock are nonetheless required to pay
applicable federal, state or local taxes on the reinvesteddistribution but will
not receive a corresponding cash distribution with which to pay any applicable
tax. Holders of shares of Series F Preferred Stock who opt out of participation
in the dividend reinvestment plan (including those holders whoseshares are
held through a broker or other nominee who has opted out of participation in the
dividend reinvestment plan) generally will receive all distributions in cash.
See "Dividend Reinvestment Plan" in this prospectus supplement for additional information regarding the dividend reinvestment plan.
Redemption at the Option of Stockholders Optional Redemption upon Death.
Subject to certain conditions, including the limitations
described under "Description of the Series F Preferred
Stock-- Redemption at the Option of Stockholders" and
subject to the notice andother requirements described under
"--Redemption Procedures," commencing on the date of original
issuance and terminating upon the listing of the Series
F Preferred Stock on Nasdaq or another national securities
exchange, shares ofSeries F Preferred Stock held by a
natural person upon his or her death may be redeemed at the
written request of the holder's estate on the tenth calendar
day following such estate's request, or, if such tenth
calendar day is not abusiness day, on the next succeeding
business day (each such date, a "Death Redemption Date") for
a cash payment of $25.00 per share of Series F Preferred
Stock, plus an amount equal to any accumulated and
unpaid dividends to but excludingthe date of redemption.
Stockholder Redemption Option.
Subject to the certain conditions, including the limitations described
under"Description of the Series F Preferred Stock--Redemption by Stockholders--
Stockholder Redemption Option," and subject to the notice and other
requirements described under "--Redemption Procedures," commencing on the
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date of original issuance and terminating on the earlier to occur of (1) the date upon which our Board of Directors,
by resolution, suspends or terminates the optional redemption right ofthe holders of Series F Preferred Stock and (2)
the date on which shares of the Series F Preferred Stock are listed on Nasdaq or another national securities exchange,
holders of shares of Series F Preferred Stock may redeem any or all of theirshares of Series F Preferred Stock upon
written request, on the tenth calendar day following such holder's request, that we redeem shares of the Series F Preferred
Stock (a "Stockholder Redemption Notice"), or, if such tenth calendarday is not a business day, on the next succeeding
business day (each such date, a "Stockholder Redemption Date") for a cash payment of $22.50 per share of Series F
Preferred Stock, plus an amount equal to any accumulated and unpaiddividends to but excluding the date of redemption.
We may suspend or terminate the stockholder redemption program at any time in our sole and absolute discretion. The maximum dollar
amount that we will make available each calendar year to redeem shares of Series FPreferred Stock will not be subject to an annual
limit; provided, that our obligation to redeem shares at the option of a holder of Series F Preferred Stock is limited to the
extent that our Board of Directors determines, in its sole and absolutediscretion, that we do not have sufficient funds available
to fund any such redemption or we are restricted by applicable law from making such redemption. Our obligation to redeem shares at
the option of a holder of Series F Preferred Stock isfurther limited to the extent our Board of Directors suspends or terminates
the optional redemption right after delivery of a Stockholder Redemption Notice but prior to the corresponding Stockholder
Redemption Date, which the Board of Directors maydo at any time, for any reason or no reason, in its absolute and sole discretion.
Optional Redemption by the Company Except in limited circumstances relating to our continuing qualification as a REIT,
we may not redeem the Series F Preferred Stock prior to the later of (1) the
one-year
anniversary of the TerminationDate and (2) June 1, 2024.
On and after the later of (1) the
one-year
anniversary of the Termination Date and (2) June 1, 2024, we may, at our option,
redeem the Series F Preferred Stock, in wholeor in part, at any time or
from time to time, by payment of $25.00 per share, plus an amount equal to any
accumulated and unpaid dividends to but excluding the date of redemption.
Liquidation Preference Upon any voluntary or involuntary liquidation, dissolution or
winding-up
of our affairs, before any distributionor payment will be made to holders of our common stock or any
other class or series of capital stock ranking junior to our shares of Series F Preferred Stock, the
holders of shares of Series F Preferred Stock will be entitled to be paid out of ourassets legally
available for distribution to our stockholders, after payment or provision for our debts and other
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liabilities, a liquidation preference equal to $25.00 per share, plus an amount equal
to any accumulated but unpaid dividends to but excluding the date of redemption.
No Maturity, Sinking Fund or Mandatory Redemption The Series F Preferred Stock has no stated
maturity date, is not subject to any
sinking fund, and except as described in
"Description of the Series F Preferred
Stock--Redemption by Stockholders--Optional
Redemption Following Deathof a Holder,"
is not subject to mandatory redemption.
We are not required to set aside funds
to redeem the Series F Preferred Stock.
Accordingly, shares of the Series F
Preferred Stock may remain outstanding
indefinitely unless and until wedecide to
redeem the shares at our option or holders
elect to cause us to redeem their
shares under the permitted circumstances
described in this prospectus supplement.
Voting Rights Holders of the Series F Preferred Stock generally have no voting rights. However,
if dividends on any shares of the Series F Preferred Stock are in arrears for
18 or more consecutive months, then holders of the Series F Preferred Stock
(votingtogether as a class with holders of the Series E Preferred Stock and Series G
Preferred Stock and any other class of our capital stock ranking on parity with the
Series F Preferred Stock with respect to payment of dividends and the distribution
ofassets upon our liquidation, dissolution or winding up and upon which like voting
rights have been conferred and are exercisable) will have the right to elect
two additional directors to serve on our Board of Directors until all dividendsaccumulated
for past dividend periods and the dividend for the then current dividend
period shall have been fully paid or declared and a sum sufficient for the payment
thereof set apart for payment. Further, we may not amend, alter or repeal
ourcharter, whether by merger, consolidation or otherwise, in a manner that would
materially and adversely affect the rights, preferences, privileges or voting
power of the Series F Preferred Stock without the affirmative vote of the holders
of atleast two-thirds of the Shares of Series F Preferred Stock then outstanding.
U.S. Federal Income Taxes Certain material federal income tax considerations of purchasing,
owning and disposing of Series F Preferred Stock are
summarized under the heading "Additional Material Federal
Income Tax Considerations" in this prospectus supplementand
under the heading "Material Federal Income Tax Considerations"
in the accompanying prospectus. Prospective investors are
urged to consult their own tax advisors regarding these
matters in light of their personal investmentcircumstances.
Listing There is currently no public market for shares of Series F Preferred Stock. We intend to apply to list the Series F
Preferred Stock on Nasdaq or another national securities exchange within one calendar year of the Termination Date,
however,there can be no assurance that a listing will be achieved in such timeframe, or at all. We do not expect a
public market to develop before the shares are listed on Nasdaq or another national securities exchange, if at all.
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Covered Security
The term "covered security" applies to securities exempt from state
registration because of their oversight by federal authoritiesand
national-level regulatory bodies pursuant to Section 18 of the Securities Act.
Generally, securities listed on national exchanges are the most common type of
covered security exempt from state registration. A
non-traded
security also can be a covered security if it ranks equal or senior to other
securities from the same issuer that are listed on a national exchange, such
as Nasdaq. The Series F Preferred Stock is acovered security because it is
senior to our common stock and equal in seniority to the Series E Preferred
Stock and Series G Preferred Stock, each of which is listed on Nasdaq, and
therefore the Series F Preferred Stock is exempt from stateregistration and
qualification.
There are several advantages to both issuers and investors of a
non-traded
security being deemed a covered security. These include:
. More Investors--Covered securities can be purchased
by a broader range of investors than can
non-covered
securities.
Non-covered
securities are subject to suitability
requirements that vary from state to state. These
so-called
"Blue Sky" regulations often prohibit the sale of securities to certain investors and may
prohibit the sale of securities altogether until a specific volume of sales have been achieved.
. Issuance Costs--Covered securities may have lower issuance costs since they avoid the expense of dealing withthe various
regulations of each of the 50 United States ("U.S."), Washington, D.C., and U.S. territories. This could save time
and money and allows issuers of covered securities the flexibility to enter the real estate markets at a time oftheir
choosing. We believe that all investors of the issuer would benefit from any lower issuance costs that may be achieved.
There are several disadvantages to investors of a security being deemed a
covered security. These include:
. Lack of Suitability Standards--Since there are no investor eligibility requirements, there is no prohibitionon the sale
of the securities to certain investors, including investors for whom the securities may not be a suitable investment.
. No State Review--Investors will not receive an additional level of
review and possible protection afforded bythe various state regulators.
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RISK FACTORS
An investment in shares of the Series F Preferred Stock involves a high degree
of risk. In consultation with your own financial and legaladvisers, you should
carefully consider, among other matters, the factors set forth below, in the
accompanying prospectus, in our Annual Report on Form
10-K
for the year ended December 31, 2023 and otherinformation that we file from
time to time with the SEC, which are incorporated by reference into this
prospectus supplement and the accompanying prospectus, before deciding whether
an investment in shares of the Series F Preferred Stock is suitablefor you. If
any of the risks contained in or incorporated by reference into this
prospectus supplement or the accompanying prospectus develop into actual
events, our business, financial condition, liquidity, results of operations,
FFO, adjustedfunds from operations and prospects could be materially and
adversely affected, we may not be able to timely pay the dividends accrued on
the Series F Preferred Stock, the value of the Series F Preferred Stock could
decline and you may lose all orpart of your investment. In addition, new risks
may emerge at any time and we cannot predict such risks or estimate the extent
to which they may affect our financial performance. Some statements in this
prospectus supplement, including statements inthe following risk factors,
constitute forward-looking statements. See the "Forward-Looking Statements"
sections in this prospectus supplement and in the accompanying prospectus.
There will initially be no public market for the Series F Preferred Stock as
we do not intend to apply for listing on Nasdaq until after the TerminationDate,
and even after listing, if achieved, a liquid secondary trading market may
not develop and the features of the Series F Preferred Stock may not provide
you with favorable liquidity options.
There is currently no public market for the Series F Preferred Stock, and we
do not intend to apply to list the Series F Preferred Stock onNasdaq or
another national securities exchange or to include these shares for listing on
any national securities market until the calendar year following the
Termination Date. Until shares of the Series F Preferred Stock are listed on
Nasdaq oranother national securities exchange, if ever, holders of such shares
may be unable to sell them at all or, if they are able to, only at substantial
discounts from the liquidation preference. Even if the Series F Preferred
Stock is listed on Nasdaqor another national securities exchange within one
calendar year of the Termination Date, as anticipated, there is a risk that
such shares may be thinly traded, and the market for such shares may be
relatively illiquid compared to the market forother types of securities, with
the spread between the bid and asked prices considerably greater than the
spreads of other securities with comparable terms and features. Additionally,
our charter contains restrictions on the ownership and transferof our
securities, including the Series F Preferred Stock, and these restrictions may
inhibit your ability to sell the Series F Preferred Stock promptly, or at all.
Also, since the Series F Preferred Stock does not have a stated maturity date,
youmay be forced to hold your Series F Preferred Stock and receive stated
dividends on the shares of Series F Preferred Stock when, as and if authorized
by our Board of Directors and declared by us with no assurance as to ever
receiving the liquidationpreference. Therefore, you should purchase shares of
the Series F Preferred Stock only as a long-term investment.
The Series F Preferred Stock has notbeen rated.
We have not sought to have the Series F Preferred Stock rated by any rating
agency. Unrated securities are usually valuedat a discount to similar, rated
securities. As a result, there is a risk that the Series F Preferred Stock may
be valued or trade at a price that is lower than the shares might otherwise
trade if rated by a rating agency.
It is possible, however, that one or more rating agencies might independently
determine to assign a rating to the Series F Preferred Stock. Inaddition, we
may elect in the future to obtain a rating of the Series F Preferred Stock,
which could adversely impact the market price of the Series F Preferred Stock,
or, we may elect to issue other securities for which we may seek to obtain
arating. Ratings only reflect the views of the rating agency or agencies
issuing the ratings and such ratings could be revised downward, placed on
negative outlook or withdrawn entirely at the discretion of the issuing agency
if in its judgmentcircumstances so warrant. If any
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ratings are assigned to the Series F Preferred Stock in the future or if we
issue other securities with a rating, such ratings, if they are lower than
market expectations or are subsequentlylowered or withdrawn, could adversely
affect the market for or the value of the Series F Preferred Stock or the
trading price on any market on which it may trade. It is also possible that
the Series F Preferred Stock will never be rated.
Dividend payments on the Series F Preferred Stock are not guaranteed.
Although dividends on the Series F Preferred Stock are cumulative, our Board
of Directors must approve the actual payment of the dividends. OurBoard of
Directors can elect at any time or from time to time, and for an indefinite
duration, not to pay any or all accrued dividends. Our Board of Directors
could elect to suspend dividends for any reason, and may be prohibited from
approvingdividends in the following instances:
. poor historical or projected cash flows;
. the need to make payments on our indebtedness;
. concluding that payment of distributions on the Series F Preferred Stock would cause
us to breach the terms ofany indebtedness or other instrument or agreement; or
. determining that the payment of dividends would violate applicable law regarding unlawful distributions tostockholders.
We operate as a holding company dependent upon the assets and operations of
our subsidiaries, and becauseof our structure, we may not be able to generate
the funds necessary to make distributions on the Series F Preferred Stock.
We generallyoperate as a holding company that conducts its businesses
primarily through the Operating Partnership, which in turn is a holding
company conducting its business through its subsidiaries. These subsidiaries
conduct all of our operations and are ouronly sources of income. Accordingly,
we are dependent on cash flows and payments of funds to us by our subsidiaries
as distributions, loans, advances, leases or other payments from our
subsidiaries to generate the funds necessary to makedistributions or dividends
on our securities. Our subsidiaries' ability to pay such distributions and/or
make such loans, advances, leases or other payments may be restricted by,
among other things, applicable laws and regulations, current andfuture debt
agreements and management agreements into which our subsidiaries may enter,
which may impair our ability to make cash payments on our securities,
including the Series F Preferred Stock. In addition, such agreements may
prohibit or limitthe ability of our subsidiaries to transfer any of their
property or assets to us, any of our other subsidiaries or third parties. Our
future indebtedness or our subsidiaries' future indebtedness may also include
restrictions with similareffects.
In addition, because we are a holding company, stockholders' claims will be
structurally subordinated to all existing andfuture liabilities and
obligations (whether or not for borrowed money) of the Operating Partnership
and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation
or reorganization, claims of holders of the Series F Preferred Stockwill be
satisfied only after all of our and the Operating Partnership's and its
subsidiaries' liabilities and obligations have been paid in full.
We will be required to terminate this offering if all of our common stock,
Series E Preferred Stock and Series G Preferred Stock are no longerlisted on
Nasdaq or another national securities exchange.
The Series F Preferred Stock is a "covered security" and therefore isnot
subject to registration under the state securities, or "Blue Sky," regulations
in the various states in which it may be sold due to its seniority to our
common stock, which is listed on Nasdaq. If all of our common stock, the
Series EPreferred Stock and the Series G Preferred Stock are no longer listed
on Nasdaq or another national securities exchange, we will be required to
register this offering in any state in which we offer shares of the Series F
Preferred Stock. This wouldeffectively require the termination of this
offering and could result in our raising an amount of gross proceeds that is
substantially less than the amount of the gross proceeds we expect to raise if
the maximum offering is sold. This would reduceour ability to make additional
investments and limit the diversification of our portfolio.
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The Series F Preferred Stock will bear a risk of redemption by us.
Except in limited circumstances relating to our continuing qualification as a
REIT, we, at our option, may not redeem shares of the Series FPreferred Stock
prior to the later of (1) the first anniversary of the Termination Date and
(2) June 1, 2024. However, any such redemptions after such date may occur at a
time that is unfavorable to holders of the Series F PreferredStock. We may
have an incentive to redeem the Series F Preferred Stock voluntarily if market
conditions allow us to issue other preferred stock or debt securities at a
dividend or interest rate that is lower than the dividend rate on the Series
FPreferred Stock. For further information regarding our ability to redeem the
Series F Preferred Stock, see "Description of the Series F Preferred Stock--
Redemption."
Your option to tender your Series F Preferred Stock for redemption is subject
to the continuation of the redemption program and our availability of
funds,each in the sole and absolute discretion of our Board of Directors, and
may also be limited by law.
Our Board of Directors mayterminate or suspend the redemption program at any
time for any reason in its sole and absolute discretion. Therefore, our
obligation to redeem shares at the option of a holder of Series F Preferred
Stock is limited to the extent our Board ofDirectors suspends or terminates
the optional redemption right for any reason, including after delivery of a
Stockholder Redemption Notice but prior to the corresponding Stockholder
Redemption Date. Our obligation to redeem shares at the option of aholder of
Series F Preferred Stock is also limited to the extent that our Board of
Directors determines, in its sole and absolute discretion, that we do not have
sufficient funds available to fund any such redemption or we are restricted
byapplicable law from making such redemption. If you deliver a request to
redeem your shares of Series F Preferred Stock, but our Board of Directors
determines we do not have sufficient funds available to fund such redemption
(even if there issufficient funding as determined under applicable law), you
may only be able to tender for redemption a portion of your shares or not be
able to tender for redemption any of your shares.
Our ability to pay dividends and/or redeem shares of Series F Preferred Stock
may be limited by Maryland law and the terms of our debt facilities as wellas
future agreements we may enter.
Under Maryland law, a corporation may pay dividends and redeem stock as long
as, after givingeffect to the payment or redemption, the corporation is able
to pay its debts as they become due in the usual course of business (the
equity solvency test) and its total assets exceed the sum of its total
liabilities plus, unless its charter permitsotherwise, the amount that would
be needed, if the corporation were to be dissolved at the time of the payment
or redemption, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights on dissolution are superiorto those
whose stock is being redeemed (the balance sheet solvency test). If we are
insolvent at any time when a redemption of shares of Series F Preferred Stock
is desired or required to be made, we may not be able to effect such
redemption.Furthermore, the terms of our debt facilities may restrict our
ability to redeem shares of our Series F Preferred Stock for cash during an
event of default, and we expect to enter agreements in the future that may
similarly restrict our ability toredeem in cash in such instances.
The cash distributions you receive may be less frequent or lower in amount
than you expect.
Our Board of Directors intends to pay distributions on the Series F Preferred
Stock monthly in arrears on or about the fifth day of each monthfor dividends
accrued the previous month (or such later date as our Board of Directors may
designate) in an amount equal to $1.50 per share per year. However, our Board
of Directors has ultimate discretion to determine the amount and timing of
thesedistributions. In making this determination, our Board of Directors will
consider all relevant factors, including the amount of cash available for
distribution, capital expenditure and reserve requirements and general
operational requirements. Wecannot assure you that we will consistently be
able to generate sufficient available cash flow to fund distributions on the
Series F Preferred Stock at the stated dividend rate nor can we assure you
that sufficient cash will be available to makedistributions to you. We cannot
predict the amount of distributions you may receive and we may be unable to
pay distributions over time. Our inability to acquire additional properties or
make real estate-related investments or operate profitably mayhave a negative
effect on our ability to generate sufficient cash flow from operations to pay
distributions on the Series F Preferred Stock.
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If you elect to exercise the Stockholder Redemption Option, the cash payment
that you receive as a resultof your option redemption will be a substantial
discount to the price that you paid for the shares of Series F Preferred Stock
in this offering.
The cash payment that stockholders who elect to exercise their Stockholder
Redemption Option (and therefore cause us to redeem their shares ofSeries F
Preferred Stock) will receive is $22.50 per share, which is a 10% discount to
the price of $25.00 per share paid for such stockholder's shares of Series F
Preferred Stock in this offering. Exercising the Stockholder Redemption
Optioncould cause you to lose a substantial portion of your investment.
Upon the sale of any individual property, holders of Series F Preferred Stock
do nothave a right to receive funds and do not have a priority over holders of
our common stock regarding return of capital.
Holders of theSeries F Preferred Stock do not have a right to receive a return
of capital prior to holders of our common stock upon the individual sale of a
property in our portfolio. Depending on the price at which such property is
sold, it is possible thatholders of our common stock will receive a return of
capital prior to the holders of the Series F Preferred Stock, provided that
any accrued but unpaid dividends have been paid in full to holders of Series F
Preferred Stock. It is also possible thatholders of common stock will receive
additional distributions from the sale of a property (in excess of their
capital attributable to the asset sold) before the holders of Series F
Preferred Stock receive a return of their capital.
Your percentage of ownership may become diluted if we incur additional debt or
issue new shares of stock or other securities, and incurrence ofindebtedness
and issuances of additional preferred stock or other securities by us may
further subordinate the rights of the holders of our common stock.
As of December 31, 2023, our total long-term indebtedness was approximately
$743.9 million (excluding Series E Preferred Stock andSeries G Preferred Stock
outstanding, which are both considered mezzanine equity), and we may incur
significant additional debt in the future. Our stockholders, including the
holders of shares of Series F Preferred Stock, will be subordinate to allof
our existing and future debt and liabilities and will be structurally
subordinate to the debt and liabilities of our subsidiaries. Our future debt
may include restrictions on our ability to pay dividends to preferred
stockholders in the event ofa default under the debt facilities or under other
circumstances. None of the provisions relating to the Series F Preferred Stock
relate to or limit our indebtedness or afford the holders of shares of Series
F Preferred Stock protection in the eventof a highly leveraged or other
transaction, including a merger or the sale, lease or conveyance of all or
substantially all our assets or business, that might adversely affect the
holders of shares of Series F Preferred Stock.
Our Board of Directors is authorized, without stockholder approval, to cause
us to issue additional shares of our common stock or to raisecapital through
the issuance of additional preferred stock (including equity or debt
securities convertible into preferred stock), options, warrants and other
rights, on such terms and for such consideration as our Board of Directors in
its solediscretion may determine. Any such issuance could result in dilution
of the equity of our stockholders. Our Board of Directors may, in its sole
discretion, authorize us to issue common stock or other equity or debt
securities to persons from whom wepurchase property, as part or all of the
purchase price of the property. Our Board of Directors, in its sole
discretion, may determine the value of any common stock or other equity or
debt securities issued in consideration of property acquired orservices
provided, or to be provided, to us.
Our charter also authorizes our Board of Directors, without stockholder
approval, todesignate and issue one or more classes or series of preferred
stock in addition to the Series F Preferred Stock (including equity or debt
securities convertible into preferred stock) and to set or change the
preferences, conversion and otherrights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications or terms or
conditions of redemption of each class or series of shares so issued. We may
also issue shares of our common stock pursuant to our
at-the-market
sale programs and we may issue other classes of capital stock pursuant to
similar
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programs in the future. If any additional preferred stock is publicly offered,
the terms and conditions of such preferred stock (including any equity or debt
securities convertible into preferredstock) will be set forth in a
registration statement registering the issuance of such preferred stock or
equity or debt securities convertible into preferred stock. Because our Board
of Directors has the power to establish the preferences and rightsof each
class or series of preferred stock, it may afford the holders of any series or
class of preferred stock preferences, powers and rights senior to the rights
of holders of common stock or the Series F Preferred Stock. If we ever create
andissue additional preferred stock or equity or debt securities convertible
into preferred stock with a distribution preference over common stock or the
Series F Preferred Stock, payment of any distribution preferences of such new
outstandingpreferred stock would reduce the amount of funds available for the
payment of distributions on our common stock and the Series F Preferred Stock.
Further, holders of preferred stock are normally entitled to receive a
preference payment if weliquidate, dissolve or wind up before any payment is
made to the common stockholders, likely reducing the amount common
stockholders would otherwise receive upon such an occurrence. In addition,
under certain circumstances, the issuance ofadditional preferred stock may
delay, prevent, render more difficult or tend to discourage a merger, tender
offer, or proxy contest, the assumption of control by a holder of a large
block of our securities or the removal of incumbent management.
Stockholders have no rights to buy additional shares of stock or other
securities if we issue new shares of stock or other securities. Wemay issue
common stock, convertible debt or preferred stock pursuant to a subsequent
public offering or a private placement, or to sellers of properties we
directly or indirectly acquire instead of, or in addition to, cash
consideration. Any newsecurities may be listed immediately on Nasdaq or
another national securities exchange. Investors purchasing Series F Preferred
Stock in this offering who do not participate in any future stock issuances
will experience dilution in the percentage ofthe issued and outstanding stock
they own. In addition, depending on the terms and pricing of any additional
offerings and the value of our investments, you also may experience dilution
in the book value and fair market value of, and the amount ofdistributions
paid on, your shares of Series F Preferred Stock.
You will experience dilution in your ownership percentage of Series F
Preferred Stockif you do not participate in our dividend reinvestment plan.
All distributions declared in cash payable to stockholders that areparticipants
in our dividend reinvestment plan for our Series F Preferred Stock are
automatically reinvested in shares of Series F Preferred Stock. As a result,
stockholders that do not participate in our dividend reinvestment plan will
experiencedilution in their ownership percentage of our Series F Preferred
Stock over time.
Our charter contains restrictions upon ownership and transfer of theSeries F
Preferred Stock, which may impair the ability of holders to acquire the Series
F Preferred Stock.
Our charter containsrestrictions on ownership and transfer of the Series F
Preferred Stock intended to assist us in maintaining our qualification as a
REIT for federal income tax purposes. For example, to assist us in qualifying
as a REIT, our charter prohibits anyonefrom owning, or being deemed to own by
virtue of the applicable constructive ownership provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), more than 9.8% of the
outstanding shares of our capital stock. See"Description of the Series F
Preferred Stock--Restrictions on Ownership and Transfer" in this prospectus
supplement. You should consider these ownership limitations prior to your
purchase of shares of the Series F Preferred Stock.
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Holders of the Series F Preferred Stock will be subject to inflation risk.
Inflation is the reduction in the purchasing power of money resulting from the
increase in the price of goods and services. Inflation risk isthe risk that
the inflation-adjusted, or "real," value of an investment in preferred stock
or the income from that investment will be worth less in the future. As
inflation occurs, the real value of the Series F Preferred Stock anddividends
payable on such shares declines.
An investment in the Series F Preferred Stock bears interest rate risk.
The Series F Preferred Stock will pay dividends at a fixed dividend rate.
Prices of fixed income investments vary inversely with changes inmarket
yields. The market yields on securities comparable to the Series F Preferred
Stock may increase, which could result in a decline in the value or secondary
market price of the Series F Preferred Stock. For additional information
concerningdividends on the Series F Preferred Stock, see "Description of the
Series F Preferred Stock--Dividends" in this prospectus supplement.
Holders of the Series F Preferred Stock will bear reinvestment risk.
Given the potential for redemption of the Series F Preferred Stock at the
Company's option commencing on the later of (1) the firstanniversary of the
Termination Date and (2) June 1, 2024, holders of such shares may face an
increased reinvestment risk, which is the risk that the return on an
investment purchased with proceeds from the sale or redemption of the Series
FPreferred Stock may be lower than the return previously obtained from the
investment in such shares.
Holders of Series F Preferred Stock will have nocontrol over changes in our
policies and operations, and have extremely limited voting rights.
Our Board of Directors determines ourmajor policies, including with regard to
investment objectives, financing growth, debt capitalization, REIT
qualification and distributions. Our Board of Directors may amend or revise
these and other policies without a vote of our stockholders.
In addition, the voting rights of holders of the Series F Preferred Stock will
be extremely limited. Our common stock is currently the onlyclass or series of
our stock carrying full voting rights. Voting rights for holders of Series F
Preferred Stock exist primarily with respect to material and adverse changes
in the terms of the Series F Preferred Stock and the election of directorsupon
our failure to pay dividends on the Series F Preferred Stock for 18 or more
consecutive months. See "Description of the Series F Preferred Stock--Voting
Rights" in this prospectus supplement.
Our management will have broad discretion in the use of the net proceeds from
this offering and may allocate the net proceeds from this offering in waysthat
you and other stockholders may not approve.
Our management will have broad discretion in the use of the net proceeds,
includingfor any of the purposes described in the section entitled "Estimated
Use of Proceeds," and you will not have the opportunity as part of your
investment decision to assess whether the net proceeds are being used in ways
with which you maynot agree with or may not otherwise consider appropriate.
Because of the number and variability of factors that will determine our use
of the net proceeds from this offering, their ultimate use may vary
substantially from their currently intendeduse. The failure of our management
to use these funds effectively could harm our business.
Pending their use, we may invest the netproceeds from this offering in
short-term, investment-grade, interest-bearing securities. These investments
may not yield a favorable return to our stockholders.
We may be unable to invest a significant portion of the net proceeds of this
offering on acceptable terms.
Delays in investing the net proceeds of this offering may impair our
performance. We cannot assure you that we will be able to consummatetransactions
on properties that meet our investment objectives or that any
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investment we make will produce a positive return. We may be unable to invest
the net proceeds of this offering on acceptable terms within the time period
that we anticipate or at all, whichcould adversely affect our financial
condition and operating results.
We have paid, may continue to pay, or may in the future pay, distributions
fromoffering proceeds, borrowings or the sale of assets to the extent our cash
flow from operations or earnings are not sufficient to fund declared
distributions. Rates of distribution to holders of our common stock and
preferred stock will notnecessarily be indicative of our operating results. If
we make distributions from sources other than our cash flows from operations
or earnings, we will have fewer funds available for the acquisition of
properties and your overall return may bereduced.
Our organizational documents permit us to make distributions from any source,
including the net proceeds from this offering.There is no limit on the amount
of offering proceeds we may use to pay distributions. During the early stages
of our operations following our IPO in January of 2003, we funded certain of
our distributions from the net proceeds of the IPO, borrowingsand the sale of
assets to the extent distributions exceed our earnings or cash flows from
operations. Generally, our policy is to pay distributions from cash flow from
operations. However, to date, certain of our distributions have been paid
fromsources other than cash flows from operations, such as from borrowings and
proceeds from equity offerings, and we may continue to pay distributions from
such sources as necessary. See "Plan of Distribution." To the extent we
funddistributions from sources other than cash flow from operations, such
distributions may constitute a return of capital and we will have fewer funds
available for the acquisition of properties and your overall return may be
reduced. Further, to theextent distributions exceed our earnings and profits,
a stockholder's basis in our stock will be reduced and, to the extent
distributions exceed a stockholder's basis, the stockholder will be required
to recognize capital gain.
If the properties we acquire or invest in do not produce the cash flow that we
expect in order to meet our REIT minimum distribution requirement, we
maydecide to borrow funds to meet the REIT minimum distribution requirements,
which could adversely affect our overall financial performance.
We may decide to borrow funds in order to meet the REIT minimum distribution
requirement even if our management believes that the thenprevailing market
conditions generally are not favorable for such borrowings or that such
borrowings would not be advisable in the absence of such tax considerations.
If we borrow money to meet the REIT minimum distribution requirement or for
otherworking capital needs, our expenses will increase, our net income will be
reduced by the amount of interest we pay on the money we borrow and we will be
obligated to repay the money we borrow from future earnings or by selling
assets, which maydecrease future distributions to stockholders.
Gladstone Securities, the dealer manager in this offering, is our affiliate,
and we established theoffering price and other terms for the Series F
Preferred Stock pursuant to discussions between us and our affiliated dealer
manager; as a result, the actual value of your investment may be substantially
less than what you pay.
Gladstone Securities is our affiliate and is not, therefore, independent.
Thus, the agreement with Gladstone Securities, including fees andexpenses
payable thereunder, was not negotiated at
arm's-length.
The offering price of the Series F Preferred Stock, the selling commissions
and the dealer manager fees have been determined pursuant todiscussions
between us and Gladstone Securities, our affiliated dealer manager, based upon
the following primary factors: the economic conditions in and future prospects
for the industry in which we compete; our prospects for future earnings;
anassessment of our management; the present state of our development; the
prevailing conditions of the equity securities markets at the time of this
offering; the present state of the market for
non-traded
REITsecurities; and current market valuations of public companies considered
comparable to us. Because the offering price and other terms are not based
upon any independent valuation, the offering price may not be indicative of
the proceeds that youwould receive upon liquidation. In addition, Gladstone
Securities does not have its own legal counsel and may engage our legal
counsel on a limited basis for certain matters related to this offering, which
could represent a conflict of interest.
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Payment of fees to our Adviser and its affiliates, including our affiliated
dealer manager, will reducethe cash available for investment and distribution
and will increase the risk that you will not be able to recover the amount of
your investment in the shares of Series F Preferred Stock.
Our Adviser and its affiliates, including our affiliated dealer manager,
perform services for us in connection with the distribution of ourshares, the
selection and acquisition of our investments and the management of our assets.
We pay our Adviser and our dealer manager fees for these services, which will
reduce the amount of cash available for investments or distributions to
ourstockholders. Among other things, the proceeds received from the sale of
Series F Preferred Stock in this offering may be included in the calculation
of the Base Management Fee (as defined in the Advisory Agreement) that our
Adviser may be entitledto pursuant to the Advisory Agreement and therefore
will likely increase the fees payable to our Adviser. In addition, in April
2017, we entered into an agreement with our dealer manager to assist us with
arranging financing for our properties. Inthe event that we place mortgages on
properties in our portfolio, we may engage our dealer manager to arrange such
mortgages and our dealer manager would receive fees for such services pursuant
to the agreement. The fees we pay to our Adviser andits affiliates decrease
the value of our portfolio and, in the event of our liquidation, dissolution
or winding up, that holders of the Series F Preferred Stock may receive
distributions in an amount less than the liquidation preference.
We may have conflicts of interest with our affiliates, which could result in
investment decisions that are not in the best interests of our stockholders.
There are potential conflicts of interest between our interests and the
interests of our affiliates, including conflicts arising outof allocation of
personnel to our activities, or the allocation of investment opportunities
between us and investment vehicles affiliated with our affiliates. Examples of
these potential conflicts of interest include:
. Competition for the time and services of personnel that work for our Adviser and its affiliates;
. The possibility that our officers and their respective affiliates, including our Adviser and
GladstoneSecurities, will face conflicts of interest, and that such conflicts may not be
resolved in our favor, thus potentially limiting our investment opportunities, impairing our
ability to make distributions and adversely affecting the trading price ofour stock; and
. The possibility that the competing demands for the time of our officers may
result in them spending insufficienttime on our business, which may result in
our missing investment opportunities or having less efficient operations, which
could reduce our profitability and result in lower distributions to you.
If you fail to meet the fiduciary and other standards under ERISA or the Code
as a result of an investment in this offering, you could be subject
toliability and civil or criminal penalties.
Special considerations apply to the purchase of stock by employee benefit
plans subject tothe fiduciary rules of Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), including pension or profit
sharing plans and entities that hold assets of such ERISA Plans, and plans and
accounts that aresubject to the prohibited transaction rules of Section 4975
of the Code, including individual retirement accounts and money purchase plans
(collectively, "IRAs") and medical savings accounts. If you are investing the
assets of anyplan, you should satisfy yourself that:
. your investment is consistent with your fiduciary obligations under ERISA and the Code;
. your investment is made in accordance with the documents and
instruments governing the plan, including theplan's investment policy;
. your investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B)
and 404(a)(1)(C)of ERISA, if applicable, and other applicable provisions of ERISA and the Code;
. your investment, for which no trading market may exist, will not impair the liquidity of the plan;
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. your investment will not produce "unrelated business taxable income" for the plan;
. you will be able to value the assets of the plan annually in accordance
with ERISA requirements and applicableprovisions of the plan; and
. your investment will not constitute a
non-exempt
prohibited transactionunder Section 406 of ERISA or Section 4975 of the Code.
Fiduciaries may be held personally liable under ERISAfor losses as a result of
failure to satisfy the fiduciary standards of conduct and other applicable
requirements of ERISA. In addition, if an investment in our stock constitutes a
non-exempt
prohibitedtransaction under ERISA or the Code, the fiduciary of the plan who
authorized or directed the investment may be subject to imposition of excise
taxes with respect to the amount invested and the imposition of civil and
criminal penalties and an IRAinvesting in the stock may lose its tax exempt
status. Plans that are not subject to ERISA or the prohibited transactions of
the Code, such as government plans or church plans, may be subject to similar
requirements under state law or other federallaw. Such plans should satisfy
themselves that the investment satisfies applicable law. We have not, and will
not, evaluate whether an investment in our stock is suitable for any
particular plan, and nothing in this prospectus supplement or theaccompanying
prospectus should be considered investment advice offered to a plan. ERISA
plan fiduciaries and IRA owners should consult with counsel before making an
investment under this offering.
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ESTIMATED USE OF PROCEEDS
The table below estimates the proceeds raised in this offering assuming (i)
that we sell all 19,088,864 shares of Series F PreferredStock in the offering
at the public offering price of $25.00 and (ii) that we do not sell any shares
of the Series F Preferred Stock pursuant to the dividend reinvestment plan.
Estimated Proceeds of Offering
Offering
Maximum Percent
Amount
Gross offering proceeds $ 477,221,600 100.00 %
Offering expenses:
Selling commissions $ 28,633,296 6.00 %
(1)
Dealer manager fee $ 14,316,648 3.00 %
(1)
Other offering expenses $ 11,930,540 2.50 %
(2)
Estimated net proceeds $ 422,341,116 88.50 %
(1) Assumes maximum selling commissions equal to 6.0% of gross offering proceeds of the offering and a dealermanager fee of
3.0% of gross offering proceeds of the offering. All or a portion of selling commissions and/or of the dealer manager
fee may be reallowed to participating broker-dealers. See the "Plan of Distribution" section of thisprospectus
supplement for a description of these commissions and fees. We or our affiliates also may provide permissible forms of
non-cash
compensation to registered representatives of our dealer
manager andthe participating broker-dealers, including
gifts. In no event will such gifts exceed an aggregate value
of $100 per annum per participating salesperson, or be
pre-conditioned
on achievement of a sales target.The value of such items will be considered
underwriting compensation in connection with this offering, and the corresponding
payments of our dealer manager fee will be reduced by the aggregate value of such
items. The aggregate combined sellingcommissions, dealer manager fee and such
non-cash
compensation for the offering will not exceed FINRA's 10.0% cap. Our dealer manager will repay to us any excess payments made to
our dealer manager overFINRA's 10.0% cap if this offering is terminated before reaching the maximum amount of offering proceeds.
The selling commissions and the dealer manager fee may be reduced or eliminated with regard to shares of Series F Preferred
Stock sold toor for the account of certain categories of purchasers. See "Plan of Distribution" in this prospectus supplement.
(2) Includes all expenses (other than selling commissions and the dealer manager fee) to be paid by
us or on ourbehalf in connection with the qualification and registration of this offering and
the marketing and distribution of the Series F Preferred Stock, including expenses for printing
and amending registration statements or supplementing prospectuses,mailing and distributing
costs, all advertising and marketing expenses (including reimbursements for actual costs
incurred for travel, meals and lodging by employees of our Adviser and other affiliates to
attend retail seminars hosted bybroker-dealers or bona fide training or educational meetings
hosted by our Adviser or its affiliates), charges of transfer agents, registrars and experts
and fees, expenses and taxes related to the filing, registration and qualification, asnecessary,
of the sale of the Series F Preferred Stock under federal and state laws, including taxes
and fees and accountants' and attorneys' fees. The dealer manager will bear any expenses
related to due diligence of us by, and anysalaries or commissions of, wholesalers and other
participating broker dealers or related to contracting with an entity to provide DTC clearing
services for the Series F Preferred Stock. We may reimburse the dealer manager or our other
affiliatesfor any other expenses incurred on our behalf in connection with the offering. All
organization and offering expenses, including selling commissions, the dealer manager fee and
non-cash
compensation, are notexpected to exceed
11.5% of the aggregate gross proceeds of
this offering, though the amount of such
expenses may exceed the expected amount.
Assuming the maximum offering, we estimate that we will receive net proceeds
from the sale of shares of Series F Preferred Stock in theoffering of
approximately $422.3 million, after deducting estimated offering
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expenses, including the maximum selling commissions and the dealer manager
fee, payable by us of approximately $54.9 million.
We intend to use the proceeds from this offering to repay existing
indebtedness (including a portion of the indebtedness outstanding under
ourcredit facility), which, in turn, will be used to fund future acquisitions
and for other general corporate purposes. This offering is not contingent upon
the closing of any pending acquisitions.
Pending application of any portion of the net proceeds as described above, we
may invest such proceeds in interest-bearing accounts andshort-term,
interest-bearing securities as is consistent with our intention to maintain
our qualification as a REIT for federal income tax purposes. Such investments
may include, for example, obligations of the Government National MortgageAssocia
tion, other government and governmental agency securities, certificates of
deposit and interest-bearing bank deposits.
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DESCRIPTION OF THE SERIES F PREFERRED STOCK
The following summary of the material terms and provisions of the Series F
Preferred Stock does not purport to be complete and is subjectto our charter
(including the articles supplementary relating to the Series F Preferred Stock
offered hereby), and our bylaws, each of which is available from us as
described under "Where You Can Find More Information" of this prospectussuppleme
nt and is incorporated by reference in this prospectus supplement. This
description of the Series F Preferred Stock supplements the description of the
general terms and provisions of our securities, including preferred stock, in
theaccompanying prospectus. You should consult that general description,
beginning on page 9 of the accompanying prospectus, for further information.
General
As of March 8, 2024, ourauthorized capital stock consists of 100,000,000
shares of capital stock, par value $0.001 per share, 62,329,084 of which are
classified as common stock, 6,760,000 of which are classified as Series E
Preferred Stock, 950,000 of which are classifiedas Senior Common Stock,
25,970,030 of which are classified as Series F Preferred Stock and 3,990,886
of which are classified as Series G Preferred Stock. Under our charter, our
Board of Directors is authorized to classify and reclassify any unissuedshares
of capital stock by setting or changing in any one or more respects, from time
to time before issuance of such stock, the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or
otherdistributions, qualifications and terms and conditions of redemption of
such stock. Our Board of Directors may also, without stockholder approval,
amend our charter from time to time to increase or decrease the aggregate
number of shares of stock orthe number of shares of stock of any class that we
have authority to issue.
On February 20, 2020, our Board of Directorsreclassified 26,000,000 shares of
unissued stock as "6.00% Series F Cumulative Redeemable Preferred Stock," up
to 19,088,864 shares of which are being offering in a primary offering
pursuant to this prospectus supplement and up to5,949,560 shares of which are
being offered pursuant to the dividend reinvestment plan under this prospectus
supplement. When issued, each share of Series F Preferred Stock will be
validly issued, fully paid and nonassessable. As of the date of thisprospectus
supplement, 911,136 shares of Series F Preferred Stock were sold in the
aggregate in the primary offering under the Original Prospectus Supplement and
the Prior Prospectus Supplement and 50,440 shares of Series F Preferred Stock
were soldin the aggregate pursuant to the dividend reinvestment plan under the
Original Prospectus Supplement and the Prior Prospectus Supplement.
The following summary of the terms and provisions of the Series F Preferred
Stock does not purport to be complete and is qualified in itsentirety by
reference to the pertinent sections of our charter including the articles
supplementary, which supplement our charter by classifying the Series F
Preferred Stock. You may obtain a complete copy of the articles supplementary
by contactingus. See "Incorporation of Certain Information by Reference" for
information on how to contact us.
Dividends
Holders of shares of the Series F Preferred Stock will be entitled to receive,
when, as and if authorized by our Board of Directors (or a dulyauthorized
committee of the board) and declared by us, out of funds legally available for
the payment of dividends, preferential cumulative cash dividends at the rate
of 6.00% per annum of the liquidation preference of $25.00 per share
(equivalentto a fixed annual amount of $1.50 per share). Each registered
holder of at least one full share of Series F Preferred Stock will be
automatically enrolled in our dividend reinvestment plan by Transfer Agent
unless the stockholder opts out of thedividend reinvestment plan. See
"Dividend Reinvestment Plan" in this prospectus supplement for additional
information regarding the dividend reinvestment plan.
Dividends on shares of the Series F Preferred Stock will accrue and be paid on
the basis of a
360-day
year consisting of twelve
30-day
months. Dividends on outstanding shares of the Series F Preferred Stock will
accrue
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and be cumulative from the end of the most recent dividend period for which
dividends have been paid or, if no dividends have been paid, from the date of
issuance. Dividends will be payablemonthly in arrears, on or about the fifth
day of each month for dividends accrued the previous month or such date as our
Board of Directors may designate, to holders of record as they appear in our
stock records at the close of business on theapplicable record date. The
record date for each dividend will be designated by our Board of Directors and
will be a date that is prior to the dividend payment date. We currently
anticipate the record date will be on or about the 25th of each month,but such
date is subject to determination by our Board of Directors.
Our Board of Directors will not authorize, and we will not declare,pay or set
apart for payment, any dividends on shares of Series F Preferred Stock at any
time that the terms and provisions of any of our agreements, including any
agreement relating to our indebtedness, prohibits that action or provides that
theauthorization, declaration, payment or setting apart for payment of those
dividends would constitute a breach of or a default under any such agreement,
or if such action is restricted or prohibited by law.
Notwithstanding the foregoing, dividends on the Series F Preferred Stock will
accumulate whether or not (1) restrictions exist in respectthereof, (2) we
have earnings, (3) there are funds legally available for the payment of such
dividends, or (4) our Board of Directors authorizes or we declare such
dividends. Accumulated but unpaid dividends on the Series F PreferredStock
will not bear interest, and holders of the Series F Preferred Stock will not
be entitled to any distributions in excess of full cumulative dividends
described above.
If we do not declare and either pay or set apart for payment the full
cumulative dividends on the Series F Preferred Stock and all shares ofcapital
stock that are equal in rank with Series F Preferred Stock (including shares
of the Series E Preferred Stock and Series G Preferred Stock), the amount
which we have declared will be allocated ratably to the Series F Preferred
Stock and toeach series of shares of capital stock equal in rank so that the
amount declared for each share of Series F Preferred Stock and for each share
of each series of capital stock equal in rank is proportionate to the accrued
and unpaid dividends onthose shares.
Except as provided in the immediately preceding paragraph, unless full
cumulative dividends on the Series F Preferred Stockhave been or contemporaneous
ly are declared and paid (or declared and a sum sufficient for the payment is
set apart for payment) for all past dividend periods, no dividends (other than
in shares of common stock or other shares of capital stockranking junior to
the Series F Preferred Stock as to dividends and upon liquidation) will be
declared and paid or declared and set apart for payment nor will any other
distribution be declared and made upon our common stock, or any of our
othercapital stock ranking junior to or equal with the Series F Preferred
Stock as to dividends or upon liquidation, nor will we redeem, purchase or
otherwise acquire for any consideration (or pay or make any monies available
for a sinking fund for theredemption of any such shares) any shares of our
common stock or any other shares of our capital stock ranking junior to or
equal with the Series F Preferred Stock as to dividends or upon liquidation
(except by conversion into or exchange for any ofour capital stock ranking
junior to the Series F Preferred Stock as to dividends and upon liquidation or
redemption for the purpose of preserving our qualification as a REIT).
Ranking
The Series F Preferred Stockwill rank, with respect to dividend rights and
rights upon our liquidation,
winding-up
or dissolution:
. senior to all classes or series of our common stock and senior common stock
and any future class or series of ourcapital stock expressly designated
as ranking junior to the Series F Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up;
. on parity with our Series E Preferred Stock, our Series G Preferred Stock
and any future class or series of ourcapital stock expressly designated
as ranking on parity with the Series F Preferred Stock with respect to
dividend rights and rights upon liquidation, dissolution or winding up;
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. junior to any future class or series of our capital stock expressly
designated as ranking senior to the Series FPreferred Stock
with respect to dividend rights or rights upon liquidation, dissolution
or winding up, none of which exists on the date hereof; and
. junior to all of our existing and future indebtedness.
Redemption at the Option of Stockholders
OptionalRedemption Following Death of a Holder
Subject to the restrictions described under "--Stockholder RedemptionOption,"
and the terms and procedures described below under "--Redemption Procedures,"
commencing on the date of original issuance and terminating upon the listing
of the Series F Preferred Stock on Nasdaq or another nationalsecurities
exchange, shares of Series F Preferred Stock held by a natural person upon his
or her death will be redeemed at the written request of the holder's estate
for a cash payment of $25.00 per share of Series F Preferred Stock on theDeath
Redemption Date, which is the tenth calendar day following delivery of such
holder's estate's request that we redeem shares of the Series F Preferred
Stock, or if such tenth calendar day is not a business day, on the next
succeedingbusiness day.
Stockholder Redemption Option
Subject to the restrictions described herein, and the terms and procedures
described below under "--Redemption Procedures,"commencing on the date of
original issuance (or, if after the date of original issuance our Board of
Directors suspends the redemption right of the holders of the Series F
Preferred Stock, on the date our Board of Directors reinstates such right)and
terminating on the earlier to occur of (1) the date upon which our Board of
Directors, by resolution, suspends or terminates the redemption program, and
(2) the date on which shares of the Series F Preferred Stock are listed on
Nasdaqor another national securities exchange, holders of the Series F
Preferred Stock may, at their option, require us to redeem any or all of their
shares of Series F Preferred Stock for a cash payment of $22.50 per share of
Series F Preferred Stock onthe Stockholder Redemption Date, which is the tenth
calendar day following delivery of such holder's request that we redeem shares
of the Series F Preferred Stock, or if such tenth calendar day is not a
business day, on the next succeedingbusiness day. The maximum dollar amount
that we will make available each calendar year to redeem shares of Series F
Preferred Stock will not be subject to an annual limit; provided, that our
obligation to redeem shares of Series F Preferred Stock islimited to the
extent that our Board of Directors determines, in its sole and absolute
discretion, that we do not have sufficient funds available to fund any such
redemption or we are restricted by applicable law from making such redemption;
and isalso limited to the extent our Board of Directors suspends or terminates
the optional redemption right at any time or for any reason, including after
delivery of a Stockholder Redemption Notice but prior to the corresponding
Stockholder RedemptionDate.
Redemption Procedures
To require us to redeem shares of Series F Preferred Stock, a holder or estate
of a holder, as applicable, must deliver a notice of redemption,by overnight
delivery or by first class mail, postage prepaid to us at our principal
executive offices. Each such notice must be an original, notarized copy and
must state: (1) the name and address of the stockholder whose shares of Series
FPreferred Stock are requested to be redeemed, (2) the number of shares of
Series F Preferred Stock requested to be redeemed, (3) the name of the broker
dealer who holds the shares of Series F Preferred Stock requested to be
redeemed, thestockholder's account number with such broker dealer and such
broker dealer's participant number for DTC and (4) in the case of a notice to
redeem upon the death of a holder, a certified copy of the death certificate
(and such otherevidence that is satisfactory to us in our sole discretion) for
the natural person who previously held the shares to be redeemed.
If, asa result of the limitations described under "--Stockholder Redemption
Option," the optional redemption right has not been suspended or terminated
but fewer than all shares for which a notice of redemption
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was delivered to us are to be redeemed, the number of shares to be redeemed
will be pro rata based on the number of shares of Series F Preferred Stock for
which each holder timely submitted anotice of redemption. If a Stockholder
Redemption Date is also a Death Redemption Date, the limitations described
under "--Stockholder Redemption Option" shall first be applied to any
redemption requested upon the death of the holderand then to shares to be
redeemed pursuant to the Stockholder Redemption Option.
Upon any redemption of shares of Series F PreferredStock, the holder thereof
will also be entitled to receive a sum equal to all accumulated and unpaid
dividends on such shares to, but excluding, the applicable Stockholder
Redemption Date or Death Redemption Date (unless such Stockholder
RedemptionDate or Death Redemption Date falls after a dividend record date and
on or prior to the corresponding dividend payment date, in which case each
holder of shares of Series F Preferred Stock on such dividend record date will
be entitled to thedividend payable on such shares on the corresponding
dividend payment date, notwithstanding the redemption of such shares on or
prior to such dividend payment date, and each holder of shares of Series F
Preferred Stock that are redeemed on suchStockholder Redemption Date or Death
Redemption Date will be entitled to the dividends, if any, occurring after the
end of the dividend period to which such dividend payment date relates up to,
but excluding, the Stockholder Redemption Date or DeathRedemption Date, as the
case may be). Upon the redemption of any shares of Series F Preferred Stock,
such shares of Series F Preferred Stock will cease to be outstanding,
dividends with respect to such shares of Series F Preferred Stock will ceaseto
accumulate and all rights whatsoever with respect to such shares (except the
right to receive the per share cash payment for the shares to be redeemed)
will terminate.
We may suspend or terminate the redemption program at any time in our sole
discretion.
Optional Redemption by the Company
Except in certain limited circumstances relating to maintaining our
qualification as a REIT as described in "--Restrictions onOwnership and
Transfer," we cannot redeem the Series F Preferred Stock prior to the later of
(1) the first anniversary of the Termination Date and (2) June 1, 2024.
On and after the later of (1) the first anniversary of the Termination Date
and (2) June 1, 2024, at our sole option upon notless than 30 nor more than 60
days' written notice, we may redeem shares of the Series F Preferred Stock, in
whole or in part, at any time or from time to time, for cash at a redemption
price of $25.00 per share, plus an amount equal to allaccumulated and unpaid
dividends on such shares to, but excluding, the date fixed for redemption,
without interest. Holders of Series F Preferred Stock to be redeemed must then
surrender such Series F Preferred Stock at the place designated in thenotice.
Upon surrender of the Series F Preferred Stock, the holders will be entitled
to the redemption price. If notice of redemption of any shares of Series F
Preferred Stock has been given and if we have deposited the funds necessary
for suchredemption with the paying agent for the benefit of the holders of any
of the shares of Series F Preferred Stock to be redeemed, then from and after
the redemption date, dividends will cease to accumulate on those shares of
Series F Preferred Stock,those shares of Series F Preferred Stock will no
longer be deemed outstanding and all rights of the holders of such shares will
terminate, except the right to receive the redemption price. If less than all
of the outstanding Series F Preferred Stockis to be redeemed, the Series F
Preferred Stock to be redeemed will be selected (1) pro rata, (2) by lot or
(3) by any other fair and equitable method that our Board of Directors may
choose.
Unless full cumulative dividends for all applicable past dividend periods on
all shares of Series F Preferred Stock and any shares of stockthat rank on
parity with regards to dividends and upon liquidation have been or
contemporaneously are declared and paid (or declared and a sum sufficient for
payment set apart for payment), no shares of Series F Preferred Stock will be
redeemed. Insuch event, we also will not purchase or otherwise acquire
directly or indirectly any shares of Series F Preferred Stock (except by
exchange for our capital stock ranking junior to the Series F Preferred Stock
as to dividends and upon liquidation).However, the foregoing will not prevent
us from purchasing shares pursuant to our charter, in order to ensure that we
continue to meet the requirements for qualification as a REIT, or from
acquiring shares of Series F Preferred Stock pursuant to a
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purchase or exchange offer made on the same terms to holders of all
outstanding shares of Series F Preferred Stock and any shares of stock that
rank on parity with regards to dividends and uponliquidation. Upon listing, if
any, of the Series F Preferred Stock on Nasdaq or another national securities
exchange, so long as no dividends are in arrears, we will be entitled at any
time and from time to time to repurchase shares of Series FPreferred Stock in
open-market transactions duly authorized by the Board of Directors and
effected in compliance with applicable laws.
Wewill deliver a notice of redemption, by overnight delivery, by first class
mail, postage prepaid or electronically to holders thereof, or request our
agent, on behalf of us, to promptly do so by overnight delivery, by first
class mail, postageprepaid or electronically. The notice will be provided not
less than 30 nor more than 60 days prior to the date fixed for redemption in
such notice. Each such notice will state: (1) the date for redemption; (2) the
number of shares ofSeries F Preferred Stock to be redeemed; (3) the CUSIP
number for the Series F Preferred Stock; (4) the applicable redemption price
on a per share basis; (5) if applicable, the place or places where the
certificate(s) for such sharesare to be surrendered for payment of the price
for redemption; (6) that dividends on the Series F Preferred Stock to be
redeemed will cease to accumulate from and after such date of redemption; and
(7) the applicable provisions of ourcharter under which such redemption is
made. If fewer than all shares held by any holder are to be redeemed, the
notice delivered to such holder will also specify the number of Series F
Preferred Stock to be redeemed from such holder or the methodof determining
such number. We may provide in any such notice that such redemption is subject
to one or more conditions precedent and that we will not be required to effect
such redemption unless each such condition has been satisfied at the time
ortimes and in the manner specified in such notice. No defect in the notice or
delivery thereof will affect the validity of redemption proceedings, except as
required by applicable law.
If a redemption date falls after a record date and on or prior to the
corresponding dividend payment date, each holder of Series F PreferredStock at
the close of business on that record date will be entitled to the dividend
payable on such shares on the corresponding dividend payment date
notwithstanding the redemption of such shares on or prior to such dividend
payment date, and eachholder of shares of Series F Preferred Stock that are
redeemed on such redemption date will be entitled to the dividends, if any,
accruing after the end of the dividend period for which such dividend payment
date relates up to, but excluding, theredemption date.
Liquidation Preference
In the event of our voluntary or involuntary liquidation, dissolution or
winding up, the holders of shares of Series F Preferred Stock will beentitled
to be paid, out of our assets legally available for distribution to our
stockholders, a liquidation preference of $25.00 per share, plus an amount
equal to any accumulated and unpaid dividends on such shares to, but
excluding, the date ofpayment, but without interest, before any distribution
of assets is made to holders of our common stock or any other class or series
of our capital stock that ranks junior to the Series F Preferred Stock as to
liquidation rights. If our assetslegally available for distribution to
stockholders are insufficient to pay in full the liquidation preference on the
Series F Preferred Stock and the liquidation preference on any shares of
preferred stock equal in rank with the Series F PreferredStock, all assets
distributed to the holders of the Series F Preferred Stock and any other
series of preferred stock equal in rank with the Series F Preferred Stock will
be distributed ratably so that the amount of assets distributed per share
ofSeries F Preferred Stock and such other series of preferred stock equal in
rank with the Series F Preferred Stock will in all cases bear to each other
the same ratio that the liquidation preference per share on the Series F
Preferred Stock and onsuch other series of preferred stock bear to each other.
Written notice of any such liquidation, dissolution or winding up of us,
stating the payment date or dates when, and the place or places where, the
amounts distributable in such circumstanceswill be payable, will be given by
first class mail, postage
pre-paid,
not less than 30 nor more than 60 days prior to the payment date stated
therein, to each record holder of the Series F Preferred Stock atthe
respective addresses of such holders as the same appear on the stock transfer
records of the Company. After payment of the full amount of the liquidation
preference, plus any accumulated and unpaid dividends to which they are
entitled, theholders of Series F Preferred Stock will have no right or claim
to any of our remaining assets. If we convert into or consolidate or merge
with or into any other corporation, trust or entity,
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effect a statutory share exchange or sell, lease, transfer or convey all or
substantially all of our property or business, we will not be deemed to have
liquidated, dissolved or wound up.
Voting Rights
Holders of the Series FPreferred Stock will not have any voting rights, except
as described below.
Whenever dividends on any shares of Series F Preferred Stockare in arrears for
18 or more consecutive months (a "Dividend Default"), then the holders of
those shares together with the holders of all other series of preferred stock
equal in rank with the Series F Preferred Stock upon which likevoting rights
have been conferred and are exercisable, will be entitled to vote separately
as a class for the election of a total of two additional directors on our
Board of Directors.
The election of these directors will take place at a special meeting called at
the written request of the holders of record of at least 20% ofthe outstanding
shares of Series F Preferred Stock or holders of record of at least 20% of any
class or series of preferred stock equal in rank with the Series F Preferred
Stock which like voting rights have been conferred and are exercisable(unless
such request is received less than 90 days before the date fixed for the next
annual or special meeting of stockholders) or at the next annual meeting of
stockholders, and at each subsequent annual meeting until all dividends
accumulatedfrom past dividend periods and the then current dividend period
have been paid (or declared and a sum sufficient for payment set apart).
A quorum for any such meeting will exist if at least a majority of the total
number of outstanding shares of Series F Preferred Stock andoutstanding shares
of preferred stock equal in rank with the Series F Preferred Stock entitled to
like voting rights are represented in person or by proxy at that meeting. The
directors elected as described above will be elected upon the affirmativevote
of a plurality of the votes cast by the holders of shares of Series F
Preferred Stock and preferred stock equal in rank with the Series F Preferred
Stock, voting separately as a single class, present and voting in person or by
proxy at a dulycalled and held meeting at which a quorum is present. If and
when all accumulated dividends and the dividend for the then current dividend
period on the Series F Preferred Stock have been paid in full or declared or
set apart for payment in full,the holders of the Series F Preferred Stock will
be divested of the right to elect directors and, if all dividend arrearages
have been paid in full or declared and set apart for payment in full on all
series of preferred stock entitled to likevoting rights, the term of office of
each director so elected will terminate. Any director so elected may be
removed at any time with or without cause by, and may not be removed otherwise
than by the vote of, the holders of record of a majority ofthe outstanding
shares of the Series F Preferred Stock having the voting rights described
above, voting separately as a single class with all classes or series of
preferred stock entitled to like voting rights. So long as a dividend
arrearagecontinues, any vacancy in the office of a director elected as
described above may be filled by written consent of the director elected as
described above who remains in office, or if none remains in office, by a vote
of the holders of record of amajority of the outstanding shares of Series F
Preferred Stock when they have the voting rights described above, voting
separately as a single class with all classes or series of preferred stock
entitled to like voting rights. These directors willeach be entitled to one
vote per director on any matter.
So long as any shares of Series F Preferred Stock remain outstanding, we
willnot, without the affirmative vote or consent of the holders of at least
two-thirds
of the shares of the Series F Preferred Stock outstanding at the time, given
in person or by proxy, either in writing or at ameeting (voting separately as
a class), amend, alter or repeal the provisions of our charter, including the
articles supplementary designating the Series F Preferred Stock, whether by
merger, consolidation or otherwise, so as to materially andadversely affect
any right, preference, privilege or voting power of the Series F Preferred
Stock. However, with respect to the occurrence of any event listed above, so
long as the Series F Preferred Stock remains outstanding (or shares issued by
asurviving entity in substitution for the Series F Preferred Stock) with its
terms materially unchanged, taking into account that upon the occurrence of
such an event, we may not be the surviving entity, the occurrence of any such
event will not bedeemed to materially and adversely affect such rights,
preferences, privileges or voting
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power of holders of the Series F Preferred Stock. In addition, (i) any
increase in the number of authorized shares of Series F Preferred Stock, (ii)
any increase in the number ofauthorized shares of preferred stock or the
creation or issuance of any other class or series of preferred stock or (iii)
any increase in the number of authorized shares of such class or series, in
each case ranking equal with or junior to theSeries F Preferred Stock with
respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, will not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwisebe required is
effected, all outstanding shares of Series F Preferred Stock have been
redeemed or called for redemption upon proper notice and sufficient funds have
been deposited in trust to effect such redemption.
Restrictions on Ownership and Transfer
In order for us to qualify as a REIT, not more than 50% (by value) of our
outstanding stock may be owned by any five or fewer individuals(including some
tax-exempt
entities) during the last half of each taxable year, and the outstanding stock
must be owned by 100 or more persons independent of us and each other during
at least 335 days of a
12-month
taxable year or during a proportionate part of a shorter taxable year for
which an election to be treated as a REIT is made. We may prohibit certain
acquisitions and transfers of shares of our stock tomaintain our qualification
as a REIT under the Code. However, no assurance can be given that this
prohibition will be effective.
In orderto assist our Board of Directors in preserving our status as a REIT,
among other purposes, our charter contains an ownership limit which prohibits
any person or group of persons from acquiring, directly or indirectly,
beneficial or constructiveownership of more than 9.8% of the outstanding
shares of our capital stock (which includes our common stock and preferred
stock). Shares owned by a person or a group of persons in excess of the
ownership limit are deemed "excess shares."Shares owned by a person who
individually owns of record less than 9.8% of outstanding shares may
nevertheless be excess shares if the person is deemed part of a group for
purposes of this restriction.
Our charter stipulates that any purported issuance or transfer of shares shall
be valid only with respect to those shares that do not resultin the
transferee-stockholder owning shares in excess of the ownership limit or in
our disqualification as a REIT under the Code. If the transferee-stockholder
acquires excess shares, the person is considered to have acted as our agent
and holds theexcess shares on behalf of the ultimate stockholder.
The ownership limit does not apply to offerors which, in accordance with
applicablefederal and state securities laws, make a cash tender offer, where
at least 90% of the outstanding shares of our stock (not including shares or
subsequently issued securities convertible into common stock which are held by
the tender offeror and any"affiliates" or "associates" thereof within the
meaning of the Exchange Act) are duly tendered and accepted pursuant to the
cash tender offer. The ownership limit also does not apply to the underwriter
in a public offering of ourstock. The ownership limit also does not apply to a
person or persons which our directors exempt from the ownership limit upon
appropriate assurances that our qualification as a REIT is not jeopardized.
We have the authority to (a) redeem excess shares upon becoming aware of the
existence of excess shares after giving the holder of theexcess shares written
notice of the redemption not less than one week prior to the redemption date,
or (b) grant the holder 30 days to transfer the excess shares to any person or
group of persons whose ownership of such shares would not exceedthe ownership
limit, in which case such shares would no longer be considered excess shares.
The price paid upon redemption by us shall be the lesser of the price paid for
such excess shares by the stockholder holding the excess shares or the
fairmarket value of the excess shares. See "
Certain Provisions of Maryland Law and of Our Charter and Bylaws--Restrictions
on Ownership and Transfer
" in the accompanying prospectus.
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Transfer Agent and Registrar
The Transfer Agent and registrar for the Series F Preferred Stock is
Computershare, Inc.
Listing
We intend to apply to list theSeries F Preferred Stock on Nasdaq within one
calendar year of the Termination Date. There can be no assurance that a
listing will be achieved in such timeframe, or at all.
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DIVIDEND REINVESTMENT PLAN
We are offering up to 5,949,560 shares of Series F Preferred Stock under the
dividend reinvestment plan, which are not included in the19,088,864 shares
being sold in the primary offering under this prospectus supplement. Each
registered holder of at least one full share of Series F Preferred Stock will
be automatically enrolled in our dividend reinvestment plan unless
thestockholder opts out of the dividend reinvestment plan. Accordingly, if our
Board of Directors authorizes, and we declare in accordance with the method
set out by the Transfer Agent, a cash dividend, then we will automatically
issue shares of SeriesF Preferred Stock to holders of Series F Preferred Stock
in lieu of paying the dividend to such holders in cash. The number of
additional shares of Series F Preferred Stock to be credited to each
participant's account will be determined bydividing the dollar amount of the
distribution by $22.75.
The offering period for the dividend reinvestment plan may extend beyond
theTermination Date and will terminate on the earlier of (1) the issuance of
all 5,949,560 shares of Series F Preferred Stock under the dividend
reinvestment plan and (2) the listing of the Series F Preferred Stock on
Nasdaq or anothernational securities exchange. We may also, in our sole
discretion, reallocate the number of shares of Series F Preferred Stock sold
in the primary offering and the offering pursuant to the dividend reinvestment
plan.
Stockholders participating in the dividend reinvestment plan may withdraw from
the dividend reinvestment plan at any time by contacting theTransfer Agent
online at www.computershare.com/investor, via telephone at (866)
464-5221
or in writing at Computershare, P.O. Box 505013, Louisville, KY 40233-5013.
Such termination will be effectiveimmediately if the notice is received by the
Transfer Agent prior to any dividend or distribution record date; otherwise,
such termination will be effective on the first trading day after the payment
date for such dividend or distribution, withrespect to any subsequent dividend
or distribution. If a holder of Series F Preferred Stock transfers the shares
of Series F Preferred Stock they hold in their dividend reinvestment plan
account at the Transfer Agent, full shares of Series FPreferred Stock will be
credited to their corresponding account, and the stockholder will be sent a
check for the cash adjustment of any remaining fractional share at a value of
$22.75 per share of Series F Preferred Stock as of the close ofbusiness on the
day the transfer is effective, less any applicable fees.
Holders of the Series F Preferred Stock who do not elect toparticipate in the
dividend reinvestment plan will receive all distributions in cash paid by
check mailed directly to the stockholder (or if the stockholder holds shares
in street or other nominee name, then to such nominee) as of the relevantrecord
date, by the plan agent, as our distribution disbursing agent. Investors who
hold their shares in the name of a broker or nominee can transfer the shares
into the investor's own name and then enroll in the dividend reinvestment plan
orcontact the broker or nominee to determine if they permit participation in
the dividend reinvestment plan.
The Transfer Agent willmaintain the account in the dividend reinvestment plan
for each participant who is a stockholder of record and will furnish periodic
written confirmations of all transactions in such account, including
information needed by the stockholder forpersonal and tax records. Shares of
Series F Preferred Stock in the account of each such dividend reinvestment
plan participant will be held by the plan agent in
non-certificated
form in the name of suchparticipant. The Transfer Agent will provide proxy
materials relating to our stockholders' meetings that will include those
shares of Series F Preferred Stock purchased through the plan agent, as well
as shares of Series F Preferred Stock heldpursuant to the dividend
reinvestment plan.
We pay the plan agent's fees for the handling of reinvestment of dividends and
otherdistributions. There are no charges to participants for reinvesting
distributions.
Certain material federal income tax consequences of participatingin the
dividend reinvestment plan
The following is a summary of certain material federal income tax consequences
of participation inthe dividend reinvestment plan as of the date of this
prospectus supplement. This summary, however, does not reflect
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every situation that could result from participation in the dividend
reinvestment plan, is for general information only and does not constitute tax
advice. This summary does not address the taximplications of your ownership of
shares of Series F Preferred Stock, including the effect of distributions made
in respect of such shares. We advise you to consult your tax and other
advisors for information about your specific situation.
The information in this section is based on the Code, existing, temporary and
proposed regulations under the Code, the legislative history ofthe Code,
current administrative rulings and practices of the Internal Revenue Service
("IRS"), and court decisions, all as of the date hereof. We cannot assure you
that new laws, interpretations of law or court decisions, any of which maytake
effect retroactively, will not cause any statement in this section to be
inaccurate. No assurance can be given that the IRS would not assert, or that a
court would not sustain, a position contrary to any of the tax consequences
described below.We have not sought and will not seek an advance ruling from
the IRS regarding any matter in this prospectus.
Although the federal incometax treatment of dividend reinvestment plans is not
entirely clear, it is expected that stockholders participating in the dividend
reinvestment plan will be treated for federal income tax purposes as having
received, on the date such dividends arereinvested, a distribution equal to
the fair market value of any shares of Series F Preferred Stock acquired with
reinvested cash dividends. Consequently, dividends reinvested in the dividend
reinvestment plan may give rise to a tax paymentobligation without the
corresponding cash to pay such tax when it becomes due. The total amount of
cash and other distributions will be reported to stockholders and to the IRS
on the appropriate tax form shortly after the end of each year. The taxbasis
of shares of Series F Preferred Stock acquired under the dividend reinvestment
plan will be equal to the fair market value of the shares on the date such
stock is purchased under the dividend reinvestment plan plus any brokerage
costs paid bythe stockholder. A stockholder's holding period for Series F
Preferred Stock acquired under the dividend reinvestment plan generally will
begin on the day after the date on which the Series F Preferred Stock is
credited to thestockholder's account.
Our distributions to stockholders constitute dividends for federal income tax
purposes up to the amount ofour current and accumulated earnings and profits
(as determined for federal income tax purposes) and, to that extent, will be
taxable as ordinary income (except to the extent that we designate any portion
of such dividend as either: (i) a"capital gain" dividend; or (ii) in the case
of stockholders taxed at individual rates who satisfy certain holding period
requirements, as "qualified dividend income" pursuant to applicable federal
income tax rules). To theextent that we make a distribution in excess of our
current and accumulated earnings and profits, such distribution will be
treated first as a
tax-free
return of capital to the extent of a stockholder'sadjusted tax basis in our
Series F Preferred Stock and, to the extent in excess of the stockholder's
basis, will be taxable as a gain realized from the sale of the stockholder's
Series F Preferred Stock. Distributions to corporatestockholders, including
amounts taxable as dividends to corporate stockholders, generally will not be
eligible for the corporate dividends-received deduction.
You will not recognize gain or loss for federal income tax purposes upon your
receipt of certificates for shares previously credited to yourdividend
reinvestment plan account. You generally will recognize gain or loss, however,
when you sell or exchange shares received from the dividend reinvestment plan
or when a fractional share interest is liquidated. Such gain or loss will
equal thedifference between the amount that you receive for such shares or
such fractional share interest and your tax basis in such shares or such
fractional share interest.
We or the Transfer Agent may be required to deduct and collect "backup
withholding" (currently at a rate of 24%) from all dividendspaid to you,
regardless of whether such dividends are reinvested pursuant to the dividend
reinvestment plan. You are subject to backup withholding if: (i) you have
failed properly to furnish us and the Transfer Agent with your correct
taxidentification number ("TIN"); (ii) the IRS or a broker notifies us or the
Transfer Agent that the TIN furnished by you is incorrect; (iii) the IRS or a
broker notifies us or the Transfer Agent that backup withholding should
becommenced because you failed to properly report dividends paid to you; or
(iv) when required to do so, you fail to certify, under penalties of perjury,
that you are not subject to backup withholding. Backup withholding amounts
will be withheldfrom dividends before such dividends are
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reinvested under the dividend reinvestment plan. Therefore, if you are subject
to backup withholding, dividends to be reinvested under the dividend
reinvestment plan will be reduced by the backupwithholding amount.
If you are a foreign stockholder, you need to provide the required federal
income tax certifications to establishyour status as a foreign stockholder so
that the foregoing backup withholding does not apply to you. You also need to
provide the required certifications if you wish to claim the benefit of
exemptions from federal income tax withholding or reducedwithholding rates
under a treaty or convention entered into between the United States and your
country of residence. If you are a foreign stockholder whose dividends are
subject to federal income tax withholding, the appropriate amount will
bewithheld and the balance in shares of Series F Preferred Stock will be
credited to your account.
Sections 1471 through 1474 of the Codeand IRS guidance thereunder (commonly
referred to as FATCA) generally impose federal withholding tax on dividends
paid to certain
non-U.S.
persons unless various reporting and other requirements are satisfied.Payments
of dividends that you receive in respect of our shares could be affected by
this withholding if you are subject to the FATCA information reporting
requirements and fail to comply with them or if you hold shares through a
non-U.S.
person (e.g., a foreign bank or broker) that fails to comply with these
requirements (even if payments to you would not otherwise have been subject to
FATCA withholding). An intergovernmental agreementbetween the U.S. and the
applicable foreign country, or future Treasury regulations or other guidance,
may modify the requirements under FATCA. We will not pay any additional
amounts to stockholders in respect of any amounts withheld under FATCA.You
should consult your own tax advisor regarding the effect of FATCA withholding.
All costs of administering the dividend reinvestmentplan will be paid by us.
Consistent with the conclusion reached by the IRS in a private letter ruling
issued to another REIT, we intend to take the position that these costs do not
constitute a distribution which is either taxable to you or whichwould reduce
your tax basis in your Series F Preferred Stock. Since the private letter
ruling was not issued to us, however, we have no legal right to rely on its
conclusions. Thus, it is possible that the IRS might view your share of the
costs asconstituting a taxable dividend to you and/or a distribution which
reduces your tax basis in your Series F Preferred Stock. For this or other
reasons, we may in the future take a different position with respect to the
costs of administering thedividend reinvestment plan.
The foregoing is intended only as a general discussion of the current federal
income tax consequences ofparticipation in the dividend reinvestment plan and
may not be applicable to certain participants, such as
tax-exempt
entities. You should consult your tax and other professional advisors
regarding thefederal, state, local and foreign income tax consequences
(including the effects of any changes in applicable law or interpretations
thereof) of your individual participation in the dividend reinvestment plan or
the disposal of shares acquiredpursuant to the dividend reinvestment plan.
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ADDITIONAL MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
This summary supplements the discussion contained under the caption "Material
U.S. Federal Income Tax Considerations" inthe accompanying prospectus and
should be read in conjunction therewith. This summary is for general
information purposes only and is not tax advice. This discussion does not
address all aspects of taxation that may be relevant to particular holdersof
our Series F Preferred Stock in light of their personal investment or tax
circumstances.
We urge prospective investors to consulttheir own tax advisors regarding the
specific tax consequences to them of the acquisition, ownership and
disposition of our Series F Preferred Stock and of our election to be taxed as
a REIT. Specifically, prospective investors should consult theirown tax
advisors regarding the federal, state, local, foreign and other tax
consequences of such acquisition, ownership, disposition and election and
regarding potential changes in applicable tax laws.
Redemption of Series F Preferred Stock
Aredemption of Series F Preferred Stock solely for cash will be treated under
Section 302 of the Code as a distribution that is taxable as dividend income
(to the extent of our current and accumulated earnings and profits), unless
the redemptionsatisfies an exception found in Section 302(b) of the Code,
which would cause the redemption to be treated as a sale of stock (in which
case the redemption will be treated in the same manner as a disposition
described in the accompanyingprospectus under "Material U.S. Federal Income
Tax Considerations--Taxation of Taxable U.S. Stockholders--Dispositions" or
"--Taxation of
Non-U.S.
Stockholders--Dispositions," as applicable). Section 302(b) of the Code
includes the following three exceptions, which are applicable if the
redemption: (1) is "substantially disproportionate" with respect to
thestockholder's interest in our stock; (2) results in a "complete
termination" of the stockholder's interest in all classes of our stock; or (3)
is "not essentially equivalent to a dividend." In determiningwhether any of
these exceptions are applicable, a stockholder takes into account not only
stock actually owned by the stockholder, but also stock that is treated as
constructively owned by it. Because the determination as to whether any of the
threealternative exceptions included in Section 302(b) of the Code described
above will be satisfied with respect to a particular redemption of Series F
Preferred Stock depends upon the facts and circumstances, prospective
investors are urged toconsult their tax advisors to determine such tax
treatment. If a redemption of Series F Preferred Stock for cash does not
qualify for any of the exceptions described above, the redemption proceeds
will be treated as a distribution, the consequencesof which are described in
the accompanying prospectus under "Material U.S. Federal Income Tax
Considerations--Taxation of Taxable U.S. Stockholders--Distributions" or
"--Taxation of
Non-U.S.
Stockholders--Distributions," as applicable. Additionally, a stockholder may
lose the benefit of the adjusted tax basis in the Series F Preferred Stock
that has been redeemed. We urgeprospective investors to consult their own tax
advisors to determine the impact of any lost adjusted tax basis.
The discussion set forthin the immediately preceding paragraph generally
applies to
non-U.S.
stockholders with respect to redemptions of Series F Preferred Stock, except
that a
non-U.S.
stockholder generally will not be subject to federal income tax or withholding
tax on gain recognized upon the sale or other taxable disposition of Series F
Preferred Stock, provided that: (i) such gain is not effectively connected
with theconduct by such
non-U.S.
stockholder of a trade or business within the U.S.; (ii) the
non-U.S.
stockholder is an individual and is not present in the U.S. for 183 daysor
more during the taxable year of the sale or disposition and certain other
conditions apply; and (iii) we are "domestically controlled." For additional
information, see "--FIRPTA Considerations" below and thediscussion under the
caption "Material U.S. Federal Income Tax Considerations--Taxation of
Non-U.S.
Stockholders--Dispositions" in the accompanying prospectus.
FIRPTA Considerations
As discussed inthe accompanying prospectus, for any year in which we qualify
as a REIT, a
non-U.S.
stockholder may incur tax on distributions that are attributable to gain from
our sale or exchange of a United
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States Real Property Interest ("USRPI"), under the Foreign Investment in Real
Property Tax Act of 1980 ("FIRPTA"). If a class of our stock is regularly
traded on anestablished securities market in the United States (any such class
of our stock referred to as a "publicly traded class"), however, capital gain
distributions to a
non-U.S.
stockholder in respect ofstock of such publicly traded class that are
attributable to our sale of real property will be treated as ordinary
dividends rather than as gain from the sale of a USRPI, as long as such
non-U.S.
stockholderdid not own more than 10% of the outstanding stock of such publicly
traded class at any time during the
one-year
period preceding the distribution. As a result, a
non-U.S.
stockholder owning 10% or less of the outstanding stock of such publicly
traded class generally would be subject to withholding tax on such capital
gain distributions in the same manner as they aresubject to withholding tax on
other distributions. We do not plan to list our Series F Preferred Stock on
any national securities exchange prior to the termination or completion of the
offering and, consequently, we are unable to predict when, ifever, our Series
F Preferred Stock will be regularly traded on an established securities market
in the United States.
As discussed in theaccompanying prospectus, a
non-U.S.
stockholder may incur tax under FIRPTA with respect to gain realized on a
disposition of our stock since our stock will constitute a USRPI unless an
applicable exceptionapplies. A
non-U.S.
stockholder generally will not incur tax under FIRPTA with respect to gain on
a sale of our stock, however, as long as, at all times during a specified
testing period, we are domesticallycontrolled, i.e.,
non-U.S.
persons hold, directly or indirectly, less than 50% in value of our
outstanding stock. We cannot assure you that we will be domestically
controlled. In addition, even if we are notdomestically controlled, a
non-U.S.
stockholder that owned, actually or constructively, 10% or less of the
outstanding stock of a publicly traded class at all times during a specified
testing period will notincur tax under FIRPTA on gain from a sale of such
stock. We do not plan to list our Series F Preferred Stock on any national
securities exchange prior to the termination or completion of the offering
and, consequently, we are unable to predictwhen, if ever, our Series F
Preferred Stock will be considered a publicly traded class.
Even if we are not domestically controlled andeven if our Series F Preferred
Stock is not a publicly traded class, a
non-U.S.
stockholder will not incur tax under FIRPTA on gain from a sale of our Series
F Preferred Stock if (1) at least one class ofour stock is treated as being
regularly traded under applicable Treasury Regulations on an established
securities market and (2) the
non-U.S.
stockholder owned, actually or constructively, an amount ofour stock with a
fair market value of 5% or less of our publicly traded class with the lowest
fair market value at all times during a specified testing period. We believe
that our common stock, Series E Preferred Stock and Series G Preferred
Stockare regularly traded on an established securities market.
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CERTAIN ERISA CONSIDERATIONS
The following is a summary of certain considerations associated with the
acquisition and holding of our Series F Preferred Stock by anemployee benefit
plan (as defined in Section 3(3) of ERISA) that is subject to Title I of
ERISA, a plan described in, and subject to, Section 4975 of the Code,
including an IRA, a plan subject to provisions under applicable federal,
state,local,
non-U.S.
or other laws or regulations that are similar to the provisions of Title I of
ERISA or Section 4975 of the Code, which we refer to as "Similar Laws," and
any entity whoseunderlying assets include "plan assets" by reason of any such
employee benefit or retirement plan's investment in such entity (each of which
we refer to as a "Plan"). This summary is based on provisions of ERISA and
theCode, each as amended through the date of this prospectus, and the relevant
regulations, opinions and other authority issued by the Department of Labor
and the IRS. We cannot assure you that there will not be adverse tax or labor
decisions orlegislative, regulatory or administrative changes in the future
that would significantly modify the statements expressed herein. Any such
changes may apply to transactions entered into prior to the date of their
enactment.
General Fiduciary Matters
ERISA and theCode impose certain duties on persons who are fiduciaries of a
Plan subject to Title I of ERISA or Section 4975 of the Code (an "ERISA Plan")
and prohibit certain transactions involving the assets of an ERISA Plan with
its fiduciariesor other interested parties. In general, under ERISA and the
Code, any person who exercises any discretionary authority or control over the
administration of such an ERISA Plan or the management or disposition of the
assets of such an ERISA Plan, orwho renders investment advice for a fee or
other compensation (direct or indirect) to such an ERISA Plan, is generally
considered to be a fiduciary of the ERISA Plan. Plans that are governmental
plans (as defined in Section 3(32) of ERISA),certain church plans (as defined
in Section 3(33) of ERISA or Section 4975(g)(3) of the Code) and
non-U.S.
plans (as described in Section 4(b)(4) of ERISA) are not subject to the
requirements ofERISA or Section 4975 of the Code but may be subject to similar
prohibitions under Similar Laws. In considering the acquisition, holding and,
to the extent relevant, disposition of our Series F Preferred Stock by an
ERISA Plan, a fiduciaryshould determine whether the investment is in
accordance with the documents and instruments governing the plan, whether the
investment is consistent with the plan's needs for liquidity to satisfy
minimum and other distribution requirements andwhether the investment is in
accordance with the applicable provisions of ERISA, the Code or any Similar
Law relating to a fiduciary's duties to the Plan including, without
limitation, the prudence, diversification, delegation of control andprohibited
transaction provisions of ERISA, the Code and any other applicable Similar
Laws.
Prohibited Transaction Issues
Section 406 of ERISA prohibits ERISA Plans from engaging in specified
transactions involving plan assets with persons or entities who are"parties in
interest," within the meaning of Section 3(14) of ERISA, and Section 4975 of
the Code imposes an excise tax on certain "disqualified persons," within the
meaning of Section 4975 of the Code, who engagein similar transactions, in
each case unless an exemption is available. A party in interest or
disqualified person who engages in a
non-exempt
prohibited transaction may be subject to other penalties andliabilities under
ERISA and the Code. In addition, a fiduciary of an ERISA Plan that engages in
such a
non-exempt
prohibited transaction may be subject to penalties and liabilities under ERISA
and the Code. Inthe case of an IRA, the occurrence of a prohibited transaction
could cause the IRA to lose its
tax-exempt
status.
We may be a party in interest or a disqualified person with respect to ERISA
Plans. The acquisition, holding and, to the extent relevant,disposition of our
Series F Preferred Stock by an ERISA Plan with respect to which we are
considered a party in interest or a disqualified person may constitute or
result in a direct or indirect prohibited transaction under Section 406 of
ERISAand/or Section 4975 of the Code, unless the investment is acquired, held
and disposed of in accordance with an applicable statutory, class or
individual prohibited transaction exemption. In this regard, the U.S.
Department of Labor (the"DOL") has issued prohibited
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transaction class exemptions ("PTCEs") that may apply to the acquisition and
holding of our Series F Preferred Stock. These class exemptions (as may be
amended from time to time)include, without limitation, PTCE
84-14
respecting transactions determined by independent qualified professional asset
managers, PTCE
90-1
respecting insurance companypooled separate accounts, PTCE
91-38
respecting bank collective investment funds, PTCE
95-60
respecting life insurance company general accounts and PTCE
96-23
respecting transactions determined by
in-house
asset managers.
In addition, Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code
each provides a limited exemption, commonly referred toas the "service
provider exemption," from the prohibited transaction provisions of ERISA and
Section 4975 of the Code for certain transactions, provided that neither the
issuer of the securities nor any of its affiliates (directly orindirectly)
have or exercise any discretionary authority or control or render any
investment advice with respect to the assets of any ERISA Plan involved in the
transaction and provided further that the ERISA Plan pays no more than
adequateconsideration in connection with the transaction. There can be no
assurance that all of the conditions of any such exemptions will be satisfied
at the time that our Series F Preferred Stock are acquired by a purchaser, or
thereafter, if the factsrelied upon for utilizing a prohibited transaction
exemption change.
Governmental plans (as defined in Section 3(32) of ERISA),certain church plans
(as defined in Section 3(33) of ERISA or Section 4975(g)(3) of the Code) and
non-U.S.
plans (as described in Section 4(b)(4) of ERISA) are not subject to the
requirements ofERISA or Section 4975 of the Code but may be subject to similar
prohibitions under Similar Laws. Fiduciaries of such plans should consult with
their counsel before acquiring our Series F Preferred Stock.
Our Series F Preferred Stock should not be acquired, held or disposed of by
any person investing "plan assets" of any Plan if suchacquisition, holding and
disposition will constitute a
non-exempt
prohibited transaction under ERISA or Section 4975 of the Code or similar
violation of any applicable Similar Laws.
Plan Asset Issues
ERISA and regulationsissued by the DOL (the "Plan Asset Regulations")
generally provide that when an ERISA Plan acquires an "equity interest" in an
entity that is neither a security issued by an investment company registered
under the InvestmentCompany Act of 1940, as amended, nor a "publicly offered
security," the ERISA Plan's assets include both the equity interest and an
undivided interest in each of the underlying assets of the entity. It is not
anticipated that ourSeries F Preferred Stock will be issued by an investment
company registered under the Investment Company Act of 1940. We expect,
however, that our Series F Preferred Stock will satisfy the requirements of a
"publicly offered security"under the Plan Asset Regulations.
As noted above, if an ERISA Plan acquires "publicly offered securities" then
the ERISAPlan's assets include the equity securities acquired by the ERISA
Plan but do not include an undivided interest in the underlying assets of the
entity. The definition of "publicly offered securities" in the Plan Asset
Regulationsrequires that the equity securities satisfy a registration
requirement under the federal securities laws, be "widely held" and "freely
transferable."
A class of securities satisfies the registration requirement under the Plan
Asset Regulations if (i) the class of securities is part of aclass of
securities registered under Section 12(b) or 12(g) of the Exchange Act or (ii)
the class of securities is part of an offering of securities registered under
the Securities Act and the class of securities of which such security isa part
is registered under the Exchange Act within 120 days (or such later time as
may be allowed by the SEC) after the end of the fiscal year of the issuer
during which the offering of such securities occurred. We anticipate that we
will meet theregistration requirements under the Plan Asset Regulations with
respect to our Series F Preferred Stock.
The Plan Asset Regulationsprovide that a class of securities is "widely held"
for purposes of the publicly offered securities exception if it is held by 100
or more persons who are independent of the issuer. We anticipate that we will
meet this requirement withrespect to our Series F Preferred Stock.
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The Plan Asset Regulations provide that whether a security is "freelytransferabl
e" is a question that is determined on the basis of all relevant facts and
circumstances. The Series F Preferred Stock are subject to certain
restrictions on transferability that are typically found in REITs and that are
intended toensure that we continue to qualify as a REIT for U.S. federal
income tax purposes. The Plan Asset Regulations provide that where (as in the
case of our Series F Preferred Stock) the minimum investment is $10,000 or
less, the presence of transferrestrictions intended to prohibit transfers that
would result in a termination or reclassification for U.S. federal or state
tax purposes will not ordinarily affect a determination that such securities
are "freely transferable." Because weanticipate that (i) we will satisfy the
requirement under the Plan Asset Regulations to register the Series F
Preferred Stock, (ii) the securities will be held by 100 or more persons who
are independent of us and (iii) the securitieswill be "freely transferable"
under the Plan Asset Regulations, we believe that the publicly offered
securities exception will apply to our Series F Preferred Stock. There can be
no assurance that we will qualify for the exception,however, especially in
light of the fact that the availability of the exception will depend on
actions to be taken at a later date, the number of persons who acquire our
Series F Preferred Stock and the facts and circumstances nature of the"freely
transferable" requirement.
The Plan Asset Regulations also provide that an ERISA Plan's assets include
the equitysecurity acquired by the ERISA Plan, but not an undivided interest
in the issuer's underlying assets, if the equity security is issued by an
"operating company" (including a "venture capital operating company" and
a"real estate operating company") or if less than 25% of the class of equity
security is held by "benefit plan investors" (the "Insignificant Participation
Exception"). It is unclear whether we qualify as a real estateoperating
company under the Plan Asset Regulations and at this time we do not intend to
rely on that exception. In addition, we do not intend to limit or monitor
benefit plan investors' investments in our Series F Preferred Stock and so
therecan be no assurance that the Insignificant Participation Exception will
apply to our Series F Preferred Stock.
If our assets were deemedto be "plan assets" under ERISA, this would result,
among other things, in (i) the application of the prudence and other fiduciary
responsibility standards of ERISA to investments made by us and (ii) the
possibility that certaintransactions in which we might seek to engage could
constitute "prohibited transactions" under ERISA and the Code.
Theforegoing requirements of ERISA and the Code are complex and subject to
change. Plan fiduciaries and the beneficial owners of IRAs are urged to
consult with their own advisors regarding an investment in our shares.
Representation
Each purchaser of ourSeries F Preferred Stock will represent and warrant that
under ERISA or applicable Similar Laws either (1) it is not a Plan and no
portion of the assets used to acquire or hold our Series F Preferred Stock
constitutes assets of any Plan, or(2) the acquisition, holding and disposition
of our Series F Preferred Stock will not constitute a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code or similar violation
under any applicable Similar Lawsfor which there is no applicable statutory,
regulatory or administrative exemption.
Valuation and Reporting
ERISA Plan fiduciaries (or the trustee or custodian of an IRA) may be required
to determine the fair market value of the assets of such planson at least an
annual basis and sometimes as frequently as quarterly. If the fair market
value of any particular asset is not readily available, the fiduciary (or
trustee or custodian in the case of an IRA) is required to make a good
faithdetermination of that asset's value.
Unless and until our shares of Series F Preferred Stock are listed on a
securities exchange, itis not expected that a public market for our shares of
Series F Preferred Stock will develop. To assist ERISA Plan fiduciaries (and
trustees and custodians of IRAs) subject to the annual reporting requirements,
we intend to provide reports of ourquarterly and annual determinations of the
current estimated share value to those fiduciaries (and trustees
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or custodians of IRAs) who identify themselves to us and request the reports
until we obtain a listing for our shares of Series F Preferred Stock.
We anticipate that we will provide annual reports of our determination of
value (i) to IRA trustees and custodians not later thanJanuary 15 of each year
and (ii) to the fiduciaries of other ERISA Plans within 75 days after the end
of each calendar year. Each determination may be based upon valuation
information available as of October 31 of the preceding year,updated, however,
for any material changes occurring between October 31 and December 31.
There can be no assurance, however, thatwith respect to any determination of
estimated value (i) the estimated value per share would actually be realized
upon liquidation, (ii) the holder would realize the estimated net asset values
if they attempted to sell the Series FPreferred Stock or (iii) the value or
method used to establish the estimated value would comply with ERISA or the
Code requirements described above.
ERISA Plans may be required to report certain compensation or commissions paid
by us (or by third parties) to our service providers as"reportable indirect
compensation" on Schedule C to Form 5500. In addition, under ERISA's general
reporting and disclosure rules, ERISA Plans that are subject to ERISA are
required to include information regarding their assets,expenses and
liabilities. To the extent any compensation arrangements described herein
constitute reportable indirect compensation or fees that must be disclosed
under ERISA, any such description (other than compensation or fees for which
there isno formula used to calculate or determine the compensation or fees or
an actual amount is stated), the descriptions are intended to assist the ERISA
Plan in satisfying its reporting and disclosure obligations.
The foregoing discussion is general in nature and is not intended to be
all-inclusive.
Due to thecomplexity of these rules and the penalties that may be imposed upon
persons involved in
non-exempt
prohibited transactions, it is particularly important that fiduciaries, or
other persons consideringpurchasing our Series F Preferred Stock on behalf of,
or with the assets of, any Plan, consult with their counsel regarding the
potential applicability of ERISA, Section 4975 of the Code and any Similar
Laws to such investment and whether anexemption would be applicable to the
purchase and holding of our Series F Preferred Stock. The acquisition, holding
and, to the extent relevant, disposition of our Series F Preferred Stock by or
to any Plan is in no respect a representation by us orany of our affiliates or
representatives that such an investment meets all relevant legal requirements
with respect to investments by such Plans generally or any particular Plan, or
that such an investment is appropriate for Plans generally or anyparticular
Plan. Purchasers of the Series F Preferred Stock have the exclusive
responsibility for ensuring that their purchase and holding of our Series F
Preferred Stock complies with the fiduciary responsibility rules of ERISA and
does not violatethe prohibited transaction rules of ERISA, the Code or
applicable Similar Laws.
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PLAN OF DISTRIBUTION
General
We are offering a maximum of19,088,864 shares of Series F Preferred Stock, on
a "reasonable best efforts" basis through Gladstone Securities pursuant to the
Dealer Manager Agreement at a public offering price of $25.00 per share, and
up to 5,949,560 shares of SeriesF Preferred Stock pursuant to a dividend
reinvestment plan at a price of $22.75 per share to those holders of the
Series F Preferred Stock who participate in such dividend reinvestment plan.
This prospectus supplement supersedes and replaces thePrior Prospectus
Supplement.
To the extent a participating broker-dealer reduces its selling commissions
below 6%, the public offeringprice per share will be decreased by an amount
equal to such reduction. No selling commissions or dealer manager fee will be
paid with respect to shares of the Series F Preferred Stock sold pursuant to
our dividend reinvestment plan."Reasonable best efforts" means that the dealer
manager is only required to use its good faith efforts and reasonable
diligence to sell the Series F Preferred Stock and has no firm commitment or
obligation to purchase any specific numberor dollar amount of the Series F
Preferred Stock. We reserve the right to reallocate shares between the primary
offering and the offering pursuant to the dividend reinvestment plan in our
sole discretion.
The Termination Date for the offering is the earlier of June 1, 2025 (unless
earlier terminated or extended by our Board of Directors) orthe date on which
all shares offered in the primary offering are sold. We may terminate this
offering at any time, or may offer the Series F Preferred Stock pursuant to a
new registration statement, including a
follow-on
registration statement. The offering period for the dividend reinvestment plan
may extend beyond the Termination Date and will terminate on the earlier of
(1) the issuance of all shares ofSeries F Preferred Stock under the dividend
reinvestment plan and (2) the listing of the Series F Preferred Stock on
Nasdaq or another national securities exchange.
We will sell shares of the Series F Preferred Stock using two closing services
provided by DTC. The first service is DTC Settlement and thesecond service is
DRS Settlement. Investors purchasing shares through DTC Settlement will
coordinate with their registered representatives to pay the full purchase
price for their shares by the settlement date, and such payments will not be
held inescrow. Investors who are permitted to utilize the DRS Settlement
method will complete and sign subscription agreements, which will be delivered
to the escrow agent, UMB Bank, National Association. In addition, such
investors will pay the fullpurchase price for their shares of Series F
Preferred Stock to the escrow agent (as set forth in the subscription
agreement), to be held in trust for the investors' benefit pending release to
us as described herein. See "--SettlementProcedures" below for a description
of the closing procedures with respect to each of the closing methods.
Gladstone Securities is aprivately held broker dealer registered with FINRA
and insured by the Securities Investor Protection Corporation. Gladstone
Securities is an affiliate of ours, as its parent company is owned and
controlled by Mr. David Gladstone, our chairman,chief executive officer and
president. Mr. Gladstone also serves on the board of managers of Gladstone
Securities. John Dellafiora, Jr., our chief compliance officer, serves as the
chief compliance officer of Gladstone Securities, and MichaelLiCalsi, our
general counsel and secretary, serves as chief legal officer of Gladstone
Securities. Both Mr. Dellafiora and Mr. LiCalsi are managing principals of
Gladstone Securities and serve on its board of managers.
The Dealer Manager Agreement between us and Gladstone Securities automatically
terminates upon the Termination Date or may be terminated byeither party at
any time on 60 days' written notice.
Compensation of Dealer Manager and Participating Broker-Dealers
We will pay to Gladstone Securities selling commissions of up to 6.0% of the
gross offering proceeds from the offering. We will also pay toGladstone
Securities up to 3.0% of the gross offering proceeds from the offering
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as compensation for acting as dealer manager. As dealer manager, Gladstone
Securities will manage, direct and supervise its associated persons who will
be wholesalers in connection with theoffering. The combined selling commission
and dealer manager fee under the offering will not exceed FINRA's 10.0% cap.
Our dealer manager will repay to us any excess payments made to our dealer
manager over FINRA's 10.0% cap if theoffering is terminated prior to reaching
the maximum amount of offering proceeds. We will not pay referral or similar
fees to any accountants, attorneys or other persons in connection with the
distribution of the Series F Preferred Stock.
We expect Gladstone Securities to authorize other broker-dealers that are
members of FINRA, which we refer to as participating broker-dealers,to sell
the Series F Preferred Stock. Gladstone Securities may reallow all or a
portion of its selling commissions attributable to a participating
broker-dealer. Gladstone Securities may also reallow a portion of its dealer
manager fee earned on theproceeds raised by a participating broker-dealer, to
such participating broker-dealer as a
non-accountable
marketing or due diligence allowance. The amount of the reallowance to any
participating broker-dealerwill be determined by the dealer manager in its
sole discretion.
We will not pay any selling commissions, but will pay dealer managerfees, in
connection with the sale of shares of Series F Preferred Stock to investors
who:
. purchase through
fee-based
programs also known as "wrapaccounts";
. purchase through participating broker-dealers that have alternative fee arrangements with their clients;
. purchase through certain registered investment advisors;
. purchase through bank trust departments or any other organization or person
authorized to act in a fiduciarycapacity for its clients or customers; or
. are an endowment, foundation, pension fund or other institutional investor.
The net proceeds to us will not be affected by reducing the commissions
payable in connection with such sales. Neither our dealer manager norits
affiliates will directly or indirectly compensate any person engaged as an
investment advisor or a bank trust department by a potential investor as an
inducement for such investment advisor or bank trust department to advise
favorably for aninvestment in the Series F Preferred Stock.
Further, the selling commission and/or dealer manager fee may be reduced or
eliminated,subject to the agreement of the Dealer Manager, to certain
investors who have agreed with a participating broker dealer to reduce or
eliminate the selling commission and/or the dealer manager fees. The net
proceeds we receive will not be affected bysuch sales of shares of Series F
Preferred Stock at a discount.
Your ability to receive a discount or fee waiver may depend on thefinancial
advisor or broker dealer through which you purchase your shares of Series F
Preferred Stock. An investor qualifying for a discount will generally receive
a higher percentage return on such investor's investment than investors who
donot qualify for such discount. Accordingly, you should consult with your
financial advisor about the ability to receive such discounts or fee waivers
before purchasing shares of Series F Preferred Stock.
Any discounts or fee waivers applicable to sales of shares of our Series F
Preferred Stock will reduce the purchase price per share of SeriesF Preferred
Stock and thereby allow the purchase by an investor of additional shares for
the same investment amount.
The table below setsforth the nature and estimated amount of all items viewed
as "underwriting compensation" by FINRA, assuming we sell all 19,088,864 of
the shares offered hereby in the offering at the maximum selling commissions
and dealer manager fee.
(Maximum)
Selling commissions (6.00%) $ 28,633,296
Dealer manager fee (3.00%) $ 14,316,648
Total $ 42,949,944
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We or our affiliates also may provide permissible forms of
non-cash
compensation to registered representatives of our dealer manager and the
participating broker-dealers, including gifts. In no event will such gifts
exceed an aggregate value of $100.00 per annum perparticipating salesperson,
or be
pre-conditioned
on achievement of a sales target. The value of such items will be considered
underwriting compensation in connection with this offering. The combined
sellingcommissions, dealer manager fee and such
non-cash
compensation under the offering will not exceed FINRA's 10.0% cap. Our dealer
manager will repay to us any excess payments made to our dealer manager
overFINRA's 10.0% cap if the offering is terminated before reaching the
maximum amount of offering proceeds. The dealer manager's legal expenses will
be paid by the dealer manager from the dealer manager fee.
To the extent permitted by law and our charter, we will indemnify the
participating broker-dealers and Gladstone Securities against certaincivil
liabilities, including certain liabilities arising under the Securities Act
and liabilities arising from breaches of our representations and warranties
contained in the Dealer Manager Agreement. However, the SEC takes the position
thatindemnification against liabilities arising under the Securities Act is
against public policy and is not enforceable.
We expect expenses(other than selling commissions and the dealer manager fee)
incurred by us or on our behalf in connection with this offering (including
the qualification and registration of this offering and the marketing and
distribution of the Series F PreferredStock, including expenses for printing
and amending registration statements or supplementing prospectuses, mailing
and distributing costs, all advertising and marketing expenses (including
reimbursements for actual costs incurred for travel, mealsand lodging by
employees of our Adviser and other affiliates to attend retail seminars hosted
by broker-dealers or bona fide training or educational meetings hosted by our
Adviser or its affiliates), charges of transfer agents, registrars andexperts
and fees, expenses and taxes related to the filing, registration and
qualification, as necessary, of the sale of the Series F Preferred Stock under
federal and state laws, including taxes and fees and accountants' and
attorneys'fees) to be in an amount not to exceed 2.5% of the aggregate gross
proceeds of this offering. The dealer manager will bear any expenses related
to due diligence of us by, and any salaries or commissions of, wholesalers and
other participating brokerdealers or related to contracting with an entity to
provide DTC clearing services for the Series F Preferred Stock. We may
reimburse the dealer manager or our other affiliates for any other expenses
incurred on our behalf in connection with theoffering. All organization and
offering expenses, including selling commissions and the dealer manager fee,
borne by us are not expected to exceed 11.5% of the aggregate gross proceeds
of this offering, though the amount of such expenses may exceedthe expected
amount.
Settlement Procedures
If your broker-dealer uses DTC Settlement, then you can place an order for the
purchase of shares of Series F Preferred Stock through yourbroker-dealer. A
broker-dealer using this service will have an account with DTC in which your
funds are placed to facilitate the anticipated
bi-monthly
closing cycle. Orders will be executed by yourbroker-dealer electronically and
you must coordinate with your registered representative to pay the full
purchase price of the shares by the settlement date, which depends on when you
place the order during the
bi-monthly
settlement cycle and can generally be anywhere from one to 15 days after the
date of your order. This purchase price will not be held in escrow.
Under special circumstances, you have the option to elect to use DRS
Settlement. If you elect to use DRS Settlement, you should complete andsign a
subscription agreement similar to the one filed as an exhibit to the
registration statement of which this prospectus supplement is a part, which is
available from your registered representative and which will be delivered to
the escrow agent.In connection with a DRS Settlement subscription, you should
pay the full purchase price of the shares of Series F Preferred Stock to the
escrow agent as set forth in the subscription agreement. Subscribers may not
withdraw funds from the escrowaccount. Subscriptions will be effective upon
our acceptance, and we reserve the right to reject any subscription in whole
or in part.
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Irrespective of whether you purchase shares using DTC Settlement or DRS
Settlement, byaccepting shares of Series F Preferred Stock you will be deemed
to have accepted the terms of our charter.
Subject to compliance withRule
15c2-4
of the Exchange Act, in connection with purchases using DRS Settlement, our
dealer manager or the broker-dealers participating in this offering promptly
will deposit any checks received fromsubscribers in an escrow account
maintained by UMB Bank, National Association by the end of the next business
day following receipt of the subscriber's subscription documents and check. In
certain circumstances where the subscription reviewprocedures are more lengthy
than customary or pursuant to a participating broker-dealer's internal
supervising review procedures, a subscriber's check will be transmitted by the
end of the next business day following receipt by the reviewoffice of the
dealer, which will then be promptly deposited by the end of the next business
day following receipt by the review office. Any subscription payments received
by the escrow agent will be deposited into a special
non-interest
bearing account in our name until such time as we have accepted or rejected
the subscription and will be held in trust for your benefit, pending our
acceptance of your subscription. Subscriptions willbe accepted or rejected
within 10 business days of receipt by us and, if rejected, all funds shall be
returned to the rejected subscribers within 10 business days. If accepted, the
funds will be transferred into our general account on our nextclosing date.
You will receive a confirmation of your purchase subsequent to a closing. We
generally expect to admit stockholders on a
bi-monthly
basis.
Each participating dealer who sells shares on our behalf has the responsibility
to make every reasonable effort to determine that the purchaseof shares is
appropriate for the investor. In making this determination, the participating
broker-dealer will rely on relevant information provided by the investor,
including information as to the investor's age, investment objectives,investment
experience, income, net worth, financial situation, other investments and
other pertinent information. Each investor should be aware that the
participating broker-dealer will be responsible for determining whether this
investment isappropriate for your portfolio. However, you are required to
represent and warrant in the subscription agreement or, if placing an order
through your registered representative not through a subscription agreement in
connection with a DTC Settlement,to the registered representative, that you
have received a copy of this prospectus supplement and have had sufficient
time to review this prospectus supplement. Each participating broker-dealer
will maintain records of the information used todetermine that an investment
in the Series F Preferred Stock is suitable and appropriate for an investor.
These records are required to be maintained for a period of at least six years.
Minimum Purchase Requirements
Therewill be a minimum permitted purchase in the offering of 200 shares having
an aggregate purchase price of $5,000. We reserve the right to waive the
minimum purchase requirement in our sole discretion in consultation with our
dealer manager. Youshould note that an investment in the shares of the Series
F Preferred Stock will not, in itself, create a retirement plan and that, in
order to create a retirement plan, you must comply with all applicable
provisions of the Code.
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LEGAL MATTERS
Certain legal matters and certain federal income tax matters relating to the
offering will be passed upon for us and the dealer manager bySquire Patton
Boggs (US) LLP, Washington, D.C. Certain matters of Maryland law, including
the validity of the securities offered hereby, will be passed upon for us by
Venable LLP, Baltimore, Maryland. Squire Patton Boggs (US) LLP may rely as
tocertain matters of Maryland law upon the opinion of Venable LLP.
EXPERTS
The financial statements and management's assessment of the effectiveness of
internal control over financial reporting (which is includedin the Report of
Management on Internal Control over Financial Reporting) incorporated in this
prospectus supplement by reference to the Annual Report on Form
10-K
for the year ended December 31, 2023have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts in auditing
and accounting.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
SEC rules allow us to "incorporate by reference" the information we file with
the SEC, which means that we can disclose importantinformation to you by
referring you to those documents filed separately with the SEC. The
information incorporated by reference in this prospectus supplement and the
accompanying prospectus is considered to be part of this prospectus supplement
andthe accompanying prospectus, and the information we file subsequently with
the SEC prior to the completion of this offering will automatically update and
supersede such information.
We previously filed the following documents with the SEC and such filings are
incorporated by reference into this prospectus supplement andthe accompanying
prospectus:
. Annual Report on
Form 10-K for
the fiscal year ended December 31, 2023
, filed February 21, 2024 (including portions of our
Definitive Proxy Statement for the 2024 Annual Meeting of Stockholders
incorporated therein byreference);
. Current Report on Form
8-K,
filed on March
26, 2024
; and
. The description of our capital stock, which is filed as
Exhibit 4.6
to our Annual Report on
Form 10-K for
the fiscal year ended December 31, 2023, which updates the description contained in our
Registration Statement on
Form 8-A, filed
August 12, 2003
, as updated through subsequently filed reports.
We also incorporate by referenceinto this prospectus supplement additional
documents that we may file with the SEC under Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, from the date of this prospectus supplement until
all of the securities offered by this prospectussupplement have been sold or
the offering of these securities is otherwise terminated, provided, however,
that information "furnished" under Item 2.02 or
Item 7.01 of Form 8-K or other
information "furnished" to the SEC which is not deemed filed is not
incorporated by reference in this prospectus supplement and in theaccompanying
prospectus. Information that we subsequently file with the SEC as aforesaid
will automatically update and may supersede information in this prospectus
supplement and the accompanying prospectus and information that we previously
filedwith the SEC.
You may obtain copies of any of these filings from us as described below,
through the SEC's website as describedbelow. Documents incorporated by
reference are available without charge, excluding all exhibits unless an
exhibit has been specifically incorporated by reference into this prospectus
supplement, by writing or calling our Investor RelationsDepartment at the
following address and telephone number:
Investor Relations
Gladstone Commercial Corporation
1521 Westbranch Drive, Suite 100
McLean, Virginia 22102
(703) 287-5893
WHERE YOU CAN FIND MORE INFORMATION
Copies of our annual report on Form
10-K,
quarterly reports on Form
10-Q,
current reports on Form
8-K,
proxy statements and amendments, if any, to those reports filed or furnished
with the SEC pursuant to Section 13(a) or 15(d) ofthe Exchange Act are
available free of charge through our website at www.GladstoneCommercial.com. A
request for any of these reports may also be submitted to us by sending a
written request addressed to Investor Relations, Gladstone CommercialCorporation
, 1521 Westbranch Drive, Suite 100, McLean, VA 22102, or by calling our
toll-free investor relations line at
1-866-366-5745.
The information located on, or accessible from, our website is not, and shall
not be deemed to be, except asdescribed
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below, a part of this prospectus supplement or the accompanying prospectus or
incorporated into any other filings that we make with the SEC. The SEC also
maintains a website that containsreports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC
at www.sec.gov.
We have filed with the SEC a "shelf" registration statement on Form
S-3
under the SecuritiesAct relating to the securities that may be offered by the
accompanying prospectus. Such prospectus is a part of that registration
statement, but does not contain all of the information in the registration
statement. We have omitted parts of theregistration statement in accordance
with the rules and regulations of the SEC. For more detail about us and any
securities that may be offered by such prospectus, you may examine the
registration statement on Form
S-3
and the exhibits filed with it at the locations listed in the previous
paragraph.
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PROSPECTUS
$1,300,000,000
Common Stock
Preferred Stock
DebtSecurities
Depositary Shares
Subscription Rights
We may offerand sell, from time to time, one or more series or classes of
common stock, preferred stock, debt securities, depositary shares and
subscription rights (collectively, the "
securities
"). We may offer these securities with anaggregate initial public offering
price of up to $1.3 billion, or its equivalent in a foreign currency based
upon the exchange rate at the time of sale, in amounts, at initial prices and
on terms determined at the time of the offering. We mayoffer these securities
separately or together, in separate series or classes and in amounts, at
prices and on terms described in one or more supplements to this prospectus.
We may offer and sell these securities to or through one or more underwriters,
dealers and agents, or directly to purchasers, on a continuousor delayed
basis. If any underwriters, dealers or agents are involved in the sale of any
of the securities, their names, and any applicable purchase price, fee,
commission or discount arrangement with, between or among them, will be set
forth, orwill be calculable from the information set forth, in an accompanying
prospectus supplement. For more detailed information, see "Plan of
Distribution" in this prospectus.
No securities may be sold without delivery of an accompanying prospectus
supplement describing the method and terms of the offering of thosesecurities.
Accordingly, we will deliver this prospectus together with an accompanying
prospectus supplement setting forth the specific terms of the securities that
we are offering. The specific terms may include limitations on direct or
beneficialownership and restrictions on transfer of the securities offered by
this prospectus, in each case as may be appropriate to preserve our status as
a real estate investment trust for federal income tax purposes, among other
purposes. The prospectussupplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with the additional information described under
the heading "Incorporation ofCertain Documents by Reference" before you make
your investment decision.
Our shares of common stock, par value $0.001 per share,6.625% Series E
Cumulative Redeemable Preferred Stock, par value $0.001 per share, and 6.00%
Series G Cumulative Redeemable Preferred Stock, par value $0.001 per share,
trade on the Nasdaq Global Select Market under the trading symbols"GOOD,"
"GOODN," and "GOODO," respectively.
Investing inour securities involves substantial risks. See "
Risk Factors
" on page 7 of this prospectus, and any similar section contained in the
applicable prospectus supplement concerning factors you should consider
beforeinvesting in our securities.
Neither the U.S. Securities and Exchange Commission (the "
SEC
") norany state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is March 21, 2024
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TABLE OF CONTENTS
ABOUT THIS PROSPECTUS 1
FORWARD-LOOKING STATEMENTS 2
PROSPECTUS SUMMARY 4
RISK FACTORS 7
USE OF PROCEEDS 8
DESCRIPTION OF CAPITAL STOCK 9
DESCRIPTION OF DEBT SECURITIES 20
DESCRIPTION OF DEPOSITARY SHARES 27
DESCRIPTION OF SUBSCRIPTION RIGHTS 30
BOOK ENTRY PROCEDURES AND SETTLEMENT 31
CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER ANDBYLAWS 32
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS 38
PLAN OF DISTRIBUTION 62
LEGAL MATTERS 66
EXPERTS 66
WHERE YOU CAN FIND MORE INFORMATION 66
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE 67
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained orincorporated by reference in this
prospectus, any accompanying prospectus supplement or any free writing
prospectus that we may provide to you in connection with an offering of
securities. You must not rely upon any unauthorized information orrepresentation
s not contained or incorporated by reference in this prospectus, any
accompanying prospectus supplement or any free writing prospectus. This
prospectus, any accompanying prospectus supplement or any free writing
prospectus does notconstitute an offer to sell or the solicitation of an offer
to buy any securities other than the registered securities to which they
relate, nor does this prospectus, any accompanying prospectus supplement or
any free writing prospectus constitutean offer to sell or the solicitation of
an offer to buy securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. The
information contained in this prospectus, any accompanyingprospectus
supplement, any free writing prospectus or the documents incorporated by
reference herein or therein are accurate only as of the date of such document.
Our business, financial condition, liquidity, results of operations, funds
fromoperations and prospects may have changed since those dates.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form
S-3
that we filed with the SEC, using a"shelf" registration process for the
delayed offering and sale of securities pursuant to Rule 415 under the
Securities Act of 1933, as amended (the
"Securities Act"
). Under this shelf registration statement, we may, overtime, sell any
combination of the securities described in this prospectus in one or more
offerings. Under the shelf registration process, we may, over time, sell any
combination of the securities described in this prospectus in one or more
offeringsup to a total dollar amount of $1.3 billion, as described in this
prospectus. This prospectus only provides you with a general description of
the securities that we may offer. As allowed by SEC rules, this prospectus
does not contain all of theinformation that you can find in the registration
statement or the exhibits thereto. For further information, we refer you to
the registration statement, including any amendments thereto, including its
exhibits.
We will not use this prospectus to offer and sell securities unless it is
accompanied by a prospectus supplement that more fully describes thesecurities
being offered and the terms of such offering. Any accompanying prospectus
supplement or free writing prospectus may also update, amend or supersede
other information contained in this prospectus. Before purchasing any
securities, youshould carefully read this prospectus, any accompanying
prospectus supplement and any free writing prospectus together with the
information incorporated or deemed to be incorporated by reference herein as
described under the heading "Where YouCan Find More Information" below.
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FORWARD-LOOKING STATEMENTS
This prospectus and any accompanying prospectus supplement, including the
documents incorporated by reference into this prospectus and anyaccompanying
prospectus supplement, contain "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended, (the
"ExchangeAct"
). Forward-looking statements provide our current expectations or forecasts of
future events and are not statements of historical fact. These forward-looking
statements include information about possible or assumed future events,including
, among other things, discussion and analysis of our business, financial
condition, results of operations, our strategic plans and objectives, and
other matters. Words such as "anticipates," "expects,""intends," "plans,"
"will," "should," "believes," "seeks," "estimates," "may," "provided,"
"future," "could," "would,""growth," "if," "possible," "potential" and
"likely" and variations of these words and similar expressions are intended to
identify forward-looking statements. These statements are not guarantees
offuture performance and are subject to risks, uncertainties and other
factors, some of which are beyond our control, are difficult to predict and/or
could cause actual results to differ materially from those expressed or
forecasted in theforward-looking statements. Statements regarding the
following subjects, among others, are forward-looking by their nature:
. future
re-leasing
efforts;
. our business and financing strategy;
. our ability to continue to implement our business plan;
. pending and future transactions;
. our projected operating results and anticipated acquisitions;
. our ability to obtain future financing arrangements;
. estimates relating to our future distributions;
. our understanding of our competition and our ability to compete effectively;
. future market and industry trends;
. future interest and insurance rates;
. estimates of our future operating expenses, including payments to our Adviser (as
defined herein) under the termsof our Advisory Agreement (as defined herein);
. the impact of technology on our operations and business, including the risk of cyber-attacks,
cyber-liability orpotential liability for breaches of our privacy or information security systems;
. projected cash requirements, including capital expenditures; and
. future use of the proceeds of our credit facility, mortgage notes payable,
future securities offerings and otherfuture capital resources, if any.
Forward-looking statements involve inherent uncertainty and may ultimately
prove tobe incorrect or false. You are cautioned to not place undue reliance
on forward-looking statements. Except as otherwise may be required by law, we
undertake no obligation to update or revise forward-looking statements to
reflect changed assumptions,the occurrence of unanticipated events or actual
operating results. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various
factors, including, but not limited to:
. the failure of our tenants and borrowers to pay rent or make mortgage payments;
. our inability to renew leases, lease vacant space or
re-lease
space asleases expire;
. a failure of net leases to result in fair market lease rates over time;
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. illiquidity of certain of our real estate investments;
. our real estate investments have a limited number of tenants and are
concentrated in a limited number ofindustries, which subjects us
to an increased risk of significant loss if any one of these tenants
is unable to pay or if particular industries experience downturns;
. our incurrence of significant costs related to government regulation and private litigation over environmentalmatters;
. general volatility in the capital markets, economic conditions, and the value of our equity securities;
. our inability to sustain the payment of distributions at current levels;
. restrictions on our borrowings and the risks associated with leverage, including our debt service obligations;
. interest rate fluctuations;
. inadvisable investment or management decisions made by our Adviser, on whom the success of our performancedepends;
. conflicts of interest with our Adviser and other affiliates;
. our failure to maintain our qualification as a real estate investment trust ("
REIT
"), and risksrelating to changing laws that affect REITs;
. our redemption of Operating
Partnership Units ("
OP Units
"), which may result in the issuance ofa large number of new shares
of our common stock and/or force us to expend significant cash;
. limitations on our ability to pay distributions pursuant to the requirements of Maryland law; and
. cybersecurity threats and cyber incidents, which may cause a disruption to our operations, or the operations ofbusinesses
in which we invest, a compromise or corruption of our confidential information and/or damage to our business relationships.
This list of risks and uncertainties is only a summary of some of the most
important factors to us and is not intended to be exhaustive. Youshould
carefully review the risks and information contained in, or incorporated by
reference into, this prospectus or in any accompanying prospectus supplement,
including, without limitation, the "Risk Factors" incorporated by
referenceherein from our
Annual Report on Form
10-K
for the year ended December 31, 2023
, and other reports andinformation that we file with the SEC from time to
time. New factors may also emerge from time to time that could materially and
adversely affect us.
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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus or incorporated by reference in this prospectus, anddoes not
contain all of the information that you need to consider in making your
investment decision. You should carefully read the entire prospectus, the
applicable prospectus supplement and any related free writing prospectus,
including the risksof investing in our securities discussed under the heading
"Risk Factors" contained in the applicable prospectus supplement and any
related free writing prospectus, and under similar headings in the other
documents that are incorporated byreference into this prospectus. Each of the
risk factors could adversely affect our business, operating results and
financial conditions, as well as adversely affect the value of an investment
in our securities.
Unless the context otherwise requires or indicates, each reference in this
prospectus to (i) "we," "our,""us" and the "Company" means Gladstone
Commercial Corporation, a Maryland corporation, and its consolidated
subsidiaries, (ii) the "Operating Partnership" means Gladstone Commercial
Limited Partnership, awholly-owned, consolidated subsidiary of the Company and
a Delaware limited partnership, (iii) the "Adviser" means Gladstone Management
Corporation, the external adviser of the Company and a Delaware corporation,
and (iv) the"Administrator" means Gladstone Administration, LLC, the external
administrator of the Company and a Delaware limited liability company. The
term "you" refers to a prospective investor.
Overview
We are an externally-advisedREIT that was incorporated under the General
Corporation Law of the State of Maryland (the "
MGCL
") on February 14, 2003. We have elected to be taxed as a REIT for federal
income tax purposes. We focus on acquiring, owning,and managing primarily
industrial and office properties. Our shares of common stock, par value $0.001
per share, 6.625% Series E Cumulative Redeemable Preferred Stock, par value
$0.001 per share ("
Series E Preferred Stock
"), and6.00% Series G Cumulative Redeemable Preferred Stock, par value $0.001
per share ("
Series G Preferred Stock
"), trade on the Nasdaq Global Select Market ("
Nasdaq
") under the trading symbols "GOOD,""GOODN" and "GOODO," respectively. Our
senior common stock, par value $0.001 per share ("
Senior Common Stock
"), and our 6.00% Series F Cumulative Redeemable Preferred Stock, par value
$0.001 per share("
Series F Preferred Stock
"), are not listed or traded on any exchange or automated quotation system.
Our properties aregeographically diversified and our tenants cover a broad
cross section of business sectors and range in size from small to very large
private and public companies, many of which are corporations that do not have
publicly-rated debt. We havehistorically entered into, and intend in the
future to enter into, purchase agreements for real estate having net leases
with terms of approximately seven to 15 years with
built-in
rental rate increases. Undera net lease, the tenant is required to pay most or
all operating, maintenance, repair and insurance costs and real estate taxes
with respect to the leased property.
We actively communicate with buyout funds, real estate brokers and other third
parties to locate properties for potential acquisition or toprovide mortgage
financing in an effort to build our portfolio. We target secondary growth
markets that possess favorable economic growth trends, diversified industries,
and growing population and employment.
We conduct substantially all of our business activities through an Umbrella
Partnership Real Estate Investment Trust structure, by which allof our
properties are held, directly or indirectly, by the Operating Partnership. We
control the sole general partner of the Operating Partnership and currently
own, directly or indirectly, approximately 99.2% of the common units of
limitedpartnership interest in the OP Units. We have in the past issued, and
may in the future issue, OP Units in connection with the acquisition of
commercial real estate, and thereby potentially expand the number of limited
partners of the OperatingPartnership. Limited partners who hold limited
partnership units in our Operating Partnership for at least one year will
generally be entitled to cause us to redeem these units for cash or, at our
election, shares of our common stock on a
one-for-one
basis.
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Our Adviser is an affiliate of ours and a registered investment adviser under
the InvestmentAdvisers Act of 1940, as amended. Our Adviser is responsible for
managing our business on a daily basis and identifying and making acquisitions
and dispositions that it believes satisfy our investment criteria.
Registrant Information
Our executiveoffices are located at 1521 Westbranch Drive, Suite 100, McLean,
Virginia 22102, and our telephone number is (703)
287-5800.
Our website address is
www.GladstoneCommercial.com
. However, theinformation located on, or accessible from, our website is not,
and shall not be deemed to be, a part of this prospectus, any accompanying
prospectus supplement or any free writing prospectus or incorporated into any
other filings that we make withthe SEC.
The Securities We May Offer
We may offer common stock, preferred stock, debt securities, depositary shares
and/or subscription rights, either individually or incombination, up to a
total dollar amount of $1.3 billion, from time to time under this prospectus,
together with the applicable prospectus supplement and any related free
writing prospectus, at prices and on terms to be determined by marketconditions
at the time of any offering. This prospectus provides you with a general
description of the securities we may offer. Each time we offer a type or
series of securities under this prospectus, we will provide a prospectus
supplement thatwill describe the specific amounts, prices and other important
terms of the securities, including, to the extent applicable:
. designation or classification;
. aggregate principal amount or aggregate offering price;
. maturity date, if applicable;
. original issue discount, if any;
. rates and times of payment of interest or dividends, if any;
. redemption, conversion, exercise, exchange or sinking fund terms, if any;
. conversion or exchange prices or rates, if any, and, if applicable, any provisions for changes to or adjustmentsin the
conversion or exchange prices or rates and in the securities or other property receivable upon conversion or exchange;
. ranking;
. restrictive covenants, if any;
. voting or other rights, if any; and
. material or special U.S. federal income tax considerations, if any.
The applicable prospectus supplement and any related free writing prospectus
that we may authorize to be provided to you may also add, updateor change any
of the information contained in this prospectus or in the documents we have
incorporated by reference. However, no prospectus supplement or free writing
prospectus will offer a security that is not registered and described in
thisprospectus at the time of the effectiveness of the registration statement
of which this prospectus is a part.
We may sell the securitiesdirectly to investors or to or through agents,
underwriters or dealers. We, and our agents or underwriters, reserve the right
to accept or reject all or part of any proposed purchase of securities. If we
do offer securities to or through agents orunderwriters, we will include in
the applicable prospectus supplement:
. the names of those agents or underwriters;
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. applicable fees, discounts and commissions to be paid to them;
. details regarding over-allotment options, if any; and
. the net proceeds to us.
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RISK FACTORS
An investment in any securities offered pursuant to this prospectus involves
substantial risks. You should carefully consider the risk factorsincorporated
by reference herein from our
Annual Report on Form
10-K
for the year ended December 31, 2023
,and the other information contained in this prospectus, as updated, amended
or superseded by our subsequent filings under the Exchange Act, and the risk
factors and other information contained in any accompanying prospectus
supplement beforeacquiring any of such securities. The occurrence of any of
these risks could materially and adversely affect our business, prospects,
financial condition, results of operations and cash flow and might cause you
to lose all or part of your investmentin the offered securities. Much of the
business information, as well as the financial and operational data contained
in our risk factors, is updated in our periodic reports filed with the SEC
pursuant to the Exchange Act, which are also incorporatedby reference into
this prospectus. Although we have tried to discuss key risk factors, please be
aware that these are not the only risks we face and there may be additional
risks that we do not presently know of or that we currently consider notlikely
to have a significant impact. New risks may emerge at any time, and we cannot
predict such risks or estimate the extent to which they may affect our
business or our financial performance. Please also refer to the section
entitled"Forward-Looking Statements" above.
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USE OF PROCEEDS
Unless we specify otherwise in an accompanying prospectus supplement, we
intend to use the net proceeds from the issuance or sale of oursecurities to
provide additional funds for general corporate purposes, which may include,
without limitation, the repayment of outstanding indebtedness, the acquisition
of additional properties, capital expenditures and/or improvements to
propertiesin our portfolio, distributions to stockholders and working capital.
Any specific allocation of the net proceeds of an offering of securities to a
specific purpose will be determined at the time of such offering and will be
described in theaccompanying prospectus supplement to this prospectus.
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DESCRIPTION OF CAPITAL STOCK
General
As of March 8, 2024, ourauthorized capital stock consists of 100,000,000
shares of capital stock, par value $0.001 per share, 62,329,084 of which are
classified as common stock, 6,760,000 of which are classified as Series E
Preferred Stock, 950,000 of which are classifiedas Senior Common Stock,
25,970,030 of which are classified as Series F Preferred Stock and 3,990,886
of which are classified as Series G Preferred Stock. Under our charter, our
board of directors is authorized to classify and reclassify any unissuedshares
of capital stock by setting or changing in any one or more respects, from time
to time before issuance of such stock, the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or
otherdistributions, qualifications and terms and conditions of redemption of
such stock. Our board of directors may also, without stockholder approval,
amend our charter from time to time to increase or decrease the aggregate
number of shares of stock orthe number of shares of stock of any class that we
have authority to issue.
For purposes of this section "Description of CapitalStock," we refer to our
common stock which is listed on Nasdaq Global Select Market under the symbol
"GOOD" as our "
Listed Common Stock
" and we refer to our
non-listed
seniorcommon stock as our "
Senior Common Stock
." We collectively refer to our Series E Preferred Stock, our Series F
Preferred Stock and our Series G Preferred Stock as our "
Preferred Stock
," where appropriate.
The following summary description of our capital stock is not necessarily
complete and is qualified in its entirety by reference to ourcharter and
bylaws, as amended, each of which has been filed with the SEC, as well as
applicable provisions of the MGCL.
Meetings and SpecialVoting Requirements
An annual meeting of the stockholders will be held each year for the purpose
of electing the class ofdirectors whose term is up for election and to conduct
other business that may be properly brought before the stockholders. Special
meetings of stockholders may be called only upon the request of a majority of
the total number of authorizeddirectors, a majority of our independent
directors, our chairman, our chief executive officer or our president and must
be called by our secretary upon the written request of stockholders entitled
to cast at least a majority of all the votesentitled to be cast at a meeting.
In general, the presence in person or by proxy of a majority of the
outstanding shares, exclusive of excess shares (described in "Certain
Provisions of Maryland Law and of Our Charter andBylaws--Restrictions on
Ownership and Transfer," below), shall constitute a quorum. Generally, the
affirmative vote of a majority of the votes cast at a meeting at which a
quorum is present is necessary to take stockholder action, exceptthat a
plurality of all votes cast at such a meeting is sufficient to elect any
director.
Under Maryland law, a Maryland corporationgenerally cannot dissolve, amend its
charter, merge, convert, sell all or substantially all of its assets, engage
in a share exchange or engage in similar transactions outside the ordinary
course of business, unless approved by the affirmative voteof stockholders
entitled to cast at least
two-thirds
of the votes entitled to be cast on the matter. However, a Maryland
corporation may provide in its charter for approval of these matters by a
lesserpercentage, but not less than a majority of all of the votes entitled to
be cast on the matter. Except for a conversion, our charter provides for
approval of these matters by a majority of all the votes entitled to be cast
on the matter.
Stockholders may, by the affirmative vote of at least
two-thirds
of all votes entitled to be castgenerally in the election of directors, elect
to remove a director for cause.
Repurchases of Excess Shares
We have the authority to redeem "excess shares" (as defined in our charter)
immediately upon becoming aware of the existence ofexcess shares or after
giving the holder of the excess shares 30 days to transfer the
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excess shares to a person whose ownership of such shares would not exceed the
ownership limit, and therefore such shares would no longer be considered
excess shares. The price paid uponredemption by us shall be the lesser of the
price paid for such excess shares by the stockholder holding the excess shares
or the fair market value of the excess shares, see "Certain Provisions of
Maryland Law and of Our Charter andBylaws--Restrictions on Ownership and
Transfer."
Common Stock
Certificates
Generally, we willnot issue stock certificates. Shares of common stock will be
held in "uncertificated" form, which will eliminate the physical handling and
safekeeping responsibilities inherent in owning transferable stock
certificates and eliminate theneed to return a duly executed stock certificate
to the transfer agent to effect a transfer. Transfers can be effected simply
by mailing to us a duly executed transfer form. Upon the issuance of shares of
common stock, we will send on request toeach stockholder a written statement
which will include all information that is required to be written upon stock
certificates pursuant to the MGCL.
Other Matters
The transfer anddistribution paying agent and registrar for our common stock
is Computershare, Inc.
Listed Common Stock
Voting Rights
Eachshare of Listed Common Stock is entitled to one vote on each matter to be
voted upon by our stockholders, including the election of directors, and,
except as provided with respect to any other class or series of capital stock,
the holders of theListed Common Stock possess exclusive voting power. There is
no cumulative voting in the election of directors which means that the holders
of a majority of the outstanding Listed Common Stock can elect all of the
directors then standing forelection and that the holders of the remaining
shares are not able to elect any directors.
Dividends, Liquidations and Other Rights
Holders of Listed Common Stock are entitled to receive distributions, when
authorized by our board of directors and declared by us, out ofassets legally
available for the payment of distributions. We currently pay distributions on
the Listed Common Stock on a monthly basis. They also are entitled to share
ratably in our assets legally available for distribution to our stockholders
inthe event of our liquidation, dissolution or winding up, after payment of or
adequate provision for all of our known debts and liabilities. These rights
are subject to the preferential rights of any other class or series of our
stock, including theSenior Common Stock and our Preferred Stock, and the
provisions of our charter regarding restrictions on transfer and ownership of
shares of our capital stock.
Holders of our Listed Common Stock have no preference, conversion, exchange,
sinking fund, redemption or appraisal rights and have nopreemptive rights to
subscribe for any of our securities. Subject to the restrictions on transfer
and ownership of shares of our capital stock contained in our charter, all
shares of Listed Common Stock have equal distribution, liquidation and
otherrights.
Senior Common Stock
Voting Rights
Holders of our Senior Common Stock have no voting rights, except as set forth
below or as otherwise from time to time required by law.So long as any shares
of Senior Common Stock remain outstanding, we will not,
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without the affirmative vote or consent of the holders of at least a majority
of the shares of the Senior Common Stock outstanding at the time, given in
person or by proxy, either in writing orat a meeting (voting separately by
class), amend, alter or repeal the provisions of our charter, whether by
merger, consolidation or otherwise, so as to materially and adversely affect
any right, preference, privilege or voting power of the SeniorCommon Stock or
the holders thereof.
Dividends, Liquidations and Other Rights
The Senior Common Stock has priority over the Listed Common Stock with respect
to payment of distributions and is pari passu with the ListedCommon Stock with
respect to distribution of amounts upon liquidation, dissolution or winding
up; however, the Senior Common Stock ranks junior to our Preferred Stock with
respect to payment of distributions and distribution of amounts uponliquidation,
dissolution or winding up. The Senior Common Stock will be entitled to
receive, subject to the preferential rights of our Preferred Stock (and any
other preferred stock that we may issue in the future), when and as authorized
by ourboard of directors and declared by us, out of funds legally available
for payment of distributions, cash distributions in an amount equal to $1.05
per share per annum, declared daily and paid at the rate of $0.0875 per share
per month. Distributionsare cumulative from the date of issue of the shares
and are payable monthly on or about the 5th business day of the month
following the month in which such distributions are earned.
Exchange Option
Holders of Senior CommonStock have the right, but not the obligation, after
the 5th anniversary of the issuance of the shares of Senior Common Stock
proposed to be exchanged, to exchange any or all of such shares of Senior
Common Stock for our Listed Common Stock at apredetermined exchange ratio (the
"
Exchange Ratio
"). The Exchange Ratio is calculated by dividing $15.00 by the greatest of (i)
the Closing Trading Price of the Listed Common Stock on the date on which such
shares of SeniorCommon Stock were originally issued, (ii) the Book Value Per
Share of the Listed Common Stock as determined as of the date on which such
shares of Senior Common Stock were originally issued, and (iii) $13.68. For
this purpose, "
BookValue Per Share
" means, as of a given date, the common stockholders' equity (as reflected in
our most recent public filing with the SEC) divided by the number of
outstanding shares of common stock as of the same date. "
ClosingTrading Price
" means, on any date of determination, (i) the most recently reported closing
price per share of the Listed Common Stock as of such date on Nasdaq, or (ii)
if, as of such date, the Listed Common Stock is not traded onNasdaq, the most
recently reported closing price per share of the Listed Common Stock on the
primary stock exchange on which the Listed Common Stock is then listed for
trading, or (iii) if, as of such date, the Listed Common Stock is not
listedfor trading on any stock exchange, the closing bid price for the Listed
Common Stock on the
Over-the-Counter
Bulletin Board, or (iv) if neither (i), (ii) or(iii) apply, the last reported
bid price on the
over-the-counter
market or on the Pink Sheets, or (v) if there is no longer any public market
for the ListedCommon Stock as of such date, the fair market value of a share
of Listed Common Stock as determined in good faith by our board of directors.
Solely for purposes of determining when shares of Senior Common Stock become
exchangeable, shares of Senior Common Stock purchased by a holderon dates
subsequent to such holder's initial purchase of Senior Common Stock (excluding
shares issued pursuant to such holder's participation in a distribution
reinvestment plan of the Company, if any) will be deemed to have been issued
ontheir respective issuance dates and, accordingly, the
5-year
holding periods for such shares will commence from their respective issuance
dates. In addition, any shares issued pursuant to a distributionreinvestment
plan of the Company, if any, will be deemed to have been issued, and the
five-year holding periods for such shares will be deemed to commence, on the
date of issuance of the shares of Senior Common Stock purchased by the holder
to whichthe shares issued pursuant to such Company's distribution reinvestment
plan relate.
All accumulated and unpaid distributions on theSenior Common Stock shall be
paid to the holder through the date of exchange.
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Automatic Conversion
Each share of Senior Common Stock will be converted into Listed Common Stock
in accordance with the Exchange Ratio automatically upon any ofthe following
events:
. an acquisition of the Company by another company by means of any transaction or
series of related transactions towhich we are a party (including, without limitation,
any stock acquisition, reorganization, merger or consolidation, but excluding
any sale of stock for capital raising purposes) other than a transaction or
series of transactions in which theholders of our voting securities outstanding
immediately prior to such transaction continue to retain at least 50% of the total
voting power represented by our voting securities or those of such other surviving
entity outstanding immediately aftersuch transaction or series of transactions;
. a sale of all or substantially all of our assets; or
. a liquidation, dissolution or winding up of the Company.
All accumulated and unpaid distributions on the Senior Common Stock shall be
paid to the holder through the date of conversion.
Call Option
Shares of Senior CommonStock are callable for cash at our option, in whole or
in part, at a redemption price equivalent to $15.30 per share, plus
accumulated and unpaid distributions thereon to the date fixed for redemption
.
Anti-Dilution
If the outstanding ListedCommon Stock is increased or decreased or changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of any other company by reason of any reclassification,
recapitalization, share split, combination ofshares, or share distribution,
appropriate adjustment will be made to the number of shares and relative terms
of the Senior Common Stock. There will be no anti-dilution adjustment upon the
future sale of additional shares of Listed Common Stock,regardless of the
price at which the Senior Common Stock is sold.
Valuation
Beginning with the quarter ended September 30, 2014, we have determined the
value of the Senior Common Stock on a quarterly basis. Thisvalue is determined
as of the last day of each quarter and is posted to our website at
www.GladstoneCommercial.info
. The information located on, or accessible from, our website is not, and
shall not be deemed to be, a part of this prospectussupplement or the
accompanying prospectus or incorporated into any other filings that we make
with the SEC.
Preferred Stock
General
Subject to limitationsprescribed by the MGCL and our charter, our board of
directors is authorized to issue, from the authorized but unissued shares of
stock, shares of preferred stock in class or series and to establish from time
to time the number of shares ofpreferred stock to be included in the class or
series and to fix the designation and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms andconditions of redemption of the
shares of each class or series. Our board may also increase the number of
shares in any existing class or series.
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Existing Series of Preferred Stock
As of March 8, 2024, we had the following series of Preferred Stock classified:
. 6,760,000 shares of Series E Preferred Stock;
. 25,970,030 shares of Series F Preferred Stock; and
. 3,990,886 shares of Series G Preferred Stock.
Series E Preferred Stock
Voting Rights
Holders of Series E Preferred Stock generally have no voting rights. However,
if dividends on any shares of the Series E PreferredStock are in arrears for
18 or more consecutive months, holders of the Series E Preferred Stock (voting
together as a single class with holders of shares of any series of our
preferred stock equal in rank with the Series E Preferred Stock upon whichlike
voting rights have been conferred and are exercisable) will have the right to
elect two additional directors to serve on our board of directors until all
dividends for the past dividend periods are fully paid or declared and set
apart forpayment. In addition, we may not amend the charter, including the
designations, rights, preferences, privileges or limitations in respect of the
Series E Preferred Stock, whether by merger, consolidation or otherwise, in a
manner that wouldmaterially and adversely affect the rights, preferences,
privileges or voting powers of the Series E Preferred Stock without the
affirmative vote of the holders of at least
two-thirds
of the shares of Series EPreferred Stock then outstanding.
Dividends, Liquidation Preference and Other Rights
Holders of Series E Preferred Stock are entitled to receive, when and as
authorized by our board of directors and declared by us, preferentialcumulative
cash dividends on the Series E Preferred Stock at a rate of 6.625%per annum of
the $25.00 per share liquidation preference (equivalent to $1.65625 per annum
per share). Beginning on the date of issuance, dividends on the Series
EPreferred Stock are payable monthly in arrears and are cumulative.
If we liquidate, dissolve or wind up, holders of the Series EPreferred Stock
will have the right to receive the $25.00 per share liquidation preference,
plus an amount equal to any accrued and unpaid dividends to and including the
date of payment, but without interest, before any payment is made to
theholders of our common stock (including our Listed Common Stock and Senior
Common Stock) or any other class or series of our capital stock ranking junior
to the Series E Preferred Stock as to liquidation rights.
With respect to the payment of dividends and amounts upon liquidation,
dissolution or winding up, the Series E Preferred Stock will be equalin rank
with our Series F Preferred Stock, our Series G Preferred Stock and all other
equity securities we issue, the terms of which specifically provide that such
equity securities rank on a parity with the Series E Preferred Stock with
respect todividend rights or rights upon our liquidation, dissolution or
winding up; senior to our common stock (including our Listed Common Stock and
Senior Common Stock); and junior to all our existing and future indebtedness.
Generally, we are not permitted to redeem the Series E Preferred Stock prior
to October 4, 2024, except in limited circumstances relatingto our ability to
qualify as a REIT and pursuant to the special optional redemption provision
described below. On and after October 4, 2024, we may, at our option, redeem
the Series E Preferred Stock, in whole or in part, at any time or fromtime to
time, for cash at a redemption price of $25.00 per share, plus an amount equal
to any accrued and unpaid dividends (whether or not authorized or declared)
to, but not including, the date fixed for redemption, without interest, to the
extentwe have funds legally available for that purpose.
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In addition, upon the occurrence of a change of control or delisting event, as
a result ofwhich neither our common stock nor the common securities of the
acquiring or surviving entity (or American Depositary Receipts representing
such securities) is listed on the New York Stock Exchange, the NYSE American
or Nasdaq, or listed or quotedon a successor exchange or quotation system, we
may, at our option, redeem the Series E Preferred Stock, in whole or in part,
within 120 days after the first date on which such change of control or
delisting event occurred, by paying $25.00 pershare, plus an amount equal to
any accrued and unpaid dividends to, but not including, the date of
redemption. Should a change of control or delisting event occur, each holder
of Series E Preferred Stock may, at its sole option, elect to cause us
toredeem any or all of such holder's shares of Series E Preferred Stock in
cash at a redemption price of $25.00 per share, plus an amount equal to all
accrued but unpaid dividends, to, but not including, the redemption date, no
earlier than 30days and no later than 60 days following the date we notify
holders of the change of control or delisting event.
Shares of Series EPreferred Stock are not convertible into or exchangeable for
any other securities or property. The Series E Preferred Stock has no stated
maturity and is not subject to mandatory redemption or any sinking fund.
Series F Preferred Stock
Voting Rights
Holders of Series F Preferred Stock generally have no voting rights. However,
if dividends on any shares of the Series F PreferredStock are in arrears for
18 or more consecutive months, holders of the Series F Preferred Stock (voting
together as a single class with holders of shares of any series of our
preferred stock equal in rank with the Series F Preferred Stock upon whichlike
voting rights have been conferred and are exercisable) will have the right to
elect two additional directors to serve on our board of directors until all
dividends for the past dividend periods are fully paid or declared and set
apart forpayment. In addition, we may not amend the charter, including the
designations, rights, preferences, privileges or limitations in respect of the
Series F Preferred Stock, whether by merger, consolidation or otherwise, in a
manner that wouldmaterially and adversely affect the rights, preferences,
privileges or voting powers of the Series F Preferred Stock without the
affirmative vote of the holders of at least
two-thirds
of the shares of Series FPreferred Stock then outstanding.
Dividends and Liquidation Preference
Holders of shares of the Series F Preferred Stock will be entitled to receive,
when, as and if authorized by our board of directors (or a dulyauthorized
committee of the board) and declared by us, out of funds legally available for
the payment of dividends, preferential cumulative cash dividends at the rate
of 6.00% per annum of the liquidation preference of $25.00 per share
(equivalentto a fixed annual amount of $1.50 per share). Beginning on the date
of issuance, dividends on the Series F Preferred Stock are payable monthly in
arrears and are cumulative.
In the event of our voluntary or involuntary liquidation, dissolution or
winding up, the holders of shares of Series F Preferred Stock will beentitled
to be paid, out of our assets legally available for distribution to our
stockholders, a liquidation preference of $25.00 per share, plus an amount
equal to any accumulated and unpaid dividends on such shares to, but
excluding, the date ofpayment, but without interest, before any distribution
of assets is made to holders of our common stock or any other class or series
of our capital stock that ranks junior to the Series F Preferred Stock as to
liquidation rights.
With respect to the payment of dividends and amounts upon liquidation,
dissolution or winding up, the Series F Preferred Stock will be equalin rank
with our Series E Preferred Stock, our Series G Preferred Stock and all other
equity securities we issue, the terms of which specifically provide that such
equity securities rank on a parity with the Series F Preferred Stock with
respect todividend rights or rights upon our liquidation, dissolution or
winding up; senior to our common stock (including our Listed Common Stock and
Senior Common Stock); and junior to all our existing and future indebtedness.
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Redemption
Optional Redemption Following Death of a Holder
Subject to the restrictions described under "--Stockholder Redemption Option,"
and the terms and procedures described below under"--Redemption Procedures,"
commencing on the date of original issuance and terminating upon the listing
of the Series F Preferred Stock on Nasdaq or another national securities
exchange, shares of Series F Preferred Stock held by anatural person upon his
or her death will be redeemed at the written request of the holder's estate
for a cash payment of $25.00 per share of Series F Preferred Stock on the
Death Redemption Date, which is the tenth calendar day followingdelivery of
such holder's estate's request to redeem shares of the Series F Preferred
Stock, or if such tenth calendar day is not a business day, on the next
succeeding business day.
Stockholder Redemption Option
Subject to the restrictions described herein, and the terms and procedures
described below under "--Redemption Procedures,"commencing on the date of
original issuance (or, if after the date of original issuance our board of
directors suspends the redemption program of the holders of the Series F
Preferred Stock, on the date our board of directors reinstates suchprogram)
and terminating on the earlier to occur of (1) the date upon which our board
of directors, by resolution, suspends or terminates the redemption program,
and (2) the date on which shares of the Series F Preferred Stock are listedon
Nasdaq or another national securities exchange, holders of the Series F
Preferred Stock may, at their option, require us to redeem any or all of their
shares of Series F Preferred Stock for a cash payment of $22.50 per share of
Series F PreferredStock on the Stockholder Redemption Date, which is the tenth
calendar day following delivery of such holder's request to redeem shares of
the Series F Preferred Stock, or if such tenth calendar day is not a business
day, on the next succeedingbusiness day. The maximum dollar amount that we
will make available each calendar year to redeem shares of Series F Preferred
Stock will not be subject to an annual limit;
provided
, that our obligation to redeem shares of Series F PreferredStock is limited
to the extent that our board of directors determines, in its sole and absolute
discretion, that we do not have sufficient funds available to fund any such
redemption or we are restricted by applicable law from making suchredemption;
and is also limited to the extent our board of directors suspends or
terminates the optional redemption right at any time or for any reason,
including after delivery of a Stockholder Redemption Notice but prior to the
correspondingStockholder Redemption Date.
Redemption Procedures
To require us to redeem shares of Series F Preferred Stock, a holder or estate
of a holder, as applicable, must deliver a notice of redemption,by overnight
delivery or by first class mail, postage prepaid to us at our principal
executive offices. Each such notice must be an original, notarized copy and
must state: (1) the name and address of the stockholder whose shares of Series
FPreferred Stock are requested to be redeemed, (2) the number of shares of
Series F Preferred Stock requested to be redeemed, (3) the name of the broker
dealer who holds the shares of Series F Preferred Stock requested to be
redeemed, thestockholder's account number with such broker dealer and such
broker dealer's participant number for DTC and (4) in the case of a notice to
redeem upon the death of a holder, a certified copy of the death certificate
(and such otherevidence that is satisfactory to us in our sole discretion) for
the natural person who previously held the shares to be redeemed.
If, asa result of the limitations described under "--Stockholder Redemption
Option," the optional redemption right has not been suspended or terminated
but fewer than all shares for which a notice of redemption was delivered to us
are to beredeemed, the number of shares to be redeemed will be pro rata based
on the number of shares of Series F Preferred Stock for which each holder
timely submitted a notice of redemption. If a Stockholder Redemption Date is
also a Death Redemption Date,the limitations described under "--Stockholder
Redemption Option" shall first be applied to any redemption requested upon the
death of the holder and then to shares to be redeemed pursuant to the
Stockholder Redemption Option.
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Upon any redemption of shares of Series F Preferred Stock, the holder thereof
will also beentitled to receive a sum equal to all accumulated and unpaid
dividends on such shares to, but excluding, the applicable Stockholder
Redemption Date or Death Redemption Date (unless such Stockholder Redemption
Date or Death Redemption Date fallsafter a dividend record date and on or
prior to the corresponding dividend payment date, in which case each holder of
shares of Series F Preferred Stock on such dividend record date will be
entitled to the dividend payable on such shares on thecorresponding dividend
payment date, notwithstanding the redemption of such shares on or prior to
such dividend payment date, and each holder of shares of Series F Preferred
Stock that are redeemed on such Stockholder Redemption Date or DeathRedemption
Date will be entitled to the dividends, if any, occurring after the end of the
dividend period to which such dividend payment date relates up to, but
excluding, the Stockholder Redemption Date or Death Redemption Date, as the
case maybe). Upon the redemption of any shares of Series F Preferred Stock,
such shares of Series F Preferred Stock will cease to be outstanding,
dividends with respect to such shares of Series F Preferred Stock will cease
to accumulate and all rightswhatsoever with respect to such shares (except the
right to receive the per share cash payment for the redeeming shares) will
terminate.
We may suspend or terminate the redemption program at any time in our sole
discretion.
Optional Redemption by the Company
Except in certain limited circumstances relating to maintaining our
qualification as a REIT as described in "Restrictions on Ownership
andTransfer," we cannot redeem the Series F Preferred Stock prior to the later
of (1) the first anniversary of the Termination Date and (2) June 1, 2024.
On and after the later of (1) the first anniversary of the Termination Date
and (2) June 1, 2024, at our sole option upon notless than 30 nor more than 60
days' written notice, we may redeem shares of the Series F Preferred Stock, in
whole or in part, at any time or from time to time, for cash at a redemption
price of $25.00 per share, plus an amount equal to allaccumulated and unpaid
dividends on such shares to, but excluding, the date fixed for redemption,
without interest. Holders of Series F Preferred Stock to be redeemed must then
surrender such Series F Preferred Stock at the place designated in thenotice.
Upon surrender of the Series F Preferred Stock, the holders will be entitled
to the redemption price. If notice of redemption of any shares of Series F
Preferred Stock has been given and if we have deposited the funds necessary
for suchredemption with the paying agent for the benefit of the holders of any
of the shares of Series F Preferred Stock to be redeemed, then from and after
the redemption date, dividends will cease to accumulate on those shares of
Series F Preferred Stock,those shares of Series F Preferred Stock will no
longer be deemed outstanding and all rights of the holders of such shares will
terminate, except the right to receive the redemption price. If less than all
of the outstanding Series F Preferred Stockis to be redeemed, the Series F
Preferred Stock to be redeemed will be selected (1) pro rata, (2) by lot or
(3) by any other fair and equitable method that our board of directors may
choose.
Unless full cumulative dividends for all applicable past dividend periods on
all shares of Series F Preferred Stock and any shares of stockthat rank on
parity with regards to dividends and upon liquidation have been or
contemporaneously are declared and paid (or declared and a sum sufficient for
payment set apart for payment), no shares of Series F Preferred Stock will be
redeemed. Insuch event, we also will not purchase or otherwise acquire
directly or indirectly any shares of Series F Preferred Stock (except by
exchange for our capital stock ranking junior to the Series F Preferred Stock
as to dividends and upon liquidation).However, the foregoing will not prevent
us from purchasing shares pursuant to our charter, in order to ensure that we
continue to meet the requirements for qualification as a REIT, or from
acquiring shares of Series F Preferred Stock pursuant to apurchase or exchange
offer made on the same terms to holders of all outstanding shares of Series F
Preferred Stock and any shares of stock that rank on parity with regards to
dividends and upon liquidation. Upon listing, if any, of the Series FPreferred
Stock on Nasdaq or another national securities exchange, so long as no
dividends are in arrears, we will be entitled at any time and from time to
time to repurchase shares of Series F Preferred Stock in open-market
transactions dulyauthorized by the board of directors and effected in
compliance with applicable laws.
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We will deliver a notice of redemption, by overnight delivery, by first class
mail, postageprepaid or electronically to holders thereof, or request our
agent, on behalf of us, to promptly do so by overnight delivery, by first
class mail, postage prepaid or electronically. The notice will be provided not
less than 30 nor more than 60 daysprior to the date fixed for redemption in
such notice. Each such notice will state: (1) the date for redemption; (2) the
number of Series F Preferred Stock to be redeemed; (3) the CUSIP number for
the Series F Preferred Stock;(4) the applicable redemption price on a per
share basis; (5) if applicable, the place or places where the certificate(s)
for such shares are to be surrendered for payment of the price for redemption;
(6) that dividends on the SeriesF Preferred Stock to be redeemed will cease to
accumulate from and after such date of redemption; and (7) the applicable
provisions of our charter under which such redemption is made. If fewer than
all shares held by any holder are to beredeemed, the notice delivered to such
holder will also specify the number of Series F Preferred Stock to be redeemed
from such holder or the method of determining such number. We may provide in
any such notice that such redemption is subject to oneor more conditions
precedent and that we will not be required to effect such redemption unless
each such condition has been satisfied at the time or times and in the manner
specified in such notice. No defect in the notice or delivery thereof
willaffect the validity of redemption proceedings, except as required by
applicable law. If a redemption date falls after a record date and on or prior
to the corresponding dividend payment date, each holder of Series F Preferred
Stock at the close ofbusiness on that record date will be entitled to the
dividend payable on such shares on the corresponding dividend payment date
notwithstanding the redemption of such shares before the dividend payment
date, and the redemption price received by theholder on the redemption date
will be $25.00 per share.
Series G Preferred Stock
Voting Rights
Holders of Series GPreferred Stock generally have no voting rights. However,
if dividends on any shares of the Series G Preferred Stock are in arrears for
18 or more consecutive months, holders of the Series G Preferred Stock (voting
together as a single class withholders of shares of any series of our
preferred stock equal in rank with the Series G Preferred Stock upon which
like voting rights have been conferred and are exercisable) will have the
right to elect two additional directors to serve on our boardof directors
until all dividends for the past dividend periods are fully paid or declared
and set apart for payment. In addition, we may not amend the charter,
including the designations, rights, preferences, privileges or limitations in
respect ofthe Series G Preferred Stock, whether by merger, consolidation or
otherwise, in a manner that would materially and adversely affect the rights,
preferences, privileges or voting powers of the Series G Preferred Stock
without the affirmative vote ofthe holders of at least
two-thirds
of the shares of Series G Preferred Stock then outstanding.
Dividends,Liquidation Preference and Other Rights
Holders of Series G Preferred Stock are entitled to receive, when and as
authorized by ourboard of directors and declared by us, preferential
cumulative cash dividends on the Series G Preferred Stock at a rate of 6.00%
per annum of the $25.00 per share liquidation preference (equivalent to $1.50
per annum per share). Beginning on thedate of issuance, dividends on the
Series G Preferred Stock are payable monthly in arrears and are cumulative.
If we liquidate, dissolveor wind up, holders of the Series G Preferred Stock
will have the right to receive the $25.00 per share liquidation preference,
plus an amount equal to any accrued and unpaid dividends to and including the
date of payment, but without interest,before any payment is made to the
holders of our common stock (including our Listed Common Stock and Senior
Common Stock) or any other class or series of our capital stock ranking junior
to the Series G Preferred Stock as to liquidation rights.
With respect to the payment of dividends and amounts upon liquidation,
dissolution or winding up, the Series G Preferred Stock will be equalin rank
with our Series E Preferred Stock and Series F Preferred Stock and any future
class or series of our capital stock expressly designated as ranking on parity
with the Series G
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Preferred Stock with respect to dividend rights or rights upon our
liquidation, dissolution or winding up; senior to our common stock (including
our Listed Common Stock and Senior Common Stock);and junior to all our
existing and future indebtedness.
Generally, we are not permitted to redeem the Series G Preferred Stock prior
toJune 28, 2026, except in limited circumstances relating to our ability to
qualify as a REIT and pursuant to the special optional redemption provision
described below. On and after June 28, 2026, we may, at our option, redeem the
Series GPreferred Stock, in whole or in part, at any time or from time to
time, for cash at a redemption price of $25.00 per share, plus an amount equal
to any accrued and unpaid dividends (whether or not authorized or declared)
to, but not including, thedate fixed for redemption, without interest, to the
extent we have funds legally available for that purpose.
In addition, upon theoccurrence of a change of control or delisting event, as
a result of which neither our common stock nor the common securities of the
acquiring or surviving entity (or American Depositary Receipts representing
such securities) is listed on the NewYork Stock Exchange, the NYSE American or
Nasdaq, or listed or quoted on a successor exchange or quotation system, we
may, at our option, redeem the Series G Preferred Stock, in whole or in part,
within 120 days after the first date on which suchchange of control or
delisting event occurred, by paying $25.00 per share, plus an amount equal to
any accrued and unpaid dividends to, but not including, the date of
redemption. Should a change of control or delisting event occur, each holder
ofSeries G Preferred Stock may, at its sole option, elect to cause us to
redeem any or all of such holder's shares of Series G Preferred Stock in cash
at a redemption price of $25.00 per share, plus an amount equal to all accrued
but unpaiddividends, to, but not including, the redemption date, no earlier
than 30 days and no later than 60 days following the date we notify holders of
the change of control or delisting event.
Shares of Series G Preferred Stock are not convertible into or exchangeable
for any other securities or property. The Series G Preferred Stockhas no
stated maturity and is not subject to mandatory redemption or any sinking fund.
Future Classes or Series of Preferred Stock
The following description of the terms of our preferred stock sets forth
general terms and provisions of our preferred stock to which anaccompanying
prospectus supplement may relate. Specific terms of any class or series of
preferred stock offered by an accompanying prospectus supplement will be
described in that prospectus supplement. The description set forth below is
subject toand qualified in its entirety by reference to the articles
supplementary to our charter fixing the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms andconditions of redemption of a
particular class or series of preferred stock.
If we offer preferred stock pursuant to this prospectus, anaccompanying
prospectus supplement will describe the specific terms of the class or series
of shares of preferred stock being offered, including, but not limited to:
. the title and stated value of the class or series of shares of preferred
stock and the number of sharesconstituting that class or series;
. the number of shares of the class or series of shares of preferred stock offered, the
liquidation preference pershare and the offering price of the shares of preferred stock;
. the dividend rate(s), period(s) and/or payment date(s) or the method(s) of calculation
for those values relatingto the shares of preferred stock of the class or series;
. the date from which dividends on shares of preferred stock of the class or series shall cumulate, if applicable;
. the procedures for any auction and remarketing, if any, for shares of preferred stock of the class or series;
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. the provision for a sinking fund, if any, for shares of preferred stock of the class or series;
. the provision for redemption or repurchase, if applicable, of shares of preferred stock of the class
or series,and any restriction on our ability to exercise those redemption and repurchase rights;
. any listing of the class or series of shares of preferred stock on any securities exchange or market;
. the terms and conditions, if applicable, upon which shares of preferred stock
of the class or series will beconvertible into shares of preferred stock
of another class or series or common stock, including the conversion price,
or manner of calculating the conversion price, and the conversion period;
. whether the preferred stock will be exchangeable into debt securities, and, if
applicable, the exchange price, orhow it will be calculated, and the exchange period;
. voting rights, if any, of the shares of preferred stock of the class or series;
. preemption rights, if any;
. whether interests in shares of preferred stock of the class or series will be represented by global securities;
. a discussion of federal income tax considerations applicable to shares of preferred stock of the
class or seriesto the extent not discussed in "Material U.S. Federal Income Tax Considerations";
. the relative ranking and preferences of shares of preferred stock of the class or series as
to dividend rightsand rights upon liquidation, dissolution or winding up of our affairs;
. to the extent not otherwise addressed in this prospectus, any limitations on
issuance of any class or series ofshares of preferred stock ranking senior to or
on a parity with the class or series of shares of preferred stock as to dividend
rights and rights upon liquidation, dissolution or winding up of our affairs;
. any limitations on direct or beneficial ownership and restrictions
on transfer of shares of preferred stock ofthe class or series,
in each case as may be appropriate to preserve our status as a
REIT under the Internal Revenue Code of 1986, as amended (the "
Code
"), among other purposes;
. the registrar and transfer agent for the shares of preferred stock; and
. any other specific terms, preferences, rights, limitations or restrictions of the class or series of shares ofpreferred stock.
If we issue shares of preferred stock under this prospectus, the shares will
be fully paid and
non-assessable
and will not have, or be subject to, any preemptive or similar rights.
The issuance ofpreferred stock could adversely affect the voting power,
conversion or other rights of holders of common stock. Preferred stock could
be issued quickly with terms designed to delay or prevent a change in control
of our company or make removal ofmanagement more difficult. Additionally, the
issuance of preferred stock may have the effect of decreasing the market price
of our common stock.
Restrictions on ownership and transfer of our common stock and Preferred Stock
are designed to preserve our status as a REIT, among otherpurposes, and,
therefore, may act to prevent or hinder a change of control. See "Certain
Provisions of Maryland Law and of Our Charter And Bylaws-- Restrictions on
Ownership and Transfer" below.
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DESCRIPTION OF DEBT SECURITIES
We may issue debt securities under one or more trust indentures to be executed
by us and the trustee to be named in the indenture. The termsof the debt
securities will include those stated in the indenture and those made a part of
the indenture by reference to the Trust Indenture Act of 1939, as amended (the
"
Trust Indenture Act
"). The indentures will be qualified underthe Trust Indenture Act.
The following description sets forth certain anticipated general terms and
provisions of the debt securities towhich an accompanying prospectus
supplement may relate. The particular terms of the debt securities offered by
an accompanying prospectus supplement (which terms may be different than those
stated below) and the extent, if any, to which such generalprovisions may
apply to the debt securities so offered will be described in the prospectus
supplement relating to such debt securities. Accordingly, for a description of
the terms of a particular issue of debt securities, investors should
reviewboth the accompanying prospectus supplement relating thereto and the
following description. A form of the indenture (as discussed herein) has been
filed as an exhibit to the registration statement of which this prospectus is
a part.
The debt securities will be our direct obligations and may be either senior
debt securities or subordinated debt securities. The indebtednessrepresented
by subordinated securities will be subordinated in right of payment to the
prior payment in full of our senior debt (as defined in the applicable
indenture).
Except as set forth in the applicable indenture and described in an
accompanying prospectus supplement relating thereto, the debt securitiesmay be
issued without limit as to aggregate principal amount, in one or more series,
secured or unsecured, in each case as established from time to time in or
pursuant to authority granted by a resolution of the board of directors or as
establishedin the applicable indenture. All debt securities of one series need
not be issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the debt securities of such
series, for issuance ofadditional debt securities of such series.
The accompanying prospectus supplement relating to any series of debt
securities being offeredwill contain their specific terms, including, without
limitation:
. their title and whether they are senior securities or subordinated securities
(including their ranking and termsof any subordination provisions);
. their initial aggregate principal amount and any limit on their aggregate principal amount;
. the percentage of the principal amount at which they will be issued and, if other than 100% of the
principalamount, the portion of the principal amount payable upon declaration of acceleration of their maturity;
. the terms, if any, upon which they may be convertible into shares of our common stock or preferred stock and theterms and
conditions upon which a conversion will be effected, including the initial conversion price or rate and the conversion period;
. if convertible or exchangeable, the portion of the principal amount that is convertible or exchangeable
intocommon stock or preferred stock, or the method by which any portion will be determined;
. if convertible or exchangeable, any applicable limitations on the ownership or transferability
of the commonstock or preferred stock into which they are convertible or exchangeable;
. the date or dates, or the method for determining the date or dates, on which the principal will be payable;
. the rate or rates (which may be fixed or variable), or the method for determining
the rate or rates, at whichthey will bear interest, if any; the date or
dates, or the method for determining the date or dates, from which any interest
will accrue, the interest payment dates on which any interest will be payable,
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the regular record dates for the interest payment dates, or the method by which the date will be determined, the person
to whom the interest will be payable, and the basis upon which interestwill be calculated if other than that of a
360-day
year of twelve
30-day
months;
. the place or places where the principal (and premium, if any) and interest, if any, will be payable, where theymay be
surrendered for conversion or registration of transfer or exchange and where notices or demands to or upon us may be served;
. the period or periods within which, the price or prices at which and the terms and conditions upon
which they maybe redeemed, as a whole or in part, at our option, if we are to have the option;
. our obligation, if any, to redeem, repay or purchase them pursuant to any sinking fund
or analogous provision orat the option of a holder, and the period or periods within
which, the price or prices at which and the terms and conditions upon which they will
be redeemed, repaid or purchased, as a whole or in part, pursuant to this obligation;
. if other than U.S. dollars, the currency or currencies in which they are denominated and payable, which may be aforeign currency
or units of two or more foreign currencies or a composite currency or currencies, and the related terms and conditions;
. whether the payments of principal (and premium, if any) or interest, if any, may be
determined with reference toan index, formula or other method (which index, formula or
method may, but need not be, based upon a currency, currencies, currency unit or units
or composite currencies) and the manner in which the amounts will be determined;
. any additions to, modifications of or deletions from their terms with
respect to the events of default orcovenants set forth in the indenture;
. any provisions for collateral security or guarantees for their repayment;
. whether they will be issued in certificated or book-entry form;
. whether they will be in registered or bearer form and, if in registered form, the denominations if other than$1,000
and any integral multiple thereof and, if in bearer form, the denominations and related terms and conditions;
. the applicability, if any, of defeasance and covenant defeasance provisions of the applicable indenture;
. whether and under what circumstances we will pay additional amounts
as contemplated in the applicable indenturein respect of any
tax, assessment or governmental charge and, if so, whether we will
have the option to redeem them in lieu of making the payment; and
. any other terms and any deletions from or modifications or additions to the applicable indenture.
The debt securities may provide for less than the entire principal amount
thereof to be payable upon declaration ofacceleration of the maturity thereof.
Special federal income tax, accounting and other considerations applicable to
debt securities will be described in the accompanying prospectus supplement.
The applicable indenture may contain provisions that would limit our ability
to incur indebtedness or that would afford holders of debtsecurities
protection in the event of a highly leveraged or similar transaction involving
us or in the event of a change of control.
Merger,Consolidation or Sale
The applicable indenture will provide that we may consolidate with, or sell,
lease or convey all orsubstantially all of our assets to, or merge with or
into, any other corporation, provided that:
. we are the continuing corporation, or the successor corporation (if other than the Company) formed by
orresulting from any consolidation or merger or which has received the transfer of our assets will be
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organized and existing under U.S. or state law and expressly assumes payment
of the principal of (and premium, if any), and interest on, all of the
applicable debt securities and the due andpunctual performance and observance
of all of the covenants and conditions contained in the applicable indenture;
. immediately after giving effect to the transaction and treating any indebtedness which becomes our obligation
orthe obligation of any subsidiary as a result thereof as having been incurred by us or such subsidiary at the
time of the transaction, no event of default under the applicable indenture, and no event which, after notice
or the lapse of time, or both,would become an event of default, will have occurred and be continuing; and
. an officer's certificate and legal opinion covering these conditions will be delivered to the trustee.
Covenants
Theapplicable indenture will contain covenants requiring us to take certain
actions and prohibiting us from taking certain actions. The covenants with
respect to any series of debt securities will be described in the accompanying
prospectus supplement.
Events of Default, Notice and Waiver
Each indenture will describe specific "events of default" with respect to a
series of debt securities issued under the indenture.These "events of default"
are likely to include (with grace and cure periods):
. our failure to pay any installment of interest;
. our failure to pay their principal (or premium, if any) at their maturity;
. our failure to make any required sinking fund payment;
. our breach of any other covenant or warranty contained in the applicable indenture (other than a
covenant addedto the indenture solely for the benefit of a different series of debt securities); and
. certain events of bankruptcy, insolvency or reorganization, or court appointment
of a receiver, liquidator ortrustee of us or any substantial part of our property.
If an event of default under any indenture with respect to debtsecurities of
any series at the time outstanding occurs and is continuing, then the
applicable trustee or the holders of not less than 25% of the principal amount
of the outstanding debt securities of that series may declare the principal
amount(or, if the debt securities of that series are original issue discount
securities or indexed securities, such portion of the principal amount as may
be specified in the terms thereof) of all the debt securities of that series
to be due and payableimmediately by written notice thereof to us (and to the
applicable trustee if given by the holders). However, at any time after such a
declaration of acceleration with respect to debt securities of such series (or
of all debt securities thenoutstanding under any indenture, as the case may
be) has been made, but before a judgment or decree for payment of the money
due has been obtained by the applicable trustee, the holders of not less than
a majority in principal amount of outstandingdebt securities of such series
(or of all debt securities then outstanding under the applicable indenture, as
the case may be) may rescind and annul such declaration and its consequences
if all events of default, other than the
non-payment
of accelerated principal (or specified portion thereof), with respect to debt
securities of such series (or of all debt securities then outstanding under
the applicable indenture, as the case may be)have been cured or waived as
provided in such indenture.
Each indenture also will provide that the holders of not less than a majority
inprincipal amount of the outstanding debt securities of any series (or of all
debt securities then outstanding under the applicable indenture, as the case
may be) may waive any past default with respect to the series and its
consequences, except a:
. payment default; or
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. covenant default that cannot be modified or amended without the consent
of the holder of each outstanding debtsecurity affected thereby.
Each trustee will be required to give notice to the holders of debt securities
within acertain number of days of a default under the applicable indenture
unless the default has been cured or waived;
provided
,
however
, that the trustee may withhold notice to the holders of any series of debt
securities of any default withrespect to the series (except a default in the
payment of the principal of (or premium, if any) or interest on any debt
security of the series or in the payment of any sinking fund installment in
respect of any debt security of the series) ifspecified responsible officers
of the trustee consider withholding the notice to be in the interest of the
holders.
Each indenture willprohibit the holders of debt securities of any series from
instituting any proceedings, judicial or otherwise, with respect to the
indenture or for any remedy thereunder, except in the case of failure of the
applicable trustee, for a certain periodof time after the trustee has received
a written request to institute proceedings in respect of an event of default
from the holders of not less than a majority in principal amount of the
outstanding debt securities of such series, as well as thefurnishing of
indemnity reasonably satisfactory to it. This provision will not prevent any
holder of debt securities from instituting a suit to enforce the payment of
the principal of (and premium, if any) and interest on the debt securities at
therespective due dates thereof.
Subject to the indenture, no trustee will be under any obligation to exercise
any of its rights or powersunder an indenture at the request or direction of
any holders of any series of debt securities then outstanding, unless the
holders furnish the trustee thereunder reasonable security or indemnity. The
holders of not less than a majority in principalamount of the outstanding debt
securities of any series (or of all debt securities then outstanding under an
indenture, as the case may be) will have the right to direct the time, method
and place of conducting any proceeding for any remedyavailable to the
applicable trustee, or of exercising any trust or power conferred upon the
trustee. However, a trustee may refuse to follow any direction which is in
conflict with any law or the applicable indenture, which may involve the
trusteein personal liability or which may be unduly prejudicial to the holders
of debt securities of such series not joining therein.
Within acertain period of time of the close of each fiscal year, we will be
required to deliver to each trustee, a certificate, signed by one of several
specified officers, stating whether or not the officer has knowledge of any
default under the applicableindenture and, if so, specifying each default and
the nature and status thereof.
Investors should review the accompanying prospectussupplement for information
with respect to any deletions from, modifications of or additions to the
events of default or covenants that are described herein, including any
addition of a covenant or other provision providing event risk or
similarprotection.
Modification of the Indenture
The indenture will provide that it may be modified or amended, with the
consent of the holders of not less than a majority in principal amountof each
series of the outstanding debt securities issued under the indenture affected
by the modification or amendment, provided that no modification or amendment
may, without the consent of each affected holder of the debt securities:
. change the stated maturity date of the principal (or premium, if any)
of or any installment of interest, if any,on the debt securities;
. reduce the principal amount (or premium, if any) of or the interest, if any, on the debt
securities or theprincipal amount due upon acceleration of an original issue discount security;
. change the place or currency of payment of principal (or premium, if any) of or interest, if any, on the debtsecurities;
. impair the right to institute suit for the enforcement of any payment on or with respect to the debt securities;
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. reduce the above-stated percentage of holders of the debt securities necessary to modify or amend the indenture;
. waive a redemption payment, if any, with respect to the debt securities or change
any of the provisions withrespect to the redemption of the debt securities; or
. modify the foregoing requirements or reduce the percentage of the outstanding debt securities necessary
to waivecompliance with certain provisions of the indenture or for waiver of certain defaults.
The holders of not less than amajority in principal amount of the outstanding
debt securities of each series affected thereby will have the right to waive
our compliance with certain covenants in the indenture. Each indenture will
contain provisions for convening meetings of theholders of debt securities of
a series to take permitted action. Under certain circumstances, we and the
trustee may make modifications and amendments to an indenture without the
consent of any holders of outstanding debt securities.
Redemption of Debt Securities
The debtsecurities may be redeemed at any time at our option, in whole or in
part, to protect our status as a REIT. The debt securities will also be
subject to optional or mandatory redemption on terms and conditions described
in the accompanying prospectussupplement.
Conversion of Debt Securities
The terms and conditions, if any, upon which any debt securities are
convertible into shares of our common stock or preferred stock will be
setforth in the applicable prospectus supplement relating thereto. The terms
will include:
. whether the debt securities are convertible into shares of our common stock or preferred stock;
. the conversion price (or the manner of calculating the price);
. the conversion period;
. the events requiring an adjustment to the conversion price and
provisions affecting conversion if the debtsecurities are redeemed; and
. any restrictions on conversion.
Subordination
Upon any distribution toour creditors in a liquidation, dissolution or
reorganization, the payment of the principal of and interest on any
subordinated securities will be subordinated to the extent provided in the
applicable indenture to the prior payment in full of allsenior securities. No
payment of principal or interest will be permitted to be made on subordinated
securities at any time if any payment default or any other default which
permits accelerations exists. After all senior securities are paid in fulland
until the subordinated securities are paid in full, holders of subordinated
securities will be subrogated to the right of holders of senior securities to
the extent that distributions otherwise payable to holders of subordinated
securities havebeen applied to the payment of senior securities. By reason of
any subordination, in the event of a distribution of assets upon our
insolvency, some of our general creditors may recover more, ratably, than
holders of subordinated securities. Theaccompanying prospectus supplement or
the information incorporated herein by reference will contain the approximate
amount of senior securities outstanding as of the end of our most recent
fiscal quarter.
Global Debt Securities
The debtsecurities of a series may be issued in whole or in part in global
form. The global securities will be deposited with a depositary, or with a
nominee for a depositary, identified in the accompanying prospectus
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supplement. In this case, one or more global securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding debtsecurities of the series to be represented
by the global security or securities. Unless and until it is exchanged in
whole or in part for debt securities in definitive form, a global security may
not be transferred except as a whole by thedepositary for the global security
to a nominee of the depositary or by a nominee of the depositary to the
depositary or another nominee of the depositary or by the depositary or any
nominee to a successor of the depositary or a nominee of thesuccessor.
The specific material terms of the depositary arrangement with respect to any
portion of a series of debt securities to berepresented by a global security
will be described in the accompanying prospectus supplement. We anticipate
that the following provisions will apply to all depositary arrangements.
Upon the issuance of a global security, the depositary for the global security
will credit, on its book-entry registration and transfersystem, the respective
principal amounts of the debt securities represented by the global security to
the accounts of persons, or participants, that have accounts with the
depositary. The accounts to be credited will be designated by anyunderwriters
or agents participating in the distribution of the debt securities. Ownership
of beneficial interests in a global security will be limited to participants
or persons that may hold interests through participants. Ownership of
beneficialinterests in the global security will be shown on, and the transfer
of that ownership will be effected only through, records maintained by the
depositary for the global security, with respect to interests of participants,
or by participants orpersons that hold through participants, with respect to
interests of persons other than participants. So long as the depositary for a
global security, or its nominee, is the registered owner of the global
security, the depositary or the nominee, asthe case may be, will be considered
the sole owner or holder of the debt securities represented by the global
security for all purposes under the indenture;
provided
,
however
, that for purposes of obtaining any consents or directionsrequired to be
given by the holders of the debt securities, we, the trustee and our agents
will treat a person as the holder of the principal amount of debt securities
as specified in a written statement of the depositary. Except as set forth
hereinor otherwise provided in the accompanying prospectus supplement, owners
of beneficial interests in a global security will not be entitled to have the
debt securities represented by the global security registered in their names,
will not receivephysical delivery of the debt securities in definitive form
and will not be considered the owners or holders thereof under the indenture.
Principal, premium, if any, and interest payments on debt securities
represented by a global security registered in the name of a depositaryor its
nominee will be made to the depositary or its nominee, as the case may be, as
the registered owner of the global security. Neither we, the trustee nor any
paying agent for the debt securities, will have any responsibility or
liability for anyaspect of the records relating to or payments made on account
of beneficial ownership interests in the global security or for maintaining,
supervising or reviewing any records relating to the beneficial ownership
interests.
We expect that the depositary for any debt securities represented by a global
security, upon receipt of any payment of principal, premium, ifany, or
interest will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the
principal amount of the global security as shown on the records of the
depositary. We alsoexpect that payments by participants will be governed by
standing instructions and customary practices, as is now the case with the
securities held for the accounts of customers registered in "street names" and
will be the responsibilityof the participants.
If the depositary for any debt securities represented by a global security is
at any time unwilling or unable tocontinue as depositary and a successor
depositary is not appointed by us within the period of time set forth in the
indenture, we will issue the debt securities in definitive form in exchange
for the global security. In addition, we may at any time,and in our sole
discretion, determine not to have any of the debt securities of a series
represented by one or more global securities and, in that event, will issue
debt securities of the series in definitive form in exchange for all of the
globalsecurity or securities representing the debt securities.
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The laws of some states require that certain purchasers of securities take
physical deliveryof the securities in definitive form. These laws may impair
the ability to transfer beneficial interests in debt securities represented by
global securities.
Governing Law
The indenture for the debtsecurities will be governed by and construed in
accordance with the laws of the State of New York.
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DESCRIPTION OF DEPOSITARY SHARES
General
We may issue depositary shares,each of which will represent a fractional
interest of a share of a particular class or series of our preferred stock, as
specified in the accompanying prospectus supplement which will more fully
describe the terms of those depositary shares. Sharesof a class or series of
preferred stock represented by depositary shares will be deposited under a
separate deposit agreement among us, the depositary named therein and the
holders from time to time of the depositary receipts issued by the
preferredstock depositary which will evidence the depositary shares. Subject
to the terms of the deposit agreement, each owner of a depositary receipt will
be entitled, in proportion to the fractional interest of a share of a
particular class or series ofpreferred stock represented by the depositary
shares evidenced by that depositary receipt, to all the rights and preferences
of the class or series of preferred stock represented by those depositary
shares (including dividend, voting, conversion,redemption and liquidation
rights).
The depositary shares to be issued will be evidenced by depositary receipts
issued pursuant to theapplicable deposit agreement. Immediately following the
issuance and delivery of a class or series of preferred stock by us to the
preferred stock depositary, we will cause the preferred stock depositary to
issue, on our behalf, the depositaryreceipts. The following description of the
depositary shares, and any description of the depositary shares in an
accompanying prospectus supplement, may not be complete and is subject to, and
qualified in its entirety by reference to, the underlyingdeposit agreement and
the depositary receipt, which we will file with the SEC at or prior to the
time of the sale of the depositary shares. You should refer to, and read this
summary together with, the deposit agreement and related depositaryreceipt.
You can obtain copies of any form of deposit agreement or other agreement
pursuant to which the depositary shares are issued by following the directions
described under the caption "Where You Can Find More Information" in
theaccompanying prospectus supplement.
Dividends and Other Distributions
The depositary will distribute all cash dividends or other cash distributions
received in respect of our preferred stock to the record holdersof depositary
shares relating to such preferred stock in proportion to the number of such
depositary shares owned by such holders. The depositary will distribute only
such amount, however, as can be distributed without attributing to any holder
ofdepositary shares a fraction of one cent, and the balance not so distributed
shall be added to and treated as part of the next sum received by the
depositary for distribution to record holders of depositary shares.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositaryshares
entitled thereto, unless the depositary determines that it is not feasible to
make such distribution, in which case the depositary may, with our approval,
sell such property and distribute the net proceeds from such sale to such
holders.
The deposit agreement will also contain provisions relating to the manner in
which any subscription or similar rights offered by us to holdersof our
preferred stock shall be made available to the holders of depositary shares.
Redemption of Depositary Shares
If a class or series of preferred stock represented by depositary shares is
subject to redemption, the depositary shares will be redeemed fromthe proceeds
received by the depositary resulting from the redemption, in whole or in part,
of such class or series of preferred stock held by the depositary. The
redemption price per depositary share will be equal to the applicable fraction
of theredemption price per share payable with respect to such class or series
of preferred stock. Whenever we redeem shares of preferred stock held by the
depositary, the
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depositary will redeem as of the same redemption date the number of depositary
shares representing the shares of preferred stock so redeemed. If fewer than
all the depositary shares are to beredeemed, the depositary shares to be
redeemed will be selected by lot or pro rata as may be determined by the
depositary.
After the datefixed for redemption, the depositary shares so called for
redemption will no longer be outstanding and all rights of the holders of the
depositary shares will cease, except the right to receive the money,
securities or other property payable uponsuch redemption and any money,
securities or other property to which the holders of such depositary shares
were entitled upon such redemption upon surrender to the depositary of the
depositary receipts evidencing such depositary shares.
Voting Our Preferred Stock
Upon receiptof notice of any meeting at which the holders of preferred stock
are entitled to vote, the depositary will mail the information contained in
such notice of meeting to the record holders of the depositary shares relating
to such preferred stock. Eachrecord holder of such depositary shares on the
record date (which will be the same date as the record date for our preferred
stock) will be entitled to instruct the depositary as to the exercise of the
voting rights pertaining to the amount ofpreferred stock represented by such
holder's depositary shares. The depositary will endeavor, insofar as
practicable, to vote the amount of preferred stock represented by such
depositary shares in accordance with such instructions, and we willagree to
take all action which may be deemed necessary by the depositary in order to
enable the depositary to do so. The depositary may abstain from voting shares
of preferred stock to the extent it does not receive specific instructions
from theholders of depositary shares representing such preferred stock.
Amendment and Termination of the Depositary Agreement
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may at any time be amended byagreement
between the depositary and us. However, any amendment that materially and
adversely alters the rights of the holders of depositary shares will not be
effective unless such amendment has been approved by the holders of at least a
majorityof the depositary shares then outstanding. The deposit agreement may
be terminated by us or the depositary only if (i) all outstanding depositary
shares have been redeemed or (ii) there has been a final distribution in
respect of ourpreferred stock in connection with any liquidation, dissolution
or winding up of the Company and such distribution has been distributed to the
holders of depositary receipts.
Charges of Depositary
We will pay alltransfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. We will pay charges
of the depositary in connection with the initial deposit of our preferred
stock and any redemption of ourpreferred stock. Holders of depositary receipts
will pay other transfer and other taxes and governmental charges and such
other charges, including a fee for the withdrawal of shares of preferred stock
upon surrender of depositary receipts, as areexpressly provided in the deposit
agreement to be for their accounts.
Miscellaneous
The depositary will forward to holders of depositary receipts all reports and
communications from the Company that are delivered to thedepositary and that
we are required to furnish to holders of preferred stock.
Neither the depositary nor the Company will be liable if itis prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the deposit agreement. The obligations of the depositary and
the Company under the deposit agreement will be limited to performance in
goodfaith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceeding in respect of any
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depositary shares or preferred stock unless satisfactory indemnity is
furnished. They may rely upon written advice of counsel or accountants, or
upon information provided by persons presentingpreferred stock for deposit,
holders of depositary receipts or other persons believed to be competent and
on documents believed to be genuine.
Resignation and Removal of the Depositary
The depositary may resign at any time by delivering to us notice of its
election to do so, and we may at any time remove the depositary, anysuch
resignation or removal to take effect upon the appointment of a successor
depositary and its acceptance of such appointment. Such successor depositary
must be appointed within 60 days after delivery of the notice of resignation
or removal.
Restrictions on Ownership
The depositagreement will contain provisions restricting the ownership and
transfer of depositary shares. Such restrictions will be described in the
accompanying prospectus supplement and will be referenced on the applicable
depositary receipts.
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DESCRIPTION OF SUBSCRIPTION RIGHTS
We may issue subscription rights to purchase one or more series or classes of
common stock, preferred stock, debt securities and depositaryshares. We may
issue subscription rights independently or together with any other offered
security, which may or may not be transferable by the stockholder. In
connection with any offering of subscription rights, we may enter into a
standbyarrangement with one or more underwriters or other purchasers pursuant
to which the underwriters or other purchasers may be required to purchase any
securities remaining unsubscribed for after such offering.
The accompanying prospectus supplement relating to any subscription rights we
may offer will contain the specific terms of the subscriptionrights. These
terms may include the following:
. the price, if any, for the subscription rights;
. the exercise price payable for common stock, preferred stock, debt
securities or depositary shares upon theexercise of the subscription rights;
. the number of subscription rights issued to each security holder;
. the number and terms of the common stock, preferred stock, debt securities
or depositary shares which may bepurchased per each subscription right;
. the extent to which the subscription rights are transferable;
. any provisions for adjustment of the number or amount of securities receivable upon
exercise of the subscriptionrights or the exercise price of the subscription rights;
. any other terms of the subscription rights, including the terms, procedures and
limitations relating to theexchange and exercise of the subscription rights;
. the date on which the right to exercise the subscription rights shall
commence, and the date on which thesubscription rights shall expire;
. the extent to which the subscription rights may include an
over-subscription privilege with respect tounsubscribed securities; and
. if applicable, the material terms of any standby underwriting or purchase arrangement
entered into by us inconnection with the offering of subscription rights.
The description in the accompanying prospectus supplement of anysubscription
rights we offer will not necessarily be complete and will be qualified in its
entirety by reference to the applicable subscription rights certificate or
subscription rights agreement, which will be filed with the SEC if we
offersubscription rights. For more information on how you can obtain copies of
any subscription rights certificate or subscription rights agreement if we
offer subscription rights, see "Where You Can Find More Information." We urge
you to readthe applicable subscription rights certificate, the applicable
subscription rights agreement and any accompanying prospectus supplement in
their entirety.
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BOOK ENTRY PROCEDURES AND SETTLEMENT
We may issue the securities offered pursuant to this prospectus in
certificated or book-entry form or in the form of one or more globalsecurities.
The accompanying prospectus supplement will describe the manner in which the
securities offered thereby will be issued.
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CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS
Classification of our Board of Directors
Our board of directors is currently comprised of seven members. Our board is
divided into three classes of directors. Directors of each classare elected
for a term expiring at the annual meeting of stockholders held in the third
year following their election and until their respective successor is duly
elected and qualifies, and each year one class of directors will be elected by
thestockholders. Any director elected to fill a vacancy shall serve for the
remainder of the full term of the class in which the vacancy occurred and
until a successor is elected and qualifies. We believe that classification of
our board of directorshelps to assure the continuity and stability of our
business strategies and policies as determined by our directors. Holders of
shares of our capital stock have no right to cumulative voting in the election
of directors. Consequently, at each annualmeeting of stockholders, the holders
of a majority of the capital stock entitled to vote are able to elect all of
the successors of the class of directors whose terms expire at that meeting.
Our classified board could have the effect of making the replacement of
incumbent directors more time consuming and difficult. At least twoannual
meetings of stockholders, instead of one, will generally be required to effect
a change in a majority of our board of directors. Thus, our classified board
could increase the likelihood that incumbent directors will retain their
positions.The classified terms of directors may delay, defer or prevent a
tender offer or an attempt to change control of us or another transaction that
might involve a premium price for our common stock that might be in the best
interest of our stockholders.
Removal of Directors
Any directormay be removed only for cause by the stockholders upon the
affirmative vote of at least
two-thirds
of all the votes entitled to be cast generally in the election of directors.
Restrictions on Ownership and Transfer
In order for us to qualify as a REIT, not more than 50% (by value) of our
outstanding stock may be owned by any five or fewer individuals(including some
tax-exempt
entities) during the last half of each taxable year, and the outstanding stock
must be owned by 100 or more persons independent of us and each other during
at least 335 days of a
12-month
taxable year or during a proportionate part of a shorter taxable year for
which an election to be treated as a REIT is made. We may prohibit certain
acquisitions and transfers of shares of our stock tomaintain our qualification
as a REIT under the Code. However, no assurance can be given that this
prohibition will be effective.
In orderto assist our board of directors in preserving our status as a REIT,
among other purposes, our charter contains an ownership limit which prohibits
any person or group of persons from acquiring, directly or indirectly,
beneficial or constructiveownership of more than 9.8% of the outstanding
shares of our capital stock (which includes our common stock and preferred
stock). Shares owned by a person or a group of persons in excess of the
ownership limit are deemed "excess shares."Shares owned by a person who
individually owns of record less than 9.8% of outstanding shares may
nevertheless be excess shares if the person is deemed part of a group for
purposes of this restriction.
Our charter stipulates that any purported issuance or transfer of shares shall
be valid only with respect to those shares that do not resultin the
transferee-stockholder owning shares in excess of the ownership limit or in
our disqualification as a REIT under the Code. If the transferee-stockholder
acquires excess shares, the person is considered to have acted as our agent
and holds theexcess shares on behalf of the ultimate stockholder.
The ownership limit does not apply to offerors which, in accordance with
applicablefederal and state securities laws, make a cash tender offer, where
at least 90% of the outstanding shares of our stock (not including
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shares or subsequently issued securities convertible into common stock which
are held by the tender offeror and any "affiliates" or "associates" thereof
within the meaning ofthe Exchange Act) are duly tendered and accepted pursuant
to the cash tender offer. The ownership limit also does not apply to the
underwriter in a public offering of our stock. The ownership limit also does
not apply to a person or persons whichour directors exempt from the ownership
limit upon appropriate assurances that our qualification as a REIT is not
jeopardized.
We havethe authority to (a) redeem excess shares upon becoming aware of the
existence of excess shares after giving the holder of the excess shares
written notice of the redemption not less than one week prior to the
redemption date, or (b) grantthe holder 30 days to transfer the excess shares
to any person or group of persons whose ownership of such shares would not
exceed the ownership limit, in which case such shares would no longer be
considered excess shares. The price paid uponredemption by us shall be the
lesser of the price paid for such excess shares by the stockholder holding the
excess shares or the fair market value of the excess shares.
Distributions
Distributions will be paidto stockholders as of the close of business on the
applicable record date selected by our board of directors. We are required to
make distributions to our stockholders sufficient to satisfy the REIT
requirements. If we satisfy the REIT requirements,we generally will not be
subject to federal corporate income tax on any income that we distribute to
our stockholders.
Unless otherwisespecified in the governing instrument of the capital stock,
distributions will be paid at the discretion of our board of directors based
upon our earnings, cash flow, general financial condition and applicable law.
Because we may receive income frominterest or rents at various times during
our fiscal year, distributions may not reflect our income earned in that
particular distribution period but may be made in anticipation of cash flow,
which we expect to receive during a later period of theyear and may be made in
advance of actual receipt in an attempt to make distributions relatively
uniform. We may borrow to make distributions if the borrowing is necessary to
maintain our REIT status, or if the borrowing is part of a liquidationstrategy
whereby the borrowing is done in anticipation of the sale of properties and
the proceeds will be used to repay the loan.
Information Rights
Any stockholder, or his or her agent, upon written request, may, during usual
business hours and for any lawful and proper purpose,inspect and copy our
bylaws, minutes of the proceedings of our stockholders, our annual financial
statements and any voting trust agreement that is on file at our principal
office. In addition, one or more stockholders who together are, and for
atleast six months have been, record holders of 5% of any class of our stock
are entitled to inspect and copy our stockholder list and books of account
upon written request. The list will include the name and address of, and the
number of shares ownedby, each stockholder and will be available at our
principal office within 20 days of the stockholder's request. A 5% stockholder
may also request in writing a statement of our affairs.
The rights of stockholders described herein are in addition to, and do not
adversely affect rights provided to investors under, Rule
14a-7
promulgated under the Exchange Act, which provides that, upon request of
investors and the payment of the expenses of the distribution, we are required
to distribute specific materials to stockholders in thecontext of the
solicitation of proxies for voting on matters presented to stockholders, or,
at our option, provide requesting stockholders with a copy of the list of
stockholders so that the requesting stockholders may make the distributionthemse
lves.
Business Combinations
The MGCL prohibits "business combinations" between a corporation and an
interested stockholder or an affiliate of an interestedstockholder for five
years after the most recent date on which the interested stockholder
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becomes an interested stockholder. These business combinations include a
merger, consolidation, statutory share exchange, or, in circumstances
specified in the statute, certain transfers ofassets, certain stock issuances
and transfers, liquidation plans and reclassifications involving interested
stockholders and their affiliates. The MGCL defines an interested stockholder
as:
. any person who beneficially owns, directly or indirectly, 10% or more
of the voting power of thecorporation's outstanding voting stock; or
. an affiliate or associate of the
corporation who, at any time within the
two-year
period immediately prior to the date in question, was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the then-outstanding stock of the corporation.
A person is not an interested stockholder if the board of directors approves
in advance the transaction by which theperson otherwise would have become an
interested stockholder. However, in approving the transaction, the board of
directors may provide that its approval is subject to compliance, at or after
the time of approval, with any terms and conditionsdetermined by the board of
directors.
After the five-year prohibition, any business combination between a
corporation and an interestedstockholder generally must be recommended by the
board of directors and approved by the affirmative vote of at least:
. 80% of the votes entitled to be cast by holders of the then outstanding shares of voting stock; and
. two-thirds
of the votes entitled to be cast by holders of the votingstock other
than shares held by the interested stockholder with whom or with
whose affiliate the business combination is to be effected or shares
held by an affiliate or associate of the interested stockholder.
These super-majority vote requirements do not apply if the common stockholders
receive a minimum price, as defined under Maryland law, fortheir shares in the
form of cash or other consideration in the same form as previously paid by the
interested stockholder for its shares.
The statute permits various exemptions from its provisions, including business
combinations that are approved by the board of directors beforethe time that
the interested stockholder becomes an interested stockholder.
Our board of directors has by resolution exempted anybusiness combination
between the corporation and our officers and directors from these provisions
of the MGCL and, consequently, the five-year prohibition and the super-majority
vote requirements will not apply to business combinations between usand any of
our officers and directors unless our board later resolves otherwise.
Subtitle 8
Subtitle 8 of Title 3 of the MGCL permits a Maryland corporation with a class
of equity securities registered under the Exchange Act and atleast three
independent directors to elect to be subject, by provision in its charter or
bylaws or a resolution of its board of directors and notwithstanding any
contrary provision in the charter or bylaws, to any or all of five provisions:
. a classified board of directors;
. a
two-thirds
vote requirement for removing a director;
. a requirement that the number of directors be fixed only by vote of the directors;
. a requirement that a vacancy on the board be filled only by the remaining directors and for
the remainder of thefull term of the class of directors in which the vacancy occurred; and
. a majority requirement for the calling of a stockholder-requested special meeting of stockholders.
We have elected to be subject to each of the above provisions of Title 3,
Subtitle 8 of the MGCL.
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Amendments to Our Charter and Bylaws
Our charter generally may be amended only if the amendment is declared
advisable by our board of directors and approved by the affirmative voteof
stockholders entitled to cast a majority of all of the votes entitled to be
cast on the matter. Our board of directors, with the approval of a majority of
the entire board, and without any action by our stockholders, may also amend
our charterfrom time to time to increase or decrease the aggregate number of
shares of stock or the number of shares of stock of any class or series we are
authorized to issue.
Each of our board of directors and stockholders has the power to adopt, alter
or repeal any provision of our bylaws and to make new bylaws.
Extraordinary Transactions
Underthe MGCL, a Maryland corporation generally cannot dissolve, merge,
convert, sell all or substantially all of its assets, engage in a statutory
share exchange or engage in similar transactions outside the ordinary course
of business unless declaredadvisable by the board of directors and approved by
the affirmative vote of stockholders entitled to cast at least
two-thirds
of the votes entitled to be cast on the matter unless a lesser percentage (but
notless than a majority of all of the votes entitled to be cast on the matter)
is set forth in the corporation's charter. As permitted by the MGCL, except
for a conversion, our charter provides that any of these actions may be
approved by theaffirmative vote of stockholders entitled to cast a majority of
all of the votes entitled to be cast on the matter.
Operations
We generally are prohibited from engaging in certain activities, including
acquiring or holding property or engaging in any activity that wouldcause us
to fail to qualify as a REIT.
Term and Termination
Our charter provides for us to have a perpetual existence. Pursuant to our
charter, and subject to the provisions of any of our classes orseries of stock
then outstanding and if declared advisable by a majority of the entire board
of directors, our stockholders by the affirmative vote of a majority of all of
the votes entitled to be cast on the matter, may approve our liquidation
anddissolution.
Advance Notice of Director Nominations and New Business
Our bylaws provide that, with respect to an annual meeting of stockholders,
nominations of persons for election to our board of directors andthe proposal
of business to be considered by stockholders at the annual meeting may be made
only:
. pursuant to our notice of the meeting;
. by or at the direction of our board of directors; or
. by a stockholder who was a stockholder of record at the time of the provision of notice, who is entitled
to voteat the meeting and who has complied with the advance notice procedures set forth in our bylaws.
With respect to specialmeetings of stockholders, only the business specified
in our notice of meeting may be brought before the meeting of stockholders and
nominations of persons for election to our board of directors at which
directors are to be elected pursuant to ournotice of the meeting may be made
only:
. by or at the direction of our board of directors; or
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. by a stockholder who was a stockholder of record at the time of the provision of notice, who is entitled
to voteat the meeting and who has complied with the advance notice provisions set forth in our bylaws.
Power to Issue Additional Shares
We currently do not intend to issue any securities other than the shares
described in this prospectus, although we may do so at anytime, including upon
the redemption of limited partnership interests that we may issue in
connection with acquisitions of real property. We believe that the power to
issue additional shares of stock and to classify or reclassify unissued shares
ofcommon stock or preferred stock and thereafter to issue the classified or
reclassified shares provides us with increased flexibility in structuring
possible future financings and acquisitions and in meeting other needs which
might arise. Theseactions can be taken without stockholder approval, unless
stockholder approval is required by applicable law or the rules of any stock
exchange or automated quotation system on which our securities may be listed
or traded. Although we have nopresent intention of doing so, we could issue a
class or series of stock that could delay, defer or prevent a transaction or a
change in control that might involve a premium price for holders of common
stock or otherwise be in their best interest.
Control Share Acquisitions
The MGCLprovides that a holder of "control shares" of a Maryland corporation
acquired in a "control share acquisition" has no voting rights with respect to
such shares except to the extent approved at a special meeting by the
affirmativevote of stockholders entitled to cast
two-thirds
of the votes entitled to be cast on the matter, excluding shares of stock in a
corporation in respect of which any of the following persons is entitled
toexercise or direct the exercise of the voting power of shares of stock of
the corporation in the election of directors: (i) a person who makes or
proposes to make a control share acquisition, (ii) an officer of the
corporation or(iii) an employee of the corporation who is also a director of
the corporation. "Control shares" are voting shares of stock which, if
aggregated with all other such shares of stock previously acquired by the
acquiror or in respect ofwhich the acquiror is able to exercise or direct the
exercise of voting power (except solely by virtue of a revocable proxy), would
entitle the acquiror to exercise voting power in electing directors within one
of the following ranges of votingpower:
(i) one-tenth
or more but less than
one-third,
(ii) one-third
or more but less than a majority, or (iii) amajority or more of all voting
power. Control shares do not include shares that the acquiring person is then
entitled to vote as a result of having previously obtained stockholder
approval. A "control share acquisition" means theacquisition of issued and
outstanding control shares, subject to certain exceptions.
A person who has made or proposes to make a controlshare acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors to call a special meeting of stockholders to
be held within 50 days of demand to consider the voting rights ofthe shares.
If no request for a meeting is made, the corporation may itself present the
question at any stockholders meeting.
If votingrights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute,
then, subject to certain conditions and limitations, the corporation may
redeem any or all of the controlshares (except those for which voting rights
have previously been approved) for fair value determined, without regard to
the absence of voting rights for the control shares, as of the date of the
last control share acquisition by the acquirer, or,if no such meeting is held,
as of the date of any meeting of stockholders at which the voting rights of
such shares are considered and not approved. If voting rights for control
shares are approved at a stockholders meeting and the acquiror becomesentitled
to vote a majority of the shares entitled to vote, all other stockholders may
exercise appraisal rights. The fair value of the shares as determined for
purposes of such appraisal rights may not be less than the highest price per
share paidby the acquiror in the control share acquisition.
The control share acquisition statute does not apply (a) to shares acquired in
amerger, consolidation or share exchange if the corporation is a party to the
transaction or (b) to acquisitions approved or exempted by the charter or
bylaws of the corporation.
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We have not opted out of the control share acquisition statute.
Possible Anti-Takeover Effect of Certain Provisions of Maryland Law and of Our
Charter and Bylaws
The business combination provisions and the control share acquisition
provisions of the MGCL, the classification of our board of directors,
therestrictions on the transfer and ownership of stock and the advance notice
provisions of our bylaws could have the effect of delaying, deferring or
preventing a transaction or a change in control that might involve a premium
price for holders ofcommon stock or otherwise be in their best interests.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
This section summarizes the current material federal income tax consequences
generally resulting from our election to be taxed as a REIT andthe current
material federal income tax considerations relating to the ownership and
disposition of our common stock and preferred stock.
This discussion is not exhaustive of all possible tax considerations and does
not provide a detailed discussion of any state, local or foreigntax
considerations. This discussion does not address all aspects of taxation that
may be relevant to particular investors in light of their personal investment
or tax circumstances, or to certain types of investors that are subject to
specialtreatment under the federal income tax laws, such as insurance
companies,
tax-exempt
organizations (except to the limited extent discussed below under "--Taxation of
Tax-Exempt
Stockholders"), financial institutions or broker-dealers,
non-U.S.
individuals and foreign corporations (except to the limited extent discussed
belowunder "--Taxation of
Non-U.S.
Stockholders") and other persons subject to special tax rules. Moreover, this
summary assumes that our stockholders hold our stock as a capital asset for
federalincome tax purposes, which generally means property held for
investment. The statements in this section are based on the current federal
income tax laws, including the Code, the regulations promulgated by the U.S.
Treasury Department (the"
Treasury Regulations
") rulings and other administrative interpretations and practices of the IRS,
and judicial decisions, all as currently in effect, and all of which are
subject to differing interpretations or to change, possiblywith retroactive
effect. This discussion is for general purposes only and is not tax advice. We
cannot assure you that new laws, interpretations of law, or court decisions,
any of which may take effect retroactively, will not cause any statement
inthis section to be inaccurate.
As discussed below in "--Taxation in Connection with Holding Securities other
than ourStock," we intend to describe in any prospectus supplement related to
the offering of our debt securities, depositary shares or subscription rights,
the material federal income tax considerations relating to the ownership and
disposition ofsuch securities as will be sold by us pursuant to that
prospectus supplement.
We urge you to consult your own tax advisor regardingthe specific tax
consequences to you of acquisition, ownership and disposition of our
securities and of our election to be taxed as a REIT. Specifically, you should
consult your own tax advisor regarding the federal, state, local, foreign, and
othertax consequences of such acquisition, ownership, disposition and
election, and regarding potential changes in applicable tax laws.
Taxation of OurCompany
We elected to be taxed as a REIT under the federal income tax laws beginning
with our taxable year ended December 31,2003. We believe that, beginning with
such taxable year, we have been organized and have operated in such a manner
as to qualify for taxation as a REIT under the Code, and we intend to continue
to operate in such a manner. No assurances can be giventhat our beliefs or
expectations will be fulfilled, however, since qualification as a REIT depends
on our ability to satisfy numerous asset, income, stock ownership and
distribution tests described below, the satisfaction of which depends, in
part,on our operating results.
The sections of the Code relating to qualification, operation and taxation as
a REIT are highly technical andcomplex. The following discussion sets forth
only the material aspects of those sections. This summary is qualified in its
entirety by the applicable Code provisions and the related Treasury
Regulations and administrative and judicialinterpretations thereof.
In connection with the filing of this registration statement, Squire Patton
Boggs (US) LLP has rendered anopinion that we have been organized and have
operated in conformity with the requirements for qualification and taxation as
a REIT pursuant to Sections 856 through 860 of the Code for our taxable years
ended December 31, 2022 andDecember 31, 2023, and our organization and current
and proposed method of operation will enable us to continue to qualify for
taxation as a REIT for our taxable year ending December 31, 2024 and in the
future.
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Investors should be aware that the opinion of Squire Patton Boggs (US) LLP is
based on thefederal income tax laws governing qualification as a REIT as of
the date of such opinion, which is subject to change, possibly on a
retroactive basis, is not binding on the IRS or any court, and speaks only as
of the date issued. In addition, theopinion of Squire Patton Boggs (US) LLP is
based on customary assumptions and is conditioned upon certain representations
made by us as to factual matters, including representations regarding the
nature of our assets and income, the diversity of theownership of our capital
stock and the future conduct of our business. Moreover, our continued
qualification and taxation as a REIT depend on our ability to meet, on a
continuing basis, through actual results, certain qualification tests set
forthin the federal income tax laws. Those qualification tests involve the
percentage of our gross income that we earn from specified sources, the
percentage of our assets that falls within specified categories, the diversity
of our stock ownership, andthe percentage of our earnings that we distribute.
Squire Patton Boggs (US) LLP will not review our compliance with those tests
on a continuing basis. Accordingly, no assurance can be given that the actual
results of our operations for anyparticular period will satisfy such
requirements. The opinion of Squire Patton Boggs (US) LLP does not foreclose
the possibility that we may have to use one or more of the REIT savings
provisions described below, which may require us to pay amaterial excise or
penalty tax in order to maintain our REIT qualification. For a discussion of
the tax consequences of our failure to maintain our qualification as a REIT,
see "--Failure to Qualify as a REIT" below.
If we maintain our qualification as a REIT, we generally will not be subject
to federal income tax on the taxable income that we distribute toour
stockholders because we will be entitled to a deduction for dividends that we
pay. The benefit of that tax treatment is that it avoids the "double
taxation," or taxation at both the corporate and stockholder levels, that
generallyresults from owning stock in a corporation. In general, income
generated by a REIT is taxed only at the stockholder level if such income is
distributed by the REIT to its stockholders. We will be subject to federal
tax, however, in the followingcircumstances:
. We are subject to the corporate federal income tax on any REIT taxable income, including net capital gain, thatwe do not
distribute to our stockholders during, or within a specified time period after, the calendar year in which the income is earned.
. We are subject to tax, at the highest corporate rate, on:
. net income from the sale or other disposition of property acquired
through foreclosure ("foreclosureproperty"), as described below under
"--Gross Income Tests--Foreclosure Property," that we hold primarily
for sale to customers in the ordinary course of business, and
. other
non-qualifying
income from foreclosure property.
. We are subject to a 100% tax on net income from sales or other dispositions of property, other than
foreclosureproperty, that we hold primarily for sale to customers in the ordinary course of business.
. If we fail to satisfy one or both of the 75% gross income test or the
95% gross income test, as described belowunder "--Gross Income Tests,"
but nonetheless maintain our qualification as a REIT because we meet
certain other requirements, we will be subject to a 100% tax on:
. the greater of the amount by which we fail the 75% gross income test or the 95% gross income test, in eithercase, multiplied by
. a fraction intended to reflect our profitability.
. If we fail to distribute during a calendar year at least the sum of: (1) 85% of our REIT ordinary
income for theyear, (2) 95% of our REIT capital gain net income for the year, and (3) any undistributed
taxable income required to be distributed from earlier periods, then we will be subject to a 4%
nondeductible excise tax on the excess of the requireddistribution over the amount we actually distributed.
. If we fail any of the asset tests, other than a de minimis failure of the 5%
asset test, the 10% vote test or the10% value test, as described below under
"--Asset Tests," as long as (1) the failure was due to reasonable cause and not
to willful neglect, (2) we file a description of each asset that caused such
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failure with the IRS, and (3) we dispose of the assets causing the failure or otherwise comply with the asset
tests within six months after the last day of the quarter in which we identifysuch failure, we will pay a tax
equal to the greater of $50,000 or the highest federal corporate income tax rate (currently 21%) multiplied by
the net income from the nonqualifying assets during the period in which we failed to satisfy the assettests.
. If we fail to satisfy one or more requirements for REIT qualification,
other than the gross income tests and theasset tests, and such
failure is due to reasonable cause and not to willful neglect, we
will be required to pay a penalty of $50,000 for each such failure.
. We will be subject to a 100% excise tax on transactions with a taxable REIT subsidiary, including
the provisionof services to us by a taxable REIT subsidiary, that are not conducted on an
arm's-length
basis.
. We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meetrecordkeeping
requirements intended to monitor our compliance with rules relating to the composition of a RET's stockholders.
. We may elect to retain and pay income tax on our net long-term capital gain. In that case,
a U.S. stockholderwould be taxed on its proportionate share of our undistributed long-term
capital gain (to the extent that we make a timely designation of the gain to the stockholders)
and would receive a credit or refund for its proportionate share of the tax wepaid.
. If we acquire any asset from a C corporation, or a corporation that generally is subject to full
corporate-leveltax, in a merger or other transaction in which we acquire a basis in the asset
that is determined by reference either to the C corporation's basis in the asset or to another
asset, and such corporation did not make a deemed sale election underTreasury Regulation
Section 1.337(d)-7,
we will pay tax at the highest corporate rate applicable if we
recognize gain on the sale or disposition of the asset during
the five-year period after we acquirethe asset. The amount
of gain on which we will pay tax generally is the lesser of:
. the amount of gain that we recognize at the time of the sale or disposition, and
. the amount of gain that we would have recognized if we had sold the asset at the time we acquired it.
. The earnings of our taxable REIT subsidiary is subject to federal corporate income tax.
In addition, we may be subject to a variety of taxes, including payroll taxes
and state, local and foreign income, property and other taxes onour assets and
operations. We also could be subject to tax in situations and on transactions
not presently contemplated.
Requirements forQualification as a REIT
A REIT is a corporation, trust or association that satisfies each of the
following requirements:
1) It is managed by one or more trustees or directors;
2) Its beneficial ownership is evidenced by transferable shares of stock,
or by transferable shares orcertificates of beneficial interest;
3) It would be taxable as a domestic corporation, but for Sections 856 through 860 of the Code, i.e., the REITprovisions;
4) It is neither a financial institution nor an insurance company subject to special provisions of the federalincome tax laws;
5) At least 100 persons are beneficial owners of its stock or ownership shares
or certificates (determined withoutreference to any rules of attribution);
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6) During the last half of any taxable year, not more than 50% in
value of its outstanding stock or shares ofbeneficial interest are
owned, directly or indirectly, by five or fewer individuals, which
the federal income tax laws define to include certain entities;
7) It elects to be a REIT, or has made such election for a previous
taxable year, and satisfies all relevantfiling and other
administrative requirements established by the IRS that must be met
to qualify to be taxed as a REIT for federal income tax purposes;
8) It uses a calendar year for federal income tax purposes and complies
with the recordkeeping requirements of thefederal income tax laws; and
9) It meets certain other requirements described below, regarding the sources of its gross
income, the nature anddiversification of its assets and the distribution of its income.
We must satisfy requirements 1 through4, and 8 during our entire taxable year
and must satisfy requirement 5 during at least 335 days of a taxable year of
12 months, or during a proportionate part of a taxable year of less than 12
months. If we comply with certain requirements forascertaining the beneficial
ownership of our outstanding stock in a taxable year and have no reason to
know that we violated requirement 6, we will be deemed to have satisfied
requirement 6 for that taxable year. For purposes of determining stockownership
under requirement 6, an "individual" generally includes a supplemental
unemployment compensation benefits plan, a private foundation, or a portion of
a trust permanently set aside or used exclusively for charitable purposes.
An"individual," however, generally does not include a trust that is a
qualified employee pension or profit sharing trust under the federal income
tax laws, and beneficiaries of such a trust will be treated as holding our
stock in proportionto their actuarial interests in the trust for purposes of
requirement 6.
Our charter provides for restrictions regarding the ownershipand transfer of
our stock which are intended to assist us in satisfying the stock ownership
requirements described in conditions (5) and (6) (6) above, among other
purposes. The provisions of the charter restricting the ownership and
transferof our stock are described in "Certain Provisions of Maryland Law And
of Our Charter And Bylaws--Restrictions on Ownership and Transfer." We believe
we have issued sufficient stock with enough diversity of ownership to
satisfyrequirements 5 and 6 set forth above. For purposes of requirement 8, we
have adopted December 31 as our year end for federal income tax purposes, and
thereby satisfy this requirement.
To monitor compliance with the share ownership requirements, we generally are
required to maintain records regarding the actual ownership ofour shares. To
do so, we must demand written statements each year from the record holders of
significant percentages of our shares pursuant to which the record holders
must disclose the actual owners of the shares (i.e., the persons required
toinclude our dividends in their gross income). We must maintain a list of
those persons failing or refusing to comply with this demand as part of our
records. We could be subject to monetary penalties if we fail to comply with
these record-keepingrequirements. If a record holder fails or refuses to
comply with the demands, such record holder will be required by U.S. Treasury
Regulations to submit a statement with such record holder's tax return
disclosing such record holder'sactual ownership of our shares and other
information. In addition, we must satisfy all relevant filing and other
administrative requirements established by the IRS to elect and maintain REIT
qualification, use a calendar year for U.S. federal incometax purposes, and
comply with the record keeping requirements of the Code and regulations
promulgated thereunder.
Qualified REITSubsidiaries
. A "qualified REIT subsidiary" generally is a corporation, all of the stock
of which is owned, directly or indirectly, by a REIT and that is not treated
as a taxable REIT subsidiary. A corporation that is a"qualified REIT
subsidiary" is treated as a division of the REIT that owns, directly or
indirectly, all of its stock and not as a separate entity for federal income
tax purposes. Thus, all assets, liabilities, and items of income,deduction,
and credit of a "qualified REIT subsidiary" are treated as assets,
liabilities, and items of income, deduction, and credit of the REIT that
directly or indirectly owns the qualified REIT subsidiary. Consequently, in
applying theREIT requirements described herein, the separate existence of any
"qualified REIT
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subsidiary" that we own will be ignored, and all assets, liabilities, and
items of income, deduction, and credit of such subsidiary will be treated as
our assets, liabilities, and items ofincome, deduction, and credit.
In the event that a disregarded subsidiary of ours ceases to be wholly
owned--for example, if anyequity interest in the subsidiary is acquired by a
person other than us or another disregarded subsidiary of ours--the
subsidiary's separate existence would no longer be disregarded for U.S.
federal income tax purposes. Instead, thesubsidiary would have multiple owners
and would be treated as either a partnership or a taxable corporation. Such an
event could, depending on the circumstances, adversely affect our ability to
satisfy the various asset and gross income requirementsapplicable to REITs,
including the requirement that REITs generally may not own, directly or
indirectly, more than 10% of the securities of another corporation. See
"--Gross Income Tests and "--Asset Tests," below.
Other Disregarded Entities and Partnerships
. An unincorporated domestic entity, such as a limited liability company, that
has asingle owner, as determined under the federal income tax laws, generally
is not treated as an entity separate from its owner for federal income tax
purposes. We own various direct and indirect interests in entities that are
classified aspartnerships, limited liability companies and trusts for state
law purposes. Nevertheless, many of these entities currently are not treated
as entities separate from their owners for federal income tax purposes because
each such entity is treated ashaving a single owner for federal income tax
purposes. Consequently, the assets and items of gross income of such entities
will be treated as assets and items of gross income of their owners for
federal income tax purposes, including the applicationof the various REIT
qualification requirements.
An unincorporated domestic entity with two or more owners, as determined under
thefederal income tax laws, generally is taxed as a partnership for federal
income tax purposes. In the case of a REIT that is an owner of an entity that
is taxed as a partnership for federal income tax purposes, the REIT is treated
as owning itsproportionate share of the assets of the entity and as earning
its allocable share of the gross income of the entity for purposes of the
applicable REIT qualification tests. Thus, our proportionate share of the
assets and items of gross income ofour Operating Partnership and each other
partnership, joint venture, or limited liability company that is taxed as a
partnership for federal income tax purposes and in which we own a direct or
indirect equity interest is treated as our assets anditems of gross income for
purposes of applying the various REIT qualification tests. For purposes of the
10% value test (described in "--Asset Tests"), our proportionate share would
be based on our proportionate interest in the equityinterests and certain debt
securities issued by the entity. For all of the other asset and income tests,
our proportionate share would be based on our proportionate interest in the
capital of the entity.
Taxable REIT Subsidiaries
.
A REIT is permitted to own, directly or indirectly, up to 100% of the stock of
one or more"taxable REIT subsidiaries." The subsidiary and the REIT generally
must jointly elect to treat the subsidiary as a taxable REIT subsidiary. A
corporation of which a taxable REIT subsidiary directly or indirectly owns
more than 35% of thevoting power or value of the securities, however, is
automatically treated as a taxable REIT subsidiary without an election. Unlike
a "qualified REIT subsidiary," the separate existence of a taxable REIT
subsidiary is not ignored forfederal income tax purposes. A taxable REIT
subsidiary is a fully taxable corporation that may earn income that would not
be qualifying income for purposes of the gross income tests, as described
below, if earned directly by the parent REIT.Accordingly, a taxable REIT
subsidiary generally is subject to corporate income tax on its earnings, which
may reduce the cash flow generated by us and our subsidiaries in the
aggregate, and may reduce our ability to make distributions to ourstockholders.
We are not treated as holding the assets of a taxable REIT subsidiary or as
receiving any income that a taxable REITsubsidiary earns. Rather, the stock
issued by a taxable REIT subsidiary to us is an asset in our hands, and we
will treat the distributions paid to us from such taxable REIT subsidiary, if
any, as income. This treatment may affect our compliancewith the gross income
tests and asset tests. Because a REIT does not include the assets and income
of taxable REIT subsidiaries in determining the REIT's compliance with REIT
requirements, such entities may be used by the REIT to undertakeactivities
indirectly that the REIT requirements
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might otherwise preclude the REIT from doing directly or through a
pass-through subsidiary (e.g., a partnership). If dividends are paid to us by
one or more of our domestic taxable REITsubsidiaries that we may own, then a
portion of such dividends that we distribute to our stockholders who are taxed
at individual rates generally will be subject to federal income tax at the
rates applicable to qualified dividend income rather thanat the rates
applicable to ordinary income. See "--Annual Distribution Requirements" and
"--Taxation of Taxable U.S. Stockholders--Distributions."
A taxable REIT subsidiary pays federal income tax at corporate rates on its
taxable income for each taxable year. Restrictions imposed onREITs and their
taxable REIT subsidiaries are intended to ensure that taxable REIT
subsidiaries will be subject to appropriate levels of federal income taxation.
These restrictions limit the deductibility of interest paid or accrued by a
taxableREIT subsidiary to its parent REIT and impose a 100% excise tax on
transactions between a taxable REIT subsidiary and its parent REIT, including
services provided by a taxable REIT subsidiary to its parent REIT, or the
REIT's tenants that arenot conducted on an
arm's-length
basis. We may engage in certain activities, such as the provision of
noncustomary tenant services or third-party management services, indirectly
through a taxable REITsubsidiary to the extent that we determine that such
activities could jeopardize our REIT status if we engaged in the activities
directly. We also might dispose of an unwanted asset through a taxable REIT
subsidiary as necessary or convenient toavoid the potential imposition of the
100% tax on income from prohibited transactions. See "--Gross Income
Tests--Rents from Real Property" and "--Gross Income Tests--Prohibited
Transactions."
Gross Income Tests
We must satisfy twogross income tests annually to maintain our qualification
as a REIT. First, at least 75% of our gross income for each taxable year must
consist of defined types of income that we derive, directly or indirectly,
from investments relating to realproperty or mortgages on real property or
qualified temporary investment income. Qualifying income for purposes of that
75% gross income test generally includes:
. rents from real property;
. interest on debt secured by mortgages on real property or on interests in
real property and interest on debtsecured by a mortgage on real property
and personal property if the fair market value of such personal property
does not exceed 15% of the total fair market value of all such property;
. dividends or other distributions on, and gain from the sale of, stock or shares of beneficial interest in otherREITs;
. gain from the sale of real estate assets;
. income and gain derived from foreclosure property; and
. income derived from the temporary investment of new capital that is attributable to the issuance of our stock
ora public offering of our debt with a maturity date of at least five years and that we receive during the
one-year
period beginning on the date on
which we receive such new capital.
Second, in general, at least 95% of our gross income for each taxable year
must consist of income that is qualifying income for purposes ofthe 75% gross
income test, other types of interest and dividends, gain from the sale or
disposition of stock or securities, or any combination of these.
Cancellation of indebtedness income and gross income from a sale of property
that we hold primarily for sale to customers in the ordinarycourse of business
will be excluded from gross income for purposes of the 75% and 95% gross
income tests. In addition, any gains from "hedging transactions," as defined
in "--Hedging Transactions," that are clearly and timelyidentified as such
will be excluded from gross income for purposes of the 75% and 95% gross
income tests. Finally, certain foreign currency gains will be excluded from
gross income for purposes of one or both of the gross income tests.
The following paragraphs discuss the specific application of the gross income
tests to us.
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Rents from Real Property
. Rent that we receive for the use of our realproperty will qualify as "rents
from real property," which is qualifying income for purposes of the 75% and
95% gross income tests, only if the following conditions are met:
First, the rent must not be based in whole or in part on the income or profits
of any person. Participating or percentage rent, however, willqualify as
"rents from real property" if it is based on percentages of receipts or sales
and the percentages:
. are fixed at the time the leases are entered into;
. are not renegotiated during the term of the leases in a manner that
has the effect of basing percentage rent onincome or profits; and
. conform with normal business practice.
More generally, the rent will not qualify as "rents from real property" if,
considering the relevant lease and all the surroundingcircumstances, the
arrangement does not conform with normal business practice, but is in reality
used as a means of basing the rent on income or profits. We intend to set and
accept rents which are fixed dollar amounts or a fixed percentage of
grossrevenue and not to any extent determined by reference to any person's
income or profits, in compliance with the rules above.
Second,we generally must not own, actually or constructively, 10% or more of
the stock or the assets or net profits of any tenant, referred to as a
"related-party tenant," other than a taxable REIT subsidiary. The constructive
ownership rulesgenerally provide that, if 10% or more in value of our stock is
owned, directly or indirectly, by or for any person, we are considered as
owning the stock owned, directly or indirectly, by or for such person. Because
the constructive ownership rulesare broad and it is not possible to monitor
direct and indirect transfers of our stock continually, no absolute assurance
can be given that such transfers or other events of which we have no knowledge
will not cause us to own constructively 10% ormore of a tenant (or a
subtenant, in which case only rent attributable to the subtenant is
disqualified), other than a taxable REIT subsidiary.
Under an exception to the related-party tenant rule described in the preceding
paragraph, rent that we receive from a taxable REIT subsidiarywill qualify as
"rents from real property" as long as (1) at least 90% of the leased space in
the property is leased to persons other than taxable REIT subsidiaries and
related-party tenants, and (2) the amount paid by thetaxable REIT subsidiary
to rent space at the property is substantially comparable to rents paid by
other tenants of the property for comparable space. The "substantially
comparable" requirement must be satisfied when the lease is enteredinto, when
it is extended, and when the lease is modified, if the modification increases
the rent paid by the taxable REIT subsidiary. If the requirement that at least
90% of the leased space in the related property is rented to unrelated tenants
ismet when a lease is entered into, extended, or modified, such requirement
will continue to be met as long as there is no increase in the space leased to
any taxable REIT subsidiary or related-party tenant. Any increased rent
attributable to amodification of a lease with a taxable REIT subsidiary in
which we own, directly or indirectly, more than 50% of the voting power or
value of the stock (a "controlled taxable REIT subsidiary") will not be
treated as "rents from realproperty."
Third, we must not furnish or render noncustomary services, other than a de
minimis amount of noncustomary services, asdescribed below, to the tenants of
our properties other than through an independent contractor from whom we do
not derive or receive any income or through a taxable REIT subsidiary. We
generally may provide services directly to our tenants, however,to the extent
that such services are "usually or customarily rendered" in connection with
the rental of space for occupancy only and are not considered to be provided
for the tenants' convenience. In addition, we may provide a minimalamount of
noncustomary services to the tenants of a property, other than through an
independent contractor from whom we do not derive or receive any income or a
taxable REIT subsidiary, as long as the income attributable to the services
(valued atnot less than 150% of the direct cost of performing such services)
does not exceed 1% of our gross income from such property. If the rent from a
lease does not qualify as "rents from real property" because we furnish
noncustomary
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services to the tenants of the property having a value in excess of 1% of our
gross income from the related property, other than through a qualifying
independent contractor or through a taxableREIT subsidiary, none of the rent
from the property will qualify as "rents from real property." We do not intend
to provide any noncustomary services to our tenants, unless such services are
provided through independent contractors fromwhom we do not derive or receive
any income or through taxable REIT subsidiaries.
If the rent from a lease does not qualify as"rents from real property" because
1) the rent is based on the net income or profits of the tenant,
2) the lessee is a related-party tenant or fails to qualify for the exception
to the related-party tenant rule forqualifying taxable REIT subsidiaries, or
3) we furnish noncustomary services to the tenants of the property having a value in excess of 1% of our
grossincome from the related property, other than through a qualifying independent contractor or
a taxable REIT subsidiary, we could lose our REIT status, unless we qualified for certain statutory
relief provisions, because we might be unable to satisfyeither the 75% or 95% gross income test.
Tenants may be required to pay, in addition to base rent, reimbursements
forcertain amounts we are obligated to pay to third parties (such as a
lessee's proportionate share of a property's operational or capital expenses),
penalties for nonpayment or late payment of rent or additions to rent. These
and othersimilar payments should qualify as "rents from real property." To the
extent they do not, they should be treated as interest that qualifies for the
95% gross income test.
In addition, rent attributable to any personal property leased in connection
with a lease of real property will not qualify as "rentsfrom real property" if
the rent attributable to such personal property exceeds 15% of the total rent
received under the lease. The rent attributable to personal property under a
lease is the amount that bears the same ratio to total rent underthe lease for
the taxable year as the average of the fair market values of the leased
personal property at the beginning and at the end of the taxable year bears to
the average of the aggregate fair market values of both the real and
personalproperty covered by the lease at the beginning and at the end of such
taxable year, or the personal property ratio. If a portion of the rent that we
receive from a property does not qualify as "rents from real property" because
the rentattributable to personal property exceeds 15% of the total rent for a
taxable year, the portion of the rent that is attributable to personal
property will not be qualifying income for purposes of either the 75% or 95%
gross income test. Thus, ifsuch rent attributable to personal property, plus
any other income that is nonqualifying income for purposes of the 95% gross
income test, during a taxable year exceeds 5% of our gross income during the
year, we would lose our REIT status, unless wewere able to utilize certain
statutory relief provisions. We believe that any income attributable to
personal property will not jeopardize our ability to maintain our
qualification as a REIT. There can be no assurance, however, that the IRS
wouldnot challenge our calculation of the personal property ratio for each of
our leases, or that a court would agree with our calculation. If such a
challenge were successful, we could fail to satisfy the 75% or 95% gross
income test and thuspotentially lose our REIT status.
Interest
. For purposes of the 75% and 95% gross income tests, 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
accruedgenerally will not be excluded from the term "interest" solely because
it is based on a fixed percentage or percentages of receipts or sales.
Furthermore, to the extent that interest from a loan that is based on the
profit or net cashproceeds from the sale of the property securing the loan
constitutes a "shared appreciation provision," income attributable to such
participation feature will be treated as gain from the sale of the secured
property.
We may invest opportunistically from time to time in mortgage debt. Interest
on debt secured by a mortgage on real property or on interests inreal
property, including, for this purpose, discount points, prepayment penalties,
loan assumption fees, and late payment charges that are not compensation for
services, generally is
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qualifying income for purposes of the 75% gross income test. In general, if a
loan is secured by real property and other property and the highest principal
amount of the loan outstanding during ataxable year exceeds the fair market
value of the real property securing the loan, determined as of (i) the date we
agreed to acquire or originate the loan or (ii) in the event of a "significant
modification," the date wemodified the loan, then a portion of the interest
income from such loan will not be qualifying income for purposes of the 75%
gross income test, but will be qualifying income for purposes of the 95% gross
income test. The portion of the interestincome that will not be qualifying
income for purposes of the 75% gross income test will be equal to the interest
income attributable to the portion of the principal amount of the loan that is
not secured by real property. The principal amount ofthe loan that is not
secured by real property is the amount by which the loan exceeds the value of
the real estate that is security for the loan.
Dividends
. Dividends received by us from a taxable REIT subsidiary will qualify for
purposes of the 95% gross income test butnot for purposes of the 75% gross
income test. Our share of any dividends received from any other REIT in which
we own an equity interest will be qualifying income for purposes of the 75%
and 95% gross income tests. Any dividends received by us froma qualified REIT
subsidiary will be excluded from gross income for purposes of the 75% and 95%
gross income tests.
ProhibitedTransactions
. A REIT will incur a 100% tax on the net income derived from any sale or
other disposition of property, other than foreclosure property, that the REIT
holds primarily for sale to customers in the ordinary course of a trade
orbusiness, and net income derived from such prohibited transactions is
excluded from gross income solely for purposes of the 75% and 95% gross income
tests. Whether a REIT holds an asset "primarily for sale to customers in the
ordinary course ofa trade or business" depends, however, on the facts and
circumstances that exist from time to time, including those related to a
particular asset. A safe harbor to the characterization of the sale of
property by a REIT as a prohibitedtransaction and the resulting imposition of
the 100% prohibited transactions tax is available, however, if the following
requirements are met:
. the REIT has held the property for not less than two years;
. the aggregate expenditures made by the REIT,
or any partner of the REIT, during the
two-year
period preceding the date of the sale that are includable in the basis
of the property do not exceed 30% of the selling price of the property;
. either (1) during the taxable year in question, the REIT did not make more than seven property
sales otherthan sales of foreclosure property or sales to which Section 1033 of the Code applies,
(2) the aggregate adjusted tax bases of all such properties sold by the REIT during the year
did not exceed 10% of the aggregate tax bases of all of theassets of the REIT at the beginning
of the year, (3) the aggregate fair market value of all such properties sold by the REIT during
the year did not exceed 10% of the aggregate fair market value of all of the assets of the REIT
at the beginningof the year, (4) the ratio of (i) the aggregate adjusted tax bases of property
(other than sales of foreclosure property or sales to which Section 1033 of the Code applies)
sold during the three taxable year period ending with thetaxable year in question, divided by (ii)
the sum of the aggregate adjusted tax bases of all of the assets of the REIT as of the beginning
of each of the three taxable years which are part of such applicable three taxable year period,
did notexceed 20%, or (5) the ratio of (i) the fair market value of property (other than
sales of foreclosure property or sales to which Section 1033 of the Code applies) sold during the
three taxable year period ending with the taxable yearin question, divided by (ii) the sum of
the fair market value of all of the assets of the REIT as of the beginning of each of the three
taxable years which are part of such applicable three taxable year period, did not exceed 20%;
. in the case of property not acquired through foreclosure or lease termination, the REIT
has held the property forat least two years for the production of rental income; and
. if the REIT has made more than seven property sales (excluding sales of
foreclosure property) during the taxableyear, substantially all of the
marketing and development expenditures with respect to the property were
made through an independent contractor from whom the REIT derives no income.
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We will attempt to comply with the terms of the safe-harbor provisions in the
federal incometax laws prescribing when an asset sale will not be
characterized as a prohibited transaction. We cannot assure you, however, that
we will be able to comply with the safe-harbor provisions or that we will
avoid owning property that may becharacterized as property held "primarily for
sale to customers in the ordinary course of a trade or business." We may hold
and dispose of certain properties through a taxable REIT subsidiary if we
conclude that the sale or otherdisposition of such property may not fall
within the safe-harbor provisions. The 100% prohibited transaction tax will
not apply to gains from the sale of property that is held through a taxable
REIT subsidiary although such gains will be taxed tothe taxable REIT
subsidiary at federal corporate income tax rates.
Foreclosure Property
. We will be subject to tax at themaximum corporate rate on any income from
foreclosure property, which includes certain foreign currency gains and
related deductions, other than income that otherwise would be qualifying
income for purposes of the 75% gross income test, lessexpenses directly
connected with the production of that income. Gross income from foreclosure
property, however, will qualify under the 75% and 95% gross income tests.
"Foreclosure property" is any real property, including interests inreal
property, and any personal property incident to such real property:
. that is acquired by a REIT as the result of the REIT having bid on such property at
foreclosure, or havingotherwise reduced such property to ownership or possession
by agreement or process of law, after there was a default or default was imminent
on a lease of such property or on indebtedness that such property secured;
. for which the related loan or leased property was acquired by the
REIT at a time when the default was notimminent or anticipated; and
. for which the REIT makes a proper election to treat the property as foreclosure property.
A REIT will not be considered to have foreclosed on a property, however, where
the REIT takes control of the property as a
mortgagee-in-possession
and cannot receive any profit or sustain any loss except as a creditor of the
mortgagor. Property generally ceases to be foreclosure property at theend of
the third taxable year following the taxable year in which the REIT acquired
the property (or longer if an extension is granted by the Secretary of the
U.S. Treasury). This period (as extended, if applicable) terminates, and
foreclosureproperty ceases to be foreclosure property on the first day:
. on which a lease is entered into for the property that, by its terms, will give rise to income
that does notqualify for purposes of the 75% gross income test, or any amount is received
or accrued, directly or indirectly, pursuant to a lease entered into on or after such day
that will give rise to income that does not qualify for purposes of the 75% grossincome test;
. on which any construction takes place on the property, other than completion of a building or any
otherimprovement, where more than 10% of the construction was completed before default became imminent; or
. which is more than 90 days after the day on which the REIT acquired the
property and the property is used in atrade or business which is conducted by
the REIT, other than through an independent contractor from whom the REIT
itself does not derive or receive any income or a taxable REIT subsidiary.
Hedging Transactions
. From time to time, we or our subsidiaries may enter into hedging
transactions with respect to one or moreof our or our subsidiaries' assets or
liabilities. Our or our subsidiaries' hedging activities may include entering
into interest rate swaps, caps, and floors, options to purchase such items,
and futures and forward contracts. Income andgain from "hedging transactions"
will be excluded from gross income for purposes of both the 75% and 95% gross
income tests. A "hedging transaction" means either (1) any transaction entered
into in the normal course of ouror our subsidiaries' trade or business
primarily to manage the risk of interest rate, price changes, or currency
fluctuations with respect to borrowings made or to be made, or ordinary
obligations incurred or to be incurred, to acquire or carryreal estate assets,
(2) any transaction entered into
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primarily to manage the risk of currency fluctuations with respect to any item
of income or gain that would be qualifying income under the 75% or 95% gross
income test (or any property whichgenerates such income or gain) or (3)
transactions entered into to hedge the income or loss from prior hedging
transactions with respect to which the property or indebtedness which was the
subject of the prior hedging transaction was disposedof or extinguished. We
are required to clearly identify any such hedging transaction before the close
of the day on which it was acquired, originated, or entered into and to
satisfy other identification requirements. We intend to structure anyhedging
transactions in a manner that does not jeopardize our qualification as a REIT;
however, no assurance can be given that our hedging activities will give rise
to income that qualifies for purposes of either or both of the gross income
tests.
Failure to Satisfy Gross Income Tests
. We intend to monitor our sources of income, including any
non-qualifying
income received by us, and manage our assets so as to ensure our compliance
with the gross income tests. If we fail to satisfy one or both of the gross
income tests for any taxable year, wenevertheless may maintain our
qualification as a REIT for that year if we are able to utilize certain relief
provisions of the federal income tax laws. Those relief provisions are
available if:
. our failure to meet the applicable test is due to reasonable cause and not to willful neglect; and
. following such failure for any taxable year, we file a schedule of the sources
of our income with the IRS inaccordance with the Treasury Regulations.
We cannot predict, however, whether any failure to meet these tests willenable
us to utilize the relief provisions. In addition, as discussed above in
"--Taxation of Our Company," even if the relief provisions apply, we would
incur a 100% tax on the gross income attributable to the greater of (1)
theamount by which we fail the 75% gross income test, or (2) the amount by
which we fail the 95% gross income test, multiplied, in either case, by a
fraction intended to reflect our profitability.
Asset Tests
To maintain ourqualification as a REIT, we also must satisfy the following
asset tests at the end of each quarter of each taxable year.
First, at least75% of the value of our total assets (the "
75% asset test
") must consist of:
. cash or cash items, including certain receivables;
. government securities;
. interests in real property, including leaseholds and options to acquire
real property and leaseholds and personalproperty leased in connection with
such real property, provided that the rent attributable to personal property
is not greater than 15% of the total rent received under such lease;
. interests in mortgage loans secured by real property;
. stock or shares of beneficial interest in other REITs;
. debt instruments of publicly-offered REITs; and
. investments in stock or
debt instruments during the
one-year
periodfollowing our receipt of new capital that we raise through equity
offerings or public offerings of debt with at least a five-year term.
Second, of our assets that are not qualifying assets for purposes of the 75%
asset test described above, the value of our interest in any oneissuer's
securities may not exceed 5% of the value of our total assets (the "
5% asset test
").
Third, of our assetsthat are not qualifying assets for purposes of the 75%
asset test described above, we may not own more than 10% of the voting power
of any one issuer's outstanding securities (the "
10% vote test
") or more than 10% of the valueof any one issuer's outstanding securities
(the "
10% value test
").
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Fourth, no more than 20% of the value of our total assets may consist of the
securities ofone or more taxable REIT subsidiaries.
Fifth, no more than 25% of the value of our total assets may consist of the
securities of taxableREIT subsidiaries and other taxable subsidiaries and
other assets that are not qualifying assets for purposes of the 75% asset test.
Sixth, not more than 25% of the value of our total assets may consist of debt
instruments of publicly-offered REITs to the extent those debtinstruments
would not be real estate assets but for the inclusion of debt instruments of
publicly-offered REITs as assets that qualify for the 75% test solely because
such debt instruments were issued by a publicly-offered REIT.
For purposes of the 5% asset test, the 10% vote test and the 10% value test,
the term "securities" does not include stock in anotherREIT, equity or debt
securities of a qualified REIT subsidiary or taxable REIT subsidiary, mortgage
loans that constitute real estate assets, or equity interests in an entity
taxed as a partnership for federal income tax purposes. The term"securities,"
however, generally includes debt securities issued by an entity taxed as a
partnership for federal income tax purposes or another REIT, except that for
purposes of the 10% value test, the term "securities" does notinclude:
. "Straight debt" securities, which is defined as a written unconditional promise to pay on
demand or ona specified date a sum certain in money if (1) the debt is not convertible,
directly or indirectly, into equity, and (2) the interest rate and interest payment dates are
not contingent on profits, the borrower's discretion, or similarfactors. "Straight debt"
securities do not include any securities issued by an entity taxed as a partnership or a
corporation in which we or any controlled taxable REIT subsidiary hold non-"straight debt"
securities that have anaggregate value of more than 1% of the issuer's outstanding securities.
"Straight debt" securities include, however, debt subject to the following contingencies:
. a contingency relating to the time of payment of interest or principal, as long as either (1) there is nochange to the effective
yield of the debt obligation, other than a change to the annual yield that does not exceed the greater of 0.25% or 5% of the
annual yield, or (2) neither the aggregate issue price nor the aggregate face amount of theissuer's debt obligations held by us
exceeds $1 million and no more than 12 months of unaccrued interest on the debt obligations can be required to be prepaid; and
. a contingency relating to the time or amount of payment on a default or prepayment of a debt
obligation, as longas the contingency is consistent with customary commercial practice.
. Any loan to an individual or an estate.
. Any "section 467 rental agreement," other than an agreement with a related-party tenant.
. Any obligation to pay "rents from real property."
. Certain securities issued by governmental entities.
. Any security issued by a REIT.
. Any debt instrument issued by an entity taxed as a partnership for federal income tax purposes in which we
are anowner to the extent of our proportionate interest in the debt and equity securities of the entity.
. Any debt instrument issued by an entity taxed as a partnership for federal income tax
purposes not described inthe preceding bullet points if at least 75% of the entity's
gross income, excluding income from prohibited transactions, is qualifying income for
purposes of the 75% gross income test described above in "--Gross Income Tests."
For purposes of the 10% value test, our proportionate share of the assets of
an entity taxed as a partnership forfederal income tax purposes is our
proportionate interest in any securities issued by such entity, without regard
to the securities described in the preceding two bullet points above.
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We believe that the assets that we hold satisfy the foregoing asset test
requirements. Wewill not obtain, however, nor are we required to obtain under
the federal income tax laws, independent appraisals to support our conclusions
as to the value of our assets and securities or the real estate collateral for
any mortgage or mezzanineloans that we may originate or acquire. Moreover, the
values of some assets may not be susceptible to a precise determination. As a
result, there can be no assurance that the IRS will not contend that our
ownership of securities and other assetsviolates one or more of the asset
tests applicable to REITs.
As noted above, we may invest opportunistically in loans secured byinterests
in real property. If the outstanding principal balance of a loan at the end of
a calendar quarter exceeds the fair market value of the real property securing
such loan as of the date we agreed to originate or acquire the loan, a portion
ofsuch loan likely will not constitute a qualifying real estate asset for
purposes of the 75% asset test. Although the law on the matter is not entirely
clear, it appears that the nonqualifying portion of such loan will be equal to
the portion of theloan amount that exceeds the value of the associated real
property that serves as security for that loan.
Failure to Satisfy AssetTests
. We will monitor the status of our assets for purposes of the various asset
tests and will manage our portfolio in order to comply at all times with such
tests. Nevertheless, if we fail to satisfy the asset tests at the end of
acalendar quarter, we will not lose our REIT status if:
. we satisfied the asset tests at the end of the preceding calendar quarter; and
. the discrepancy between the value of our assets and the asset test requirements arose from changes in the
marketvalues of our assets and was not caused, in part or in whole, by the acquisition of one or more
non-qualifying
assets.
If we did not satisfy the condition described in the second bullet point
immediately above, we still could avoid REIT disqualification byeliminating
any discrepancy within 30 days after the close of the calendar quarter in
which the discrepancy arose.
In the event that weviolate the 5% asset test, the 10% vote test or the 10%
value test described above, we will not lose our REIT status if (1) the
failure is de minimis (i.e., up to the lesser of 1% of our assets or $10
million) and (2) we dispose of assetscausing the failure or otherwise comply
with the asset tests within six months after the last day of the quarter in
which we identify such failure. In the event of a failure of any of such asset
tests other than a de minimis failure, as described inthe preceding sentence,
we will not lose our REIT status if (1) the failure was due to reasonable
cause and not to willful neglect, (2) we file a description of each asset
causing the failure with the IRS, (3) we dispose of assetscausing the failure
or otherwise comply with the asset tests within six months after the last day
of the quarter in which we identify the failure, and (4) we pay a tax equal to
the greater of $50,000 or the highest federal corporate income taxrate
(currently 21%) multiplied by the net income from the nonqualifying assets
during the period in which we failed to satisfy the asset tests.
Annual Distribution Requirements
Eachtaxable year, we must make distributions, other than capital gain dividend
distributions and deemed distributions of retained capital gain, to our
stockholders in an aggregate amount at least equal to:
. the sum of:
. 90% of our "REIT taxable income," computed without regard to the dividends paid deduction and excludingany net capital gain, and
. 90% of our
after-tax
net income, if any, from foreclosure property, minus
. the sum of certain items of
non-cash
income.
Generally, we must pay such distributions in the taxable year to which they
relate, or in the following taxable year if either (1) wedeclare the
distribution before we timely file our federal income tax return for the
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year and pay the distribution on or before the first regular dividend payment
date after such declaration or (2) we declare the distribution in October,
November, or December of the taxableyear, payable to stockholders of record on
a specified day in any such month, and we actually pay the dividend before the
end of January of the following year. In both instances, these distributions
relate to our prior taxable year for purposes ofthe annual distribution
requirement.
We will pay federal income tax on any taxable income, including net capital
gain, that we do notdistribute to our stockholders. Furthermore, if we fail to
distribute during a calendar year, or by the end of January of the following
calendar year in the case of distributions with declaration and record dates
falling in the last three months ofthe calendar year, at least the sum of:
. 85% of our REIT ordinary income for the year,
. 95% of our REIT capital gain net income for the year, and
. any undistributed taxable income from prior years, we will incur a 4% nondeductible excise
tax on the excess ofsuch required distribution over the amounts we actually distributed.
We may elect to retain and pay federal income taxon the net long-term capital
gain that we receive in a taxable year. If we so elect, we will be treated as
having distributed any such retained amount for purposes of the 4%
nondeductible excise tax described above. We intend to make timelydistributions
sufficient to satisfy the annual distribution requirement and to minimize
corporate income tax and avoid the 4% nondeductible excise tax.
In addition, if we were to recognize
"built-in
gain" on the disposition of any assetsacquired from an entity treated as a C
corporation for federal income tax purposes in a transaction in which our
basis in the assets was determined by reference to such entity's tax basis
(for instance, if the assets were acquired in a
tax-free
reorganization), we would be required to distribute at least 90% of the
built-in-gain
net of the tax we would pay on suchgain.
"Built-in
gain" is the excess of (1) the fair market value of the asset (measured at the
time of acquisition) over (2) the basis of the asset (measured at the time of
acquisition).
It is possible that, from time to time, we may experience timing differences
between the actual receipt of income and actual payment ofdeductible expenses
and the inclusion of that income and deduction of such expenses in arriving at
our REIT taxable income. Further, it is possible that, from time to time, we
may be allocated a share of net capital gain from an entity taxed as
apartnership for federal income tax purposes in which we own an interest that
is attributable to the sale of depreciated property that exceeds our allocable
share of cash attributable to that sale. As a result of the foregoing, we may
have less cashthan is necessary to make distributions to our stockholders that
are sufficient to avoid corporate income tax and the 4% nondeductible excise
tax imposed on certain undistributed income or even to meet the annual
distribution requirement. In such asituation, we may need to borrow funds or
issue additional stock or, if possible, pay dividends consisting, in whole or
in part, of our stock or debt securities.
Under certain circumstances, we may be able to correct a failure to meet the
distribution requirement for a year by paying "deficiencydividends" to our
stockholders in a later year. We may include such deficiency dividends in our
deduction for dividends paid for the earlier year. Although we may be able to
avoid income tax on amounts distributed as deficiency dividends, wewill be
required to pay interest to the IRS based on the amount of any deduction we
take for deficiency dividends.
Recordkeeping Requirements
We must maintain certain records in order to maintain our qualification as a
REIT. To avoid paying monetary penalties, we must demand, on anannual basis,
information from certain of our stockholders designed to disclose the actual
ownership of our outstanding stock, and we must maintain a list of those
persons failing or
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refusing to comply with such demand as part of our records. A stockholder that
fails or refuses to comply with such demand is required by the Treasury
Regulations to submit a statement with itstax return disclosing the actual
ownership of our stock and other information. We intend to comply with these
recordkeeping requirements.
Failure toQualify as a REIT
If we fail to satisfy one or more requirements for REIT qualification, other
than the gross income tests and theasset tests, we could avoid disqualification
if our failure is due to reasonable cause and not to willful neglect and we
pay a penalty of $50,000 for each such failure. In addition, as discussed
above, there are relief provisions available under theCode for a failure of
the gross income tests and asset tests, as described in "--Gross Income
Tests
" and "--Asset Tests."
If we were to fail to maintain our qualification as a REIT in any taxable
year, and no relief provisions were available, we would be subjectto (i)
federal income tax on our taxable income at federal corporate income tax rates
and (ii) with respect to taxable years ended on or before December 31, 2017,
any applicable federal alternative minimum tax. In calculating ourtaxable
income for a year in which we failed to maintain our qualification as a REIT,
we would not be able to deduct from our taxable income amounts distributed to
our stockholders, and we would not be required under the Code to distribute
anyamounts to our stockholders for that year. In such event, to the extent of
our current and accumulated earnings and profits, distributions to our
stockholders generally would be taxable to our stockholders as ordinary
income. Subject to certainlimitations of the federal income tax laws, our
corporate stockholders may be eligible for the dividends received deduction,
and stockholders taxed at individual rates may be eligible for a maximum
federal income tax rate of 20% on such dividends.Unless we qualified for
relief under the statutory relief provisions described in the preceding
paragraph, we also would be disqualified from taxation as a REIT for the four
taxable years following the year during which we ceased to maintain
ourqualification as a REIT. We cannot predict whether in all circumstances we
would qualify for such statutory relief.
Taxation in Connection withHolding Securities other than our Stock
We intend to describe in any prospectus supplement related to the offering of
our debtsecurities, depositary shares or subscription rights, the material
federal income tax considerations relating to the ownership and disposition of
such securities, including, if applicable, (1) the taxation of any debt
securities that will besold with original issue discount or acquired with
market discount or amortizable bond premium and (2) the tax treatment of
sales, exchanges or retirements of our debt securities.
Taxation of Taxable U.S. Stockholders
For purposes of our discussion, the term "U.S. stockholder" means a holder of
our common stock or preferred stock that, for federalincome tax purposes, is:
. a citizen or resident of the United States;
. a corporation (including an entity treated as a corporation for federal income tax purposes) created
or organizedunder the laws of the United States, any of its states or the District of Columbia;
. an estate whose income is subject to federal income taxation regardless of its source; or
. any trust if (1) a U.S. court is able to exercise primary supervision
over the administration of such trustand one or more U.S. persons have
the authority to control all substantial decisions of the trust or
(2) it has a valid election in place to be treated as a U.S. person.
If a partnership, entity or arrangement taxed as a partnership for federal
income tax purposes (a "
partnership
") holds ourstock, the federal income tax treatment of an owner of the
partnership generally will
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depend on the status of the owner and the activities of the partnership. If
you are an owner of a partnership that may acquire our stock, you should
consult your tax advisor regarding the taxconsequences of the ownership and
disposition of our stock by the partnership.
Distributions
. As long as we qualify as aREIT, distributions made out of our current and
accumulated earnings and profits that we do not designate as capital gain
dividends or retained long-term capital gains will be treated as dividends to
taxable U.S. stockholders. In determining theextent to which a distribution
with respect to our stock constitutes a dividend for federal income tax
purposes, our earnings and profits will be allocated first to distributions
with respect to our preferred stock and then to distributions withrespect to
our common stock. A corporate U.S. stockholder will not qualify for the
dividends-received deduction, which generally is available to corporations,
with respect to distributions received from us. Dividends paid to a U.S.
stockholdergenerally will not qualify for the tax rates applicable to
"qualified dividend income." Qualified dividend income generally includes
dividends paid by domestic C corporations and certain qualified foreign
corporations to U.S.
stockholders that are taxed at individual rates. Because we generally are not
subject to federal income tax on the portion of our REIT taxable income that
we distribute to our stockholders, our dividends generally will not
constitutequalified dividend income.
The highest marginal individual income tax rate on ordinary income currently
is 37% (which rate will apply fortaxable years ending on or before December
31, 2025). For taxable years ending on or before December 31, 2025, certain
U.S. holders, including individuals, estates and certain trusts, generally may
deduct an amount equal to 20% of thedividends received from a REIT, other than
capital gain dividends and dividends treated as qualified dividend income. As
a result of such 20% deduction, the maximum effective rate for such U.S.
holders with respect to dividends paid by us, otherthan capital gain dividends
and dividends treated as qualified dividend income, is 29.6% for taxable years
ending on or before December 31, 2025.
The federal income tax rates applicable to qualified dividend income generally
will apply, however, to our ordinary REIT dividends, if any,that are (1)
attributable to qualified dividends received by us from
non-REIT
corporations, such as any taxable REIT subsidiaries, or (2) attributable to
income recognized by us and on which we havepaid federal corporate income tax
(e.g., to the extent that we distribute less than 100% of our taxable income).
In general, to qualify for the reduced federal income tax rate on qualified
dividend income under such circumstances, a U.S. stockholdermust hold our
stock for more than 60 days during the
121-day
period beginning on the date that is 60 days before the date on which our
stock becomes
ex-dividend.
Any distribution we declare in October, November, or December of any year that
is payable to a U.S. stockholder of record on a specified datein any of those
months and is attributable to our current and accumulated earnings and profits
for such year of declaration will be treated as paid by us and received by the
U.S. stockholder on December 31 of that year, provided that weactually pay the
distribution during January of the following calendar year.
Distributions to a U.S. stockholder which we designate ascapital gain
dividends generally will be treated as long-term capital gain, without regard
to the period for which the U.S. stockholder has held our stock. See
"--Capital Gains and Losses" below. A corporate U.S. stockholder may
berequired to treat up to 20% of certain capital gain dividends as ordinary
income.
We may elect to retain and pay federal corporate incometax on the net
long-term capital gain that we receive in a taxable year. In that case, to the
extent that we designate such amount in a timely notice to our stockholders, a
U.S. stockholder would be taxed on its proportionate share of ourundistributed
long-term capital gain. The U.S. stockholder would receive a credit or refund
for its proportionate share of the federal corporate income tax we paid,
however, the U.S. stockholder would increase its basis in our stock by the
amount ofits proportionate share of our undistributed long-term capital gain,
minus its share of the federal corporate income tax we paid.
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A U.S. stockholder will not incur federal income tax on a distribution in
excess of ourcurrent and accumulated earnings and profits if the distribution
does not exceed the U.S. stockholder's adjusted basis in our stock. Instead,
the distribution will reduce the U.S. stockholder's adjusted basis in our
stock, and any amountin excess of both its share of our current and
accumulated earnings and profits and its adjusted basis will be treated as
capital gain, long-term if the stock has been held for more than one year,
provided the stock is a capital asset in the handsof the U.S. stockholder.
U.S. stockholders may not include in their individual federal income tax
returns any of our net operating lossesor capital losses. Instead, these
losses are generally carried over by us, subject to certain limitations, for
potential offset against our future income. Taxable distributions from us and
gain from the disposition of our stock will not be treatedas passive activity
income, and, therefore, U.S. stockholders generally will not be able to apply
any "passive activity losses," such as, for example, losses from certain types
of entities in which the U.S. stockholder is treated as alimited partner for
federal income tax purposes, against such income. In addition, taxable
distributions from us and gain from the disposition of our stock generally
will be treated as investment income for purposes of the investment
interestlimitations. We will notify U.S. stockholders after the close of our
taxable year as to the portions of the distributions attributable to that
taxable year that constitute ordinary income, return of capital and capital
gain.
Dispositions
. A U.S. stockholder who is not a dealer in securities generally must treat
any gain or loss realized on a taxabledisposition of our stock as long-term
capital gain or loss if the U.S. stockholder has held such stock for more than
one year, and otherwise as short-term capital gain or loss. In general, a U.S.
stockholder will realize gain or loss in an amountequal to the difference
between (1) the sum of the fair market value of any property and the amount of
cash received in such disposition and (2) the U.S. stockholder's adjusted tax
basis in such stock. A U.S. stockholder'sadjusted tax basis in our stock
generally will equal the U.S. stockholder's acquisition cost, increased by the
excess of undistributed net capital gains deemed distributed by us to the U.S.
stockholder over the federal corporate income taxdeemed paid by the U.S.
stockholder on such gains and reduced by any returns of capital. However, a
U.S. stockholder must treat any loss on a sale or exchange of our stock held
by such stockholder for six months or less as a long-term capital lossto the
extent of capital gain dividends and any other actual or deemed distributions
from us that such U.S. stockholder treats as long-term capital gain. All or a
portion of any loss that a U.S. stockholder realizes on a taxable disposition
ofshares of our stock may be disallowed if the U.S. stockholder purchases
other shares of our stock within 30 days before or after the disposition.
Capital Gains and Losses
. The federal income tax rate differential between long-term capital gain and
ordinary income for
non-corporate
taxpayers may be significant. A taxpayer generally must hold a capital asset
for more than one year for gain or loss derived from its sale or exchange to
be treated as long-term capital gain or loss.The maximum federal income tax
rate on ordinary income applicable to U.S. stockholders that are taxed at
individual rates currently is 37% (which rate will apply through our taxable
year ending in 2025). For taxable years ending on or beforeDecember 31, 2025,
certain U.S. holders, including individuals, estates and certain trusts,
generally may deduct 20% of dividends from a REIT, other than capital gain
dividends and dividends treated as qualified dividend income. As a result
ofsuch 20% deduction, the maximum effective rate for such U.S. holders with
respect to dividends paid by us that are taxable as ordinary income is 29.6%
for taxable years ending on or before December 31, 2025. The maximum federal
income tax rateon long-term capital gain applicable to U.S. stockholders that
are taxed at individual rates currently is 20%. The maximum tax rate on
long-term capital gain from the sale or exchange of "section 1250 property"
(i.e., generally,depreciable real property) is 25% to the extent the gain
would have been treated as ordinary income if the property were "section 1245
property" (i.e., generally, depreciable personal property). We generally will
designate whether adistribution that we designate as capital gain dividends
(and any retained capital gain that we are deemed to distribute) is
attributable to the sale or exchange of "section 1250 property." The
characterization of income as capital gain orordinary income may affect the
deductibility of capital losses. A
non-corporate
taxpayer may deduct capital losses not offset by capital gains against its
ordinary income only up to a maximum annual amount of$3,000. A
non-corporate
taxpayer may carry forward unused capital losses indefinitely. A corporate
taxpayer
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must pay tax on its net capital gain at federal corporate income tax rates,
whether or not such gains are classified as long-term capital gains. A
corporate taxpayer may deduct capital lossesonly to the extent of capital
gains, with unused losses carried back three years and forward five years.
Additional MedicareTax
. A taxable U.S. stockholder that is an individual, an estate or an enumerated
trust and that has taxable income in excess of certain thresholds generally is
subject to a 3.8% Medicare tax on dividends and certain other investment
income,including dividends received from us and gain from the sale or other
taxable disposition of our stock.
Taxation of
Tax-Exempt
Stockholders
Tax-exempt
entities, includingqualified employee pension and profit sharing trusts ("
qualified trust
") and individual retirement accounts and annuities, generally are exempt from
federal income taxation. However, they are subject to taxation on
their"unrelated business taxable income" ("
UBTI
"). Amounts that we distribute to
tax-exempt
stockholders generally should not constitute UBTI. If a
tax-exempt
stockholder were to finance its acquisition of our stock with debt, however, a
portion of the distribution that it received from us would constitute UBTI
pursuant to the "debt-financedproperty" rules. Furthermore, social clubs,
voluntary employee benefit associations, supplemental unemployment benefit
trusts, and qualified group legal services plans that are exempt from taxation
under special provisions of the federal incometax laws are subject to
different UBTI rules, which generally will require them to characterize
distributions that they receive from us as UBTI.
Finally, in certain circumstances, a qualified trust that owns more than 10%
of the value of our stock must treat a percentage of thedividends that it
receives from us as UBTI. Such percentage is equal to the gross income that we
derive from unrelated trades or businesses, determined as if we were a
qualified trust, divided by our total gross income for the year in which we
paythe dividends. Such rule applies to a qualified trust holding more than 10%
of the value of our stock only if:
. we are classified as a "pension-held REIT"; and
. the amount of gross income that we derive from unrelated trades or businesses for the year in which we pay
thedividends, determined as if we were a qualified trust, is at least 5% of our total gross income for such year.
We willbe classified as a "pension-held REIT" if:
. we qualify as a REIT by reason of the modification of the rule requiring
that no more than 50% of our stock beowned by five or fewer individuals that
allows the beneficiaries of the qualified trust to be treated as holding our
stock in proportion to their actuarial interests in the qualified trust; and
. either:
. one qualified trust owns more than 25% of the value of our stock; or
. a group of qualified trusts, of which each qualified trust holds more than 10% of
the value of our stock,collectively owns more than 50% of the value of our stock.
As a result of limitations included in our charter on thetransfer and
ownership of our stock, we do not expect to be classified as a "pension-held
REIT," and, therefore, the tax treatment described in this paragraph should be
inapplicable to our stockholders. However, because certain classes ofour stock
are publicly traded, we cannot guarantee that this will always be the case.
Taxation of
Non-U.S.
Stockholders
For purposes of our discussion, the term
"non-U.S.
stockholder" means aholder of our stock that is not a U.S. stockholder, an
entity or arrangement taxed as a partnership for U.S. federal income tax
purposes or a
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tax-exempt
stockholder. Special rules may apply to
non-U.S.
stockholders that are subject to special treatmentunder the Code, including
controlled foreign corporations, passive foreign investment companies, U.S.
expatriates and foreign persons eligible for benefits under an applicable
income tax treaty with the United States.
We urge
non-U.S.
stockholders to consult their own tax advisors to determine the impact of
federal, state, localand foreign income tax laws on the acquisition, ownership
and disposition of our stock, including any reporting requirements.
Distributions
. A
non-U.S.
stockholder that receives a distribution that is notattributable to gain from
our sale or exchange of a "United States real property interest" (a "
USRPI
") (discussed below), and that we do not designate as a capital gain dividend
or retained long-term capital gain willrecognize ordinary income to the extent
that we pay such distribution out of our current and accumulated earnings and
profits. A withholding tax equal to 30% of the gross amount of the
distribution ordinarily will apply unless an applicable taxtreaty reduces
or eliminates the tax. A
non-U.S.
stockholder generally will be subject to federal income tax at graduated
rates, however, on any distribution treated as effectively connected withthe
non-U.S.
stockholder's conduct of a U.S. trade or business, in the same manner as U.S.
stockholders are taxed on distributions. A corporate
non-U.S.
stockholdermay, in addition, be subject to the 30% branch profits tax with
respect to any such distribution. We plan to withhold federal income tax at
the rate of 30% on the gross amount of any distribution paid to a
non-U.S.
stockholder unless either:
. a lower treaty rate applies and the
non-U.S.
stockholder submits an IRSForm
W-8BEN
to us evidencing eligibility for that reduced rate;
. the
non-U.S.
stockholder submits an IRS Form
W-8ECI
to us claiming that the distribution is effectively connected income; or
. the distribution is treated as attributable to a sale of a USRPI under FIRPTA (discussed below).
A
non-U.S.
stockholder will not incur tax on a distribution in excess of ourcurrent and
accumulated earnings and profits if the excess portion of such distribution
does not exceed such
non-U.S.
stockholder's adjusted basis in our stock. Instead, the excess portion of
suchdistribution will reduce the
non-U.S.
stockholder's adjusted basis in our stock. A
non-U.S.
stockholder will be subject to tax on a distribution that exceeds bothour
current and accumulated earnings and profits and the
non-U.S.
stockholder's adjusted basis in our stock, if the
non-U.S.
stockholder otherwise would be subjectto tax on gain from the sale or
disposition of our stock, as described below. See "--Dispositions" below.
Under FIRPTA (discussed below), we may be required to withhold 15% of any
distribution that exceeds our current and accumulatedearnings and profits.
Although we intend to withhold at a rate of 30% on the entire amount of any
distribution (other than a distribution attributable to a sale of a USRPI), to
the extent that we do not do so, we may withhold at a rate of 15% on
anyportion of a distribution not subject to withholding at a rate of 30%.
Because we generally cannot determine at the time we make a distribution
whether the distribution will exceed our current and accumulated earnings and
profits, we may withholdtax on the entire amount of any distribution. However,
a
non-U.S.
stockholder may obtain a refund of amounts that we withhold if we later
determine that a distribution in fact exceeded our current andaccumulated
earnings and profits.
For any year in which we maintain our qualification as a REIT, the Foreign
Investment in Real PropertyTax Act of 1980 ("
FIRPTA
"), may apply to our sale or exchange of a USRPI. A USRPI includes certain
interests in real property and stock in corporations at least 50% of whose
assets consist of interests in real property. UnderFIRPTA, a
non-U.S.
stockholder is taxed on distributions attributable to gain from sales of
USRPIs as if such gain were effectively connected with the conduct of a U.S.
trade or business of the
non-U.S.
stockholder. A
non-U.S.
stockholder thus would be taxed on such a distribution at the normal capital
gains rates applicable to U.S. stockholders, subject toapplicable alternative
minimum tax and a special alternative minimum tax in the case of a nonresident
alien individual. A
non-U.S.
corporate stockholder not entitled to treaty relief or exemption also may
besubject to the 30% branch profits tax on such a distribution.
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If a class of our stock is regularly traded on an established securities
market in theUnited States (any such class of our stock referred to as a
"publicly traded class"), capital gain distributions to a
non-U.S.
stockholder in respect of stock of such publicly traded class that
isattributable to our sale of real property will be treated as ordinary
dividends rather than as gain from the sale of a USRPI, as long as such
non-U.S.
stockholder did not own more than 10% of the outstandingstock of such publicly
traded class at any time during the
one-year
period preceding the distribution. As a result,
non-U.S.
stockholders owning 10% or less of theoutstanding stock of such publicly
traded class generally would be subject to withholding tax on such capital
gain distributions in the same manner as they are subject to withholding tax
on other distributions. In addition, distributions to certain
non-U.S.
publicly-traded shareholders that meet certain record-keeping and other
requirements ("qualified shareholders") are exempt from FIRPTA, except to the
extent owners of such qualified shareholdersthat are not also qualified
shareholders own, actually or constructively, more than 10% of the outstanding
stock of a publicly traded class. Furthermore, distributions to "qualified
foreign pension funds" or entities all of the interestsof which are held by
"qualified foreign pension funds" are exempt from FIRPTA.
Non-U.S.
holders should consult their tax advisors regarding the application of these
rules. Except as described in theimmediately preceding two sentences, if a
non-U.S.
stockholder owned more than 10% of the outstanding stock of a publicly traded
class at any time during the
one-year
period preceding the distribution, capital gain distributions to such
non-U.S.
stockholder in respect of the stock of such publicly traded class that are
attributable to our sale of USRPIs would be subject totax under FIRPTA, as
described above.
If a distribution is subject to FIRPTA, we must withhold a percentage of such
distribution that wecould designate as a capital gain dividend equal to the
highest federal corporate income tax rate (currently 21%). A
non-U.S.
stockholder may receive a credit against its tax liability for the amount that
wewithhold. Moreover, if a
non-U.S.
stockholder disposes of our stock during the
30-day
period preceding a dividend payment, and such
non-U.S.
stockholder (or a person related to such
non-U.S.
stockholder) acquires or enters into a contract or option to acquire our stock
within 61 days of the first dayof the
30-day
period described above, and any portion of such dividend payment would, but
for the disposition, be treated as a USRPI capital gain to such
non-U.S.
stockholder, then such
non-U.S.
stockholder will be treated as having USRPI capital gain in an amount that,
but for the disposition, would have been treated as USRPI capital gain.
Dispositions
.
Non-U.S.
stockholders may incur tax under FIRPTA with respect to gainrealized on a
disposition of our stock since our stock will constitute a USRPI unless one of
the applicable exceptions, as described below, applies. Any gain subject to
tax under FIRPTA will be treated in the same manner as it would be in the
handsof U.S. stockholders subject to alternative minimum tax, but under a
special alternative minimum tax in the case of nonresident alien individuals.
Non-U.S.
stockholders generally will not incur tax under FIRPTA with respect to gain on
a sale of ourstock, however, as long as, at all times during a specified
testing period, we are domestically controlled, i.e.,
non-U.S.
persons hold, directly or indirectly, less than 50% in value of our
outstanding stock.We cannot assure you that we will be domestically
controlled. In addition, even if we are not domestically controlled, a
non-U.S.
stockholder that owned, actually or constructively, 10% or less of
theoutstanding stock of a publicly traded class at all times during a
specified testing period will not incur tax under FIRPTA on gain from a sale
of such stock. In addition, dispositions of our stock by qualified
shareholders are not subject toFIRPTA, except to the extent owners of such
qualified shareholders that are not also qualified shareholders own, actually
or constructively, more than 10% of the outstanding stock of a publicly traded
class. An actual or deemed disposition of ourstock by such shareholders may
also be treated as a dividend. Furthermore, dispositions of our capital stock
by "qualified foreign pension funds" or entities all of the interests of which
are held by "qualified foreign pensionfunds" are exempt from FIRPTA.
Non-U.S.
holders should consult their tax advisors regarding the application of these
rules.
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A
non-U.S.
stockholder generally will incur tax ongain from a disposition of our stock
not subject to FIRPTA if:
. the gain is effectively connected with the conduct of the
non-U.S.
stockholder's U.S. trade or business, in which case the
non-U.S.
stockholder will be subject to the same treatment as U.S. stockholders with respect to such gain, except that a
non-U.S.
stockholder that is a corporation also may be subject to the 30% branch profits tax; or
. the
non-U.S.
stockholder is a nonresident alien individual who waspresent in the U.S. for 183 days or
more during the taxable year and certain other conditions are satisfied, in which case the
non-U.S.
stockholder will incur a 30%
tax on its capital gains.
Information Reporting Requirements, Backup Withholding and Certain Other
Required Withholding
We will report to our stockholders and to the IRS the amount of distributions
that we pay during each calendar year, and the amount of tax thatwe withhold,
if any. Under the backup withholding rules, a
stockholder may be subject to backup withholding (currently at a rate of 24%
through our taxable year ending December 31, 2025) with respect to
distributions unless thestockholder:
. is a corporation or qualifies for certain other exempt categories and, when required, demonstrates this fact; or
. provides a taxpayer identification number, certifies as to no loss of exemption from backup
withholding, andotherwise complies with the applicable requirements of the backup withholding rules.
A stockholder who does not provideus with its correct taxpayer identification
number also may be subject to penalties imposed by the IRS. Any amount paid as
backup withholding will be creditable against the stockholder's federal income
tax liability. In addition, we may berequired to withhold a portion of capital
gain distributions to any stockholders who fail to certify their
non-foreign
status to us.
Backup withholding generally will not apply to payments of dividends made by
us or our paying agents, in their capacities as such, to a
non-U.S.
stockholder provided that such
non-U.S.
stockholder furnishes to us or our paying agent the required certification as
to its
non-U.S.
status, such as providing a valid IRS Form
W-8BEN
or
W-8ECI,
or certain other requirements are met. Notwithstanding theforegoing, backup
withholding may apply if either we or our paying agent has actual knowledge,
or reason to know, that the holder is a "U.S. person" that is not an exempt
recipient. Payments of the proceeds from a disposition or redemptionof our
stock that occurs outside the U.S. by a
non-U.S.
stockholder made by or through a foreign office of a broker generally will not
be subject to information reporting or backup withholding. However,information
reporting (but not backup withholding) generally will apply to such a payment
if the broker has certain connections with the U.S. unless the broker has
documentary evidence in its records that demonstrates that the beneficial
owner is a
non-U.S.
stockholder and specified conditions are met or an exemption is otherwise
established. Payment of the proceeds from a disposition of our stock by a
non-U.S.
stockholder made by or through the U.S. office of a broker generally is
subject to information reporting and backup withholding unless the
non-U.S.
stockholder certifies under penalties of perjury that it isnot a U.S. person
and satisfies certain other requirements, or otherwise establishes an
exemption from information reporting and backup withholding.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against thestockholder's
federal income tax liability if certain required information is furnished to
the IRS. Stockholders should consult their own tax advisors regarding
application of backup withholding to them and the availability of, and
procedurefor obtaining an exemption from, backup withholding.
Sections 1471 through 1474 of the Code and IRS guidance thereunder
(commonlyreferred to as FATCA) generally impose federal withholding tax on
dividends and certain other amounts paid to certain
non-U.S.
entities unless various reporting, withholding, and other requirements
aresatisfied. Current provisions of the Code and
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Treasury regulations that govern FATCA treat gross proceeds from the sale or
other disposition of instruments that can produce U.S.-source dividends (such
as our common stock) as subject to FATCAwithholding. Under proposed Treasury
regulations, however, the preamble to which specifies that taxpayers may rely
on them pending finalization, such gross proceeds are not subject to FATCA
withholding. An intergovernmental agreement between theU.S. and the applicable
foreign country, or future Treasury regulations or other guidance, may modify
the requirements under FATCA. We will not pay any additional amounts to
stockholders in respect of any amounts withheld under FATCA. You shouldconsult
your own tax advisor regarding the effect of FATCA on an investment in our
stock.
Tax Aspects of Our Investments in Our Operating Partnershipand Subsidiary
Partnerships.
The following discussion summarizes the material U.S. federal income tax
considerations applicable to ourinvestment in our Operating Partnership and
any of our other subsidiaries that are treated as partnerships for federal
income tax purposes, each individually referred to as a "
Partnership
" and, collectively, as the"
Partnerships
." The following discussion does not address state or local tax laws or any
federal tax laws other than income tax laws.
Classification as Partnerships
We arerequired to include in our income our distributive share of each
Partnership's income and to deduct our distributive share of each
Partnership's losses but only if such Partnership is classified for federal
income tax purposes as apartnership, rather than as a corporation or an
association taxable as a corporation. An unincorporated entity with at least
two owners, as determined for federal income tax purposes, will be classified
as a partnership, rather than as acorporation, for federal income tax purposes
if it:
. is treated as a partnership under the Treasury Regulations relating to entity classification, or the
"check-the-box
regulations;" and
. is not a "publicly traded partnership."
Under the
check-the-box
regulations, an unincorporated entitywith at least two owners for federal
income tax purposes may elect to be classified either as an association
taxable as a corporation or as a partnership. If such an entity does not make
an election, it generally will be taxed as a partnership forfederal income tax
purposes.
A publicly traded partnership is a partnership whose interests are traded on
an established securitiesmarket or are readily tradable on a secondary market
or the substantial equivalent thereof. A publicly traded partnership generally
is treated as a corporation for federal income tax purposes, but will not be
so treated if, for each taxable yearbeginning after December 31, 1987 in which
it was classified as a publicly traded partnership, at least 90% of the
partnership's gross income consisted of specified passive income, including
real property rents, gains from the sale orother disposition of real property,
interest, and dividends, or the "90% passive income exception." The Treasury
Regulations provide limited safe harbors from treatment as a publicly traded
partnership. Pursuant to one of those safeharbors, interests in a partnership
will not be treated as readily tradable on a secondary market or the
substantial equivalent thereof if (1) all interests in the partnership were
issued in a transaction or transactions that were not requiredto be registered
under the Securities Act of 1933, as amended, and (2) the partnership does not
have more than 100 partners at any time during the partnership's taxable year.
In determining the number of partners in a partnership, a personowning an
interest in a partnership, grantor trust, or S corporation that owns an
interest in the partnership is treated as a partner in such partnership only
if (1) substantially all of the value of the owner's interest in the entity
isattributable to the entity's direct or indirect interest in the partnership
and (2) a principal purpose of the use of the entity is to permit the
partnership to satisfy the
100-partner
limitation. Ifany Partnership does not qualify for any safe harbor and is
treated as a publicly traded partnership, we believe that such Partnership
would have sufficient qualifying income to satisfy the 90% passive income
exception and, therefore, would not betreated as a corporation for federal
income tax purposes.
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We have not requested, and do not intend to request, a ruling from the IRS
that any of ourdirect or indirect subsidiaries is or will be classified as a
partnership for federal income tax purposes. If, for any reason, a Partnership
were taxable as a corporation, rather than as a partnership, for federal
income tax purposes, we may not beable to maintain our qualification as a
REIT, unless we qualify for certain statutory relief provisions. See "--Gross
Income Tests" and "--Asset Tests." In addition, any change in a Partnership's
status for taxpurposes might be treated as a taxable event, in which case we
might incur tax liability without any related cash distribution. See "--Annual
Distribution Requirements." Further, items of income and deduction of such
Partnership wouldnot pass through to us, and we would be treated as a
stockholder of such Partnership for federal income tax purposes. Consequently,
such Partnership would be required to pay income tax at corporate rates on its
net income, and distributions to uswould constitute dividends that would not
be deductible in computing such Partnership's taxable income.
Income Taxation of the Partnerships andTheir Partners
Partners, Not the Partnerships, Subject to Tax
. A Partnership is not a taxable entity for federal incometax purposes.
Rather, we are required to take into account our distributive share of each
Partnership's income, gains, losses, deductions, and credits for each taxable
year of the Partnership ending with or within our taxable year, even if
wereceive no distribution from the Partnership for that year or a distribution
that is less than our share of taxable income. Similarly, even if we receive a
distribution, it may not be taxable if the distribution does not exceed our
adjusted taxbasis in our interest in the Partnership.
Partnership Allocations
. Although an agreement among the owners of an entitytaxed as a partnership
for federal income tax purposes generally will determine the allocation of
income and losses among the owners, such allocations will be disregarded for
tax purposes if they do not comply with the provisions of the federalincome
tax laws governing partnership allocations. If an allocation is not recognized
for federal income tax purposes, the item subject to the allocation will be
reallocated in accordance with the "partners' interests in thepartnership,"
which will be determined by taking into account all of the facts and
circumstances relating to the economic arrangement of the owners with respect
to such item.
Tax Allocations With Respect to Contributed Properties
. Income, gain, loss, and deduction attributable to appreciated ordepreciated
property that is contributed to an entity taxed as a partnership for federal
income tax purposes in exchange for an interest in such entity must be
allocated for federal income tax purposes in a manner such that the
contributing owner ischarged with, or benefits from, respectively, the
unrealized gain or unrealized loss associated with the property at the time of
the contribution (the "704(c) Allocations"). The amount of such unrealized
gain or unrealized loss, referredto as
"built-in
gain" or
"built-in
loss," at the time of contribution is generally equal to the difference
between the fair market value of thecontributed property at the time of
contribution and the adjusted tax basis of such property at that time,
referred to as a
book-tax
difference. A
book-tax
differenceattributable to depreciable property generally is decreased on an
annual basis as a result of the allocation of depreciation deductions to the
contributing owner for book purposes, but not for tax purposes. The 704(c)
Allocations are solely forfederal income tax purposes and do not affect the
book capital accounts or other economic or legal arrangements among the
owners. The Treasury Regulations require entities taxed as partnerships for
federal income tax purposes to use a"reasonable method" for allocating items
with respect to which there is a
book-tax
difference and outline several reasonable allocation methods.
The carryover tax basis of any properties actually contributed to our
Operating Partnership or another Partnership in which we own an interestby an
additional owner, under certain reasonable methods available to us, including
the "traditional method," (1) may cause us to be allocated lower amounts of
depreciation deductions for tax purposes than would be allocated to us if
allcontributed properties were to have a tax basis equal to their fair market
value at the time of the contribution and (2) in the event of a sale of such
properties, may cause us to be allocated taxable gain in excess of the
economic or book gainallocated to us as a result of such sale, with a
corresponding tax benefit to the contributing partners. An allocation
described in clause (2) of the immediately preceding sentence may cause us to
recognize taxable income in excess of cashproceeds in the event of a sale or
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other disposition of property, which may adversely affect our ability to
comply with the REIT distribution requirements and may result in a greater
portion of our distributions being taxed asdividends.
Tax Basis in Partnership Interest
. Our adjusted tax basis in any Partnership interest we own generally will be:
. the amount of cash and the basis of any other property we contribute to the Partnership;
. increased by our distributive share of the Partnership's income (including
tax-exempt
income) and any increase in our allocable share of indebtedness of the Partnership; and
. reduced, but not below zero, by our distributive
share of the Partnership's loss (including any
non-deductible
items), the amount of cash and the basis of property distributed to us, and
any reduction in our allocable share of indebtedness of the Partnership.
Loss allocated to us in excess of our basis in a Partnership interest will not
be taken into account for federal income tax purposes until weagain have tax
basis sufficient to absorb the loss. A reduction of our allocable share of
indebtedness of the Partnership will be treated as a constructive cash
distribution to us, and will reduce our adjusted tax basis in the Partnership
interest.Distributions, including constructive distributions, in excess of the
basis of our partnership interest will constitute taxable income to us. Such
distributions and constructive distributions normally will be characterized as
long-term capital gain.
Sale of a Partnership's Property
. Generally, any gain realized by a Partnership on the sale of property held
for morethan one year will be long-term capital gain, except for any portion
of the gain treated as depreciation or cost recovery recapture. Our share of
any Partnership's gain from the sale of inventory or other property held
primarily for sale tocustomers in the ordinary course of the Partnership's
trade or business will be treated as income from a prohibited transaction
subject to a 100% tax. Income from a prohibited transaction may have an
adverse effect on our ability to satisfy thegross income tests for REIT
status. See "--Gross Income Tests." We presently do not intend to acquire or
hold, or to allow any Partnership to acquire or hold, any property that is
likely to be treated as inventory or property heldprimarily for sale to
customers in the ordinary course of our, or any Partnership's, trade or
business.
State and Local Taxes
We and you may be subject to taxation by various states and localities,
including those in which we or a holder of our securities transactsbusiness,
owns property or resides. The state and local tax treatment may differ from
the federal income tax treatment described above. Consequently, you should
consult your own tax advisors regarding the effect of state and local tax laws
on aninvestment in our securities.
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PLAN OF DISTRIBUTION
Offering and Sale of Securities
Unlessotherwise set forth in an accompanying prospectus supplement to this
prospectus, we may sell the securities being offered hereby, from time to
time, in one or more offerings, on a continuous or delayed basis, by one or
more of the following methods:
. to or through underwriting syndicates represented by managing underwriters;
. through one or more underwriters without a syndicate for them to offer and sell to the public;
. to or through dealers, brokers, placement agents or other agents;
. to investors directly in negotiated sales or in competitively bid transactions; and
. in "at the market offerings" within the meaning of Rule 415(a)(4) of the Securities Act.
One or more prospectus supplements will describe the terms of the offering of
the respective securities, including:
. the name or names of any underwriters, dealers, brokers, placement agents or other agents, if any;
. the purchase price of the securities and the proceeds we will receive from the sale;
. any over-allotment options under which underwriters may purchase additional securities from us;
. any agency fees or underwriting discounts and other items constituting agents' or underwriters'compensation;
. any public offering price;
. any discounts or concessions allowed or reallowed or paid to dealers; and
. any securities exchange or market on which the securities may be listed.
The distribution of the securities may be effected from time to time in one or
more transactions:
. at fixed prices which may be changed;
. at market prices prevailing at the time of the sale;
. at varying prices determined at the time of sale;
. at negotiated prices; or
. at prices determined by an auction process.
Each prospectus supplement will set forth the manner and terms of an offering
of securities including:
. the number and terms of the securities to which such prospectus relates;
. the name or names of any underwriters, dealers, brokers, placement agents or other agents
with whom we haveentered into arrangements with respect to the sale of such securities;
. whether any dealer is to act in the capacity of
sub-underwriter
and is tobe allowed or paid any additional discounts or commissions for acting in such capacity;
. the rules and procedures for any auction or bidding process, if used;
. any delayed delivery arrangements;
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. the public offering or purchase price of such securities and the net proceeds we will receive from such sale; and
. any other applicable terms of the offering.
If we do not name a firm in the prospectus supplement, the firm may not
directly or indirectly participate in any underwriting of thosesecurities,
although it may participate in the distribution of securities under
circumstances entitling it to a dealer's allowance or agent's commission. We
may enter into derivative transactions with third parties or sell securities
notcovered by this prospectus to third parties in privately negotiated
transactions. If the related prospectus supplement so indicates, in connection
with those derivatives, the third parties may sell securities covered by this
prospectus and therelated prospectus supplement, including in short sale
transactions. If so, the third party may use securities pledged by us or
borrowed from us or others to settle those sales or to close out any related
open borrowings of stock and may usesecurities received from us in settlement
of those derivatives to close out any related open borrowings of stock. The
third party in such sale transactions will be an underwriter and, if not
identified in this prospectus, will be identified in therelated prospectus
supplement (or a post-effective amendment).
Sales Through Underwriters
If underwriters are used in the sale, they will acquire the securities for
their own account and may resell them from time to time in one ormore
transactions at a fixed public offering price. The obligations of the
underwriters to purchase the securities will be subject to the conditions set
forth in the applicable underwriting agreement. We may offer the securities to
the publicthrough underwriting syndicates represented by managing underwriters
or by underwriters without a syndicate. Subject to certain conditions, the
underwriters will be obligated to purchase all of the securities of the series
offered by the prospectussupplement. Any public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may change
from time to time. The underwriters may engage in stabilizing and syndicate
covering transactions in accordance with Rule 104of Regulation M under the
Exchange Act, and such transactions may be discontinued at any time by the
underwriters. We may use underwriters who may engage in transactions with and
perform services for us or our affiliates in the ordinary course ofbusiness.
We will describe in the prospectus supplement, naming the underwriter, the
nature of any such relationship.
Sales Through Agents
We may sell securities directly or through agents that we designate from time
to time. We will name any agent involved in the offering and saleof
securities, and we will describe any commissions that we will pay the agent in
the prospectus supplement. Unless the prospectus supplement states otherwise,
our agent will act on a best-efforts basis for the period of its appointment.
Securities bought in accordance with a redemption or repayment under their
terms also may be offered and sold, if so indicated in theaccompanying
prospectus supplement, in connection with a remarketing by one or more firms
acting as principals for their own accounts or as agents for us. Any
remarketing firm will be identified, and the terms of its agreement, if any,
with us andits compensation will be described in the prospectus supplement.
Remarketing firms may be deemed to be underwriters in connection with the
securities remarketed by them. If so indicated in the applicable prospectus
supplement, we may authorizeagents, underwriters or dealers to solicit offers
by certain specified institutions to purchase securities at a price set forth
in the prospectus supplement pursuant to delayed delivery contracts providing
for payment and delivery on a future datespecified in the prospectus
supplement. These contracts will be subject only to those conditions set forth
in the accompanying prospectus supplement, and the prospectus supplement will
set forth the commissions payable for solicitation of thesecontracts.
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Direct Sales
We may solicit offers to purchase securities directly from the public from
time to time. We may also authorize agents or underwriters tosolicit offers by
certain types of institutional investors to purchase securities from us at the
public offering price set forth in the prospectus supplement pursuant to
delayed delivery contracts providing for payment and delivery on a
specifieddate in the future. We will describe the conditions to these
contracts and the commissions that we must pay for solicitation of these
contracts in the prospectus supplement.
General Information
We will file asupplement to this prospectus, if required, pursuant to Rule
424(b) under the Securities Act, if we enter into any material arrangement
with a broker, dealer, agent or underwriter for the sale of securities through
a block trade, special offering,exchange distribution or secondary
distribution or a purchase by a broker or dealer. Such prospectus supplement
will disclose:
. the name of any participating underwriter, broker, dealer, placement agent or other agent;
. the number and type of securities involved;
. any securities exchanges on which such securities may be listed;
. the commissions paid or discounts or concessions allowed to any such broker, dealer, agent or underwriter whereapplicable;
. a description of any indemnification rights to which underwriters,
brokers, dealers, placement agents or otheragents are entitled; and
. other facts material to the transaction.
We may provide agents and underwriters with indemnification against certain
civil liabilities, including liabilities under the Securities Act,or
contribution with respect to payments that the agents or underwriters may make
with respect to such liabilities. Agents and underwriters may engage in
transactions with, or perform services for, us in the ordinary course of
business.
Our common stock trades on Nasdaq under the symbol "GOOD." Our Series E
Preferred Stock and Series G Preferred Stock trade on Nasdaqunder the symbols
"GOODN" and "GOODO," respectively. Our senior common stock and our Series F
Preferred Stock are not listed or traded on any exchange or automated
quotation system. All securities that we offer, other than ourListed Common
Stock and other than securities issued upon a reopening of a previous series,
such as our outstanding series of Preferred Stock, will be new issues of
securities with no established trading market. Any underwriters may make a
market inthese securities but will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for any securities sold by us.
Any underwriter may engage in over-allotment, stabilizing transactions, short
covering transactions and penalty bids in accordance withRegulation M under
the Exchange Act. Over-allotment involves sales in excess of the offering size
which create a short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed
aspecified maximum price. Short covering transactions involve purchases of the
securities in the open market after the distribution is completed to cover
short positions. Penalty bids permit the underwriters to reclaim a selling
concession from adealer when the securities originally sold by the dealer are
purchased in a covering transaction to cover short positions. Those activities
may cause the price of the securities to be higher than it would otherwise be.
If commenced, the underwritersmay discontinue any of the activities at any
time.
Any underwriters who are qualified market makers on Nasdaq may engage in
passivemarket making transactions in the securities on Nasdaq in accordance
with Rule 103 of Regulation M under the Exchange Act
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during the business day prior to the pricing of the offering and before the
commencement of offers or sales of the securities. Passive market makers must
comply with applicable volume and pricelimitations and must be identified as
passive market makers. In general, a passive market maker must display its bid
at a price not in excess of the highest independent bid for such security; if
all independent bids are lowered below the passivemarket maker's bid, however,
the passive market maker's bid must then be lowered when certain purchase
limits are exceeded.
Some of the underwriters, dealers and agents and their affiliates may engage
in transactions with or perform services for us and ouraffiliates in the
ordinary course of business. Underwriters have from time to time in the past
provided, and may from time to time in the future provide, investment banking
services to us for which they have in the past received, and in the futuremay
receive, customary fees.
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LEGAL MATTERS
Certain legal matters in connection with the offering of securities covered by
this prospectus and certain federal income tax matters will bepassed upon for
us by Squire Patton Boggs (US) LLP, Washington, D.C. Certain matters of
Maryland law, including the validity of certain the securities to be offered
by means of this prospectus, will be passed upon for us by Venable LLP,
Baltimore,Maryland. Additional legal matters may be passed upon for us or any
underwriters, brokers, dealers, placement agents or other agents, by counsel
that we will name in the applicable prospectus supplement.
EXPERTS
The financial statements and management's assessment of the effectiveness of
internal control over financial reporting (which is includedin the Report of
Management on Internal Control over Financial Reporting) incorporated in this
prospectus by reference to the
Annual Report on
Form 10-K
for the year ended December 31, 2023
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, an independent registered public accounting firm, given on theauthority
of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We are a public company and file annual, quarterly and current reports, proxy
statements and other information with the SEC. Our SEC filingsare also
available to the public at the SEC's website at
www.sec.gov
.
We also make available free of charge through our website our Annual Reports
on Form
10-K,
Quarterly Reports on Form
10-Q,
Current Reports on Form
8-K
and amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Exchange Act as well as our definitiveproxy statement and
Section 16 reports on Forms 3, 4 and 5. Our website address is
www.GladstoneCommercial.com
. However, the information located on, or accessible from, our website is not,
and shall not be deemed to be, except asdescribed below, a part of this
prospectus or any accompanying prospectus supplement or incorporated into any
other filings that we make with the SEC.
This prospectus comprises only part of a registration statement on Form
S-3
that we have filed withthe SEC under the Securities Act and, therefore, omits
some of the information contained in the registration statement. We have also
filed exhibits and schedules to the registration statement which are excluded
from this prospectus, and you shouldrefer to the applicable exhibit or
schedule for a complete description of any statement referring to any contract
or other document. You may inspect or obtain a copy of the registration
statement, including the exhibits and schedules, as describedin the previous
paragraph.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This prospectus is part of a registration statement that we have filed with
the SEC. The SEC allows us to "incorporate by reference"the information that
we file with it which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to comprise a part of this prospectus from the date wefile that
document. Any reports filed by us with the SEC after the date of this
prospectus and before the date that the offering of the securities by means of
this prospectus is terminated will automatically update and, where applicable,
supersedeany information contained in this prospectus or incorporated by
reference in this prospectus.
We previously filed the following documentswith the SEC, and such filings are
incorporated by reference into this prospectus.
. Annual Report on Form
10-K
for the fiscal year ended December 31, 2023
, filed February 21, 2024 (including portions of our
Definitive Proxy Statement for the 2024 Annual Meeting of Stockholders
incorporated therein by reference);
. The description of our common stock contained in our
Registration Statement on Form
8-A,
filed August 12, 2003,
as updated through subsequently filed reports;
. The description of our Series E Preferred Stock contained in our
Registration Statement on Form
8-A,
filed October 1, 2019,
as updated through subsequently filed reports; and
. The description of our Series G Preferred Stock contained in our
Registration Statement on Form
8-A,
filed June 24, 2021,
as updated through subsequently filed reports.
We also incorporate by reference into this prospectus additional documents
that we may file with the SEC under Section 13(a), 13(c), 14or 15(d) of the
Exchange Act, from the date of the initial filing of the registration
statement of which this prospectus is a part until all of the securities
offered by this prospectus have been sold or we otherwise terminate the
offering of thesesecurities, including all filings made after the date of the
initial filing of the registration statement of which this prospectus is a
part and prior to the effectiveness of the registration statement; provided,
however, that information"furnished" under Item 2.02 or Item 7.01 of Form
8-K
or other information "furnished" to the SEC which is not deemed filed is not
incorporated by reference in this prospectus and anyaccompanying prospectus
supplement. Information that we subsequently file with the SEC will
automatically update and may supersede information in this prospectus, any
accompanying prospectus supplement and information previously filed with the
SEC.
We will provide, upon written or oral request, without charge to each person,
including any beneficial owner, to whom a copy of thisprospectus is delivered,
a copy of any or all of the information incorporated herein by reference
(exclusive of exhibits to such documents unless such exhibits are specifically
incorporated by reference herein). You may request in writing or orallya copy
of these filings, at no cost, by telephoning us or writing us at the following
address:
Investor Relations
Gladstone Commercial Corporation
1521 Westbranch Drive, Suite 100
McLean, Virginia 22102
(703)
287-5893
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Maximum of 19,088,864 Shares inPrimary Offering
Maximum of 5,949,560 Shares Pursuant to Dividend
Reinvestment Plan
6.00% Series F Cumulative Redeemable Preferred Stock
(Liquidation Preference $25.00 Per Share)
PROSPECTUSSUPPLEMENT
Gladstone Securities, LLC
May 1, 2024
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