e424b5
The
information in this preliminary prospectus supplement and
accompanying prospectus is not complete and may be changed. This
preliminary prospectus supplement and the accompanying
prospectus are not an offer to sell these securities and are not
soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
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Subject to
completion, dated November 9, 2009
Preliminary Prospectus
supplement
(To prospectus dated
February 27, 2007)
4,500,000 Common
shares
Entertainment Properties
Trust
We are offering 4,500,000 common shares of beneficial interest,
par value $0.01 per share, or common shares, at a price of
$ per share in this offering.
Our common shares trade on the New York Stock Exchange, or NYSE,
under the symbol EPR. On November 6, 2009, the
last reported sale price of our common shares on the NYSE was
$32.26 per share.
Our common shares are subject to certain restrictions on
ownership and transfer designed to preserve our qualification as
a real estate investment trust for federal income tax purposes.
See Description of Certain Provisions of Maryland Law and
EPRs Declaration of Trust and BylawsRestrictions on
Ownership and Transfer of Shares on page 29 of the
accompanying prospectus for more information about these
restrictions.
Investing in our common shares involves risks. Before buying
any common shares you should carefully read this entire
prospectus supplement and the accompanying prospectus and the
documents incorporated by reference herein and therein,
including the section of this prospectus supplement entitled
Risk factors beginning on
page S-12,
the section of the accompanying prospectus entitled Risk
Factors on page 3 and the Risk Factors
section of our Annual Report on
Form 10-K
for the year ended December 31, 2008 and, to the extent
applicable, our Quarterly Reports on
Form 10-Q.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or
accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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Per share
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Total
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Public offering price
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$
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$
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Underwriting discount
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$
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$
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Proceeds, before expenses, to us
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$
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$
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The underwriters have an option to purchase up to an additional
675,000 common shares from us to cover over-allotments, if any.
The underwriters expect that the common shares will be ready for
delivery in book-entry form through the facilities of The
Depository Trust Company on or
about ,
2009.
Joint book running managers
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J.P.
Morgan |
RBC Capital Markets |
Co-lead managers
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Citi |
Barclays Capital |
KeyBanc Capital Markets |
Co-manager
FBR Capital Markets
The date of this prospectus
supplement
is ,
2009
You should rely only on the information contained in or
incorporated by reference into this prospectus supplement and
the accompanying prospectus, and any free writing prospectus we
may authorize to be delivered to you. Neither we nor the
underwriters have authorized any person to provide you with
different or additional information. If anyone provides you with
different or additional information, you should not rely on it.
We are not, and the underwriters are not, making an offer to
sell these securities in any jurisdiction where the offer or
sale is not permitted. The information contained in this
prospectus supplement, the accompanying prospectus and the
documents incorporated by reference herein and therein is
accurate only as of their respective dates or as of other dates
which are specified in those documents, regardless of the time
of delivery of this prospectus supplement or of any of our
common shares. Our business, financial condition, results of
operations and prospects may have changed since those dates.
Table of
contents
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Prospectus supplement
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S-1
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S-1
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S-2
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S-5
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S-10
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S-12
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S-15
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S-17
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S-18
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S-21
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S-29
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S-34
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S-34
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S-34
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Prospectus
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1
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48
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About this
prospectus supplement
We are providing information to you about this offering of our
common shares in two parts. The first part is this prospectus
supplement, which provides the specific details regarding this
offering. The second part is the accompanying prospectus, which
provides general information, including information about our
common shares. Generally, when we refer to this
prospectus, we are referring to both documents
combined. Some of the information in the accompanying prospectus
may not apply to this offering. If information in this
prospectus supplement is inconsistent with the accompanying
prospectus, you should rely on the information contained in this
prospectus supplement.
References to we, us, our,
EPR or the Company refer to
Entertainment Properties Trust. When we refer to our
Declaration of Trust we mean Entertainment
Properties Trusts Amended and Restated Declaration of
Trust, including the articles supplementary for each series of
preferred shares, as amended. When we refer to our
Bylaws we mean Entertainment Properties Trusts
Bylaws, as amended. The term you refers to a
prospective investor.
Incorporation of
certain information by reference
The SEC allows us to incorporate by reference the
information we file with the SEC, which means we can disclose
important information to you by referring to those documents.
The information incorporated by reference is an important part
of this prospectus supplement and the accompanying prospectus.
Any statement contained in a document which is incorporated by
reference in this prospectus supplement or the accompanying
prospectus is automatically updated and superseded if
information contained in this prospectus supplement, the
accompanying prospectus, or information we later file with the
SEC, modifies or replaces that information.
The documents listed below have been filed by us under the
Securities Exchange Act of 1934, as amended (the Exchange
Act) (File
No. 1-13561)
and are incorporated by reference in this prospectus supplement:
1. Our Annual Report on
Form 10-K
for the year ended December 31, 2008 (including information
specifically incorporated by reference into our
Form 10-K
from our Proxy Statement for our 2009 Annual Meeting of
Shareholders).
2. Our Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2009; our Quarterly Report
on
Form 10-Q
for the quarter ended June 30, 2009; and our Quarterly
Report on
Form 10-Q
for the quarter ended September 30, 2009.
3. Our Current Report on
Form 8-K
filed on April 21, 2009; our Current Report on
Form 8-K
filed on May 20, 2009, as amended on
Form 8-K/A
filed on June 12, 2009; and our Current Report on
Form 8-K
filed on July 1, 2009.
4. The description of our common shares included in our
registration statement on
Form 8-A
filed on November 4, 1997.
In addition, all documents filed by us under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act (excluding any
information that is deemed to have been furnished
and not filed with the SEC) after the date of this
prospectus supplement and prior to the termination of the
offering of the securities covered by this prospectus
supplement, are incorporated by reference herein.
S-1
To obtain a free copy of any of the documents incorporated by
reference in this prospectus supplement (other than exhibits,
unless they are specifically incorporated by reference in the
documents) please contact us at:
Investor Relations Department
Entertainment Properties Trust
30 W. Pershing Road, Suite 201
Kansas City, Missouri 64108
(816) 472-1700/FAX
(816) 472-5794
Email info@eprkc.com
Our SEC filings also are available on our Internet website at
www.eprkc.com. The information on our website is not, and you
must not consider the information to be, a part of this
prospectus supplement or the accompanying prospectus.
As you read these documents, you may find some differences in
information from one document to another. You should assume that
the information appearing in the prospectus supplement or the
accompanying prospectus is accurate only as of the date on their
respective covers, and you should assume the information
appearing in any document incorporated or deemed to be
incorporated by reference in this prospectus supplement or the
accompanying prospectus is accurate only as of the date that
document was filed with the SEC. Our business, financial
condition, results of operations and prospects may have changed
since those dates.
Cautionary
statement concerning forward-looking statements
With the exception of historical information, this prospectus
supplement and the accompanying prospectus and our reports filed
under the Exchange Act and incorporated by reference in this
prospectus supplement and the accompanying prospectus and other
offering materials and documents deemed to be incorporated by
reference herein or therein may contain forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the Securities
Act), and Section 21E of the Exchange Act, such as
those pertaining to our acquisition or disposition of
properties, our capital resources, future expenditures for
development projects and our results of operations.
Forward-looking statements involve numerous risks and
uncertainties and you should not rely on them as predictions of
actual events. There is no assurance the events or circumstances
reflected in the forward-looking statements will occur. You can
identify forward-looking statements by use of words such as
will be, intend, continue,
believe, may, expect,
hope, anticipate, goal,
forecast, or other comparable terms, or by
discussions of strategy, plans or intentions. Forward-looking
statements necessarily are dependent on assumptions, data or
methods that may be incorrect or imprecise.
Factors that could materially and adversely affect us include,
but are not limited to, the factors listed below:
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General international, national, regional and local business and
economic conditions;
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Current levels of market volatility are unprecedented;
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The recent downturn in the credit markets;
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S-2
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The failure of a bank to fund a request by us to borrow money or
the failure of banks in which we have deposited funds;
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Defaults in the performance of lease terms by our tenants and
the financial condition of our tenants;
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Defaults or bankruptcy by our customers, mortgagors and
counterparties on their obligations owed to us;
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A significant loan commitment for a development project that may
not be completed as planned;
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The obsolescence of older multiplex theaters owned by some of
our tenants;
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Risks of operating in the entertainment industry;
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Our ability to compete effectively;
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The concentration of our leases and property investments with a
limited number of tenants or mortgagors, for example a single
tenant leases the majority of our multiplex theater properties,
a single tenant leases all of our charter schools and a single
tenant leases or is the mortgagor of all of our ski area
investments;
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Risks associated with use of leverage to acquire properties;
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Financing arrangements that require lump-sum payments;
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Our ability to raise capital;
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Covenants in our debt instruments that limit our ability to take
certain actions;
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Risks of acquiring, owning and developing properties,
particularly entertainment and entertainment-related properties,
vineyards, wineries and recreational properties;
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Our continued qualification as a REIT;
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Development and financing arrangements that expose us to funding
or purchase risks;
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We have a limited number of employees and the loss of personnel
could harm operations;
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Fluctuations in the value of real estate income and investments
and the fact that our real estate investments are relatively
illiquid;
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Risks relating to real estate ownership, leasing and
development, including for example, local conditions such as an
oversupply of space or a reduction in demand for real estate in
the area, competition from other available space, whether
tenants and users such as customers of our tenants consider a
property attractive, changes in real estate taxes and other
expenses, changes in market rental rates, the timing and costs
associated with property improvements and rentals, changes in
taxation or zoning laws or other governmental regulation,
whether we are able to pass some or all of any increased
operating costs through to tenants, and how well we manage our
properties;
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Our ability to secure adequate insurance and risk of potential
uninsured losses, including from natural disasters;
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Risks involved in joint ventures;
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S-3
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Risks in leasing multi-tenant properties;
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A failure to comply with the Americans with Disabilities Act,
environmental or other laws;
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Risks associated with our ownership of assets in foreign
countries;
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Risks associated with owning or financing properties for which
the tenants or mortgagors operations may be impacted
by weather conditions;
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Fluctuations in interest rates;
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Equity issuances could dilute the value of our shares;
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Risks associated with changes in the Canadian exchange
rate; and
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Changes in laws and regulations, including tax laws and
regulation.
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You should consider the risks described in the Risk
factors section on
page S-12
of this prospectus supplement, the Risk Factors
section on page 3 of the accompanying prospectus and the
Risk Factors section of our Annual Report on
Form 10-K
for the year ended December 31, 2008 and, to the extent
applicable, our Quarterly Reports on
Form 10-Q,
in evaluating any forward-looking statements included or
incorporated by reference in this prospectus supplement and the
accompanying prospectus.
Given these uncertainties, you should not place undue reliance
on these forward-looking statements. We undertake no obligation
to publicly update or revise any forward-looking statements
included or incorporated by reference in this prospectus
supplement or the accompanying prospectus, whether as a result
of new information, future events or otherwise. In light of the
factors referred to above, the future events discussed or
incorporated by reference in this prospectus supplement or the
accompanying prospectus may not occur and actual results,
performance or achievements could differ materially from those
anticipated or implied in the forward-looking statements.
S-4
Prospectus
supplement summary
This summary may not contain all of the information that is
important to you. Before making a decision to purchase our
common shares, you should carefully read this entire prospectus
supplement and the accompanying prospectus, especially the
Risk Factors section on
page S-12
of this prospectus supplement, the Risk Factors
section on page 3 of the accompanying prospectus and the
Risk Factors section of our Annual Report on
Form 10-K
for the year ended December 31, 2008 and incorporated by
reference herein, as well as the Risk Factors
section in our Quarterly Reports on
Form 10-Q,
to the extent applicable, and the other documents incorporated
by reference in this prospectus supplement and in the
accompanying prospectus. Unless otherwise indicated, financial
information included in this prospectus supplement is presented
on a historical basis.
About
EPR
We are a self-administered real estate investment trust, or
REIT, that develops, owns, leases and finances
megaplex theatres, entertainment retail centers (centers
generally anchored by an entertainment component such as a
megaplex theatre and containing other entertainment-related
properties), and destination recreational and specialty
properties.
Our real estate portfolio is comprised of over $2.2 billion
in assets (before accumulated depreciation) and consists of
interests in:
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80 megaplex movie theatre properties (including four joint
venture properties) located in 27 states and Ontario, Canada
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eight entertainment retail centers (including two joint venture
properties) located in Westminster, Colorado; New Rochelle, New
York; White Plains, New York; Burbank, California; and Ontario,
Canada
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22 public charter schools located in eight states and the
District of Columbia
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other specialty properties, including ten wineries and eight
vineyards located in California and Washington, one winery under
development in California and a ski property located in Ohio
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land parcels leased to restaurant and retail operators adjacent
to several of our theatre properties
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As of November 5, 2009, we had invested approximately
$21.3 million in development land and construction in
progress for real estate development.
Also, as of November 5, 2009, we had the following mortgage
notes receivable with an outstanding balance of approximately
$519.7 million net of the provision for loan loss of
$34.8 million (all amounts include accrued interest):
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$163.3 million in mortgage financing for the development of
a water park anchored entertainment village in the greater
Kansas City area that was opened in July 2009 and is
additionally secured by two operating water parks in Texas
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$134.8 million in mortgage financing for ten ski properties
and development land located in New Hampshire, Vermont,
Missouri, Indiana, Ohio and Pennsylvania
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S-5
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$133.2 million in mortgage financing for a planned casino
and resort development in Sullivan County, New York
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CAD $94.2 million ($88.4 million U.S.) net of a
provision for loan loss of CAD $37.6 million
($34.8 million U.S.), in mortgage financing for the
development of the Toronto Dundas Square Project, an
entertainment retail center in Canada that was completed in May
2008
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The mortgage notes relating to the Toronto Dundas Square Project
and the Sullivan County, New York project are in default and no
interest income has been recognized on either note in 2009. Our
management has determined that no loan loss reserve was
necessary for the mortgage note relating to the Sullivan County,
New York project, based on the value of the underlying
collateral. For further discussion, see the Recent
Developments section on
page S-8
of this prospectus supplement.
Also, as of November 5, 2009, we had eight other notes
receivable with an outstanding balance of $12.4 million
(including accrued interest) net of a provision for an aggregate
loan loss of $31.0 million.
As of November 5, 2009, we had invested approximately
$169.2 million, net of initial direct costs of
$1.7 million, in 22 public charter school properties leased
under a master lease to Imagine Schools. We own the fee interest
in these properties; however, due to the long-term nature of
this lease it is accounted for as a direct financing lease.
These properties are located in Arizona, Florida, Georgia,
Indiana, Missouri, Nevada, Michigan, Ohio and the District of
Columbia.
We generally lease our single-tenant properties to tenants on a
long-term
triple-net
basis that requires the tenant to assume the primary risks
involved in operating the property and to pay substantially all
expenses associated with the operation and maintenance of the
property. We also provide secured mortgage financing and we own
multi-tenant properties which are managed for us by third-party
management companies.
Our theatre properties are leased to prominent theatre
operators, including American Multi-Cinema, Inc. (referred to in
this prospectus as AMC), Muvico Entertainment LLC,
Regal Cinemas, Rave Motion Pictures, Wallace Theatres, Southern
Theatres, Cobb Theatres, Kerasotes Showplace Theatres and
Cinemark USA, Inc. As of November 5, 2009, approximately
51% of our megaplex theatre properties were leased to AMC as a
result of a series of sale-leaseback transactions relating to a
number of AMC megaplex theatres, and approximately 48% of our
total annual rental revenue were derived from rental payments by
AMC under these leases.
Approximately 13% of our total annual revenue is derived from
our four entertainment retail centers in Ontario, Canada. The
Canadian entertainment retail centers combined with the carrying
value of our mortgage note receivable secured by the Toronto
Dundas Square Project represent approximately 17% of our net
assets as of November 5, 2009.
We have elected to be treated as a REIT for U.S. federal
income tax purposes. In order to maintain our status as a REIT,
we must comply with a number of requirements under federal
income tax law that are discussed in Additional
U.S. Federal Income Tax Considerations on
page S-21
of this prospectus supplement and U.S. Federal Income
Tax Considerations on page 32 of the accompanying
prospectus.
Our executive offices are located at 30 W. Pershing
Road, Suite 201, Kansas City, Missouri 64108. Our telephone
number is
(816) 472-1700.
S-6
Growth
strategies
As a part of our growth strategies, we will consider developing
or acquiring additional megaplex theatre properties, and
developing or acquiring entertainment, entertainment-related,
recreational or specialty properties. We will also consider
developing or acquiring additional entertainment retail centers.
We may also pursue opportunities to provide mortgage financing
for these same property types.
Historically, our primary challenges have been locating suitable
properties, negotiating favorable lease or financing terms, and
managing our portfolio as we have continued to grow. We believe
the knowledge and industry relationships of our management have
facilitated favorable opportunities for us to acquire, finance
and lease properties. During 2009, as a result of the economic
downturn and related challenges in the credit market that have
increased our cost of capital, we have tempered our focus on
growth of funds from operations (FFO), and have
principally focused on maintaining adequate liquidity and a
strong balance sheet. As a result, our capital spending for the
nine months ended September 30, 2009 was much lower than
for the same period in 2008 as we focused primarily on funding
existing commitments. We expect to continue our focus on
liquidity and a strong balance sheet for the remainder of 2009
and into 2010. However, we also believe the steps taken thus far
in 2009 position us to consider potential investment,
acquisition and financing transaction opportunities that may
become available to us from time to time, particularly theatre
and charter school properties which allow us to utilize our
experience to mitigate some of the risks inherent in the current
economic environment. We cannot assure you that any such
potential investment or acquisition opportunities will arise in
the near future, or that we will actively pursue any such
opportunities.
Our investing strategies center on certain guiding principles,
which we refer to as our Five Star Principles:
¶Inflection
opportunity
We look for a new generation of facilities emerging as a result
of age, technology, or change in the lifestyle of consumers
which create development, renewal or restructuring opportunities
requiring significant capital.
¶Enduring
value
We look for real estate that supports activities that are
commercially successful and have a reasonable basis for
continued and sustainable customer demand in the future.
Further, we seek circumstances where the magnitude of change in
the new generation of facilities adds substantially to the
customer experience.
¶Excellent
execution
We seek attractive locations and best-of-class executions that
create market-dominant properties which we believe create a
competitive advantage and enhance sustainable customer demand
within the category despite a potential change in tenant. We
minimize the potential for turnover by seeking quality tenants
with a reliable track record of customer service and
satisfaction.
S-7
¶Attractive
economics
We seek investments that provide accretive returns initially and
increasing returns over time with rent escalators and percentage
rent features that allow participation in the financial
performance of the property. Further, we are interested in
investments that provide a depth of opportunity to invest
sufficient capital to be meaningful to our total financial
results and also provide a diversity by market, geography or
tenant operator.
¶Advantageous
position
In combination with the preceding principles, when investing we
look for a competitive advantage such as unique knowledge of the
category, access to industry information, a preferred tenant
relationship, or other relationships that provide access to
sites and development projects.
Recent
developments
The following are principal recent developments that occurred on
or after September 30, 2009:
Investment
pipeline
We are in the process of negotiating a letter of intent with a
prominent theatre operator pursuant to which we may provide the
operator with approximately $135.0 million of financing
through a sale-leaseback arrangement relating to 19 theatre
properties, containing an aggregate of approximately
291 screens, approximately 67,000 seats, and
representing an aggregate of approximately 1,560,000 square
feet of space located on 393 acres. The theatre operator is
currently negotiating with a third-party for the purchase of the
theatres. It is anticipated that we would acquire the theatre
properties directly from the third-party and lease them to the
theatre operator pursuant to a single master lease. We believe
that the master lease will have an initial base rent equal to
the product of the purchase price multiplied by 12%, and provide
for escalators every 5 years. The master lease is also
expected to have an initial term of 20 years structured as
a triple-net
lease with the tenant responsible for all taxes, costs and
expenses arising from the use or operation of the properties. We
cannot assure you that we will enter into this letter of intent
on these terms or at all. This possible investment would be
contingent upon, among other things, the operator, the
third-party and us negotiating and reaching a definitive
agreement with respect to the terms of the acquisition of the
theatre properties, negotiation and execution of other
definitive agreements, due diligence and other contingencies. We
cannot assure you that the transaction will be completed on the
terms described above or at all.
We are currently in discussions with Imagine Schools regarding
an option to purchase up to five charter schools. We also plan
to invest in the expansion of an existing charter school. The
proposed investment is estimated to be $50.0 million and on
terms substantially similar to our prior investments with
Imagine Schools. If we purchase less than all of the properties,
the purchase price would be reduced. This possible investment
would be contingent upon, among other things, negotiation and
execution of definitive agreements, due diligence and other
contingencies. We cannot assure you that these discussions will
result in any agreement on these terms or at all or, if an
agreement is reached, that the transaction would be completed on
the terms described above or at all.
S-8
We are in the process of seeking to purchase the Toronto Dundas
Square Project out of receivership. The Toronto Dundas Square
Project, a 13 level entertainment retail center in downtown
Toronto that was completed in May 2008 for a total cost of
approximately CAD $330.0 million, has been in receivership
since April 27, 2009. As of November 5, 2009, we had a
mortgage note receivable of CAD $94.2 million
($88.4 million U.S.), net of a provision for loan loss of
CAD $37.6 million ($34.8 million U.S.), secured by a
second mortgage on this property. A group of banks has a loan
totaling approximately CAD $119.0 million
($111.7 million U.S.) secured by a first mortgage on this
property. We are currently negotiating to refinance the first
mortgage should we become the owner of the property. Based on
preliminary negotiations, we currently estimate a new first
mortgage loan would provide proceeds of CAD $100.0 million
($93.8 million U.S.) and that a purchase of the Toronto
Dundas Square Project would require an additional investment,
including transaction costs, of between $20.0 million and
$30.0 million U.S. We cannot assure you that we will
purchase the property on these terms or at all, or that we will
successfully obtain the first mortgage refinancing. If we become
the owner through the sale process, we expect to consolidate the
financial results of the property subsequent to the purchase.
S-9
The
offering
The following is a brief summary of certain terms of this
offering and is not intended to be complete. It does not contain
all of the information that will be important to a purchaser of
common shares. For a more complete description of our common
shares, see Description of Shares of Beneficial
Interest and Description of Certain Provisions of
Maryland Law and EPRs Declaration of Trust and
Bylaws in the accompanying prospectus.
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Issuer |
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Entertainment Properties Trust. |
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Securities offered |
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4,500,000 common shares of beneficial interest plus up to
an additional 675,000 common shares of beneficial interest that
we may issue and sell upon the exercise of the
underwriters over-allotment option. |
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Common shares to be outstanding after the offering |
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41,015,731 common shares (41,690,731 common shares if the
underwriters exercise their over-allotment option in full). |
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Listing |
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Our common shares are listed for trading on the NYSE under the
symbol EPR. |
|
Form |
|
The common shares will be issued and maintained initially in
book-entry form registered in the name of the nominee of The
Depository Trust Company. |
|
Restrictions on ownership |
|
For us to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the Code), not more than 50% in
value of our outstanding shares of beneficial interest may be
owned, directly or constructively, by five or fewer individuals,
as defined in the Code to include certain entities, during the
last half of any taxable year. In addition, our Declaration of
Trust contains provisions that limit to 9.8% the percentage
ownership of our equity by class or series, including the common
shares, by any one person or group of affiliated persons. Our
Declaration of Trust allows our Board of Trustees to waive this
ownership limit, subject to certain conditions. See
Description of Certain Provisions of Maryland Law and
EPRs Declaration of Trust and BylawsRestrictions on
Ownership and Transfer of Shares on page 29 of the
accompanying prospectus. |
|
Tax consequences |
|
The U.S. federal income tax consequences of purchasing, owning
and disposing of the common shares are summarized in
Additional U.S. federal income tax
considerations on
page S-21
of this prospectus supplement and U.S. Federal Income Tax
Considerations on page 32 of the accompanying
prospectus. |
|
Use of proceeds |
|
The net proceeds to us from the sale of common shares offered
hereby are expected to be approximately
$ ($
if the underwriters exercise their over-allotment option in
full), after deducting the underwriting discount and our
estimated offering expenses. We intend to use the net proceeds
from this offering for general business purposes, |
S-10
|
|
|
|
|
which may include funding the acquisition, development or
financing of properties or the repayment of debt. We are in the
process of negotiating a letter of intent pursuant to which we
may provide a prominent theatre operator with approximately
$135.0 million in sale-leaseback financing relating to the
acquisition of 19 theatre properties from a third-party. We
are in discussions with Imagine Schools regarding an option to
purchase up to five charter schools and invest in the expansion
of an existing charter school for an estimated investment of
$50.0 million. If we purchase less than all of the
properties, the purchase price would be reduced. We are in the
process of seeking to purchase the Toronto Dundas Square Project
out of receivership, which we believe will require an additional
investment, including transaction costs, of between
$20.0 million and $30.0 million U.S. For a
description of these potential investments, see Prospectus
supplement summaryRecent developmentsInvestment
pipeline. Pending application of net proceeds from this
offering to the uses described above, we intend to use the net
proceeds from this offering to reduce indebtedness under our
revolving credit facility and to invest any remaining net
proceeds in interest-bearing accounts and short-term
interest-bearing securities which are consistent with our
qualification as a REIT under the Code. The proceeds we
ultimately receive from this offering of common shares are
dependent upon numerous factors and subject to general market
conditions. Accordingly, the amounts described above may differ
materially from the actual amounts we receive. See Use of
proceeds. |
|
Settlement date |
|
Delivery of the common shares will be made against payment
therefor on or
about ,
2009. |
|
Transfer agent |
|
The transfer agent for our common shares is Computershare
Trust Company, N.A. |
|
Risk factors |
|
See the Risk factors section on
page S-12
of this prospectus supplement, the Risk Factors
section on page 3 of the accompanying prospectus and the
Risk Factors section of our Annual Report on
Form 10-K
for the year ended December 31, 2008 and, to the extent
applicable, our Quarterly Reports on
Form 10-Q
for other information you should consider before buying our
common shares. |
|
Conflict of interest |
|
Because more than 5.0% of the proceeds of this offering, not
including underwriting compensation, may be received by one or
more of the underwriters in this offering or by their
affiliates, this offering is being conducted in compliance with
NASD Rule 2720(a)(1), as administered by the Financial
Industry Regulatory Authority (FINRA). Pursuant to
that rule, the appointment of a qualified independent
underwriter is not necessary in connection with this offering,
as this offering is of a class of equity securities for which a
bona fide public market, as defined by FINRA,
exists. See UnderwritingConflict of interest
on
page S-33
of this prospectus supplement. |
S-11
Risk
factors
Before you decide to purchase our common shares, you should
be aware that there are risks in making this investment. You
should carefully consider the risks described below, in the
Risk Factors section on page 3 of the
accompanying prospectus, in the Risk Factors section
of our Annual Report on
Form 10-K
for the year ended December 31, 2008 and, to the extent
applicable, in our Quarterly Reports on
Form 10-Q,
together with all other information included or incorporated by
reference in this prospectus supplement and the accompanying
prospectus, before you decide to invest in our common shares.
The trading
price for our common shares could be substantially and adversely
affected by various factors.
Between January 1, 2009 and November 6, 2009, the
closing price of our common shares on the NYSE ranged from
$12.70 to $35.19 per share. As with other publicly-traded
securities, the trading price for our common shares will depend
on many factors, which may change from time to time, including:
|
|
|
the trading price for our Series B preferred shares,
Series C convertible preferred shares, Series D
preferred shares, Series E convertible preferred shares or
any other preferred shares we may issue in the future;
|
|
|
any changes in prevailing interest rates;
|
|
|
any changes in fiscal policy;
|
|
|
the market for similar securities;
|
|
|
additional issuances of common shares or preferred shares;
|
|
|
general economic conditions or conditions in the financial or
real estate markets; and
|
|
|
our financial condition, performance and prospects.
|
Current levels
of market volatility are unprecedented and may adversely affect
our potential growth and the market value of our common
shares.
The capital and credit markets have been experiencing extreme
volatility and disruption, which has made it more difficult to
raise capital or borrow money. Our plans for growth require
regular access to the capital and credit markets. If current
levels of market disruption and volatility continue or worsen,
access to capital and credit markets could be disrupted making
growth through acquisitions and development projects difficult
or impractical to pursue until such time as markets stabilize.
The volatility in capital and credit markets may also have a
material adverse effect on the market value of our common shares.
We depend on
leasing space to tenants on economically favorable terms and
collecting rent from our tenants, who may not be able to pay,
and we have experienced loss of tenants and tenant defaults
under our leases.
Consumer spending continues to be negatively impacted by adverse
economic conditions. This has resulted in lower sales volume and
profitability to many retail and other merchants, including
those who are our tenants. As such, delinquencies of tenants
under our leases have
S-12
increased, causing us to increase the related bad debt reserve
as warranted. Ballys, Circuit City and Filenes
Basement each filed bankruptcy proceedings, vacated their
respective spaces at our entertainment retail centers in New
York and either terminated or rejected their leases with us.
Revenue from these tenants totaled approximately $790,000 and
$3.9 million for the nine months ended September 30,
2009 and 2008, respectively. There were outstanding receivables
of approximately $1.3 million related to these tenants at
September 30, 2009 that have been fully reserved. In
addition, during the nine months ended September 30, 2009,
we repossessed four properties from two of our vineyard and
winery tenants who defaulted under the provisions of their
leases for failure to pay rent. Total quarterly rent related to
these properties prior to default was $649,000, which represents
16.6% of the average total quarterly rent for all of our
vineyard and winery tenants during the 12 months ended
September 30, 2009. There were outstanding receivables of
approximately $383,000 related to these two vineyard and winery
tenants at September 30, 2009 that have been fully
reserved. We may experience additional loss of tenants and
tenant defaults which may have a material adverse effect on our
business or cause us to increase the amount of our bad debt
reserves.
Adverse market
and economic conditions may continue to adversely affect us and
could cause us to recognize additional impairment charges and
loan loss reserves with respect to our properties and
investments, or otherwise harm our performance.
Ongoing adverse market and economic conditions and market
volatility will likely continue to make it difficult to value
the properties and investments owned by us and our
unconsolidated joint ventures. There may be significant
uncertainty in the valuation, or in the stability of the value,
of such properties and investments that could result in a
substantial decrease in their value. We cannot assure you that
we will be able to recover the current carrying value of all of
our properties and investments and those of our unconsolidated
joint ventures or our goodwill in the future. Our failure to do
so would require us to recognize additional impairment charges
or loan loss reserves for the period in which we reached that
conclusion, which could materially and adversely affect us and
the market price of our common shares. As of November 5,
2009, our real estate mortgage portfolio consisted of nine
mortgage notes with an outstanding gross balance of
$554.5 million (including accrued interest), and we had
additional investments in other notes receivable with an
outstanding gross balance of $43.4 million (including
accrued interest). As of September 30, 2009,
$255.1 million of the mortgage notes and $41.8 million
of the other notes receivable were considered impaired and
during the three months ended September 30, 2009,
$34.8 million and $31.0 million of loan loss
provisions were recognized on these mortgage notes and other
notes receivable, respectively. As a result, as of
September 30, 2009, the mortgage notes and other notes
receivable which are impaired or for which loan loss provisions
were recognized have a remaining carrying value of
$220.0 million and $10.8 million, respectively. In
addition, during the three months ended September 30, 2009,
we recorded an impairment charge of $35.8 million related
to our entertainment retail center in White Plains, New York. As
a result, as of September 30, 2009, this asset had a
remaining carrying value of $118.0 million. A description
of material investments for which we have experienced loan loss
reserves and an impairment charge is included in our Quarterly
Report on
Form 10-Q
for the quarter ended September 30, 2009, incorporated by
reference in this prospectus supplement.
S-13
We previously
made several investments with a developer, including a
significant loan commitment on a planned resort development. The
project to which the loan commitment related may not be
completed, and the deterioration of the developers
financial condition or sources of liquidity could have a
material adverse effect on our investments with the
developer.
As previously reported, on August 20, 2008, we provided a
secured first mortgage loan of $225.0 million to Concord
Resorts, LLC (Concord Resorts), an entity controlled
by Louis Cappelli, related to a planned casino and resort
development in Sullivan County, New York. Our remaining loan
commitment to fund an additional $91.8 million to Concord
Resorts, which is the remaining loan commitment under the first
mortgage loan, is no longer applicable due to the
developers decision to downsize the initial phase of the
Concord project to an investment level of $600.0 million.
In connection with Mr. Cappellis efforts to downsize
the project and obtain the financing necessary to complete it,
the Company provided a commitment to Concord Resorts to
restructure the outstanding balance of the mortgage loan as
equity in the resort portion of the project, and invest up to an
additional $75.0 million for equity in the casino portion
of the project. The Companys investment is subject to
numerous conditions, including the receipt by the project of
additional financing. To date, many of the conditions have not
yet been satisfied, including the financing condition. Our
commitment expires on December 31, 2009. We can give no
assurance that the conditions to our commitment will be
satisfied prior to expiration, and accordingly we cannot provide
assurance that we will fund under the commitment.
Concord Resorts has ceased making interest payments to us as
contractually obligated under the loan agreement. If the
development is cancelled or delayed indefinitely, our investment
in Concord Resorts (the net carrying value of which was
$133.2 million at September 30, 2009) could be
subject to an impairment loss, which in turn could result in a
material adverse impact on our financial condition and results
of operations. In addition, Concord Resorts is controlled by
Mr. Cappelli, a real estate developer with whom we have
several other investments, including the entertainment retail
centers in New Rochelle, New York and White Plains, New York and
$30.0 million of loans to Mr. Cappelli and his
affiliates. During the quarter ended September 30, 2009, we
recorded an impairment charge for our interest in the White
Plains entertainment retail center of $35.8 million, and
have established a $28.0 million loan loss reserve on
impaired loans to Mr. Cappelli and his affiliates. There
can be no assurance that the cancellation or indefinite delay of
the Concord Resorts development, or the deterioration of
Mr. Cappellis financial condition or sources of
liquidity, would not have a material adverse effect on our
investments with Mr. Cappelli and our ability to collect
amounts due under the loans to Mr. Cappelli and his
affiliates.
Our
shareholders will experience dilution as a result of this
offering and we may be unable to invest the proceeds we receive
from this offering in a timely manner.
We expect this offering to have a dilutive impact on our
earnings per share and funds from operations (FFO)
per share for 2009. The actual impact cannot be determined at
this time and is based on numerous factors. Achieving our
expected levels of financial performance will depend
significantly upon our ability to utilize a significant portion
of the net proceeds of this offering in a timely manner in
accretive transactions. However, our current investment pipeline
is subject to numerous uncertainties and conditions that make it
difficult to predict if or when our potential transactions will
be consummated. For a description of these potential
transactions, see Prospectus supplement
summaryRecent developmentsInvestment pipeline.
If our current investment pipeline does not develop into
completed transactions, we may experience
S-14
delays in locating and securing attractive alternative
investments, which have become much more difficult to identify
and consummate as a result of current economic uncertainties and
tight credit markets. These delays could result in additional
dilution and may cause our financial results, including FFO per
share, to fall short of expectations and potentially reduce the
rate at which we pay distributions to our shareholders.
We may issue
additional securities and thereby materially and adversely
affect the price of our common shares.
We may issue additional common shares, preferred shares, or
securities convertible into or exchangeable for our common
shares. If we issue additional common shares, preferred shares
or convertible or exchangeable securities, the price of our
common shares may be materially and adversely affected.
We may not be
able to pay distributions upon events of default under our
financing documents.
Some of our financing documents contain restrictions on
distributions upon the occurrence of events of default
thereunder. If such an event of default occurs, such as our
failure to pay principal at maturity or interest when due for a
specified period of time, we would be prohibited from making
payments on our shares of beneficial interest, including our
common shares.
Use of
proceeds
The net proceeds to us from the sale of common shares offered
hereby are expected to be approximately
$ ($
if the underwriters exercise their over-allotment option in
full), after deducting the underwriting discount and commissions
and our estimated offering expenses.
We intend to use the net proceeds from this offering for general
business purposes, which may include funding the acquisition,
development or financing of properties or the repayment of debt.
We consider investment, acquisition and financing transaction
opportunities that may become available to us from time to time,
particularly those relating to theatre and charter school
properties which allow us to utilize our experience to mitigate
some of the risks inherent in the current economic environment.
We are in the process of negotiating a letter of intent pursuant
to which we may provide a prominent theatre operator with
approximately $135.0 million in sale-leaseback financing
relating to the acquisition of 19 theatre properties from a
third-party. This possible investment would be contingent upon,
among other things, the operator, the third-party and us
negotiating and reaching a definitive agreement with respect to
the terms of the acquisition of the theatre properties,
negotiation and execution of other definitive agreements, due
diligence and other contingencies. We are in discussions with
Imagine Schools regarding an option to purchase up to five
charter schools and invest in the expansion of an existing
charter school for an estimated investment of
$50.0 million. If we purchase less than all of the
properties, the purchase price would be reduced. This possible
investment would be contingent upon, among other things,
negotiation and execution of definitive agreements, due
diligence and other contingencies. We are in the process of
seeking to purchase the Toronto Dundas Square Project out of
receivership, which we believe will require an additional
investment, including transaction costs, of between
$20.0 million and $30.0 million U.S. We cannot
assure you that these transactions will be completed on the
terms described above or at all. For
S-15
a description of these potential investments, see
Prospectus supplement summaryRecent
developmentsInvestment pipeline. Pending application
to the uses described above, we intend to use a portion of the
net proceeds from this offering to reduce indebtedness under our
revolving credit facility and to invest any remaining net
proceeds in interest-bearing accounts and short-term
interest-bearing securities which are consistent with our
qualification as a REIT under the Code.
Our revolving credit facility bears interest at a floating rate
equal to LIBOR (subject to a 2.0% floor) plus 3.5%.
Alternatively, we can elect to have interest accrue at the base
rate plus 3.5%. The base rate is defined as the
greater of the prime rate, the federal funds rate plus 0.5%, or
the then current
30-day LIBOR
(subject to a 2.0% floor). The revolving credit facility matures
on October 26, 2011 and may be extended for an additional
year at our option subject to certain terms and conditions,
including payment of an extension fee. JPMorgan Chase Bank,
N.A., an affiliate of one of the underwriters, J.P. Morgan
Securities Inc., is a lender under the credit facility and will
receive approximately 18.6% of any proceeds from this offering
that are used to repay indebtedness under the credit facility.
Royal Bank of Canada, an affiliate of one of the underwriters,
RBC Capital Markets Corporation, is also a lender under the
credit facility and will receive approximately 18.6% of any
proceeds of this offering that are used to repay indebtedness
under the credit facility. KeyBank National Association, an
affiliate of one of the underwriters, KeyBanc Capital Markets
Inc., is also a lender under the credit facility and will
receive approximately 18.6% of any proceeds of this offering
that are used to repay indebtedness under the credit facility.
Citicorp North America, Inc., an affiliate of one of the
underwriters, Citigroup Global Markets Inc., is also a lender
under the credit facility and will receive approximately 11.6%
of any proceeds of this offering that are used to repay
indebtedness under the credit facility. Barclays Bank Plc, an
affiliate of one of the underwriters, Barclays Capital Inc., is
also a lender under the credit facility and will receive
approximately 9.3% of any proceeds of this offering that are
used to repay indebtedness under the credit facility. See
UnderwritingConflict of interest on
page S-33
of this prospectus supplement.
S-16
Capitalization
The following table describes our actual capitalization as of
September 30, 2009, and our capitalization on an as
adjusted basis to reflect the issuance and sale of the
4,500,000 common shares offered by this prospectus
supplement (assuming no exercise of the underwriters
over-allotment option) and the application of the net proceeds
from this offering as described in Use of proceeds
(other than with respect to any potential acquisitions). This
information should be read in conjunction with, and is qualified
in its entirety by, the consolidated financial statements and
schedules and notes thereto and Managements
Discussion and Analysis of Financial Condition and Results of
Operations included in our Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2009, incorporated by
reference in this prospectus supplement.
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009
|
|
|
|
|
|
|
(Dollars in thousands) (unaudited)
|
|
Actual
|
|
|
As adjusted
|
|
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
Revolving credit facility(1)
|
|
$
|
73,000
|
|
|
$
|
|
|
Other long-term debt
|
|
|
1,111,139
|
|
|
|
1,111,139
|
|
|
|
|
|
|
|
Total debt
|
|
|
1,184,139
|
|
|
|
1,111,139
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Common shares, $0.01 par value, 50,000,000 shares
authorized; 37,419,399 shares issued, actual and
41,919,399 shares issued, as adjusted
|
|
|
374
|
|
|
|
419
|
|
Preferred shares, $0.01 par value, 25,000,000 shares
authorized; 3,200,000 Series B preferred shares issued,
actual and as adjusted; 5,400,000 Series C convertible
preferred shares issued, actual and as adjusted; 4,600,000
Series D preferred shares issued, actual and as adjusted;
and 3,450,000 Series E convertible preferred shares issued,
actual and as adjusted
|
|
|
167
|
|
|
|
167
|
|
Additional paid-in capital
|
|
|
1,440,063
|
|
|
|
|
|
Treasury shares, at cost, 904,824 shares
|
|
|
(27,698
|
)
|
|
|
(27,698
|
)
|
Loans to shareholders
|
|
|
(1,925
|
)
|
|
|
(1,925
|
)
|
Accumulated other comprehensive income
|
|
|
16,985
|
|
|
|
16,985
|
|
Distributions in excess of net income
|
|
|
(126,760
|
)
|
|
|
(126,760
|
)
|
|
|
|
|
|
|
Entertainment Properties Trust shareholders equity
|
|
|
1,301,206
|
|
|
|
|
|
Noncontrolling interests
|
|
|
(3,993
|
)
|
|
|
(3,993
|
)
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
1,297,213
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CAPITALIZATION
|
|
$
|
2,481,352
|
|
|
$
|
|
|
|
|
|
|
|
(1)
|
|
At November 5, 2009, we had
$102.0 million of indebtedness outstanding under our
revolving credit facility.
|
S-17
Selected
financial data
The following table sets forth our selected historical
consolidated financial data as of the dates and for the periods
indicated. The selected historical consolidated financial data
in this table have been derived from, and are not intended to
replace, the consolidated financial statements and schedules
included in our Annual Report on
Form 10-K
for the year ended December 31, 2008 or our Quarterly
Reports on
Form 10-Q
for the quarters ended March 31, 2009, June 30, 2009
and September 30, 2009, respectively, which are
incorporated by reference in this prospectus supplement. Our
historical results are not necessarily indicative of future
performance or results of operations. Our results for the
interim period are not necessarily indicative of the results
that may be expected for a full year. The operating and balance
sheet data for each of the five years ended December 31,
2008 reflects the reclassification of discontinued operations
related to the June 2008 and June 2007 sales of properties, the
adoption of the Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC)
810-10-65-1
(formerly Statement of Financial Accounting Standard
No. 160, Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB 51) and the
adoption of FASB ASC
260-10-45,
55, 65 (formerly FSP
EITF 03-6-1
Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities). You
should read carefully the consolidated financial statements and
schedules, and Managements Discussion and Analysis
of Financial Condition and Results of Operations, included
in our Annual Report on
Form 10-K
for the year ended December 31, 2008 and our Quarterly
Reports on
Form 10-Q
for the quarters ended March 31, 2009, June 30, 2009
and September 30, 2009, respectively.
Operating
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
Years ended December 31,
|
|
(Dollars in thousands)
|
|
2009 (unaudited)
|
|
|
2008(1)
|
|
|
2007(1)
|
|
|
2006(1)
|
|
|
2005(1)
|
|
|
2004(1)
|
|
|
|
|
Rental revenue
|
|
$
|
152,215
|
|
|
$
|
202,581
|
|
|
$
|
185,873
|
|
|
$
|
167,168
|
|
|
$
|
144,838
|
|
|
$
|
123,989
|
|
Tenant reimbursements
|
|
|
13,627
|
|
|
|
20,883
|
|
|
|
18,499
|
|
|
|
14,450
|
|
|
|
12,508
|
|
|
|
8,335
|
|
Other income
|
|
|
2,310
|
|
|
|
2,241
|
|
|
|
2,402
|
|
|
|
3,274
|
|
|
|
3,517
|
|
|
|
557
|
|
Mortgage and other financing income
|
|
|
33,392
|
|
|
|
60,435
|
|
|
|
28,841
|
|
|
|
10,968
|
|
|
|
4,882
|
|
|
|
1,957
|
|
|
|
|
|
|
|
Total revenue
|
|
|
201,544
|
|
|
|
286,140
|
|
|
|
235,615
|
|
|
|
195,860
|
|
|
|
165,745
|
|
|
|
134,838
|
|
Property operating expense
|
|
|
21,108
|
|
|
|
26,775
|
|
|
|
23,010
|
|
|
|
18,764
|
|
|
|
16,101
|
|
|
|
10,627
|
|
Other expense
|
|
|
2,087
|
|
|
|
2,103
|
|
|
|
4,205
|
|
|
|
3,486
|
|
|
|
2,985
|
|
|
|
|
|
General and administrative expense
|
|
|
11,961
|
|
|
|
16,914
|
|
|
|
12,970
|
|
|
|
12,515
|
|
|
|
7,249
|
|
|
|
6,093
|
|
Costs associated with loan refinancing
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
|
673
|
|
|
|
|
|
|
|
1,134
|
|
Interest expense, net
|
|
|
54,274
|
|
|
|
70,951
|
|
|
|
60,505
|
|
|
|
48,866
|
|
|
|
43,749
|
|
|
|
40,011
|
|
Provision for loan losses
|
|
|
65,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charge
|
|
|
35,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
36,383
|
|
|
|
43,829
|
|
|
|
37,422
|
|
|
|
31,021
|
|
|
|
27,473
|
|
|
|
23,241
|
|
|
|
|
|
|
|
Income (loss) before gain on sale of land, equity in income from
joint ventures and discontinued operations
|
|
|
(25,944
|
)
|
|
|
125,568
|
|
|
|
97,503
|
|
|
|
80,535
|
|
|
|
68,188
|
|
|
|
53,732
|
|
Gain on sale of land
|
|
|
|
|
|
|
|
|
|
|
129
|
|
|
|
345
|
|
|
|
|
|
|
|
|
|
Equity in income from joint ventures
|
|
|
673
|
|
|
|
1,962
|
|
|
|
1,583
|
|
|
|
759
|
|
|
|
728
|
|
|
|
654
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(25,271
|
)
|
|
|
127,530
|
|
|
|
99,215
|
|
|
|
81,639
|
|
|
|
68,916
|
|
|
|
54,386
|
|
S-18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
Years ended December 31,
|
|
(Dollars in thousands)
|
|
2009 (unaudited)
|
|
|
2008(1)
|
|
|
2007(1)
|
|
|
2006(1)
|
|
|
2005(1)
|
|
|
2004(1)
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
|
|
|
|
(26
|
)
|
|
|
839
|
|
|
|
650
|
|
|
|
178
|
|
|
|
280
|
|
Gain on sale of real estate
|
|
|
|
|
|
|
119
|
|
|
|
3,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(25,271
|
)
|
|
|
127,623
|
|
|
|
103,294
|
|
|
|
82,289
|
|
|
|
69,094
|
|
|
|
54,666
|
|
Add: Net loss (income) attributable to noncontrolling interests
|
|
|
19,014
|
|
|
|
2,353
|
|
|
|
1,370
|
|
|
|
|
|
|
|
(34
|
)
|
|
|
(953
|
)
|
|
|
|
|
|
|
Net income (loss) attributable to Entertainment Properties Trust
|
|
|
(6,257
|
)
|
|
|
129,976
|
|
|
|
104,664
|
|
|
|
82,289
|
|
|
|
69,060
|
|
|
|
53,713
|
|
Preferred dividend requirements
|
|
|
(22,655
|
)
|
|
|
(28,266
|
)
|
|
|
(21,312
|
)
|
|
|
(11,857
|
)
|
|
|
(11,353
|
)
|
|
|
(5,463
|
)
|
Series A preferred share redemption costs
|
|
|
|
|
|
|
|
|
|
|
(2,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders of
Entertainment Properties Trust
|
|
$
|
(28,912
|
)
|
|
$
|
101,710
|
|
|
$
|
81,251
|
|
|
$
|
70,432
|
|
|
$
|
57,707
|
|
|
$
|
48,250
|
|
|
|
Per share
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
Years ended December 31,
|
|
(Dollars in thousands)
|
|
2009 (unaudited)
|
|
|
2008(1)(2)
|
|
|
2007(1)(2)
|
|
|
2006(1)(2)
|
|
|
2005(1)(2)
|
|
|
2004(1)(2)
|
|
|
|
|
Per share data attributable to Entertainment Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations available to common
shareholders
|
|
$
|
(0.83
|
)
|
|
$
|
3.29
|
|
|
$
|
2.87
|
|
|
$
|
2.65
|
|
|
$
|
2.28
|
|
|
$
|
2.10
|
|
Income from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
0.15
|
|
|
|
0.03
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders
|
|
$
|
(0.83
|
)
|
|
$
|
3.29
|
|
|
$
|
3.02
|
|
|
$
|
2.68
|
|
|
$
|
2.29
|
|
|
$
|
2.11
|
|
Diluted earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations available to common
shareholders
|
|
$
|
(0.83
|
)
|
|
$
|
3.26
|
|
|
$
|
2.83
|
|
|
$
|
2.61
|
|
|
$
|
2.25
|
|
|
$
|
2.03
|
|
Income from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
0.15
|
|
|
|
0.03
|
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders
|
|
$
|
(0.83
|
)
|
|
|
3.26
|
|
|
|
2.98
|
|
|
|
2.64
|
|
|
|
2.26
|
|
|
|
2.04
|
|
Shares used for computation (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
34,937
|
|
|
|
30,910
|
|
|
|
26,929
|
|
|
|
26,317
|
|
|
|
25,159
|
|
|
|
22,852
|
|
Diluted
|
|
|
34,937
|
|
|
|
31,177
|
|
|
|
27,304
|
|
|
|
26,689
|
|
|
|
25,504
|
|
|
|
23,664
|
|
Cash dividends declared per common share
|
|
$
|
1.95
|
|
|
$
|
3.36
|
|
|
$
|
3.04
|
|
|
$
|
2.75
|
|
|
$
|
2.50
|
|
|
$
|
2.25
|
|
|
|
S-19
Balance sheet
data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
Years ended December 31,
|
|
(Dollars in thousands)
|
|
2009 (unaudited)
|
|
|
2008(1)
|
|
|
2007(1)
|
|
|
2006(1)
|
|
|
2005(1)
|
|
|
2004(1)
|
|
|
|
|
Net real estate investments
|
|
$
|
1,746,711
|
|
|
$
|
1,765,861
|
|
|
$
|
1,671,622
|
|
|
$
|
1,413,484
|
|
|
$
|
1,302,067
|
|
|
$
|
1,144,553
|
|
Mortgage notes and related accrued interest receivable
|
|
|
518,069
|
|
|
|
508,506
|
|
|
|
325,442
|
|
|
|
76,093
|
|
|
|
44,067
|
|
|
|
|
|
Total assets
|
|
|
2,553,537
|
|
|
|
2,633,925
|
|
|
|
2,171,633
|
|
|
|
1,571,279
|
|
|
|
1,414,165
|
|
|
|
1,213,448
|
|
Common dividends payable
|
|
|
23,748
|
|
|
|
27,377
|
|
|
|
21,344
|
|
|
|
18,204
|
|
|
|
15,770
|
|
|
|
14,097
|
|
Preferred dividends payable
|
|
|
7,552
|
|
|
|
7,552
|
|
|
|
5,611
|
|
|
|
3,110
|
|
|
|
2,916
|
|
|
|
1,366
|
|
Long-term debt
|
|
|
1,184,139
|
|
|
|
1,262,368
|
|
|
|
1,081,264
|
|
|
|
675,305
|
|
|
|
714,591
|
|
|
|
592,892
|
|
Total liabilities
|
|
|
1,256,324
|
|
|
|
1,341,274
|
|
|
|
1,145,533
|
|
|
|
714,123
|
|
|
|
742,509
|
|
|
|
620,059
|
|
Noncontrolling interests
|
|
|
(3,993
|
)
|
|
|
15,217
|
|
|
|
18,207
|
|
|
|
4,474
|
|
|
|
5,235
|
|
|
|
6,049
|
|
Shareholders equity
|
|
|
1,297,213
|
|
|
|
1,292,651
|
|
|
|
1,026,100
|
|
|
|
857,156
|
|
|
|
671,656
|
|
|
|
593,389
|
|
|
|
|
|
|
(1)
|
|
As of the first quarter of 2009, we
adopted FASB ASC
810-10-65-1
(formerly Statement of Financial Accounting Standard
No. 160, Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB 51) under which
noncontrolling interest of consolidated subsidiaries (previously
referred to as minority interests) are reported as a
component of equity. Resulting from this adoption, net income
(loss) encompasses the total net income (loss) of all
consolidated subsidiaries and there is a separate disclosure on
the face of the consolidated income statement of the attribution
of that net income (loss) between controlling and noncontrolling
interests. The presentation and disclosure requirements of FASB
ASC
810-10-65-1
are applied retrospectively and all prior period information has
been presented and disclosed in accordance with these new
requirements.
|
|
(2)
|
|
As of the first quarter of 2009, we
adopted FASB ASC
260-10-45,
55, 65. Resulting from this adoption, nonvested share awards are
considered participating securities and are included in the
calculation of earnings per share under the two-class method.
Prior period earnings per share data was computed using the
treasury stock method and has been adjusted retrospectively.
|
S-20
Additional U.S.
federal income tax considerations
Please read the U.S. Federal Income Tax
Considerations section on page 32 of the accompanying
prospectus for additional U.S. federal income tax
considerations that apply to this offering.
The following summary describes certain material
U.S. federal income tax consequences relating to the
acquisition, ownership and disposition of common shares. This
summary supplements and updates the more detailed description of
these matters in the U.S. Federal Income Tax
Considerations section of the accompanying prospectus.
Stinson Morrison Hecker LLP will render a legal opinion that the
discussions in this section and in the U.S. Federal
Income Tax Considerations section of the accompanying
prospectus are accurate in all material respects and, taken
together, fairly summarize the federal income tax consequences
discussed in those sections. Specifically, subject to
qualifications and assumptions contained in its opinion, Stinson
Morrison Hecker LLP will give opinions to the effect that we
have been organized and have qualified as a REIT under the
Internal Revenue Code of 1986, as amended (the
Code), for our 1997 taxable year through the date
hereof, and that our actual operation through the date hereof
and current investments and proposed plan of operation will
enable us to continue to meet the requirements for qualification
and taxation as a REIT under the Internal Revenue Code.
This summary is based on current law and does not address all
aspects of taxation that may be relevant to particular
shareholders in light of their personal investment or tax
circumstances, or to certain types of shareholders (including,
without limitation, dealers or traders in securities, insurance
companies, financial institutions, partnerships and tax-exempt
organizations and shareholders that hold our shares as part of a
hedge, straddle conversion transaction or other arrangement)
subject to special treatment under U.S. federal income tax
laws.
It should be noted that the current tax rates referenced in
this discussion are set to expire at the end of 2010. Absent
legislative action, the maximum capital gains rate for
U.S. Shareholders who are individuals will revert to 20% at
that time and the maximum ordinary income tax rate will revert
to 39.6%.
You should
consult your own tax advisor regarding the specific tax
consequences of the purchase, ownership and sale of the common
shares.
Taxation of the
company
As a REIT, we generally will not have to pay Federal corporate
income taxes on our net income that we currently distribute to
shareholders. This treatment substantially eliminates the
double taxation at the corporate and shareholder
levels that generally results from investment in a regular
corporation, subject to general exceptions that result in
corporate level tax. See U.S. Federal Income Tax
ConsequencesTaxation of the CompanyGeneral in
the prospectus. In order to maintain our status as a REIT, we
must meet certain asset and income tests. See
U.S. Federal Income Tax ConsequencesTaxation of
the CompanyRequirements for Qualification in the
prospectus.
President Bush signed the Housing and Economic Recovery Tax Act
of 2008 (the 2008 Act) into law on July 30,
2008. The 2008 Acts sections that affect the REIT
provisions of the Code are generally effective for taxable years
beginning after its date of enactment. In our case this means
the new provisions apply from and after January 1, 2009,
except as specifically mentioned otherwise below.
S-21
Ownership of
Interests in Partnerships, Limited Liability Companies and
Qualified REIT Subsidiaries and Taxable REIT
Subsidiaries
The 2008 Act increased the limit on the value of taxable REIT
subsidiaries securities held by a REIT from
20 percent to 25 percent of the total value of such
REITs assets. We have a relatively de minimis amount of
assets in taxable REIT subsidiaries and do not anticipate that
either the 20 percent or 25 percent thresholds will be
breached. See U.S. Federal Income Tax Consequences
Taxation of the CompanyOwnership of Interests in
Partnerships, Limited Liability Companies and Qualified REIT
Subsidiaries and Taxable REIT Subsidiaries in the
prospectus.
Asset
tests
Under the 2008 Act, foreign currency that is the functional
currency of a REIT or a qualified business unit of a REIT and is
held for use in the normal course of business of such trust or
unit will be treated as cash for purposes of the 75% asset test.
The foreign currency must not be derived from dealing, or
engaging in substantial and regular trading in securities. See
U.S. Federal Income Tax ConsequencesTaxation of
the CompanyAsset Tests in the prospectus.
Prohibited
transaction income
The 2008 Act enlarged the safe harbor from the prohibited
transactions tax for certain sales of real estate assets by
reducing the holding period from four years to two years, making
the aggregate expenditures limitation apply only to those
expenditures made within the two years preceding the sale and
excluding foreclosure property sales and involuntary conversion
sales from the ten percent fair market value of sales
limitation. See U.S. Federal Income Tax
ConsequencesTaxation of the CompanyProhibited
Transaction Income in the prospectus.
Gross income
tests
The 2008 Act provides greater detail as to the treatment of
foreign currency exchange gains, trading and hedging for
purposes of the 75% and 95% gross income tests. See
Foreign investments in this discussion, below.
The 2008 Act also provides that income from a hedging
transaction that complies with identification procedures set out
in Treasury regulations that hedges indebtedness incurred or to
be incurred by us to acquire or carry real estate assets will
not constitute gross income for purposes of both the 75% and 95%
gross income tests.
Further, the Secretary of the Treasury is given broad authority
to determine whether particular items of gain or income that
qualify or do not qualify under the 75% and 95% gross income
tests are, or are not, treated as gross income for purposes of
the 75% and 95% gross income tests.
Each of these provisions applies to gains and items of income
recognized or transactions entered into after July 30,
2008. See U.S. Federal Income Tax
ConsequencesTaxation of the CompanyGross Income
Tests in the prospectus.
Annual
distribution requirements
In early 2009, the IRS issued guidance regarding when
distributions of both cash and shares of stock or beneficial
interests to shareholders will qualify for purposes of the 90%
distribution
S-22
requirement. See U.S. Federal Income Tax
ConsequencesTaxation of the CompanyAnnual
Distribution Requirements in the prospectus. The IRS
guidance provides that a distribution that includes a
shareholder election to receive shares of stock or beneficial
interests or cash, with the cash distribution limited (at our
option) to 10% of the total distribution will qualify as a
distribution, in its entirety, for purposes of the 90%
distribution requirement. This provision is effective only for
declarations for the years ending on or before December 31,
2009. We currently do not intend to make taxable distributions
of our common shares or other securities in order to satisfy the
annual distribution requirements.
Foreign
investments
We and our subsidiaries may hold investments in, and pay taxes
to, foreign countries. Taxes we pay in foreign jurisdictions may
not be passed through to, or used by, our U.S. Shareholders
as a foreign tax credit or otherwise. However, such taxes would
create a tax deduction which would reduce REIT taxable income.
Our foreign investments might also generate foreign currency
gains and losses. Based on recent guidance prior to the 2008
Act, to the extent that a REIT realizes foreign currency gain
attributable to income recognized by a REIT that is qualifying
income under the 95% and 75% gross income tests, then the
foreign currency gain is also qualifying income under the 95%
and 75% gross income tests. No assurance can be given that a
combination of non-qualifying income, personal property rents,
and other non-qualifying income or income excluded from the
gross income tests, such as certain foreign currency gains, will
not adversely affect our ability to satisfy the REIT
qualification requirements.
Under the 2008 Act, real estate foreign exchange gain is
excluded from gross income for purposes of both the 75% and 95%
gross income tests, if the income to which it relates is
(i) qualifying income under the 75% gross income test,
(ii) is earned in connection with the acquisition or
ownership of obligations secured by mortgages on real property
or interests in real property, (iii) is earned from being
an obligor on an obligation secured by mortgages on real
property or on interests in real property, or (iv) is
derived from certain qualifying separate business units of the
REIT.
Passive foreign exchange gain is not treated as gross income for
purposes of the 95% gross income test and, accordingly, is
excluded from both the numerator and denominator of such test.
The definition of a passive foreign exchange gain includes
foreign currency gain attributable to any income or gain that
is: (i) qualifying income under the 95% gross income test;
(ii) earned from ownership of obligations or
(iii) earned from being the obligor on obligations and
that, in the case of (ii) and (iii) does not fall
within the scope of the real estate foreign exchange definition.
The 2008 Act further provides that any gain derived from
dealing, or engaging in substantial and regular trading, in
securities denominated in, or determined by reference to, one or
more nonfunctional currencies will be treated as non-qualifying
income for both the 75% and 95% gross income tests. We do not
currently, and do not intend to, engage in such trading. See
Taxation of the CompanyGross income tests.
Under the 2008 Act, income from managing the risk of currency
fluctuations with respect to any income or gain otherwise
qualifying under the 75% and 95% gross income tests will be
excluded from gross income for purpose of such tests.
S-23
Taxation of
taxable domestic shareholders
As used herein, the term U.S. Shareholder means
a holder of common shares who (for U.S. federal income tax
purposes) (i) is a citizen or resident of the United
States, (ii) is a corporation, partnership or other entity
created or organized in or under the laws of the United States
or any political subdivision thereof (unless, in the case of a
partnership, the Treasury provides otherwise by regulations),
(iii) is an estate the income of which is subject to
U.S. federal income taxation regardless of its source, or
(iv) is a trust whose administration is subject to the
primary supervision of a U.S. court and which has one or
more U.S. persons who have the authority to control all
substantial decisions of the trust, or has a valid election in
effect under applicable U.S. Treasury regulations to be
treated as a U.S. person.
As long as EPR qualifies as a REIT, distributions made out of
our current or accumulated earnings and profits (and not
designated as capital gain dividends) will generally constitute
dividends taxable to our taxable corporate
U.S. Shareholders as ordinary income taxed at a maximum
rate of 35%, such corporate U.S. Shareholders will not be
eligible for the dividends received deduction otherwise
available with respect to dividends received by corporate
U.S. Shareholders. It is not likely that a significant
amount of our dividends paid to individual
U.S. Shareholders will constitute qualified dividend
income eligible for the current reduced maximum tax rate
of 15%. Dividends received from a REIT generally are treated as
qualified dividend income eligible for the reduced
tax rate only to the extent that the REIT has received
qualified dividend income from other non-REIT
corporations, such as taxable REIT subsidiaries. In addition, if
a REIT pays U.S. federal income tax on its undistributed
net taxable income or on certain gains from the disposition of
assets acquired from C corporations, the excess of the income
subject to tax over the taxes paid will be treated as
qualified dividend income in the subsequent taxable
year.
Distributions made by us that are properly designated as capital
gain dividends will be taxable to U.S. Shareholders as
gains (to the extent they do not exceed our actual net capital
gain for the taxable year) from the sale or disposition of a
capital asset. Depending on the period of time we held the
assets which produced the gains, and on certain designations, if
any, which may be made by us, such gains may be taxable to
noncorporate U.S. Shareholders at a 15% or 25% rate
(through 2010), without regard to the period for which the
U.S. Shareholder has held the common shares.
U.S. Shareholders that are corporations may, however, be
required to treat up to 20% of certain capital gain dividends as
ordinary income. To the extent we make distributions (not
designated as capital gain dividends) in excess of our current
and accumulated earnings and profits, such distributions will be
treated first as a tax-free return of capital to each
U.S. Shareholder, reducing the adjusted basis which such
U.S. Shareholder has in his common shares for tax purposes
by the amount of such distribution (but not below zero).
Distributions in excess of a U.S. Shareholders
adjusted basis in his shares will be taxable as capital gain
(provided that the shares have been held as a capital asset) and
will be taxable as long-term capital gain if the common shares
have been held for more than one year. Dividends declared by us
in October, November or December of any year and payable to a
shareholder of record on a specified date in any such month
shall be treated as both paid by us and received by the
shareholder on December 31st of that year; provided
the dividend is actually paid by us on or before
January 31st of the following calendar year.
Shareholders may not include in their own income tax returns any
net operating losses or capital losses of EPR.
Distributions made by us and gain arising from the sale or
exchange by a U.S. Shareholder of shares will not be
treated as passive activity income, and, as a result,
U.S. Shareholders generally
S-24
will not be able to apply any passive losses against
such income or gain. Distributions made by us (to the extent
they do not constitute a return of capital) generally will be
treated as investment income for purposes of computing the
investment interest limitation. Gain arising from the sale or
other disposition of common shares and certain qualifying
dividends (or distributions treated as such), will not be
treated as investment income under certain circumstances.
Redemption of
common shares
Redemption of common shares for cash will likely qualify as a
sale or exchange rather than being treated under
Section 302 of the Code as a distribution taxable as a
dividend (to the extent of our current and accumulated earnings
and profits) provided the redemption satisfies one of the tests
set forth in Section 302(b) of the Code for the sale or
exchange of the redeemable shares. None of these dividend
distributions would be eligible for the dividends received
deduction for corporate shareholders. The redemption will be
treated as a sale or exchange if it (i) is
substantially disproportionate with respect to you,
(ii) results in a complete termination of your
share interest in EPR, or (iii) is not essentially
equivalent to a dividend with respect to you, all within
the meaning of Section 302(b) of the Code. In determining
whether any of these tests have been met, common shares
considered to be owned by you by reason of certain constructive
ownership rules set forth in the Code, as well as common shares
actually owned by you, must generally be taken into account. If
you do not own (actually or constructively) any common shares of
EPR, or an insubstantial percentage of our outstanding common
shares, a redemption of your common shares is likely to qualify
for sale or exchange treatment because the redemption would not
be essentially equivalent to a dividend. However,
because the determination as to whether any of the alternative
tests of Section 302(b) of the Code will be satisfied with
respect to your common shares depends upon the facts and
circumstances at the time the determination must be made, you
are advised to consult your own tax advisor to determine such
tax treatment.
If a redemption of common shares is not treated as a
distribution taxable as a dividend to you, it will be treated as
a taxable sale or exchange of the shares. As a result, you will
recognize gain or loss for federal income tax purposes in an
amount equal to the difference between (i) the amount of
cash and the fair market value of any property received (less
any portion thereof attributable to accumulated and declared but
unpaid dividends, which will be taxable as a dividend to the
extent of our current and accumulated earnings and profits), and
(ii) your adjusted basis in the common shares for tax
purposes. Such gain or loss will be capital gain or loss if the
common shares have been held as a capital asset, and will be
long-term gain or loss if the common shares have been held for
more than one year at the time of the redemption. If a
redemption of common shares is treated as a distribution taxable
as a dividend, the amount of the distribution will be measured
by the amount of cash and the fair market value of any property
received by you. Your adjusted basis in the redeemable common
shares for tax purposes will be transferred to your remaining
shares in EPR. If you do not own any of our other shares, such
basis may, under certain circumstances, be transferred to a
related person or it may be lost entirely.
Disposition of
common shares
If you are a U.S. Shareholder and you sell or dispose of
your common shares, you will recognize gain or loss for federal
income tax purposes in an amount equal to the difference between
the
S-25
amount of cash and the fair market value of any property you
receive on the sale or other disposition and your adjusted basis
in the common shares for tax purposes. This gain or loss will be
capital gain or loss if you have held the common shares as a
capital asset and, if you are a U.S. Shareholder, will be
long-term capital gain or loss if you have held the common
shares for more than one year at the time of disposition.
In general, if you are a U.S. Shareholder and you recognize
loss upon the sale or other disposition of common shares that
you have held for six months or less, after applying the holding
period rules set forth in the Code, the loss you recognize will
be treated as a long-term capital loss to the extent you
received distributions from us which were required to be treated
as long-term capital gains.
Capital losses recognized by a U.S. Shareholder upon
disposition of our common shares that were held more than one
year at the time of disposition will be considered long-term
capital losses and are generally available only to offset
capital gain income of the U.S. Shareholder but not
ordinary income (except in the case of individuals who may apply
up to $3,000 per year of the excess, if any, of capital losses
over capital gains to offset ordinary income). However, if you
are a U.S. shareholder and you recognize loss upon the sale
or other disposition of shares that you have held for six months
or less (after applying certain holding period rules), the loss
you recognize will be treated as a long-term capital loss, to
the extent you received distributions from us or which were
retained by us and which were required to be treated as
long-term capital gains.
Backup
withholding
We will report to our domestic shareholders and to the IRS the
amount of dividends paid during each calendar year, and the
amount of tax withheld, if any from those dividends. Under the
backup withholding rules, a shareholder may be subject to backup
withholding at the rate equal to the fourth lowest rate of tax
under Section 1(c) of the Code (which is currently 28%)
with respect to dividends paid and redemption proceeds unless
the shareholder (a) is a corporation or comes within
certain other exempt categories and, when required, demonstrates
this fact, or (b) provides a taxpayer identification
number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements
of the backup withholding rules. Notwithstanding the foregoing,
we will institute backup withholding with respect to a
shareholder when instructed to do so by the IRS. A shareholder
that does not provide us with his correct taxpayer
identification number may also be subject to penalties imposed
by the IRS. Any amount paid as backup withholding will be
creditable against the shareholders U.S. federal
income tax liability.
In addition, we may be required to withhold a portion of capital
gain distributions to any shareholders who fail to certify their
non-foreign status. See Taxation of
Non-U.S. Shareholders
in the prospectus.
Taxation of
tax-exempt shareholders
The IRS has issued a revenue ruling in which it held that
amounts distributed by a REIT to a tax-exempt employees
pension trust do not constitute unrelated business taxable
income (UBTI). Revenue rulings, however, are
interpretive in nature and are subject to revocation or
modification by the IRS. Based upon the ruling and the analysis
therein, distributions by us to a shareholder that is a
tax-exempt entity should not constitute UBTI, provided the tax
exempt
S-26
entity has not financed the acquisition of its common shares
with acquisition indebtedness within the meaning of
the Code, and the common shares are not otherwise used in an
unrelated trade or business of the tax-exempt entity. In
addition, REITs generally treat the beneficiaries of qualified
pension trusts as the beneficial owners of REIT shares owned by
such pension trusts for purposes of determining if more than 50%
of the REITs shares are owned by five or fewer
individuals. However, if a pension trust owns more than 10% of
the REITs shares (by value), it can be subject to UBTI on
all or a portion of REIT dividends made to it, if the REIT is
treated as a pension-held REIT. A pension-held REIT
is any REIT if more than 25% (by value) of its shares are owned
by one pension trust, or one or more pension trusts each owns
10% (by value) of such shares, and in the aggregate, such
pension trusts own more than 50% (by value) of its shares. We do
not expect to be treated as a pension-held REIT.
However, because our common shares are publicly traded, and it
is anticipated the common shares will be publicly traded, no
assurance can be given in this regard.
For social clubs, voluntary employee benefit associations,
supplemental unemployment benefit trusts and qualified group
legal services plans exempt from U.S. federal income tax
under Section 501(c)(7), (9), (17) and (20) of
the Code, respectively, income from an investment in EPR will
constitute UBTI. However, income from an investment in EPR will
not constitute UBTI for voluntary employee benefit associations,
supplemental unemployment trusts and qualified group legal
services plans if the organization is able to deduct amounts
set aside or placed in reserve for certain purposes
so as to offset the UBTI generated by its investment in EPR.
Such prospective shareholders should consult with their own tax
advisors concerning these set aside and reserve
requirements.
Taxation of
foreign shareholders
The rules governing U.S. federal income taxation of the
ownership and disposition of common shares by persons who are
not U.S. Shareholders
(Non-U.S. Shareholders)
are complex and no attempt has been made to provide more than a
summary of these rules. The summary of such rules is set forth
in the U.S. Federal Income Tax Considerations
section of the accompanying prospectus at Taxation
of
Non-U.S. Shareholders.
Prospective
Non-U.S. Shareholders
should consult with their own tax advisors to determine the
impact of federal, state, local and any foreign income tax laws
with regard to an investment in EPR, including any reporting
requirements.
If the proceeds of a disposition of common shares are paid by or
through a U.S. office of a broker, the payment is subject
to information reporting and backup withholding unless the
disposing
Non-U.S. Shareholder
certifies as to his name, address and
non-U.S. status
or otherwise establishes an exemption. Generally,
U.S. information reporting and backup withholding will not
apply to a payment of disposition proceeds if the payment is
made outside the U.S. through a
non-U.S. office
of a
non-U.S. broker.
U.S. information reporting requirements (but not backup
withholding) will apply, however, to a payment of disposition
proceeds outside the U.S. if (i) the payment is made
through an office outside the U.S. of a broker that is
either (a) a U.S. person, (b) a foreign person
that derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the U.S., (c) a
controlled foreign corporation for U.S. federal
income tax purposes, or (d) a foreign partnership more than
50% of the capital or profits of which is owned by one or more
U.S. persons or which engages in a U.S. trade or
business, and (ii) the broker fails to obtain documentary
evidence that the shareholder is a
Non-U.S. Shareholder
and that certain conditions are met or that the
Non-U.S. Shareholder
otherwise is entitled to an exemption.
S-27
Possible
legislative or other actions affecting tax
consequences
Prospective investors should recognize that the present
U.S. federal income tax treatment of an investment in our
shares may be modified by legislative, judicial or
administrative action at any time, and that any such action may
affect investments and commitments previously made. The rules
dealing with U.S. federal income taxation are constantly
under review by persons involved in the legislative process and
by the IRS and the U.S. Treasury Department, resulting in
revisions of regulations and revised interpretations of
established concepts as well as statutory changes. Revisions in
U.S. federal tax laws and interpretations thereof could
adversely affect the tax consequences of an investment in our
shares.
Moreover, prospective investors should be aware that as of
January 1, 2011, absent legislative action, the maximum
capital gains federal income tax rate for U.S. shareholders
who are individuals will revert to 20% and the maximum ordinary
income tax rate will revert to 39.6%.
State tax
consequences and withholding
We may be subject to state or local taxation in various state or
local jurisdictions, including those in which we transact
business, and our shareholders may be subject to state and local
taxation or withholding in various state or local jurisdictions,
including those in which they reside. The state and local tax
treatment of EPR and our shareholders may not conform to the
U.S. federal income tax consequences discussed above.
Several states in which we may own properties may treat REITs as
ordinary corporations. You should consult your own tax advisor
regarding the effect of state and local tax laws on an
investment in our shares.
You are
advised to consult with your own tax advisor regarding the
specific tax consequences to you of the ownership and sale of
shares in an entity electing to be taxed as a real estate
investment trust, including the federal, state, local, foreign,
and other tax consequences of such purchase, ownership, sale,
and election and of potential changes in applicable tax
laws.
S-28
Underwriting
We are offering the common shares described in this prospectus
supplement through the underwriters listed below. We have
entered into an underwriting agreement with J.P. Morgan
Securities Inc. as representative of the underwriters. Subject
to the terms and conditions of the underwriting agreement, we
have agreed to sell to the underwriters, and each underwriter
has severally agreed to purchase, at the public offering price
less the underwriting discounts and commissions set forth on the
cover page of this prospectus supplement, the number of common
shares listed next to its name in the following table:
|
|
|
|
|
|
|
Name
|
|
Number of shares
|
|
|
|
|
J.P. Morgan Securities Inc.
|
|
|
|
|
RBC Capital Markets Corporation
|
|
|
|
|
Citigroup Global Markets Inc.
|
|
|
|
|
Barclays Capital Inc.
|
|
|
|
|
KeyBanc Capital Markets Inc.
|
|
|
|
|
FBR Capital Markets & Co.
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,500,000
|
|
|
|
The underwriting agreement provides that the obligations of the
underwriters are conditional and may be terminated upon the
occurrence of the events specified in the underwriting
agreement. The underwriters are committed to purchase all the
common shares offered by us if they purchase any shares, other
than those shares covered by the over-allotment option described
below. The underwriting agreement also provides that if an
underwriter defaults, the purchase commitments of non-defaulting
underwriters may also be increased or the offering may be
terminated.
The underwriters propose to offer the common shares directly to
the public initially at the public offering price set forth on
the cover page of this prospectus supplement and to certain
dealers at that price less a concession not in excess of
$ per share. Any such dealers may
resell shares to certain other brokers or dealers at a discount
of up to $ per share from the
public offering price. After the initial public offering of the
shares, the offering price and other selling terms may be
changed by the underwriters. Sales of shares made outside of the
United States may be made by affiliates of the underwriters.
The underwriters have an option to buy up to 675,000 additional
common shares from us to cover sales of shares by the
underwriters which exceed the number of shares specified in the
table above. The underwriters have 30 days from the date of
this prospectus supplement to exercise this over-allotment
option. If any shares are purchased with this over-allotment
option, the underwriters will purchase shares in approximately
the same proportion as shown in the table above. If any
additional common shares are purchased, the underwriters will
offer the additional shares on the same terms as those on which
the shares are being offered.
The underwriting fee is equal to the public offering price per
common share less the amount paid by the underwriters to us per
common share. The underwriting fee is
$ per share. The following table
shows the per share and total underwriting discounts and
commissions to be
S-29
paid to the underwriters assuming both no exercise and full
exercise of the underwriters option to purchase additional
shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
Without
|
|
|
With full
|
|
|
|
over-allotment
|
|
|
over-allotment
|
|
|
|
exercise
|
|
|
exercise
|
|
|
|
|
Per share
|
|
$
|
|
|
|
$
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
|
We estimate that the total expenses of this offering payable by
us, including registration, filing and listing fees, printing
fees and legal and accounting expenses, but excluding the
underwriting discounts and commissions, will be approximately
$350,000.
The underwriters are offering the shares, subject to prior sale,
when, as and if issued to and accepted by them, subject to
approval of legal matters by their counsel, including the
validity of the shares, and other conditions contained in the
underwriting agreement, such as the receipt by the underwriters
of officers certificates and legal opinions. The
underwriters reserve the right to withdraw, cancel or modify
offers to the public without notice and to reject orders in
whole or in part.
A prospectus in electronic format may be made available on the
web sites maintained by one or more underwriters, or selling
group members, if any, participating in the offering. The
underwriters may agree to allocate a number of shares to
underwriters and selling group members for sale to their online
brokerage account holders. Internet distributions will be
allocated by the representatives to underwriters and selling
group members that may make Internet distributions on the same
basis as other allocations.
We have agreed that for a period of 90 days after the date
of this prospectus supplement, subject to the limited exceptions
and extensions described below, we will not, without the prior
written consent of J.P. Morgan Securities Inc., offer,
sell, contract to sell, hypothecate, pledge, grant any option to
purchase or otherwise dispose of, directly or indirectly, or
file with the SEC or cause to be declared effective a
registration statement under the Securities Act relating to, any
of our common shares, any other of our equity securities or any
of our subsidiaries on parity with or senior to our common
shares (with respect to distribution rights or payments upon our
liquidation, dissolution or winding up), or any securities
convertible into, exchangeable or exercisable for, or that
represent the right to receive, any of our common shares or
other such equity securities, and will not agree to or publicly
disclose the intention to make any such offer, sale, pledge,
grant, disposition or filing, other than common shares to be
sold hereunder, any common shares issued upon the exercise of
options or warrants currently outstanding or the issuance of any
employee stock options not exercisable until the expiration of
the restricted period or any restricted share awards, in each
case granted under our existing management incentive plans. If
(1) during the last 17 days of the
90-day
restricted period, we issue an earnings release or material news
or a material event relating to our company occurs; or
(2) prior to the expiration of the
90-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
90-day
period, the restrictions described above shall continue to apply
until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.
Our executive officers have agreed that for a period of
90 days after the date of this prospectus supplement,
subject to the limited exceptions and extensions described
below, they may not,
S-30
without the prior written consent of J.P. Morgan Securities
Inc. (1) offer, sell, contract or agree to sell,
hypothecate, pledge, grant any option to purchase or otherwise
dispose of, directly or indirectly, or establish or increase a
put equivalent position or liquidate or decrease a call
equivalent position with respect to any of our common shares,
any other of our equity securities or any of our subsidiaries on
parity with or senior to our common shares (with respect to
distribution rights or payments upon our liquidation,
dissolution or winding up), or any securities convertible into,
exchangeable or exercisable for, or that represent the right to
receive, any of our common shares or other such equity
securities, (2) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the
economic consequences of ownership of such securities, whether
any such transaction is to be settled by delivery of such
securities, other securities, in cash or otherwise or
(3) agree to or publicly announce an intention to effect
any such transaction. If (1) during the last 17 days
of the
90-day
restricted period, we issue an earnings release or material news
or a material event relating to our company occurs; or
(2) prior to the expiration of the
90-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
90-day
period, the restrictions described above shall continue to apply
until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event. These
lock-up
agreements generally do not prohibit gifts, estate planning
dispositions, our withholding of shares as payment for taxes due
with respect to the vesting or exercise of incentive awards or
as payment for the exercise price thereof. In addition, during
this 90-day
restricted period, David M. Brain, our President and Chief
Executive Officer, and Gregory K. Silvers, our Vice President,
Chief Operating Officer, General Counsel and Secretary, will
each be permitted to sell up to 10,000 common shares and Mark A.
Peterson, our Vice President and Chief Financial Officer, will
be permitted to sell up to 5,000 common shares, without
obtaining the prior consent of J.P. Morgan Securities Inc.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of
1933, and, where such indemnification is unavailable, to
contribute to payments that the underwriters may be required to
make in respect of such liabilities.
Our common shares trade on the New York Stock Exchange, or NYSE,
under the symbol EPR.
The underwriters have advised us that they intend to make a
market in the common shares, but they are not obligated to do so
and may discontinue market making at any time without notice. No
assurance can be given as to the liquidity of the trading market
for the common shares.
In connection with this offering, the underwriters may engage in
stabilizing transactions, which involves making bids for,
purchasing and selling our common shares in the open market for
the purpose of preventing or retarding a decline in the market
price of the common shares while this offering is in progress.
These stabilizing transactions may include making short sales of
the common shares, which involves the sale by the underwriters
of a greater number of common shares than they are required to
purchase in this offering, and purchasing common shares on the
open market to cover positions created by short sales. Short
sales may be covered shorts, which are short
positions in an amount not greater than the underwriters
over-allotment option referred to above, or may be
naked shorts, which are short positions in excess of
that amount. The underwriters may close out any covered short
position either by exercising their over-allotment option, in
whole or in part, or by purchasing shares in the open market. In
making this determination, the underwriters will consider, among
other things, the price of shares available for purchase in the
open market compared to the price at which the underwriters may
purchase shares through the over-allotment option. A naked short
position is more
S-31
likely to be created if the underwriters are concerned that
there may be downward pressure on the price of the common shares
in the open market that could adversely affect investors who
purchase in this offering. To the extent that the underwriters
create a naked short position, they will purchase shares in the
open market to cover the position.
The underwriters have advised us that, pursuant to
Regulation M of the Securities Act of 1933, they may also
engage in other activities that stabilize, maintain or otherwise
affect the price of the common shares, including the imposition
of penalty bids. This means that if the representatives of the
underwriters purchase common shares in the open market in
stabilizing transactions or to cover short sales, the
representatives can require the underwriters that sold those
shares as part of this offering to repay the underwriting
discount received by them.
These activities may have the effect of raising or maintaining
the market price of the common shares or preventing or retarding
a decline in the market price of the common shares, and, as a
result, the price of the common shares may be higher than the
price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue
them at any time. The underwriters may carry out these
transactions on the NYSE, in the over the counter market or
otherwise.
Other than in the United States, no action has been taken by us
or the underwriters that would permit a public offering of the
securities offered by this prospectus supplement in any
jurisdiction where action for that purpose is required. The
securities offered by this prospectus supplement may not be
offered or sold, directly or indirectly, nor may this prospectus
supplement or any other offering material or advertisements in
connection with the offer and sale of any such securities be
distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable
rules and regulations of that jurisdiction. Persons into whose
possession this prospectus supplement comes are advised to
inform themselves about and to observe any restrictions relating
to the offering and the distribution of this prospectus
supplement. This prospectus supplement does not constitute an
offer to sell or a solicitation of an offer to buy any
securities offered by this prospectus supplement in any
jurisdiction in which such an offer or a solicitation is
unlawful.
This document is only being distributed to and is only directed
at (i) persons who are outside the United Kingdom or
(ii) to investment professionals falling within
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (the Order) or
(iii) high net worth entities, and other persons to whom it
may lawfully be communicated, falling with Article 49(2)(a)
to (d) of the Order (all such persons together being
referred to as relevant persons). The securities are
only available to, and any invitation, offer or agreement to
subscribe, purchase or otherwise acquire such securities will be
engaged in only with, relevant persons. Any person who is not a
relevant person should not act or rely on this document or any
of its contents.
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a
Relevant Member State), from and including the date
on which the European Union Prospectus Directive (the EU
Prospectus Directive) is implemented in that Relevant
Member State (the Relevant Implementation Date) an
offer of securities described in this prospectus supplement may
not be made to the public in that Relevant Member State prior to
the publication of a prospectus supplement in relation to the
shares which has been approved by the competent authority in
that Relevant Member State or, where appropriate, approved in
another Relevant Member State and notified to the competent
authority in that Relevant Member State, all in accordance with
the EU Prospectus Directive, except that it may,
S-32
with effect from and including the Relevant Implementation Date,
make an offer of shares to the public in that Relevant Member
State at any time:
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to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
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to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts;
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to fewer than 100 natural or legal persons (other than qualified
investors as defined in the EU Prospectus Directive) subject to
obtaining the prior consent of J.P. Morgan Securities Inc.
for any such offer; or
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in any other circumstances which do not require the publication
by the Issuer of a prospectus pursuant to Article 3 of the
Prospectus Directive.
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For the purposes of this provision, the expression an
offer of securities to the public in relation to any
securities in any Relevant Member State means the communication
in any form and by any means of sufficient information on the
terms of the offer and the securities to be offered so as to
enable an investor to decide to purchase or subscribe for the
securities, as the same may be varied in that Member State by
any measure implementing the EU Prospectus Directive in that
Member State and the expression EU Prospectus Directive means
Directive 2003/71/EC and includes any relevant implementing
measure in each Relevant Member State.
Certain of the underwriters and their affiliates have provided
in the past to us and our affiliates and may provide from time
to time in the future certain commercial banking, financial
advisory, investment banking and other services for us and such
affiliates in the ordinary course of their business, for which
they have received and may continue to receive customary fees
and commissions. In addition, from time to time, certain of the
underwriters and their affiliates may effect transactions for
their own account or the account of customers, and hold on
behalf of themselves or their customers, long or short positions
in our debt or equity securities or loans, and may do so in the
future.
Conflict of
interest
Affiliates of each of J.P. Morgan Securities Inc., RBC
Capital Markets Corporation, KeyBanc Capital Markets Inc.,
Citigroup Global Markets Inc. and Barclays Capital Inc. are
lenders under our revolving credit facility. As described in the
section entitled Use of proceeds, we intend to use
the net proceeds from this offering for general business
purposes, which may include the repayment of debt under such
credit facility. As a result, a portion of the net proceeds from
this offering, not including underwriting compensation, will be
paid to affiliates of the underwriters in connection with the
repayment of such borrowings. JPMorgan Chase Bank, N.A., an
affiliate of one of the underwriters, J.P. Morgan
Securities Inc., will receive approximately 18.6% of any
proceeds from this offering that are used to repay indebtedness
under the credit facility. Royal Bank of Canada, an affiliate of
one of the underwriters, RBC Capital Markets Corporation, will
receive approximately 18.6% of any proceeds of this offering
that are used to repay indebtedness under the credit facility.
KeyBank National Association, an affiliate of one of the
underwriters, KeyBanc Capital Markets Inc., will receive
approximately 18.6% of any proceeds of this offering that are
used to repay indebtedness under the credit facility. Citicorp
North America, Inc., an affiliate of one of the underwriters,
Citigroup Global Markets Inc., will receive
S-33
approximately 11.6% of any proceeds of this offering that are
used to repay indebtedness under the credit facility. Barclays
Bank Plc, an affiliate of one of the underwriters, Barclays
Capital Inc., will receive approximately 9.3% of any proceeds of
this offering that are used to repay indebtedness under the
credit facility. Because of the manner in which the proceeds
will be used, the offering will be conducted in accordance with
NASD Rule 2720(a)(1), as administered by the Financial
Industry Regulatory Authority (FINRA). Pursuant to
that rule, the appointment of a qualified underwriter is not
necessary in connection with this offering, as this offering is
of a class of equity securities for which a bona fide
public market, as defined by FINRA, exists.
It is expected that delivery of the common shares will be made
on or
about ,
2009, which will be
the
business day following the date of pricing of the common shares.
Legal
matters
Stinson Morrison Hecker LLP will issue an opinion regarding the
validity of the common shares offered by this prospectus
supplement. In addition, the discussion under the caption
Additional U.S. federal income tax
considerations in this prospectus supplement and
U.S. Federal Income Tax Considerations in the
accompanying prospectus (as amended and supplemented by
Additional U.S. Federal Income Tax
Considerations in this prospectus supplement) is based on
the tax opinion of Stinson Morrison Hecker LLP. Certain legal
matters in connection with this offering will be passed upon for
the underwriters by Dechert LLP.
Experts
The consolidated financial statements and schedules of EPR as of
December 31, 2008 and 2007 and for each of the years in the
three-year period ended December 31, 2008 and
managements assessment of internal control over financial
reporting as of December 31, 2008 have been incorporated by
reference in this prospectus supplement and the accompanying
prospectus and in the registration statement of which this
prospectus supplement and the accompanying prospectus are a
part, in reliance upon the reports of KPMG LLP, independent
registered public accounting firm, incorporated by reference
herein and upon the authority of said firm as experts in
accounting and auditing.
Available
information
We are subject to the informational requirements of the Exchange
Act, and in accordance with those requirements, we file reports
and other information with the SEC. The reports and other
information can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1580,
100 F Street, N.E., Washington, D.C. 20549.
Copies of this material can be obtained by mail from the Public
Reference Section of the SEC at
Room 1580,100 F Street, N.E.,
Washington, D.C. 20549 at prescribed rates. The public may
obtain information on the operation of the public reference room
by calling the SEC at
1-800-SEC-0330.
The SEC maintains an Internet website
(http://www.sec.gov)
that contains reports, proxy and information statements and
other materials that are filed through the SEC Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system. In addition,
our common shares, our Series B preferred shares,
Series C convertible preferred shares, Series D
preferred shares and Series E convertible preferred shares
S-34
are listed on the New York Stock Exchange and we are required to
file reports, proxy and information statements and other
information with the New York Stock Exchange. These documents
can be inspected at the principal office of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. We
have filed with the SEC a registration statement on
Form S-3
(Registration File
No. 333-140978)
covering the securities offered by this prospectus supplement.
You should be aware that this prospectus supplement does not
contain all of the information contained or incorporated by
reference in that registration statement and its exhibits and
schedules. You may inspect and obtain the registration
statement, including exhibits, schedules, reports and other
information that we have filed with the SEC, as described in the
preceding paragraph. Statements contained in this prospectus
supplement concerning the contents of any document we refer you
to are not necessarily complete and in each instance we refer
you to the applicable document filed with the SEC for more
complete information.
S-35
PROSPECTUS
Entertainment
Properties Trust
Debt Securities, Common Shares,
Preferred Shares,
Depositary Shares and Warrants
We may offer, from time to time, in one or more series or
classes and in amounts, at prices and on terms that we will
determine at the time of offering:
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debt securities which may be either senior debt securities or
subordinated debt securities;
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common shares of beneficial interest (common shares);
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preferred shares of beneficial interest (preferred
shares);
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depositary shares representing preferred shares of beneficial
interest (depositary shares); or
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warrants.
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These securities may be offered and sold separately or together
in units with other securities described in this prospectus. We
will provide the specific terms of these securities in
supplements to this prospectus or other offering materials. You
should read this prospectus, the applicable prospectus
supplement and other applicable offering materials carefully
before you invest.
The securities may be sold directly or through agents,
underwriters or dealers. If any agent, dealer or underwriter is
involved in selling the securities, its name, the applicable
purchase price, fee, commission or discount arrangement, and the
net proceeds to us from the sale of the securities will be
described in a prospectus supplement or other offering
materials. See Plan of Distribution.
Our common shares are listed on the New York Stock Exchange
under the symbol EPR. The last reported sale price
of our common shares on the New York Stock Exchange on
February 26, 2007 was $67.88 per share. Our Series A
Cumulative Redeemable Preferred Shares (Series A
Preferred Shares), Series B Cumulative Redeemable
Preferred Shares (Series B Preferred Shares)
and Series C Cumulative Convertible Preferred Shares
(Series C Preferred Shares) are listed on the
New York Stock Exchange under the symbols EPR PrA,
EPR PrB, and EPR PrC, respectively.
To preserve our qualification as a real estate investment trust
or REIT for U.S. federal income tax purposes
and for other purposes, we impose restrictions on ownership of
our common and preferred shares. See U.S. Federal
Income Tax Considerations and Description of Certain
Provisions of Maryland Law and EPRs Declaration of Trust
and Bylaws in this prospectus.
Investing in these securities involves certain risks. See the
Risk Factors section on page 3 of this
prospectus as well as the Risk Factors section of
our most recent annual report on
Form 10-K
and, to the extent applicable, our quarterly reports on
Form 10-Q.
Neither the Securities and Exchange Commission nor any
state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
Our principal executive office is located at 30 W. Pershing
Road, Suite 201, Kansas City, Missouri 64108. The telephone
number for our principal executive office is
(816) 472-1700.
The date of
this prospectus is February 27, 2007.
TABLE OF
CONTENTS
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47
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48
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48
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i
ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement
(No. 333- )
that we filed with the Securities and Exchange Commission
(SEC) using a shelf registration
process. Under this shelf process, we may sell any combination
of the securities described in this prospectus from time to time
in one or more offerings.
This prospectus provides you with a general description of the
securities we may offer. Each time we offer and sell securities,
we will provide a prospectus supplement or other offering
materials that contain specific information about the terms of
the offering and the securities offered. The prospectus
supplement or other offering materials also may add to, update
or change information provided in this prospectus. You should
read this prospectus, the applicable prospectus supplement, the
other applicable offering materials and the other information
described in Available Information and
Incorporation of Certain Information by Reference
prior to investing.
As allowed by SEC rules, this prospectus does not contain all
the information you can find in the registration statement or
the exhibits to the registration statement. For further
information, we refer you to the registration statement,
including its exhibits and schedules. Statements contained in
this prospectus about the provisions or contents of any
contract, agreement or any other document referred to are not
necessarily complete. For each of these contracts, agreements or
documents filed as an exhibit to the registration statement, we
refer you to the actual exhibit for a more complete description
of the matters involved.
We have not authorized any dealer, salesman or other person to
give any information or to make any representation other than
those contained or incorporated by reference in this prospectus,
any applicable supplement to this prospectus or any other
applicable offering materials. You must not rely upon any
information or representation not contained or incorporated by
reference in this prospectus or any applicable supplement to
this prospectus or any other applicable offering materials as if
we had authorized it. This prospectus, any applicable prospectus
supplement and any other applicable offering materials do not
constitute an offer to sell or the solicitation of an offer to
buy any securities other than the registered securities to which
they relate. Nor do this prospectus, any accompanying prospectus
supplement or any other applicable offering materials constitute
an 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. You should assume that the information appearing
in this prospectus, the accompanying prospectus supplement or
any other offering materials is accurate only as of the date on
their respective covers, and you should assume that the
information appearing in any document incorporated or deemed to
be incorporated by reference in this prospectus, any
accompanying prospectus supplement or any other applicable
offering materials is accurate only as of the date that document
was filed with the SEC. Our business, financial condition,
results of operations and prospects may have changed since those
dates.
Unless otherwise indicated or unless the context requires
otherwise, all references in this prospectus to we,
us, our, the Company or
EPR mean Entertainment Properties Trust. When we
refer to our Declaration of Trust we mean
Entertainment Properties Trusts Amended and Restated
Declaration of Trust, including the articles supplementary for
each series of preferred shares, as amended. When we refer to
our Bylaws we mean Entertainment Properties
Trusts Bylaws, as amended.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference the
information we file with the SEC, which means we can disclose
important information to you by referring to those documents.
The information incorporated by reference is an important part
of this prospectus. Any statement contained in a document which
is incorporated by reference in this prospectus is automatically
updated and superseded if information contained in this
prospectus or information we later file with the SEC, modifies
or replaces that information.
The documents listed below have been filed by us under the
Securities Exchange Act of 1934, as amended (the Exchange
Act), (File
No. 1-13561)
and are incorporated by reference in this prospectus:
1. Our annual report on
Form 10-K
for the year ended December 31, 2006 filed on
February 28, 2007.
2. The description of our common shares included in our
registration statement on
Form 8-A
filed on November 4, 1997.
1
3. The description of our Series A Preferred Shares
included in our registration statement on
Form 8-A
filed on May 24, 2002.
4. The description of our Series B Preferred Shares
included in our registration statement on
Form 8-A
filed on January 12, 2005.
5. The description of our Series C Preferred Shares
included in our registration statement on
Form 8-A
filed on December 21, 2006.
In addition, all documents filed by us under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act (excluding any
information that is deemed to have been furnished
and not filed with the SEC) after the date of this
prospectus and prior to the termination of the offering of the
securities covered by this prospectus are incorporated by
reference herein.
To obtain a free copy of any of the documents incorporated by
reference in this prospectus (other than exhibits, unless they
are specifically incorporated by reference in the documents)
please contact us at:
Investor Relations Department
Entertainment Properties Trust
30 W. Pershing Road, Suite 201
Kansas City, Missouri 64108
(816) 472-1700/FAX
(816) 472-5794
Email info@eprkc.com
Our SEC filings also are available on our Internet website at
www.eprkc.com. The information on our website is not, and you
must not consider the information to be, a part of this
prospectus.
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
With the exception of historical information, this prospectus
and our reports filed under the Exchange Act and incorporated by
reference in this prospectus and other offering materials and
documents deemed to be incorporated by reference herein or
therein may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as
amended (the Securities Act), and Section 21E
of the Exchange Act, such as those pertaining to our acquisition
or disposition of properties, our capital resources, future
expenditures for development projects and our results of
operations. Forward-looking statements involve numerous risks
and uncertainties and you should not rely on them as predictions
of actual events. There is no assurance the events or
circumstances reflected in the forward-looking statements will
occur. You can identify forward-looking statements by use of
words such as will be, intend,
continue, believe, may,
expect, hope, anticipate,
goal, forecast, or other comparable
terms, or by discussions of strategy, plans or intentions.
Forward-looking statements necessarily are dependent on
assumptions, data or methods that may be incorrect or imprecise.
Factors that could materially and adversely affect us include,
but are not limited to, the factors listed below:
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General business and economic conditions;
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Our ability to compete effectively;
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Defaults in the performance of lease terms by our tenants;
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Risk of our tenants filing for bankruptcy;
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Risk of our tenants not renewing their leases;
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The concentration of leases with our single largest tenant;
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Our continued qualification as a REIT;
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Risks relating to real estate ownership and development;
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Risks associated with use of leverage to acquire properties;
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Fluctuations in interest rates;
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Acts of terrorism;
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Risk of potential uninsured losses, including from natural
disasters;
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Risks involved in joint ventures;
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Risks in leasing multi-tenant properties;
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Risks of environmental liability;
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Our ability to raise capital;
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Our ability to pay distributions to our shareholders;
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Changes in laws and regulations, including tax laws and
regulations;
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Risks associated with changes in the Canadian exchange
rate; and
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Certain limits on change in control imposed under law and by our
Declaration of Trust and Bylaws.
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You should consider the risks described in the Risk
Factors section of our most recent annual report on
Form 10-K
and, to the extent applicable, our quarterly reports on
Form 10-Q,
in evaluating any forward-looking statements included or
incorporated by reference in this prospectus.
Given these uncertainties, you should not place undue reliance
on these forward-looking statements. We undertake no obligation
to publicly update or revise any forward-looking statements
included or incorporated by reference in this prospectus whether
as a result of new information, future events or otherwise. In
light of the factors referred to above, the future events
discussed or incorporated by reference in this prospectus may
not occur and actual results, performance or achievements could
differ materially from those anticipated or implied in the
forward-looking statements.
RISK
FACTORS
An investment in our securities involves certain risks. See the
Risk Factors section of our most recent annual
report on
Form 10-K
and, to the extent applicable, our quarterly reports on
Form 10-Q,
to read about factors you should consider before investing in
our securities.
THE
COMPANY
We are a self-administered real estate investment trust, or
REIT. As of February 26, 2007, our real estate
portfolio consists of:
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megaplex movie theatre properties (including joint venture
properties)
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entertainment retail centers (including joint venture properties)
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other specialty properties
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megaplex movie theatre properties, entertainment retail centers
and other specialty properties under development
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land parcels leased to restaurant and retail operators adjacent
to several of our theatre properties
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We generally lease our single-tenant properties to tenants on a
long-term
triple-net
basis that requires the tenant to assume the primary risks
involved in operating the property and to pay substantially all
expenses associated with the operation and maintenance of the
property. We also provide secured mortgage financing, as
appropriate, and we own multi-tenant properties which are
managed for us by third-party management companies.
3
Beginning with our taxable year ended December 31, 1997, we
elected to be treated as a REIT for U.S. federal income tax
purposes. In order to maintain our status as a REIT, we must
comply with a number of requirements under federal income tax
law that are discussed in U.S. Federal Income Tax
Considerations.
Our executive offices are located at 30 W. Pershing Road,
Suite 201, Kansas City, Missouri 64108. Our telephone
number is
(816) 472-1700.
USE OF
PROCEEDS
Unless otherwise indicated in the applicable prospectus
supplement or other applicable offering materials, EPR intends
to use the net proceeds from any sale of common shares,
preferred shares, depositary shares, warrants or debt securities
under this prospectus for general business purposes, which may
include funding the acquisition, development or financing of
properties and repayment of debt. Further details relating to
the use of net proceeds from any specific offering will be
described in the applicable prospectus supplement or other
applicable offering materials.
RATIO OF
EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED
SHARE DISTRIBUTIONS
The table below presents our ratio of earnings to fixed charges
by dividing earnings by fixed charges. For this purpose,
earnings is the sum of net income before equity in
earnings of unconsolidated subsidiaries, minority interest in
earnings and fixed charges (excluding capitalized interest) plus
distributed income from unconsolidated joint ventures.
Fixed charges consist of interest incurred on all
indebtedness. The ratios are based solely on historical
financial information and no pro forma adjustments have been
made.
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Years Ended December 31
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2006
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2005
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2004
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2003
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2002
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Ratio of earning to fixed charges
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2.7X
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2.6X
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2.3X
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2.2X
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2.2X
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The table below presents our ratio of earnings to combined fixed
charges and preferred share distributions by dividing earnings
by combined fixed charges and preferred share distributions. The
terms earnings and fixed charges have
the meanings assigned above. The ratios are based solely on
historical financial information and no pro forma adjustments
have been made.
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Years Ended December 31
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2006
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2005
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2004
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2003
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2002
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Ratio of earning to combined fixed
charges and preferred share distributions
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2.2X
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2.0X
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2.0X
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1.8X
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1.9X
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4
DESCRIPTION
OF DEBT SECURITIES
The following description, together with the additional
information we include in any applicable prospectus supplements
or other applicable offering materials, summarizes the material
terms and provisions of the debt securities that we may offer
under this prospectus. Because it is a summary, it does not
contain all information that may be important to you. If you
want more information, you should read the forms of indentures
we have filed as exhibits to the registration statement of which
this prospectus is a part. While the terms we have summarized
below will apply generally to any future debt securities we may
offer, we will describe the particular terms of any debt
securities that we may offer in more detail in the applicable
prospectus supplement or other offering materials. This summary
is also subject to and qualified by reference to the
descriptions of the particular terms of the securities described
in the applicable prospectus supplement or other applicable
offering materials and by the terms of the applicable final
indenture, applicable indenture supplement and debt security.
See Available Information.
General
The debt securities that we may issue will constitute
debentures, notes, bonds or other evidences of indebtedness of
the Company, to be issued in one or more series, which may
include senior debt securities, subordinated debt securities and
senior subordinated debt securities. The particular terms of any
series of debt securities we offer, including the extent to
which the general terms set forth below may be applicable to a
particular series, will be described in a prospectus supplement
relating to such series.
Debt securities that we may issue will be issued under one or
more separate indentures between us and a trustee to be named in
the related prospectus supplement. Senior debt securities will
be issued under a senior indenture and subordinated debt
securities will be issued under a subordinated indenture.
Together the senior indenture and the subordinated indenture are
called indentures. We have filed the forms of the
indentures as exhibits to the registration statement of which
this prospectus is a part. If we enter into any indenture
supplement, we will file a copy of that supplement with the SEC.
Unless otherwise indicated in the applicable prospectus
supplement, the debt securities will be our direct obligations.
The senior debt securities will rank equally with all of our
other senior and unsubordinated debt. The subordinated debt
securities will have a junior position to certain of our debt,
as described in the subordinated securities themselves or under
the supplemental indenture under which they are issued. Unless
we otherwise provide, we may reopen a series, without the
consent of the holders of the series, for issuances of
additional securities of that series.
We conduct a significant portion of our operations through our
subsidiaries. Therefore, holders of debt securities will have a
position junior to the prior claims of creditors of our
subsidiaries, including trade creditors, debtholders, secured
creditors, taxing authorities and guarantee holders, and any
preferred stockholders, except to the extent that we may
ourselves be a creditor with recognized and unsubordinated
claims against any subsidiary. Our ability to pay principal of
and premium, if any, and interest on any debt securities is, to
a large extent, dependent upon the payment to us of dividends,
interest or other charges by our subsidiaries.
The following description is a summary of the material
provisions of the forms of indentures. It does not restate the
indentures in their entireties. The indentures are governed by
the Trust Indenture Act of 1939. The terms of the debt
securities include those stated in the indentures and those made
part of the indentures by reference to the Trust Indenture Act.
We urge you to read the indentures because they, and not this
description, define your rights as a holder of the debt
securities. The following description is subject to and
qualified by reference to the terms of the final indentures and
any supplement thereto.
Information
You Will Find in the Prospectus Supplement or Other Offering
Materials
The indentures provide that we may issue debt securities from
time to time in one or more series and that we may denominate
the debt securities and make them payable in foreign currencies.
The indentures do not limit the aggregate principal amount of
debt securities that can be issued thereunder. The prospectus
supplement or other
5
offering materials for a series of debt securities will provide
information relating to the terms of the series of debt
securities being offered, which may include:
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the issue price of the debt securities of the series;
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the title and denominations of the debt securities of the series;
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the aggregate principal amount and any limit on the aggregate
principal amount of the debt securities of the series;
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the date or dates on which the principal and premium, if any,
with respect to the debt securities of the series are payable,
the amount or amounts of such payments or principal and premium,
if any, or the method of determination thereof;
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the amount payable upon maturity or upon acceleration;
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the rate or rates, which may be fixed or variable, at which the
debt securities of the series shall bear interest, if any, or
the method of calculating and/or resetting such rate or rates of
interest;
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any limits on ownership or transferability;
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the person to whom such interest will be payable, if other than
the person in whose name the debt securities are registered;
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the dates from which such interest shall accrue or the method by
which such dates shall be determined and the basis upon which
interest shall be calculated;
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the interest payment dates for the series of debt securities or
the method by which such dates will be determined, the terms of
any deferral of interest and any right of ours to extend the
interest payment periods;
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the place or places where the principal of and any premium and
interest on the series of debt securities will be payable, or
where the debt securities may be surrendered for conversion,
transfer or exchange;
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the terms and conditions, if any, upon which debt securities of
the series may be redeemed, in whole or in part, at our option
or otherwise;
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our obligation, if any, to redeem, purchase, or repay debt
securities of the series pursuant to any sinking fund or other
specified event or at the option of the holders and the terms of
any such redemption, purchase, or repayment;
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the terms, if any, upon which the debt securities of the series
may be convertible into or exchanged for other securities,
including, among other things, the initial conversion or
exchange price or rate and the conversion or exchange period;
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if the amount of principal, premium, if any, or interest with
respect to the debt securities of the series may be determined
with reference to an index, formula or other method, the manner
in which such amounts will be determined;
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if any payments on the debt securities of the series are to be
made in a currency or currencies (or by reference to an index or
formula) other than that in which such securities are
denominated or designated to be payable, the currency or
currencies (or index or formula) in which such payments are to
be made and the terms and conditions of such payments;
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any additional amounts payable in respect of taxes or government
charges or assessments;
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the extent to which the debt securities of the series, in whole
or any specified part, shall be defeasible pursuant to the
indenture and the terms and conditions of such defeasance;
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the currency or currencies in which payment of the principal and
premium, if any, and interest with respect to debt securities of
the series will be payable, or in which the debt securities of
the series shall be denominated, and the particular provisions
applicable thereto;
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whether the debt securities of the series will be secured or
guaranteed and, if so, on what terms;
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the covenants and events of default if different from or in
addition to those described in this prospectus;
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any addition to or change in the events of default with respect
to the debt securities of the series;
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the identity of any trustees, authenticating or paying agents,
transfer agents or registrars;
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the applicability of, and any addition to or change in, the
covenants currently set forth in the indenture;
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the subordination, if any, of the debt securities of the series
and terms of the subordination;
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whether our subsidiaries will provide guarantees of the debt
securities, and the terms of any subordination of such guarantee;
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provisions, if any, granting special rights to holders of the
debt securities upon the occurrence of such events as may be
specified;
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whether we will issue the debt securities in certificate or book
entry form;
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whether such debt securities shall be issuable in registered
form or bearer form, and if in registered form, the denomination
if other than in even multiples of $1,000, and any restrictions
applicable to the offering, sale or delivery of bearer debt
securities;
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identity of registrar and paying agent;
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the forms of the debt securities of the series;
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the terms, if any, which may be related to warrants, options, or
other rights to purchase securities issued by the Company in
connection with debt securities of the series;
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whether the debt securities will be governed by, and the extent
to which the debt securities will be governed by, any law other
than the laws of the State of New York;
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any other terms of the debt securities of the series which are
not prohibited by the indenture.
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Subordination
We will describe in the applicable prospectus supplement or
other offering materials the terms and conditions, if any, upon
which any series of subordinated securities is subordinated to
debt securities of another series or to our other indebtedness.
The terms will include a description of:
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the indebtedness ranking senior to the debt securities being
offered;
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the restrictions, if any, on payments to the holders of the debt
securities being offered while a default with respect to the
senior indebtedness is continuing;
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the restrictions, if any, on payments to the holders of the debt
securities being offered following an event of default; and
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provisions requiring holders of the debt securities being
offered to remit some payments to holders of senior indebtedness.
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Interest
Rate
Debt securities that bear interest will do so at a fixed rate or
a floating rate.
Original
Issue Discount
One or more series of debt securities offered by this prospectus
may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate that
at the time of issuance is below market rates. The material
federal income tax consequences and special considerations
applicable to any series of debt securities generally will be
described in the applicable prospectus supplement or other
applicable offering materials.
7
Registered
Global Securities
We may issue registered debt securities of a series in the form
of one or more fully registered global securities. We will
deposit the registered global security with a depositary or with
a nominee for a depositary identified in the prospectus
supplement or other offering materials relating to such series.
The global security or global securities will represent and will
be in a denomination or aggregate denominations equal to the
portion of the aggregate principal amount of outstanding
registered debt securities of the series to be represented by
the registered global security or securities. Unless otherwise
specified in the applicable prospectus supplement or other
applicable offering materials, unless it is exchanged in whole
or in part for debt securities in definitive registered form, a
registered global security may not be transferred, except as a
whole in three cases:
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by the depositary for the registered global security to a
nominee of the depositary;
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by a nominee of the depositary to the depositary or another
nominee of the depositary; and
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by the depositary or any nominee to a successor of the
depositary or a nominee of the successor.
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The prospectus supplement or other offering materials relating
to a series of debt securities will describe the specific terms
of the depositary arrangement concerning any portion of that
series of debt securities to be represented by a registered
global security. We anticipate that the following provisions
will generally apply to all depositary arrangements.
Upon the issuance of a registered global security, the
depositary will credit, on its book-entry registration and
transfer system, the principal amounts of the debt securities
represented by the registered global security to the accounts of
persons that have accounts with the depositary. These persons
are referred to as participants. Any underwriters,
agents or debtors participating in the distribution of debt
securities represented by the registered global security will
designate the accounts to be credited. Only participants or
persons that hold interests through participants will be able to
beneficially own interests in a registered global security. The
depositary for a global security will maintain records of
beneficial ownership interests in a registered global security
for participants. Participants or persons that hold through
participants will maintain records of beneficial ownership
interests in a global security for persons other than
participants. These records will be the only means to transfer
beneficial ownership in a registered global security.
The laws of some states may require that specified purchasers of
securities take physical delivery of the securities in
definitive form. These laws may limit the ability of those
persons to own, transfer or pledge beneficial interests in
global securities.
So long as the depositary, or its nominee, is the registered
owner of a registered global security, the depositary or its
nominee will be considered the sole owner or holder of the debt
securities represented by the registered global security for all
purposes under the indenture. Except as set forth below, or in
the applicable supplemental indenture, owners of beneficial
interests in a registered global security:
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may not have the debt securities represented by a registered
global security registered in their names;
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will not receive or be entitled to receive physical delivery of
debt securities represented by a registered global security in
definitive form; and
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will not be considered the owners or holders of debt securities
represented by a registered global security under the indenture.
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Accordingly, each person owning a beneficial interest in a
registered global security must rely on the procedures of the
depositary for the registered global security and, if the person
is not a participant, on the procedures of the participant
through which the person owns its interests, to exercise any
rights of a holder under the indenture applicable to the
registered global security.
Payment
of Interest on and Principal of Registered Global
Securities
Unless otherwise specified in the applicable prospectus
supplement or other applicable offering materials, we will make
payments of principal, premium, if any, interest on and
additional amounts with respect to debt securities
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represented by a registered global security registered in the
name of a depositary or its nominee to the depositary or its
nominee as the registered owner of the registered global
security. None of the Company, the trustee, or any paying agent
for debt securities represented by a registered global security
will have any responsibility or liability for
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any aspect of the records relating to, or payments made on
account of, beneficial ownership interests in such registered
global security;
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maintaining, supervising, or reviewing any records relating to
beneficial ownership interests;
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the payments to beneficial owners of the global security of
amounts paid to the depositary or its nominee; or
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any other matter relating to the actions and practices of the
depositary, its nominee or any of its participants.
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Generally, a depositary, upon receipt of any payment of
principal, premium, interest on or additional amounts with
respect to the global security, will immediately credit
participants accounts with payments in amounts
proportionate to their beneficial interests in the principal
amount of a registered global security as shown on the
depositarys records. Generally, payments by participants
to owners of beneficial interests in a registered global
security held through participants will be governed by standing
instructions and customary practices. This is currently the case
with the securities held for the accounts of customers
registered in street name. Such payments will be the
responsibility of participants.
Exchange
of Registered Global Securities
We may issue debt securities in definitive form in exchange for
the registered global security if both of the following occur:
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the depositary for any debt securities represented by a
registered global security is at any time unwilling or unable to
continue as depositary or ceases to be a clearing agency
registered under the Exchange Act; and
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we do not appoint a successor depositary within 90 days.
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In addition, we may, at any time, determine not to have any of
the debt securities of a series represented by one or more
registered global securities. In this event, we will issue debt
securities of that series in definitive form in exchange for all
of the registered global security or securities representing
those debt securities.
Covenants
by the Company
The indenture includes covenants by us, including among other
things that (i) we will make all payments of principal and
interest at the times and places required and (ii) we will
do or cause to be done all things necessary to preserve and keep
in full force our existence, subject to certain terms as
generally described under Mergers,
Consolidations and Certain Sales of Assets. The board
resolution or supplemental indenture establishing each series of
debt securities may contain additional covenants, including
covenants which could restrict our right to incur additional
indebtedness or liens and to take certain actions with respect
to our businesses and assets.
The indentures contain no covenant or provision which affords
debt holders protection in the event of a highly leveraged
transaction.
Events of
Default
Unless otherwise indicated in the applicable prospectus
supplement or other applicable offering materials, the following
will be events of default under the indenture with respect to
each series of debt securities issued under the indenture:
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failure to pay when due any interest on or additional amounts
with respect to any debt security of that series, continued for
30 days;
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failure to pay when due the principal of, or premium, if any,
on, any debt security of that series at its maturity;
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default in the payment of any sinking fund installment with
respect to any debt security of that series when due and
payable, continued for 30 days;
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failure to perform any other covenant or agreement of ours under
the indenture or the supplemental indenture with respect to that
series or the debt securities of that series, continued for
60 days after written notice to us by the trustee or
holders of at least 25% in aggregate principal amount of the
outstanding debt securities of a series to which the covenant or
agreement relates;
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certain events of bankruptcy, insolvency or similar proceedings
affecting us; and
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any other event of default specified in any supplemental
indenture under which such series of debt securities is issued.
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Except as to certain events of bankruptcy, insolvency or similar
proceedings affecting us and except as provided in the
applicable prospectus supplement, if any event of default shall
occur and be continuing with respect to any series of debt
securities under the indenture, either the trustee or the
holders of at least 25% in aggregate principal amount of
outstanding debt securities of such series may accelerate the
maturity of all debt securities of such series. Upon certain
events of bankruptcy, insolvency or similar proceedings
affecting us, the principal, premium, if any, and interest on
all debt securities of each series shall be immediately due and
payable. After any such acceleration, but before a judgment or
decree based on acceleration has been obtained by the trustee,
the holders of a majority in aggregate principal amount of each
affected series of debt securities may waive all defaults with
respect to such series and rescind and annul such acceleration
if all events of default, other than the non-payment of
accelerated principal, have been cured, waived or otherwise
remedied.
An event of default for a particular series of debt securities
does not necessarily constitute an event of default for any
other series of debt securities issued under an indenture. The
trustee may withhold notice to the holders of debt securities of
any default (except in the payment of principal, premium, if
any, interest on or any additional amounts with respect to such
debt securities) if it considers such withholding of notice to
be in the best interests of the holders.
No holder of any debt securities of any series will have any
right to institute any proceeding with respect to the applicable
indenture or for any remedy under such indenture, unless:
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an event of default with respect to such series shall have
occurred and be continuing and such holder shall have previously
given to the trustee written notice of such continuing event of
default;
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the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of the relevant series shall have
made written request and offered reasonable indemnity to the
trustee to institute such proceeding as trustee;
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the trustee shall not have received from the holders of a
majority in aggregate principal amount of the outstanding debt
securities of such series a direction inconsistent with such
request; and
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the trustee shall have failed to institute such proceeding
within 60 days.
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However, such limitations do not apply to a suit instituted by a
holder of a debt security for enforcement of payment of the
principal of and premium, if any, interest on or any additional
amounts with respect to such debt security on or after the
respective due dates expressed in such debt security.
Supplemental
Indentures
We and the applicable trustee may, at any time and from time to
time, without prior notice to or consent of any holders of debt
securities, enter into one or more indentures supplemental to
the indentures, among other things to:
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add additional obligors on, guarantees to or secure any series
of debt securities;
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evidence the succession of another person pursuant to the
provisions of the indentures relating to consolidations, mergers
and sales of assets and the assumption by such successor of our
covenants and obligations or those of any guarantor;
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surrender any right or power conferred upon us under the
indentures or to add to our covenants for the protection of the
holders of all or any series of debt securities;
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add any additional events of default for the benefit of the
holders of any one or more series of debt securities;
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add to or change any of the provisions of the indentures to such
extent as shall be necessary to permit or facilitate the
issuance of debt securities in bearer form, or to permit or
facilitate the issuance of debt securities in global form or
uncertificated form;
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add to, change or eliminate any of the provisions of the
indentures in respect of one or more series of debt securities,
provided that any such addition, change or elimination
(a) shall neither (1) apply to any outstanding debt
security of any series created prior to the execution of such
supplemental indenture and entitled to the benefit of such
provision, or (2) modify the rights of any holder of any
outstanding debt security with respect to such provision, or
(b) shall become effective when there is no debt security
then outstanding;
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correct or supplement any provision which may be defective or
inconsistent with any other provision or to cure any ambiguity
or omission or to correct any mistake;
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make any other provisions with respect to matters or questions
arising under the indentures, provided such action shall not
adversely affect the rights of any holder of debt securities of
any series;
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evidence and provide for the acceptance of appointment by a
successor or separate trustee; or
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establish the form or terms of debt securities of any series and
to make any change that does not adversely affect the rights of
any holder of debt securities.
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With the consent of the holders of at least a majority in
principal amount of debt securities of each series affected by
such supplemental indenture (voting as one class), we and the
trustee may enter into one or more supplemental indentures for
the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the indentures or
modifying in any manner the rights of the holders of debt
securities of each such series.
Notwithstanding our rights and the rights of the trustee to
enter into one or more supplemental indentures with the consent
of the holders of debt securities of the affected series as
described above, no such supplemental indenture shall, without
the consent of the holder of each outstanding debt security of
the affected series, among other things:
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change the maturity of the principal of or any installment of
principal of, or the date fixed for payment of interest on, any
additional amounts or any sinking fund payment with respect to,
any debt securities;
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reduce the principal amount of any debt securities or the rate
of interest on or any additional amounts with respect to any
debt securities;
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change the place of payment or the currency in which any debt
securities are payable;
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impair the right of the holders to institute a proceeding for
the enforcement of any right to payment on or after
maturity; or
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reduce the percentage in principal amount of any series of debt
securities whose holders must consent to an amendment or
supplemental indenture or any waiver provided in the indenture.
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Unless otherwise provided in a supplemental indenture with
respect to any series of debt securities, under the indenture,
the holders of at least a majority of the principal amount of
debt securities of each series may, on behalf of that series:
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waive compliance by the Company of certain restrictive covenants
of the indenture; and
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waive any past default under the indenture, except
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a default in the payment of principal of or any premium or
interest, or any additional amounts with respect to such series;
or
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a default under any provision of the indenture which itself
cannot be modified or amended without the consent of the holder
of each outstanding debt security affected.
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11
Satisfaction
and Discharge of the Indenture; Defeasance
Except to the extent set forth in a supplemental indenture with
respect to any series of debt securities, we, at our election,
may discharge the applicable indenture and such indenture shall
generally cease to be of any further effect with respect to that
series of debt securities if (i) we have delivered to the
trustee for cancellation all debt securities of that series or
(ii) all debt securities of that series not previously
delivered to the trustee for cancellation shall have become due
and payable, or are by their terms to become due and payable
within one year or are to be called for redemption within one
year, and we have deposited with the trustee the entire amount
sufficient to pay at maturity or upon redemption all such debt
securities.
In addition, to the extent set forth in a supplemental indenture
with respect to a series of debt securities, we may have a
legal defeasance option (pursuant to which we may
terminate, with respect to the debt securities of a particular
series, all of our obligations under such debt securities and
the indenture with respect to such debt securities) and a
covenant defeasance option (pursuant to which we may
terminate, with respect to the debt securities of a particular
series, our obligations with respect to such debt securities
under certain specified covenants contained in the indenture).
If we have and exercise a legal defeasance option with respect
to a series of debt securities, payment of such debt securities
may not be accelerated because of an event of default. If we
have and exercise a covenant defeasance option with respect to a
series of debt securities, payment of such debt securities may
not be accelerated because of an event of default related to the
specified covenants.
To the extent set forth in a supplemental indenture with respect
to a series of debt securities, we may exercise a legal
defeasance option or a covenant defeasance option with respect
to the debt securities of a series only if we irrevocably
deposit in trust with the trustee cash or U.S. government
obligations (for debt securities denominated in
U.S. dollars) or certain foreign government obligations
(for debt securities denominated in a currency other than
U.S. dollars) for the payment of principal, premium, if
any, and interest and any additional amounts with respect to
such debt securities to maturity or redemption, as the case may
be. In addition, to exercise either of the defeasance options,
we must comply with certain other conditions, including for debt
securities denominated in U.S. dollars the delivery to the
trustee of an opinion of counsel to the effect that the holders
of debt securities of such series will not recognize income,
gain or loss for federal income tax purposes as a result of such
defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred (and, in the
case of legal defeasance only, such opinion of counsel must be
based on a ruling from the Internal Revenue Service or other
change in applicable federal income tax law).
The trustee will hold in trust the cash or government
obligations deposited with it as described above and will apply
the deposited cash and the proceeds from deposited government
obligations to the payment of principal, premium, if any, and
interest and any additional amounts with respect to the debt
securities of the defeased series.
Mergers,
Consolidations and Certain Sales of Assets
Except to the extent set forth in a supplemental indenture with
respect to any series of debt securities, we may not:
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consolidate with or merge into any other person or entity or
permit any other person or entity to consolidate with or merge
into us in a transaction in which we are not the surviving
entity, or
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transfer, lease or dispose of all or substantially all of our
assets to any other person or entity; unless in the case of both
preceding clauses:
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the resulting, surviving or transferee entity shall be a
corporation organized and existing under the laws of the United
States or any state thereof or the District of Columbia and such
resulting, surviving or transferee entity shall expressly
assume, by supplemental indenture, all of our obligations under
the debt securities and the applicable indenture;
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immediately after giving effect to such transaction, no default
or event of default would occur or be continuing; and
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we shall have delivered to the trustee an officers
certificate and an opinion of counsel, each stating that such
consolidation, merger or transfer and such supplemental
indenture (if any) comply with the applicable indenture.
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Governing
Law
The indentures and the debt securities will be governed by the
laws of the State of New York, except as may be provided as to
any series in a supplemental indenture.
Conversion
or Exchange Rights
Any debt securities that we may issue pursuant to this
prospectus may be convertible into or exchangeable for shares of
our equity or other securities. The terms and conditions of such
conversion or exchange will be set forth in the applicable
prospectus supplement or other offering materials. Such terms
may include, among others, the following:
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the conversion or exchange price;
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the conversion or exchange period;
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restrictions on conversion, including to maintain REIT status;
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provisions regarding our ability or that of the holder to
convert or exchange the debt securities;
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events requiring adjustment to the conversion or exchange
price; and
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provisions affecting conversion or exchange in the event of our
redemption of such debt securities.
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Concerning
the Trustee
The indentures provide that there may be more than one trustee
with respect to one or more series of debt securities but we
need not designate more than one trustee. If there are different
trustees for different series of debt securities, each trustee
will be a trustee of a trust under a supplemental indenture
separate and apart from the trust administered by any other
trustee under such indenture. Except as otherwise indicated in
this prospectus or any prospectus supplement, any action
permitted to be taken by a trustee may be taken by the trustee
only with respect to the one or more series of debt securities
for which it is the trustee under an indenture. Any trustee
under an indenture or a supplemental indenture may resign or be
removed with respect to one or more series of debt securities.
All payments of principal or, premium, if any, interest on and
any additional amounts with respect to, and all registration,
transfer, exchange authentication and delivery of, the debt
securities of a series will be effected with respect to such
series at an office designated by us.
The indentures contain limitations on the rights of any trustee,
should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise.
If any trustee acquires an interest that conflicts with any
duties with respect to the debt securities, such trustee is
required to either resign or eliminate such conflicting interest
to the extent and in the manner provided by the applicable
indenture.
Notices
Notices to holders of debt securities will be given by mail to
the addresses of such holders as they appear in the security
register.
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DESCRIPTION
OF SHARES OF BENEFICIAL INTEREST
The following description of our shares of beneficial
interest (shares) is only a summary and is subject
to, and qualified in its entirety by reference to, the provision
governing such shares contained in our Declaration of Trust and
Bylaws, copies of which we have previously filed with the SEC.
Because it is a summary, it does not contain all of the
information that may be important to you. See Available
Information for information about how to obtain copies of
the Declaration of Trust and Bylaws. This summary also is
subject to and qualified by reference to the descriptions of the
particular terms of the securities described in the applicable
prospectus supplement or other applicable offering materials.
Our Declaration of Trust authorizes us to issue up to 50,000,000
common shares, par value $0.01 per share, and 15,000,000
preferred shares, par value $0.01 per share, 2,300,000 of
which are designated as Series A Preferred Shares,
3,200,000 of which are designated as Series B Preferred
Shares, and 6,000,000 of which are designated as Series C
Preferred Shares, and authorizes our Board of Trustees to
determine, at any time and from time to time the number of
authorized shares of beneficial interest, as described below. As
of February 26, 2007, we had 26,458,875 common shares
issued and outstanding, 2,300,000 Series A Preferred Shares
issued and outstanding, 3,200,000 Series B Preferred Shares
issued and outstanding, and 5,400,000 Series C Preferred
Shares issued and outstanding. As of the date of this prospectus
no other class or series of preferred shares has been
established. For a summary of restrictions on ownership and
transfers of shares, see Description of Certain Provisions
of Maryland Law and EPRs Declaration of Trust and
Bylaws Restrictions on Ownership and Transfers of
Shares.
Our Declaration of Trust contains a provision permitting our
Board of Trustees, without any action by our shareholders, to
amend the Declaration of Trust at any time to increase or
decrease the aggregate number of shares or the number of shares
of any class that we have authority to issue. Our Declaration of
Trust further authorizes our Board of Trustees to cause us to
issue our authorized shares and to reclassify any unissued
shares into other classes or series. We believe that this
ability of our Board of Trustees will provide us with
flexibility in structuring possible future financings and
acquisitions and in meeting other business needs which might
arise. Although our Board of Trustees has no intention at the
present time of doing so, it could authorize us to issue a new
class or series that could, depending upon the terms of the
class or series, delay, defer or prevent a change of control of
EPR.
The transfer agent and registrar for our shares is UMB Bank, n.a.
Common
Shares
All of our common shares are entitled to the following, subject
to the preferential rights of any other class or series of
shares which may be issued and to the provisions of our
Declaration of Trust regarding the restriction of the ownership
of shares:
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to receive distributions on our shares if, as and when
authorized by our Board of Trustees and declared by us out of
assets legally available for distribution;
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upon our liquidation, dissolution, or winding up, to receive all
remaining assets available for distribution to common
shareholders after satisfaction of our liabilities and the
preferential rights of any preferred shares.
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Subject to the provisions of our Declaration of Trust on
restrictions on transfer, each outstanding common share entitles
the holder to one vote on all matters submitted to a vote of
shareholders, including the election of trustees. Holders of our
common shares do not have cumulative voting rights in the
election of trustees.
Holders of our common shares have no preference, conversion,
exchange, sinking fund, redemption or, except to the extent
expressly required by the law pertaining to Maryland real estate
investment trusts, appraisal rights. Shareholders have no
preemptive rights to subscribe for any of our securities.
For other information with respect to our common shares,
including effects that provisions in our Declaration of Trust
and Bylaws may have in delaying, deferring or preventing a
change in our control, see Description of Certain
Provisions of Maryland Law and EPRs Declaration of Trust
and Bylaws below.
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Preferred
Shares
General
Our Declaration of Trust authorizes our Board of Trustees to
determine the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms and conditions of
redemption of our authorized and unissued preferred shares.
These may include:
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the distinctive designation of each series and the number of
shares that will constitute the series;
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the voting rights, if any, of shares of the series;
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the distribution rate on the shares of the series, any
restriction, limitation or condition upon the payment of the
distribution, whether distributions will be cumulative, and the
dates on which distributions accumulate and are payable;
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the prices at which, and the terms and conditions on which, the
shares of the series may be redeemed, if the shares are
redeemable;
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the purchase or sinking fund provisions, if any, for the
purchase or redemption of shares of the series;
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any preferential amount payable upon shares of the series upon
our liquidation or the distribution of our assets;
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if the shares are convertible, the price or rates of conversion
at which, and the terms and conditions on which, the shares of
the series may be converted into other securities; and
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whether the series can be exchanged, at our option, into debt
securities, and the terms and conditions of any permitted
exchange.
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The issuance of preferred shares, or the issuance of any rights
or warrants to purchase preferred shares, could discourage an
unsolicited acquisition proposal. In addition, the rights of
holders of common shares will be subject to, and may be
adversely affected by, the rights of holders of any preferred
shares that we may issue in the future.
The following describes some general terms and provisions of the
preferred shares to which a prospectus supplement or other
applicable offering materials may relate. The statements below
describing the preferred shares are in all respects subject to
and qualified in their entirety by reference to the applicable
provisions of our Declaration of Trust, including the articles
supplementary for the applicable series of preferred shares, and
our Bylaws.
The applicable prospectus supplement or other applicable
offering materials will describe the specific terms as to each
issuance of preferred shares, including:
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the description or designation of the preferred shares;
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the number of the preferred shares offered;
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the voting rights, if any, of the holders of the preferred
shares;
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the offering price of the preferred shares;
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whether distributions will be cumulative and, if so, the
distribution rate, when distributions will be paid, or the
method of determining the distribution rate if it is based on a
formula or not otherwise fixed;
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the date from which distributions on the preferred shares shall
accumulate;
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the provisions for any auctioning or remarketing, if any, of the
preferred shares;
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the provision, if any, for redemption or a sinking fund;
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the liquidation preference per share;
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any listing of the preferred shares on a securities exchange;
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whether the preferred shares will be convertible and, if so, the
security into which they are convertible and the terms and
conditions of conversion, including the conversion price or the
manner of determining it;
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whether interests in the preferred shares will be represented by
depositary shares as more fully described below under
Description of Depositary Shares;
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a discussion of material federal income tax considerations;
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the relative ranking and preferences of the preferred shares as
to distribution and liquidation rights;
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any limitations on issuance of any preferred shares ranking
senior to or on a parity with the series of preferred shares
being offered as to distribution and liquidation rights;
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any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to
preserve our status as a real estate investment trust or
otherwise; and
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any other specific preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or
other distributions, qualifications and terms and conditions of
redemption of the preferred shares.
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As described under Description of Depositary Shares,
we may, at our option, elect to offer depositary shares
evidenced by depositary receipts. If we elect to do this, each
depositary receipt will represent a fractional interest in a
share of the particular series of the preferred shares issued
and deposited with a depositary. The applicable prospectus
supplement or other applicable offering materials will specify
that fractional interest.
Rank
Unless our Board of Trustees otherwise determines and we so
specify in the applicable prospectus supplement or other
applicable offering materials, we expect that the preferred
shares will, with respect to distribution rights and rights upon
liquidation or dissolution, rank senior to all of our common
shares.
Distributions
Holders of preferred shares of each series will be entitled to
receive dividends at the rates and on the dates shown in the
applicable prospectus supplement or other offering materials.
Even though the preferred shares may specify a fixed rate of
distribution, our Board of Trustees must authorize and declare
those distributions and they may be paid only out of assets
legally available for payment. We will pay each distribution to
holders of record as they appear on our share transfer books on
the record dates fixed by our Board of Trustees. In the case of
preferred shares represented by depositary receipts, the records
of the depositary referred to under Description of
Depositary Shares will determine the persons to whom
distributions are payable.
Distributions on any series of preferred shares may be
cumulative or noncumulative, as provided in the applicable
prospectus supplement or other offering materials. We refer to
each particular series, for ease of reference, as the applicable
series. Cumulative distributions will be cumulative from and
after the date shown in the applicable prospectus supplement or
other applicable offering materials. If our Board of Trustees
fails to authorize a distribution on any applicable series that
is noncumulative, the holders will have no right to receive, and
we will have no obligation to pay, a distribution in respect of
the applicable distribution period, whether or not distributions
on that series are declared payable in the future.
Unless otherwise provided in the applicable prospectus or other
applicable offering materials, if the applicable series is
entitled to a cumulative distribution, we may not declare, or
pay or set aside for payment, any full distributions on any
other series of preferred shares ranking, as to distributions,
on a parity with or junior to the applicable series, unless we
declare, and either pay or set aside for payment, full
cumulative distributions on the applicable series for all past
distribution periods and the then current distribution period.
If the applicable series does not have a cumulative
distribution, we must declare, and pay or set aside for payment,
full distributions for the then current distribution period only
unless otherwise provided in the applicable prospectus
supplement or other applicable offering materials. Unless
otherwise provided in the applicable prospectus or other
applicable offering materials, when distributions are not paid,
or set aside for payment, in full upon any applicable series and
the shares
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of any other series ranking on a parity as to distributions with
the applicable series, we must declare, and pay or set aside for
payment, all distributions upon the applicable series and any
other parity series proportionately, in accordance with accrued
and unpaid distributions of the several series. Unless otherwise
provided in the applicable prospectus supplement or other
applicable offering materials, for these purposes, accrued and
unpaid distributions do not include unpaid distribution periods
on noncumulative preferred shares. No interest will be payable
in respect of any distribution payment that may be in arrears
unless otherwise provided in the applicable prospectus or other
applicable offering materials.
Unless otherwise provided in the applicable prospectus
supplement or other applicable offering materials, except as
provided in the immediately preceding paragraph, unless we
declare, and pay or set aside for payment, full cumulative
distributions, including for the then current period, on any
cumulative applicable series, we may not declare, or pay or set
aside for payment, any distributions upon common shares or any
other equity securities ranking junior to or on a parity with
the applicable series as to distributions or upon liquidation.
The foregoing restriction does not apply to distributions paid
in common shares or other equity securities ranking junior to
the applicable series as to distributions and upon liquidation,
unless otherwise provided in the applicable prospectus
supplement or other applicable offering materials. Unless
otherwise provided in the applicable prospectus supplement or
other applicable offering materials, if the applicable series is
noncumulative, we need only declare, and pay or set aside for
payment, the distribution for the then current period, before
declaring distributions on common shares or junior or parity
securities. In addition, under the circumstances that we could
not declare a distribution, we may not redeem, purchase or
otherwise acquire for any consideration any common shares or
other parity or junior equity securities, except upon conversion
into or exchange for common shares or other junior equity
securities, unless otherwise provided in the applicable
prospectus supplement or other applicable offering materials. We
may, however, make purchases and redemptions otherwise
prohibited pursuant to certain redemptions or pro rata offers to
purchase the outstanding shares of the applicable series and any
other parity series of preferred shares, unless otherwise
provided in the applicable prospectus supplement or other
applicable offering materials.
We will credit any distribution payment made on an applicable
series first against the earliest accrued but unpaid
distribution due with respect to the series.
Redemption
We may have the right or may be required to redeem one or more
series of preferred shares, as a whole or in part, in each case
upon the terms, if any, and at the times and at the redemption
prices shown in the applicable prospectus supplement or other
applicable offering materials.
If a series of preferred shares is subject to mandatory
redemption, we will specify in the applicable prospectus
supplement or other applicable offering materials the number of
shares we are required to redeem, when those redemptions start,
the redemption price, and any other terms and conditions
affecting the redemption. The redemption price will include all
accrued and unpaid distributions, except in the case of
noncumulative preferred shares. The redemption price may be
payable in cash or other property, as specified in the
applicable prospectus supplement or other applicable offering
materials. If the redemption price for preferred shares of any
series is payable only from the net proceeds of our issuance of
shares of beneficial interest, the terms of the preferred shares
may provide that, if no shares of beneficial interest shall have
been issued or to the extent the net proceeds from any issuance
are insufficient to pay in full the aggregate redemption price
then due, the preferred shares will automatically and
mandatorily be converted into shares of beneficial interest
pursuant to conversion provisions specified in the applicable
prospectus supplement or other applicable offering materials.
Liquidation
Preference
The applicable prospectus supplement or other applicable
offering materials will show the liquidation preference of the
applicable series. Upon our voluntary or involuntary
liquidation, before any distribution may be made to the holders
of our common shares or any other shares of beneficial interest
ranking junior in the distribution of assets upon any
liquidation to the applicable series, the holders of that series
will be entitled to receive, out of our assets legally available
for distribution to shareholders, liquidating distributions in
the amount of the liquidation preference, plus an amount equal
to all distributions accrued and unpaid. In the case of a
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noncumulative applicable series, accrued and unpaid
distributions include only the then current distribution period.
After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of
preferred shares will have no right or claim to any of our
remaining assets. If liquidating distributions shall have been
made in full to all holders of preferred shares, our remaining
assets will be distributed among the holders of any other shares
of beneficial interest ranking junior to the preferred shares
upon liquidation, according to their rights and preferences and
in each case according to their number of shares.
If, upon any voluntary or involuntary liquidation, our available
assets are insufficient to pay the amount of the liquidating
distributions on all outstanding shares of that series and the
corresponding amounts payable on all shares of beneficial
interest ranking on a parity in the distribution of assets with
that series, then the holders of that series and all other
equally ranking shares of beneficial interest shall share
ratably in the distribution in proportion to the full
liquidating distributions to which they would otherwise be
entitled.
For these purposes, our consolidation or merger with or into any
other trust or corporation or other entity, or the sale, lease
or conveyance of all or substantially all of our property or
business, or a statutory share exchange, will not be a
liquidation unless otherwise provided in the applicable
prospectus supplement or other applicable offering materials.
Voting
Rights
Holders of our preferred shares will not have any voting rights,
except as shown below or as otherwise from time to time
specified in the applicable prospectus supplement or other
applicable offering materials.
Unless otherwise specified in the applicable prospectus
supplement or other applicable offering materials, holders of
our preferred shares (voting separately as a class with all
other series of preferred shares with similar voting rights)
will be entitled to elect two additional trustees to our Board
of Trustees at our next annual meeting of shareholders or at a
special meeting called for such purpose, if at any time
distributions on the applicable series are in arrears for six or
more quarterly periods. If the applicable series has a
cumulative distribution, the right to elect additional trustees
described in the preceding sentence shall remain in effect until
we declare and pay or set aside for payment all distributions
accrued and unpaid on the applicable series. In the event the
preferred shareholders are so entitled to elect trustees, the
entire Board of Trustees will be increased by two trustees.
Unless otherwise specified in the applicable prospectus
supplement or other applicable offering materials, so long as
any preferred shares are outstanding, we may not, without the
affirmative vote or consent of two-thirds of the shares of each
series of preferred shares (and other shares having like voting
rights) outstanding at that time:
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effect a share exchange, consolidation or merger into another
entity unless the series remains outstanding and its terms are
not materially and adversely changed or the series is converted
into or exchanged for preferred shares having identical terms
(except for changes that do not materially and adversely affect
the holders of such series);
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amend, alter or repeal the provisions of our Declaration of
Trust or Bylaws that materially and adversely affects the series
of preferred shares;
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increase the authorized amount of such series of preferred
shares or decrease the authorized amount of such series of
preferred shares below the number then issued and outstanding;
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authorize, create or increase the authorized or issued amount of
any class or series of shares ranking senior to that series of
preferred shares;
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reclassify any class or series of shares ranking senior to that
series of preferred shares or any security or obligation
convertible into any class of shares ranking senior to that
series of preferred shares; and
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create, authorize or increase the authorized or issued amount of
any security or obligation convertible into or evidencing the
right to purchase any shares ranking senior to that series of
preferred shares.
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The authorization, creation, increase or decrease of the
authorized amount of any class or series of shares ranking on
parity or junior to a series of preferred shares with respect to
distribution and liquidation rights, or the issuance of such
shares, will not be deemed to materially and adversely affect
that series.
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The foregoing voting provisions will not apply if, at or prior
to the time of such amendment, provisions are made for the
redemption of all of the outstanding shares of the series of
preferred with the right to vote.
As more fully described under Description of Depositary
Shares below, if we elect to issue depositary shares, each
representing a fraction of a share of a series, each depositary
will in effect be entitled to a fraction of a vote per
depositary share.
Conversion
Rights
We will describe in the applicable prospectus supplement or
other applicable offering materials the terms and conditions, if
any, upon which you may, or we may require you to, convert
shares of any series of preferred shares into common shares or
any other class or series of securities. The terms will include
the number of common shares or other securities into which the
preferred shares are convertible, the conversion price (or the
manner of determining it), the conversion period, provisions as
to whether conversion will be at the option of the holders of
the series or at our option, the events requiring an adjustment
of the conversion price, and provisions affecting conversion
upon the redemption of shares of the series.
Our
Exchange Rights
We will describe in the applicable prospectus supplement or
other applicable offering materials the terms and conditions, if
any, upon which we can require you to exchange shares of any
series of preferred shares for debt securities. If an exchange
is required, you will receive debt securities with a principal
amount equal to the liquidation preference of the applicable
series of preferred shares. The other terms and provisions of
the debt securities will not be materially less favorable to you
than those of the series of preferred shares being exchanged.
Series A
Cumulative Redeemable Preferred Shares
Our Series A Preferred Shares provide for quarterly
payments of cumulative dividends at the rate of 9.50% of the
$25 per share liquidation preference of the Series A
Preferred Shares, or a fixed rate of $2.375 per share each
year. Dividends not declared or paid in any quarter continue to
accumulate. On liquidation of the Company, holders of the
Series A Preferred Shares are entitled to a liquidation
preference of $25 per share plus all accumulated, accrued
and unpaid dividends before any amount is payable to the holders
of our common shares. The Series A Preferred Shares are not
redeemable prior to May 29, 2007, except in limited
circumstances relating to the preservation of our status as a
REIT. On or after that date, we may at our own option redeem the
Series A Preferred Shares in whole or in part by paying the
$25 per share liquidation preference plus all accumulated,
accrued and unpaid dividends. The Series A Preferred Shares
rank senior to our common shares and on a parity with our
Series B Preferred Shares, Series C Preferred Shares
and other parity securities we may issue in the future with
respect to the payment of dividends and amounts on liquidation,
dissolution and winding up. Holders of Series A Preferred
Shares generally have no voting rights, except that if dividends
on the Series A Preferred Shares have not been paid for six
or more quarterly periods (whether or not consecutive), holders
of the Series A Preferred Shares (together with other
shares having like voting rights) are entitled to elect two
additional trustees to the Board of Trustees to serve until all
unpaid dividends have been paid or declared and set aside for
payment. In addition, certain material and adverse changes to
the terms of the Series A Preferred Shares cannot be made
without the affirmative vote of at least two-thirds of the
outstanding Series A Preferred Shares and the holders of
all other shares on a parity with the Series A Preferred
Shares and having like voting rights.
Series B
Cumulative Redeemable Preferred Shares
Our Series B Preferred Shares provide for quarterly
payments of cumulative dividends at the rate of 7.75% of the
$25 per share liquidation preference of the Series B
Preferred Shares, or a fixed rate of $1.9375 per share each
year. Dividends not declared or paid in any quarter continue to
accumulate. On liquidation of the Company, holders of the
Series B Preferred Shares are entitled to a liquidation
preference of $25 per share plus all accumulated, accrued
and unpaid dividends before any amount is payable to the holders
of our common shares. The Series B Preferred Shares are not
redeemable prior to January 19, 2010, except in limited
circumstances relating to the preservation of our status as a
REIT. On or after that date, we may at our own option redeem the
Series B Preferred
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Shares in whole or in part by paying the $25 per share
liquidation preference plus all accumulated, accrued and unpaid
dividends. The Series B Preferred Shares rank senior to our
common shares and on a parity with our Series A Preferred
Shares, Series C Preferred Shares and other parity
securities we may issue in the future with respect to the
payment of dividends and amounts on liquidation, dissolution and
winding up. Holders of Series B Preferred Shares generally
have no voting rights, except that if dividends on the
Series B Preferred Shares have not been paid for six or
more quarterly periods (whether or not consecutive), holders of
the Series B Preferred Shares (together with other shares
having like voting rights) are entitled to elect two additional
trustees to the Board of Trustees to serve until all unpaid
dividends have been paid or declared and set aside for payment.
In addition, certain material and adverse changes to the terms
of the Series B Preferred Shares cannot be made without the
affirmative vote of at least two-thirds of the outstanding
Series B Preferred Shares and the holders of all other
shares on a parity with the Series B Preferred Shares and
having like voting rights.
Series C
Cumulative Convertible Preferred Shares
Our Series C Preferred Shares provide for quarterly
payments of cumulative dividends at the rate of 5.75% of the
$25 per share liquidation preference of the Series C
Preferred Shares, or a fixed rate of $1.4375 per share each
year. Dividends not declared or paid in any quarter continue to
accumulate. On liquidation of the Company, holders of the
Series C Preferred Shares are entitled to a liquidation
preference of $25 per share plus all accumulated, accrued
and unpaid dividends before any amount is payable to the holders
of our common shares. The Series C Preferred Shares are not
redeemable. Holders of Series C Preferred Shares may, at
their option, convert the Series C Preferred Shares into
our common shares subject to certain conditions at the then
applicable conversion rate. The conversion rate is subject to
adjustment upon the occurrence of specified events. On or after
January 15, 2012, we may, at our option, convert some or
all of the Series C Preferred Shares into common shares at
the then applicable conversion rate in certain circumstances
based on the market price of our common shares. Upon any
conversion of Series C Preferred Shares, we will have the
option to deliver either (1) a number of common shares
based upon the applicable conversion rate, or (2) an amount
of cash and common shares as specified in the articles
supplementary for such shares. If the holders of Series C
Preferred Shares elect to convert their Series C Preferred
Shares in connection with a fundamental change that occurs on or
prior to January 15, 2017, we will increase the conversion
rate for the Series C Preferred Shares surrendered for
conversion to the extent described in the articles supplementary
for the Series C Preferred Shares. In addition, upon a
fundamental change, when the actual applicable price of our
common shares, as determined in accordance with the article
supplementary, is less than $59.45 per share, the holders
of Series C Preferred Shares may require us to convert some
or all of their Series C Preferred Shares at a conversion
rate equal to the liquidation preference of the Series C
Preferred Shares being converted plus accrued and unpaid
distributions divided by 98% of the market price of our common
shares. We will have the right to repurchase for cash some or
all of the Series C Preferred Shares that would otherwise
be required to be converted. The Series C Preferred Shares
rank senior to our common shares and on a parity with our
Series A Preferred Shares, Series B Preferred Shares
and other parity securities we may issue in the future with
respect to the payment of dividends and amounts on liquidation,
dissolution and winding up. Holders of Series C Preferred
Shares generally have no voting rights, except that if dividends
on the Series C Preferred Shares have not been paid for six
or more quarterly periods (whether or not consecutive), holders
of the Series C Preferred Shares (together with shares
having like voting rights) are entitled to elect two additional
trustees to the Board of Trustees to serve until all unpaid
dividends have been paid or declared and set aside for payment.
In addition, certain material and adverse changes to the terms
of the Series C Preferred Shares cannot be made without the
affirmative vote of at least two-thirds of the outstanding
Series C Preferred Shares and the holders of all other
shares on a parity with the Series C Preferred Shares and
having like voting rights.
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DESCRIPTION
OF DEPOSITARY SHARES
The following is a summary of the material provisions of any
deposit agreement and of the depositary shares and depositary
receipts representing depositary shares. Because it is a
summary, it does not contain all of the information that may be
important to you. If you want more information, you should read
the form of deposit agreement and depositary receipts which we
will file as exhibits to the registration statement of which
this prospectus is part prior to an offering of depositary
shares. See Available Information. This summary also
is subject to and qualified by reference to the descriptions of
the particular terms of the securities described in the
applicable prospectus supplement or other applicable offering
materials and by the terms of the applicable final deposit
agreement and depositary receipts.
General
We may, at our option, elect to offer fractional interests in
shares of preferred shares, rather than shares of preferred
shares. If we exercise this option, we will appoint a depositary
to issue depositary receipts representing those fractional
interests. Preferred shares of each series represented by
depositary shares will be deposited under a separate deposit
agreement between us and the depositary. The prospectus
supplement or other offering materials relating to a series of
depositary shares will show the name and address of the
depositary. Subject to the terms of the applicable deposit
agreement, each owner of depositary shares will be entitled to
all of the distribution, voting, conversion, redemption,
liquidation and other rights and preferences of the preferred
shares represented by those depositary shares.
Depositary receipts issued pursuant to the applicable deposit
agreement will evidence ownership of depositary shares. Upon
surrender of depositary receipts at the office of the
depositary, and upon payment of the charges provided in and
subject to the terms of the applicable deposit agreement, a
holder of depositary shares will be entitled to receive the
preferred shares underlying the surrendered depositary receipts.
Distributions
A depositary will be required to distribute all cash
distributions received in respect of the applicable preferred
shares to the record holders of depositary receipts evidencing
the related depositary shares in proportion to the number of
depositary receipts owned by the holders. Fractions will be
rounded down to the nearest whole cent.
If the distribution is other than in cash, a depositary will be
required to distribute property received by it to the record
holders of depositary receipts entitled thereto, unless the
depositary determines that it is not feasible to make the
distribution. In that case, the depositary may, with our
approval, sell the property and distribute the net proceeds from
the sale to the holders.
Depositary shares that represent preferred shares converted or
exchanged will not be entitled to distributions. The deposit
agreement also will contain provisions relating to the manner in
which any subscription or similar rights we offer to holders of
the preferred shares will be made available to holders of
depositary shares. All distributions will be subject to
obligations of holders to file proofs, certificates and other
information and to pay certain charges and expenses to the
depositary.
Withdrawal
of Preferred Shares
You may receive the number of whole shares of your series of
preferred shares and any money or other property represented by
those depositary receipts after surrendering the depositary
receipts at the corporate trust office of the depositary.
Partial shares of preferred shares will not be issued. If the
depositary shares that you surrender exceed the number of
depositary shares that represent the number of whole preferred
shares you wish to withdraw, then the depositary will deliver to
you at the same time a new depositary receipt evidencing the
excess number of depositary shares. Once you have withdrawn your
preferred shares, you will not be entitled to re-deposit those
preferred shares under the deposit agreement in order to receive
depositary shares. We do not expect that there will be any
public trading market for withdrawn preferred shares.
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Redemption
of Depositary Shares
If we redeem a series of the preferred shares underlying the
depositary shares, the depositary will redeem those shares from
the proceeds received by it. The depositary will mail notice of
redemption not less than 30 days, and not more than
60 days, before the date fixed for redemption to the record
holders of the depositary receipts evidencing the depositary
shares we are redeeming at their addresses appearing in the
depositarys books. The redemption price per depositary
share will be equal to the applicable fraction of the redemption
price per share payable with respect to the series of the
preferred shares. The redemption date for depositary shares will
be the same as that of the preferred shares. If we are redeeming
less than all of the depositary shares, the depositary will
select the depositary shares we are redeeming by lot or pro rata
as the depositary may determine.
After the date fixed for redemption, the depositary shares
called for redemption no longer will be deemed outstanding. All
rights of the holders of the depositary shares and the related
depositary receipts will cease at that time, except for the
right to receive the money or other property to which the
holders of depositary shares were entitled upon redemption.
Receipt of the money or other property is subject to surrender
to the depositary of the depositary receipts evidencing the
redeemed depositary shares.
Voting of
the Preferred Shares
Upon receipt of notice of any meeting at which the holders of
the applicable preferred shares are entitled to vote, a
depositary will be required to mail the information contained in
the notice of meeting to the record holders of the applicable
depositary receipts. Each record holder of depositary receipts
on the record date will be entitled to instruct the depositary
as to the exercise of the voting rights pertaining to the amount
of preferred shares represented by the holders depositary
shares. The depositary will try, as practical, to vote the
shares as you instruct. We will agree to take all reasonable
action that the depositary deems necessary in order to enable it
to do so.
If you do not instruct the depositary how to vote your shares,
the depositary will abstain from voting those shares. The
depositary will not be responsible for any failure to carry out
an instruction to vote or for the effect of any such vote made
so long as the action or inaction of the depositary is in good
faith and is not the result of the depositarys gross
negligence or willful misconduct.
Liquidation
Preference
Upon our liquidation, whether voluntary or involuntary, each
holder of depositary shares will be entitled to the fraction of
the liquidation preference accorded each preferred share
represented by the depositary shares, as shown in the applicable
prospectus supplement or other applicable offering materials.
Conversion
or Exchange of Preferred Shares
The depositary shares will not themselves be convertible into or
exchangeable for common shares, preferred shares or any of our
other securities or property. Nevertheless, if so specified in
the applicable prospectus supplement or other applicable
offering materials, the depositary receipts may be surrendered
by holders to the applicable depositary with written
instructions to it to instruct us to cause conversion of the
preferred shares represented by the depositary shares.
Similarly, if so specified in the applicable prospectus
supplement or other applicable offering materials, we may
require you to surrender all of your depositary receipts to the
applicable depositary upon our requiring the conversion or
exchange of the preferred shares represented by the depositary
shares into our debt securities. We will agree that, upon
receipt of the instruction and any amounts payable in connection
with the conversion or exchange, we will cause the conversion or
exchange using the same procedures as those provided for
delivery of preferred shares to effect the conversion or
exchange. If you are converting only a part of the depositary
shares, the depositary will issue you a new depositary receipt
for any unconverted depositary shares.
Federal
Income Tax Consequences Relating to Depositary Shares
As an owner of depositary shares, you will be treated for
U.S. federal income tax purposes as if you were an owner of
the series of preferred shares represented by the depositary
shares. Therefore, you will be required to take
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into account, for U.S. federal income tax purposes, income
and deductions to which you would be entitled if you were a
holder of the underlying series of preferred shares. In addition:
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no gain or loss will be recognized for U.S. federal income
tax purposes upon the withdrawal of preferred shares in exchange
for depositary shares provided in the deposit agreement;
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the tax basis of each preferred share to you as an exchanging
owner of depositary shares will, upon exchange, be the same as
the aggregate tax basis of the depositary shares exchanged for
the preferred shares; and
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if you held the depositary shares as a capital asset at the time
of the exchange for preferred shares, the holding period for the
preferred shares will include the period during which you owned
the depositary shares.
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Amendment
and Termination of a Deposit Agreement
We and the applicable depositary will be permitted to amend the
provisions of the depositary receipts and the deposit agreement.
However, the holders of at least a majority of the applicable
depositary shares then outstanding must approve any amendment
that adds or increases fees or charges or prejudices an
important right of holders. Every holder of an outstanding
depositary receipt at the time any amendment becomes effective,
by continuing to hold the receipt, will be bound by the
applicable deposit agreement, as amended.
Any deposit agreement may be terminated by us upon not less than
30 days prior written notice to the applicable
depositary if (1) the termination is necessary to preserve
our status as a Maryland real estate investment trust or
(2) a majority of each series of preferred shares affected
by the termination consents to the termination. When either
event occurs, the depositary will be required to deliver or make
available to each holder of depositary receipts, upon surrender
of the depositary receipts held by the holder, the number of
whole or fractional shares of preferred shares as are
represented by the depositary shares evidenced by the depositary
receipts, together with any other property held by the
depositary with respect to the depositary receipts. In addition,
a deposit agreement will automatically terminate if:
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all depositary shares have been redeemed;
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there shall have been a final distribution in respect of the
related preferred shares in connection with our liquidation and
the distribution has been made to the holders of depositary
receipts evidencing the depositary shares underlying the
preferred shares; or
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each related preferred share shall have been converted or
exchanged into securities not represented by depositary shares.
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Charges
of a Depositary
We will pay all transfer and other taxes and governmental
charges arising solely from the existence of a deposit
agreement. In addition, we will pay the fees and expenses of a
depositary in connection with the initial deposit of the
preferred shares and any redemption of preferred shares.
However, holders of depositary receipts will pay any transfer or
other governmental charges and the fees and expenses of a
depositary for any duties the holders request to be performed
that are outside of those expressly provided for in the
applicable deposit agreement.
Resignation
and Removal of Depositary
A depositary may resign at any time by delivering to us notice
of its election to do so. In addition, we may at any time remove
a depositary. Any resignation or removal will take effect when
we appoint a successor depositary and it accepts the
appointment. We must appoint a successor depositary within
60 days after delivery of the notice of resignation or
removal.
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Miscellaneous
A depositary will be required to forward to holders of
depositary receipts any reports and communications from us that
it receives with respect to the related preferred shares.
Holders of depositary receipts will be able to inspect the
transfer books of the depositary and the list of holders of
depositary receipts upon reasonable notice.
Neither a depositary nor our company will be liable if it is
prevented from or delayed in performing its obligations under a
deposit agreement by law or any circumstances beyond its
control. Our obligations and those of the depositary under a
deposit agreement will be limited to performing duties in good
faith and without gross negligence or willful misconduct.
Neither we nor any depositary will be obligated to prosecute or
defend any legal proceeding in respect of any depositary
receipts, depositary shares or related preferred shares unless
satisfactory indemnity is furnished. We and each depositary will
be permitted to rely on written advice of counsel or
accountants, on information provided by persons presenting
preferred shares for deposit, by holders of depositary receipts,
or by other persons believed in good faith to be competent to
give the information, and on documents believed in good faith to
be genuine and signed by a proper party.
If a depositary receives conflicting claims, requests or
instructions from any holders of depositary receipts, on the one
hand, and us, on the other hand, the depositary shall be
entitled to act on the claims, requests or instructions received
from us.
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DESCRIPTION
OF WARRANTS
The following is a summary of the material terms of our
warrants and the warrant agreement. Because it is a summary, it
does not contain all of the information that may be important to
you. If you want more information, you should read the forms of
warrants and the warrant agreement which we will file as
exhibits to the registration statement of which this prospectus
is part. See Available Information. This summary
also is subject to and qualified by reference to the
descriptions of the particular terms of the securities described
in the applicable prospectus supplement or other applicable
offering materials and the terms of the applicable final warrant
agreement and warrants.
We may issue, together with any other securities being offered
or separately, warrants entitling the holder to purchase from or
sell to us, or to receive from us the cash value of the right to
purchase or sell, debt securities, preferred shares, depositary
shares or common shares. We and a warrant agent will enter a
warrant agreement pursuant to which the warrants will be issued.
The warrant agent will act solely as our agent in connection
with the warrants and will not assume any obligation or
relationship of agency or trust for or with any holders or
beneficial owners of warrants. We will file a copy of the forms
of warrants and the warrant agreement with the SEC at or before
the time of the offering of the applicable series of warrants.
In the case of each series of warrants, the applicable
prospectus supplement or other applicable offering materials
will describe the terms of the warrants being offered thereby.
These include the following, if applicable:
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the title of the warrants
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the offering price for the warrants
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the aggregate number of the warrants
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the designation and terms of the securities purchasable upon
exercise of the warrants
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if applicable, the designation and terms of the securities that
the warrants are issued with and the number of warrants issued
with each security
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if applicable, the date after which the warrants and any
securities issued with them will be separately transferable
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the number or amount of securities that may be purchased upon
exercise of a warrant and the price at which the securities may
be purchased upon exercise
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the dates on which the right to exercise the warrants will
commence and expire
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if applicable, the minimum or maximum amount of the warrants
that may be exercised at any one time
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whether the warrants represented by the warrant certificates or
securities that may be issued upon exercise of the warrants will
be issued in registered or bearer form
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information relating to book-entry procedures
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anti-dilution provisions of the warrants, if any
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redemption, repurchase or analogous provisions, if any,
applicable to the warrants
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any additional terms of the warrants, including terms,
procedures and limitations relating to the exchange and exercise
of the warrants.
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Warrants may be exercised at the appropriate office of the
warrant agent or any other office indicated in the applicable
prospectus supplement or other applicable offering materials.
Before the exercise of warrants, holders will not have any of
the rights of holders of the securities purchasable upon
exercise and will not be entitled to payments made to holders of
those securities.
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The warrant agreement may be amended or supplemented without the
consent of the holders of the warrants to which the amendment or
supplement applies to effect changes that are not inconsistent
with the provisions of the warrants and that do not adversely
affect the interests of the holders of the warrants. However,
any amendment that materially and adversely alters the rights of
the holders of warrants will not be effective unless the holders
of at least a majority of the applicable warrants then
outstanding approve the amendment. Every holder of an
outstanding warrant at the time any amendment becomes effective,
by continuing to hold the warrant, will be bound by the
applicable warrant agreement as amended thereby. The prospectus
supplement or other offering materials applicable to a
particular series of warrants may provide that certain
provisions of the warrants, including the securities for which
they may be exercisable, the exercise price, and the expiration
date, may not be altered without the consent of the holder of
each warrant.
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DESCRIPTION
OF CERTAIN PROVISIONS OF MARYLAND LAW AND EPRS
DECLARATION OF TRUST AND BYLAWS
We are organized as a Maryland real estate investment trust.
The following is a summary of our Declaration of Trust and
Bylaws and several provisions of Maryland law. Because it is a
summary, it does not contain all the information that may be
important to you. If you want more information, you should read
our entire Declaration of Trust and Bylaws, copies of which we
have previously filed with the SEC, or refer to the provisions
of Maryland law. See Available Information for
information about how to obtain copies of our Declaration of
Trust and Bylaws.
Trustees
Our Declaration of Trust and Bylaws provide that only our Board
of Trustees will establish the number of Trustees, provided
however that the term of office of a Trustee will not be
affected by any decrease in the number of Trustees. Any vacancy
on the Board of Trustees may be filled only by a majority of the
remaining Trustees, even if the remaining trustees do not
constitute a quorum, or by the sole Trustee. Any Trustee elected
to fill a vacancy will hold office until the next annual meeting
of shareholders and until a successor is elected and qualified.
Our Declaration of Trust divides our Board of Trustees into
three classes. Shareholders elect the Trustees of each class for
three-year terms upon the expiration of their current terms.
Shareholders elect only one class of Trustees each year.
We believe that classification of our Board of Trustees helps to
assure the continuity of our business strategies and policies.
There is no cumulative voting in the election of Trustees.
Consequently, at each annual meeting of shareholders, the
holders of a majority of our common shares are able to elect all
of the successors of the class of Trustees whose term expires at
that meeting. The classified Board of Trustees provision could
have the effect of making the replacement of our incumbent
Trustees more time consuming and difficult. At least two annual
meetings of shareholders are generally required to effect a
change in a majority of our Board of Trustees.
Our Declaration of Trust provides that, subject to the rights of
holders of one or more classes of preferred shares to elect or
remove one or more Trustees, a Trustee may be removed for cause
by the affirmative vote of the holders of at least two-thirds of
our common shares entitled to be cast in the election of
trustees. This provision precludes shareholders from removing
our incumbent Trustees unless cause, as defined in the
Declaration of Trust, exists, and they can obtain a substantial
affirmative vote of shares.
Advance
Notice of Trustee Nominations and New Business
Our Bylaws provide that nominations of persons for election to
our Board of Trustees and business to be transacted at
shareholder meetings may be properly brought pursuant to our
notice of the meeting, by our Board of Trustees, or by a
shareholder who (i) is a shareholder of record at the time
of giving the advance notice and at the time of the meeting,
(ii) is entitled to vote at the meeting and (iii) has
complied with the advance notice provisions set forth in our
Bylaws.
Under our Bylaws, a shareholders notice of nominations for
Trustee or business to be transacted at an annual meeting of
shareholders must be delivered to our secretary at our principal
office not later than the close of business on the 60th day
and not earlier than the close of business on the 90th day
prior to the first anniversary of the preceding years
annual meeting. In the event that the date of the annual meeting
is advanced by more than 30 days or delayed by more than
60 days from the anniversary date of the preceding
years annual meeting, a shareholders notice must be
delivered to us not earlier than the close of business on the
90th day prior to such annual meeting and not later than
the later of: (i) the 60th day prior to such annual
meeting, or (ii) the 10th day following the day on
which we first make a public announcement of the date of such
meeting. The public announcement of a postponement or of an
adjournment of such annual meeting to a later date or time will
not commence a new time period for the giving of a
shareholders notice. If the number of Trustees to be
elected to our Board of Trustees is increased and we make no
public announcement of such action at least 70 days prior
to the first anniversary of the preceding years annual
meeting, a shareholders notice also will be considered
timely, but only with respect to nominees for any new positions
created by such increase, if the notice is delivered to our
secretary at
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our principal office not later than the close of business on the
10th day immediately following the day on which such public
announcement is made.
For special meetings of shareholders, our Bylaws require a
shareholder who is nominating a person for election to our Board
of Trustees at a special meeting at which Trustees are to be
elected to give notice of such nomination to our secretary at
our principal office not earlier than the close of business on
the 90th day prior to such special meeting and not later
than the close of business on the later of: (1) the
60th day prior to such special meeting or (2) the
10th day following the day on which public announcement is
first made of the date of the special meeting and of the
nominees proposed by the Trustees to be elected at such meeting.
The public announcement of a postponement or adjournment of a
special meeting to a later date or time will not commence a new
time period for the giving of a shareholders notice as
described above.
Meetings
of Shareholders
Under our Bylaws, our annual meeting of shareholders will take
place during the second quarter of each year following delivery
of the annual report. Our Chairman, President, or one-third of
our Trustees may call a special meeting of the shareholders. Our
secretary also may call a special meeting of shareholders upon
the written request of holders of at least a majority of the
shares entitled to vote at the meeting.
Liability
and Indemnification of Trustees and Officers
The laws relating to Maryland real estate investment trusts (the
Maryland REIT Law) permit a real estate investment
trust to indemnify and advance expenses to its trustees,
officers, employees and agents to the same extent permitted by
the Maryland General Corporation Law (the MGCL) for
directors and officers of Maryland corporations. The MGCL
permits a corporation to indemnify its present and former
directors and officers against judgments, penalties, fines,
settlements and reasonable expenses incurred in connection with
any proceeding to which they may be made, or are threatened to
be made, a party by reason of their service in those capacities.
However, a Maryland corporation is not permitted to provide this
type of indemnification if the following is established:
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the act or omission of the director or officer was material to
the matter giving rise to the proceeding and was committed in
bad faith or was the result of active and deliberate dishonesty;
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the director or officer actually received an improper personal
benefit in money, property or services; or
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in the case of any criminal proceeding, the director or officer
had reasonable cause to believe that the act or omission was
unlawful.
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Additionally, a Maryland corporation may not indemnify a
director or officer for an adverse judgment in a suit by or in
the right of that corporation or for a judgment of liability on
the basis that personal benefit was improperly received, unless
in either case a court orders indemnification and then only for
expenses. The MGCL permits a corporation to advance reasonable
expenses to a director or officer upon the corporations
receipt of the following:
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a written affirmation by the director or officer of his good
faith belief that he has met the standard of conduct necessary
for indemnification by the corporation; and
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a written undertaking by him or on his behalf to repay the
amount paid or reimbursed by the corporation if it is ultimately
determined that this standard of conduct was not met.
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Our officers and trustees are and will be indemnified under our
Declaration of Trust against certain liabilities. Our
Declaration of Trust provides that we will, to the maximum
extent permitted by Maryland law in effect from time to time,
indemnify: (a) any individual who is a present or former
trustee or officer of EPR; or (b) any individual who, while
a trustee or officer of EPR and at the request of EPR, serves or
has served as a director, officer, shareholder, partner,
trustee, employee or agent of any real estate investment trust,
corporation, partnership, joint venture, trust, employee benefit
plan or any other enterprises against any claim or liability,
together with reasonable expenses actually incurred in advance
of a final disposition of a legal proceeding, to which such
person may become subject or which such person may incur by
reason of his or her status as such. We have the power, with the
approval of our Board of Trustees, to provide such
indemnification and advancement of expenses to a person who
served a
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predecessor of EPR in any of the capacities described in
(a) or (b) above and to any employee or agent of EPR
or its predecessors.
We have also entered into indemnification agreements with our
trustees and certain of our officers providing for procedures
for indemnification by us to the fullest extent permitted by law
and advancements by us of certain expenses and costs relating to
claims, suits or proceedings arising from their service to us.
We have obtained trustees and officers liability
insurance for the purpose of funding the provision of any such
indemnification.
The SEC has expressed the opinion that indemnification of
trustees, officers or persons otherwise controlling a company
for liabilities arising under the Securities Act is against
public policy and is therefore unenforceable.
Shareholder
Liability
Under Maryland law, a shareholder is not personally liable for
the obligations of a real estate investment trust solely as a
result of his or her status as a shareholder. Despite this, our
legal counsel has advised us that in some jurisdictions the
possibility exists that shareholders of a trust entity such as
ours may be held liable for acts or obligations of the trust.
While we intend to conduct our business in a manner designed to
minimize potential shareholder liability, we can give no
assurance that you can avoid liability in all instances in all
jurisdictions. Our Trustees have not provided in the past and do
not intend to provide insurance covering these risks to our
shareholders.
Actions
by Shareholders by Written Consent
Our Bylaws provide procedures governing actions by shareholders
by written consent. The Bylaws specify that any written consents
must be signed by shareholders entitled to cast a sufficient
number of votes to approve the matter, as required by statute,
our Declaration of Trust or our Bylaws, and such consent must be
filed with minutes of the proceedings of the shareholders.
Restrictions
on Ownership and Transfer of Shares
Our Declaration of Trust restricts the number of shares which
may be owned by shareholders. Generally, for us to qualify as a
REIT under the Code, not more than 50% in value of our
outstanding shares may be owned, directly or indirectly, by five
or fewer individuals (defined in the Code to include certain
entities and constructive ownership among specified family
members) at any time during the last half of a taxable year. The
shares also must be beneficially owned by 100 or more persons
during at least 335 days of a taxable year. In order to
maintain our qualification as a REIT, our Declaration of Trust
contains restrictions on the acquisition of shares intended to
ensure compliance with these requirements.
Our Declaration of Trust generally provides that any person (not
just individuals) holding more than 9.8% in number of shares or
value, of the outstanding shares of any class or series of our
common stock or preferred stock (the Ownership
Limit) may be subject to forfeiture of the shares
(including common shares and preferred shares) owned in excess
of the Ownership Limit. We refer to the shares in excess of the
Ownership Limit as Excess Shares. The Excess Shares
may be transferred to a trust for the benefit of one or more
charitable beneficiaries. The trustee of that trust would have
the right to vote the voting Excess Shares, and dividends on the
Excess Shares would be payable to the trustee for the benefit of
the charitable beneficiaries. Holders of Excess Shares would be
entitled to compensation for their Excess Shares, but that
compensation may be less than the price they paid for the Excess
Shares. Persons who hold Excess Shares or who intend to acquire
Excess Shares must provide written notice to us.
Our Ownership Limit may also act to deter an unfriendly takeover
of the Company.
Business
Combinations
The MGCL contains a provision which regulates business
combinations with interested shareholders. This provision
applies to Maryland real estate investment trusts like us. Under
the MGCL, business combinations such as
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mergers, consolidations, share exchanges and the like between a
Maryland real estate investment trust and an interested
shareholder or an affiliate of an interested shareholder are
prohibited for five years after the most recent date on which
the shareholder becomes an interested shareholder. Under the
MGCL the following persons are deemed to be interested
shareholders:
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any person who beneficially owns 10% or more of the voting power
of the trusts shares; or
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an affiliate or associate of the trust who, at any time within
the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the then
outstanding voting shares of the trust.
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After the five-year prohibition period has ended, a business
combination between a trust and an interested shareholder must
be recommended by the board of trustees of the trust and must
receive the following shareholder approvals:
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the affirmative vote of at least 80% of the votes entitled to be
cast; and
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the affirmative vote of at least two-thirds of the votes
entitled to be cast by holders of shares other than shares held
by the interested shareholder with whom or with whose affiliate
or associate the business combination is to be effected or held
by an affiliate or associate of the interested shareholder.
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The shareholder approvals discussed above are not required if
the trusts shareholders receive the minimum price set
forth in the MGCL for their shares and the consideration is
received in cash or in the same form as previously paid by the
interested shareholder for its shares.
The foregoing provisions of the MGCL do not apply, however, to
business combinations that are approved or exempted by the board
of trustees of the trust prior to the time that the interested
shareholder becomes an interested shareholder. A person is not
an interested shareholder under the MGCL if the board of
trustees approved in advance the transaction by which the person
otherwise would have become an interested shareholder. The board
of trustees may provide that its approval is subject to
compliance with any terms and conditions determined by the board
of trustees.
Control
Share Acquisitions
The MGCL contains a provision which regulates control share
acquisitions. This provision also applies to Maryland real
estate investment trusts. The MGCL provides that control shares
of a Maryland real estate investment trust acquired in a control
share acquisition have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be
cast on the matter. Shares owned by the acquiror, by officers or
by trustees who are employees of the trust are excluded from
shares entitled to vote on the matter. Control shares are voting
shares which, if aggregated with all other shares owned by the
acquiror, or in respect of which the acquiror is able to
exercise or direct the exercise of voting power (except solely
by virtue of a revocable proxy), would entitle the acquiror to
exercise voting power in electing trustees within one of the
following ranges of voting power:
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One-tenth or more but less than one-third;
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One-third or more but less than a majority; or
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a majority or more of all voting power.
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Control shares do not include shares which the acquiring person
is entitled to vote as a result of having previously obtained
shareholder approval. A control share acquisition means the
acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share
acquisition may compel the board of trustees to call a special
meeting of shareholders to be held within 50 days of demand
to consider the voting rights of the shares. The right to compel
the calling of a special meeting is subject to the satisfaction
of certain conditions, including an undertaking to pay the
expenses of the meeting. If no request for a meeting is made,
the trust may itself present the question at any shareholders
meeting.
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If voting rights are not approved at the meeting or if the
acquiring person does not deliver an acquiring person statement
as required by the MGCL, then the trust may redeem for fair
value any or all of the control shares, except those for which
voting rights have previously been approved. The right of the
trust to redeem control shares is subject to conditions and
limitations. Fair value is determined, without regard to the
absence of voting rights for the control shares, as of the date
of the last control share acquisition by the acquiror or of any
meeting of shareholders at which the voting rights of the shares
are considered and not approved. If voting rights for control
shares are approved at a shareholders meeting and the acquiror
becomes entitled to vote a majority of the shares entitled to
vote, all other shareholders may exercise appraisal rights. The
fair value of the shares as determined for purposes of appraisal
rights may not be less than the highest price per share paid by
the acquiror in the control share acquisition.
The control share acquisition statute of the MGCL does not apply
to the following:
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shares acquired in a merger, consolidation or share exchange if
the trust is a party to the transaction; or
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acquisitions approved or exempted by a provision in the
declaration of trust or bylaws of the trust adopted before the
acquisition of shares.
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Anti-Takeover
Effect of Maryland Law and of Our Declaration of Trust and
Bylaws
The following provisions in our Declaration of Trust and Bylaws
and in Maryland law could delay or prevent a change in control
of EPR:
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the limitation on ownership and acquisition of more than 9.8% of
our shares;
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the classification of our Board of Trustees into classes and the
election of each class for three-year staggered terms;
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the requirement of cause and a two-thirds majority vote of
shareholders for removal of our Trustees;
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the fact that the number of our Trustees may be fixed only by
vote of our Board of Trustees and that a vacancy on our Board of
Trustees may be filled only by the affirmative vote of a
majority of our remaining Trustees;
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the limitations on our shareholders abilities to act
without a meeting;
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the advance notice requirements for shareholder nominations for
Trustees and other proposals;
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the business combination provisions of the MGCL;
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the control share acquisition provisions of the MGCL; and
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the power of our Board of Trustees to authorize and issue
additional shares, including additional classes of shares with
rights defined at the time of issuance, without shareholder
approval.
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U.S. FEDERAL
INCOME TAX CONSIDERATIONS
The following discussion summarizes the material United
States (U.S.) federal income tax considerations
regarding EPR and the acquisition, ownership and disposition of
our securities. If we offer debt securities, depositary shares
or warrants, information about any additional income tax
consequences to holders of those securities will be included in
the prospectus supplement or other applicable offering materials
under which those securities are offered.
This summary is based on current law, is for general
information only and is not tax advice. The tax treatment to
holders of our securities will vary depending on a holders
particular situation. This summary does not address all aspects
of federal income taxation that may be relevant to a holder of
securities in light of his or her personal investments or tax
circumstances. Moreover, this summary does not address tax
considerations applicable to certain types of holders subject to
special treatment under the federal income tax laws (including,
without limitation dealers or traders in securities, financial
institutions, insurance companies and shareholders that hold our
stock as part of a hedge, straddle, conversion transaction or
other arrangement) except to the extent discussed under the
subheadings Taxation of Tax-Exempt
Shareholders and Taxation of
Non-U.S. shareholders.
In addition, the summary below does not consider the effect of
any foreign, state, local or other tax laws that may be
applicable to holders of our shares.
The information in this section is based on the
U.S. Internal Revenue Code (the Code), current,
temporary and proposed Treasury Regulations promulgated under
the Code, the legislative history of the Code, current
administrative interpretations and practices of the Internal
Revenue Service (the IRS), and court decisions, all
as of the date of this prospectus. Future legislation, Treasury
Regulations, administrative interpretations and practices and
court decisions may adversely affect, perhaps retroactively, the
tax considerations described herein. We have not requested, and
do not plan to request, any rulings from the IRS concerning our
tax treatment and the statements in this prospectus are not
binding on the IRS or any court. Thus, we can provide no
assurance that these statements will not be challenged by the
IRS or sustained by a court if challenged by the IRS.
You are advised to consult your tax advisor regarding the
specific tax consequences to you of the acquisition, ownership
and sale of our securities, and of our election to be taxed as a
REIT, including the federal, state, local, foreign and other tax
consequences of such acquisition, ownership, sale and election
and of potential changes in applicable tax laws.
Taxation
of the Company
General
We elected to be taxed as a REIT under Sections 856 through
860 of the Code, commencing with our taxable year ended
December 31, 1997. We believe we have been organized and
have operated in a manner which allows us to qualify for
taxation as a REIT under the Code commencing with our taxable
year ended December 31, 1997. We intend to continue to
operate in this manner.
In the opinion of Stinson Morrison Hecker LLP, we have qualified
as a REIT under the Code for our taxable years ended
December 31, 1997 through December 31, 2006, we are
organized in conformity with the requirements for qualification
as a REIT, and our current and proposed method of operation will
enable us to meet the requirements for qualification and
taxation as a REIT under the Code for our taxable year ending
December 31, 2007 and for future taxable years. It must be
emphasized that this opinion is based upon certain assumptions
and representations as to factual matters made by us, including
representations made by us in a representation letter and
certificate provided by our officers and our factual
representations set forth herein and in registration statements
previously filed with the SEC. Any variation from the factual
statements set forth herein, in registration statements
previously filed with the SEC, or in the representation letter
and certificate we have provided to Stinson Morrison Hecker LLP
may affect the conclusions upon which its opinion is based.
The opinions of Stinson Morrison Hecker LLP are based on
existing law as contained in the Code and Treasury Regulations
promulgated thereunder, in effect on the date of this
prospectus, and the interpretations of such provisions and
Treasury Regulations by the IRS and court decisions, all of
which are subject to change either prospectively or
retroactively, and to possibly different interpretations.
Stinson Morrison Hecker LLP will have no
32
obligation to advise us or the holders of our securities of any
subsequent change in the matters stated, represented or assumed,
or of any subsequent change in the applicable law. You should be
aware that the opinions expressed are not binding upon the IRS
or any court. Accordingly, there can be no assurance that
contrary positions may not successfully be asserted by the IRS.
Moreover, our qualification and taxation as a REIT depends upon
our ability, through actual annual operating results and methods
of operation, to satisfy various qualification tests imposed
under the Code, such as distributions to shareholders, asset
composition levels, and diversity of stock ownership, the actual
results of which have not been and will not be reviewed by
Stinson Morrison Hecker LLP. In addition, our ability to qualify
as a REIT also depends in part upon the operating results,
organizational structure and entity classification for federal
income tax purposes of certain affiliated entities, including
affiliates that have made elections to be taxed as REITs, and
for whom the actual results of the various REIT qualification
tests have not been and will not be reviewed by Stinson Morrison
Hecker LLP.
Accordingly, no assurance can be given that the actual results
of our operations for any particular taxable year will satisfy
such requirements for qualification and taxation as a REIT.
If we qualify for taxation as a REIT, we generally will not be
subject to federal corporate income taxes on our taxable income
that is distributed currently to our shareholders. This
treatment substantially eliminates the double
taxation (once at the corporate level when earned and once
again at the shareholders level when distributed) that
generally results from investment in an ordinary Subchapter C
corporation. However, we will be subject to federal income tax
as follows:
First, we will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net
capital gains.
Second, we may be subject to the alternative minimum
tax on our items of tax preference under certain
circumstances.
Third, if we have (a) net income from the sale or other
disposition of foreclosure property (defined
generally as property we acquired through foreclosure or after a
default on a loan secured by the property or a lease of the
property) which is held primarily for sale to customers in the
ordinary course of business or (b) other nonqualifying
income from foreclosure property, we will be subject to tax at
the highest U.S. federal corporate income tax rate on this
income.
Fourth, we will be subject to a 100% tax on any net income from
prohibited transactions (which are, in general, certain sales or
other dispositions of property (other than foreclosure property)
held primarily for sale to customers in the ordinary course of
business).
Fifth, if we fail to satisfy the 75% or 95% gross income tests
(as discussed below), but have maintained our qualification as a
REIT because we satisfied certain other requirements, we will be
subject to a 100% tax on an amount equal to (a) the gross
income attributable to the greater of the amounts by which we
fail the 75% or 95% gross income tests multiplied by (b) a
fraction intended to reflect our profitability.
Sixth, if we fail to distribute during each calendar year at
least the sum of (a) 85% of our REIT ordinary income for
the year, (b) 95% of our REIT capital gain net income for
the year (other than certain long-term capital gains for which
we make a capital gains designation (described below) and on
which we pay the tax), and (c) any undistributed taxable
income from prior periods, we would be subject to a 4% excise
tax on the excess of the required distribution over the amounts
actually distributed.
Seventh, if we acquire any asset from a corporation which is or
has been a Subchapter C corporation in a transaction in which
the basis of the asset in our hands is determined by reference
to the basis of the asset in the hands of the Subchapter C
corporation, and we subsequently recognize gain on the
disposition of the asset during the ten year period beginning on
the date on which we acquired the asset, then we will be subject
to tax at the highest regular corporate tax rate on the excess
of (a) the fair market value of the asset over (b) our
adjusted basis in the asset, in each case determined as of the
date we acquired the asset. The results described in this
paragraph with respect to the recognition of gain assume that we
will not make an election pursuant to existing Treasury
Regulations to recognize such gain at the time we acquire the
asset.
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Eighth, we will be required to pay a 100% tax on any
redetermined rents, redetermined
deductions or excess interest. In general,
redetermined rents are rents from real property that are
overstated as a result of services furnished to any of our
tenants by a taxable REIT subsidiary of ours.
Redetermined deductions and excess interest generally represent
amounts that are deducted by a taxable REIT subsidiary of ours
for amounts paid to us that are in excess of the amounts that
would have been deducted based on arms length negotiations.
Ninth, if we fail to satisfy any of the REIT asset tests, as
described below, by more than a de minimis amount, due to
reasonable cause and we nonetheless maintain our REIT
qualification because of specified cure provisions, we will be
required to pay a tax equal to the greater of $50,000 or the
highest corporate tax rate multiplied by the net income
generated by the nonqualifying assets that caused us to fail
such test.
Tenth, if we fail to satisfy any provision of the Code that
would result in our failure to qualify as a REIT (other than a
violation of the REIT gross income tests or certain violations
of the asset tests described below) and the violation is due to
reasonable cause, we may retain our REIT qualification but we
will be required to pay a penalty of $50,000 for each such
failure.
Requirements
for Qualification as a REIT
The Code defines a REIT as a corporation, trust or association:
(1) which is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by
transferable shares or transferable certificates;
(3) which would be taxable as a domestic corporation, but
for Sections 856 through 859 of the Code;
(4) which is neither a financial institution or an
insurance company within the meaning of certain provisions of
the Code;
(5) the beneficial ownership of which is held by 100 or
more persons;
(6) not more than 50% in value of the outstanding shares of
which is owned, actually or constructively, by five or fewer
individuals (as defined in the Code to include certain entities)
during the last half of each taxable year;
(7) that meets certain other tests, described below,
regarding the nature of its income and assets and the amount of
its distributions; and
(8) that elects to be a REIT, or has made such election for
a previous year, and satisfies the applicable filing and
administrative requirements to maintain qualification as a REIT.
The Code provides that conditions (1) through (4),
inclusive, must be met during the entire taxable year and that
condition (5) must be met during at least 335 days of
a taxable year of 12 months, or during a proportionate part
of a taxable year of less than 12 months. Conditions
(5) and (6) do not apply until after the first taxable
year for which an election is made to be taxed as a REIT. For
purposes of condition (6), pension funds and certain other
tax-exempt entities are treated as individuals, subject to a
look-through exception with respect to pension
funds. A REIT also must report its income for federal income tax
purposes based on a calendar year accounting period.
We believe that we have satisfied each of the above conditions.
In addition, our Declaration of Trust provides for restrictions
regarding ownership and transfer of shares to prevent further
concentration of share ownership (as summarized below
Description of Certain Provisions of Maryland Law and
EPRs Declaration of Trust and Bylaws). These
restrictions are intended to assist us in continuing to satisfy
the share ownership requirements described in (5) and
(6) above. These restrictions, however, may not ensure that
we will, in all cases, be able to satisfy the share ownership
requirements described in (5) and (6) above. In
general, if we fail to satisfy these share ownership
requirements, our status as a REIT will terminate. However, if
we comply with the rules in applicable Treasury Regulations that
require us to ascertain the actual ownership of our shares, and
we do not know, or would not have known through the exercise of
reasonable diligence, that we failed to meet the requirement
described in condition (6) above, we will be treated as
having met this requirement.
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Ownership
of Interests in Partnerships, Limited Liability Companies and
Qualified REIT Subsidiaries and Taxable REIT
Subsidiaries.
In the case of a REIT which is a partner in a partnership, or a
member in a limited liability company treated as a partnership
for federal income tax purposes, Treasury Regulations provide
that the REIT will be deemed to own its proportionate share of
the assets of the partnership or limited liability company,
based on its interest in partnership capital, subject to special
rules relating to the 10% REIT asset test described below. Also,
the REIT will be deemed to be entitled to its proportionate
share of the income of that entity. The assets and items of
gross income of the partnership or limited liability company
retain the same character in the hands of the REIT for purposes
of Section 856 of the Code, including satisfying the gross
income tests and the asset tests. Thus, our proportionate share
of the assets and items of income of partnerships and limited
liability companies taxed as partnerships, in which we are,
directly or indirectly through other partnerships or limited
liability companies taxed as partnerships, a partner or member,
are treated as our assets and items of income for purposes of
applying the REIT qualification requirements described in this
prospectus (including the income and asset tests described
below).
We own 100% of the stock of a number of corporate subsidiaries
that are qualified REIT subsidiaries (each, a QRS)
and may acquire stock of one or more new subsidiaries. A
corporation qualifies as a QRS if 100% of its outstanding stock
is held by us, and we do not elect to treat the corporation as a
taxable REIT subsidiary, as described below. A QRS is not
treated as a separate corporation, and all assets, liabilities
and items of income, deduction and credit of a QRS are treated
as our assets, liabilities and items of income, deduction and
credit for all purposes of the Code, including the REIT
qualification tests. For this reason, references to our income
and assets include the income and assets of any QRS. A QRS is
not subject to federal income tax, and our ownership of the
voting stock of a QRS is ignored for purposes of determining our
compliance with the ownership limits described below under
Asset Tests.
A taxable REIT subsidiary (TRS) is a corporation
other than a REIT in which a REIT directly or indirectly holds
stock, and that has made a joint election with the REIT to be
treated as a TRS. A TRS also includes any corporation other than
a REIT with respect to which a TRS owns securities possessing
more than 35% of the total voting power or value of the
outstanding securities of such corporation. Other than some
activities relating to lodging and health care facilities, a TRS
generally may engage in any business, including the provision of
customary or non-customary services to tenants of its parent
REIT.
A taxable REIT subsidiary is subject to Federal income tax at
regular corporate rates (currently a maximum rate of 35%), and
also may be subject to state and local taxation. Any dividends
paid or deemed paid by any one of the Companys taxable
REIT subsidiaries will be taxable to the Companys
stockholders to the extent the dividends received from the
taxable REIT subsidiary are paid to the Companys
stockholders. The Company may own more than 10% of the stock of
a taxable REIT subsidiary without jeopardizing its qualification
as a REIT. However, as noted below, in order for the Company to
quality as a REIT, the securities of all of the taxable REIT
subsidiaries in which it has invested either directly or
indirectly may not represent more than 20% of the total value of
its assets. The Company expects that the aggregate value of all
of its interests in taxable REIT subsidiaries will represent
less than 20% of the total value or its assets; however, the
Company cannot assure that this will always be true. In
addition, a TRS may be prevented from deducting interest on debt
funded directly or indirectly by its parent REIT if certain
tests regarding the taxable REIT subsidiarys debt to
equity ratio and interest expense are not satisfied. A
REITs ownership of securities of a TRS will not be subject
to the 10% or 5% asset tests described below, and its operations
will be subject to the provisions described above.
Asset
Tests
At the close of each quarter of our taxable year, we must
satisfy four tests relating to the nature and diversification of
our assets. First, at least 75% of the value of our total assets
must be represented by (1) interests in real property,
(2) interests in mortgages on real property, (3) share
(or transferable certificates of beneficial interest) in other
REITs, (4) cash, (5) cash items (including
receivables arising in the ordinary course of the REITs
business) and (6) government securities (as well as certain
temporary investments in stock or debt instruments purchased
with the proceeds of new capital raised by EPR for the one-year
period beginning on the date of receipt of such new capital).
Second, not more than 25% of our total assets may be represented
by securities, other than those securities
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includable in the 75% asset test. Third, of the investments
included in the 25% asset class, and except for investments in
another REIT, a QRS or a TRS, the value of any one issuers
securities may not exceed 5% of the value of our total assets,
and we may not own more than 10% of the total vote or value of
the outstanding securities of any one issuer except, in the case
of the 10% value test, securities satisfying the straight
debt safe-harbor. Certain types of securities we may own
are disregarded as securities solely for purposes of the 10%
value test, including, but not limited to, any loan to an
individual or an estate, any obligation to pay rents from real
property and any security issued by a REIT. In addition,
commencing January 1, 2005, solely for purposes of the 10%
value test, the determination of our interest in the assets of a
partnership or limited liability company in which we own an
interest will be based on our proportionate interest in any
securities issued by the partnership or limited liability
company, excluding for this purpose certain securities described
in the Code. Fourth, no more than 20% of the value of our assets
may be comprised of securities of one or more TRSs.
After initially meeting the asset tests at the close of any
quarter, we will not lose our status as a REIT for failure to
satisfy the asset tests at the end of a later quarter solely by
reason of changes in asset values. If we fail to satisfy an
asset test because we acquire securities or other property
during a quarter, we can cure this failure by disposing of
sufficient nonqualifying assets within 30 days after the
close of that quarter. We believe we have maintained and intend
to continue to maintain adequate records of the value of our
assets to ensure compliance with the asset tests. If we fail to
cure any noncompliance with the asset tests within the
30 day cure period, we would cease to qualify as a REIT
unless we are eligible for certain relief provisions discussed
below.
Commencing with our taxable year beginning January 1, 2005,
certain relief provisions may be available to us if we fail to
satisfy the asset tests described above after the 30 day
cure period. Under these provisions, we will be deemed to have
met the 5% and 10% REIT asset tests if (i) the value of our
nonqualifying assets does not exceed the lesser of (a) 1%
of the total value of our assets at the end of the applicable
quarter or (b) $10,000,000, and (ii) we dispose of the
nonqualifying assets or otherwise satisfy such tests within six
months after the last day of the quarter in which the failure to
satisfy the asset tests is discovered or the period of time
prescribed by Treasury Regulations. For a failure that exceeds
the de minimis thresholds described above which is due to
reasonable cause and not willful neglect, we may avoid
disqualification as a REIT under any of the asset tests, after
the 30 day cure period, by taking steps including
(i) disposing of sufficient nonqualifying assets, or taking
other actions, which allow us to meet the asset test within six
months after the last day of the quarter in which the failure to
satisfy the asset tests is discovered or the period of time
prescribed by Treasury Regulations, (ii) paying a tax equal
to the greater of (a) $50,000 or (b) the highest
corporate tax rate multiplied by the net income generated by the
nonqualifying assets and (iii) filing a schedule describing
each asset that caused the failure in accordance with applicable
Treasury Regulations.
Although we expect to satisfy the asset tests described above
and plan to take steps to ensure that we satisfy such tests for
any quarter end, there can be no assurance we always will be
successful. If we fail to cure any noncompliance with the asset
tests in a timely manner, and the relief provisions described
above are not available, we would cease to qualify as a REIT.
Gross
Income Tests
We must satisfy two gross income requirements for each taxable
year to maintain our qualification as a REIT. First, in each
taxable year at least 75% of our gross income must be
qualifying income. Qualifying income generally
includes (i) rents from real property (except
as modified below), (ii) interest on obligations
collateralized by mortgages on, or interests in, real property
and real estate mortgages, other than gain from property held
primarily for sale to customers in the ordinary course of our
trade or business (dealer property),
(iii) dividends or other distributions on shares in other
REITs, as well as gain from the sale of those shares,
(iv) abatements and refunds of real property taxes,
(v) income from the operation, and gain from the sale, of
property acquired at or in lieu of a foreclosure of the mortgage
collateralized by such property (foreclosure
property), (vi) commitment fees received for agreeing
to make loans collateralized by mortgages on real property or to
purchase or lease real property, (vii) qualified
temporary investment income, and (viii) gain from the
sale or other disposition of a real estate asset which is not a
prohibited transaction. Second, in each taxable year at least
95% of our gross income (excluding gross income from prohibited
transactions) must be derived directly or indirectly from income
from the
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real property investments described above or dividends, interest
and gain from the sale or disposition of stock or securities (or
from any combination of the foregoing).
Rents we receive will qualify as rents from real
property for purposes of satisfying the gross income tests
for a REIT described above only if all of the following
conditions are met:
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The amount of rent must not be based in any way on the income or
profits of any person, although rents generally will not be
excluded solely because they are based on a fixed percentage or
percentages of gross receipts or gross sales.
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We, or an actual or constructive owner of 10% or more of our
capital shares, must not actually or constructively own 10% or
more of the interests in the tenant, or, if the tenant is a
corporation, 10% or more of the voting power or value of all
classes of stock of the tenant. Rents received from any such
tenant that is our TRS, however, will not be excluded from the
definition of rents from real property as a result
of this condition if at least 90% of the space at the property
to which the rents relate is leased to third parties, and the
rents paid by the TRS are comparable to rents paid by our other
tenants for comparable space. Whether rents paid by a TRS are
substantially comparable to rents paid by other tenants is
determined at the time the lease with the TRS is entered into,
extended, and modified, if such modification increases the rents
due under such lease. Notwithstanding the foregoing, however, if
a lease with a controlled taxable REIT subsidiary is
modified and such modification results in an increase in the
rents payable by such TRS, any such increase will not qualify as
rents from real property. For purposes of this rule,
a controlled taxable REIT subsidiary is a TRS in
which we own stock possessing more than 50% of the voting power
or more than 50% of the total value of outstanding stock of such
TRS.
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Rent attributable to personal property, leased in connection
with a lease of real property, must not be greater than 15% of
the total rent received under the lease. If this condition is
not met, then the portion of the rent attributable to personal
property will not qualify as rents from real
property.
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The REIT generally must not operate or manage the property for
which the rents are received or furnish or render services to
the tenants of the property (subject to a 1% de minimis
exception), other than through an independent contractor from
whom the REIT derives no revenue or through a TRS. The REIT may,
however, directly perform certain services that are
usually or customarily rendered in connection with
the rental of space for occupancy only and are not otherwise
considered rendered to the occupant of the property.
Any amounts we receive from a TRS with respect to the TRSs
provision of non-customary services will be nonqualifying income
under the 75% gross income test and, except to the extent
received through the payment of dividends, the 95% gross income
test.
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We do not intend to charge rent for any property that is based
in whole or in part on the net income or profits of any person
(except by reason of being based on a percentage of gross
receipts or sales, as described above), and generally we do not
intend to rent any personal property (other than in connection
with a lease of real property where either less than 15% of the
total rent is attributable to personal property or an amount
immaterial to our operations is attributable to personal
property). We directly perform services under certain of our
leases, but such services are not rendered to the occupant of
the property. Furthermore, these services are usual and
customary management services provided by landlords renting
space for occupancy in the geographic areas in which we own
property. To the extent that the performance of any services
provided by us would cause amounts received from our tenants to
be excluded from rents from real property, we intend to hire a
TRS, or an independent contractor from whom we derive no
revenue, to perform such services.
The term interest generally does not include any
amount received or accrued (directly or indirectly) if the
determination of some or all of the amount depends in any way on
the income or profits of any person. However, an amount received
or accrued generally will not be excluded from the term
interest solely by reason of being based on a fixed
percentage or percentages of receipts or sales.
From time to time, we may enter into hedging transactions with
respect to one or more of our assets or liabilities. Our hedging
activities may include entering into interest rate swaps, caps,
and floors, options to purchase these items, and futures and
forward contracts. Any income we derive from a hedging
transaction will be nonqualifying income for purposes of the 75%
gross income test. The term hedging transaction, as
used above,
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generally means any transaction we enter into in the normal
course of our business primarily to manage the risk of interest
rate changes or fluctuations with respect to borrowings made or
to be made by us. To the extent that we hedge with other types
of financial instruments, the income from those transactions is
not likely to be treated as qualifying income for purposes of
the gross income tests. We intend to structure any hedging
transactions in a manner that does not jeopardize our status as
a REIT.
If we fail to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, we may nevertheless qualify as a
REIT for the year if we are entitled to relief under certain
provisions of the Code. Commencing with our taxable year
beginning January 1, 2005, we generally may make use of the
relief provisions if:
(i) our failure to meet these tests was due to reasonable
cause and not due to willful neglect; and
(ii) following our identification of the failure to meet
the 75% or 95% gross income tests for any taxable year, we file
a schedule with the IRS setting forth each item of our gross
income for purposes of the 75% or 95% gross income tests for
such taxable year in accordance with Treasury Regulations.
For our taxable year ended December 31, 2006, we generally
may avail ourselves of the relief provisions if:
(i) our failure to meet these tests was due to reasonable
cause and not due to willful neglect;
(ii) we attach a schedule of the sources of our income to
our federal income tax return; and
(iii) any incorrect information on the schedule was not due
to fraud with intent to evade tax.
It is not possible, however, to state whether in all
circumstances we would be entitled to the benefit of these
relief provisions. For example, if we fail to satisfy the gross
income tests because nonqualifying income that we intentionally
accrue or receive exceeds the limits on nonqualifying income,
the IRS could conclude that our failure to satisfy the tests was
not due to reasonable cause. If these relief provisions do not
apply to a particular set of circumstances, we will not qualify
as a REIT. As discussed above, even if these relief provisions
apply, and we retain our status as a REIT, a tax would be
imposed with respect to our nonqualifying income. We may not
always be able to comply with the gross income tests for REIT
qualification despite periodic monitoring of our income.
Prohibited
Transaction Income
Any gain we realize on the sale of any property, other than
foreclosure property, held primarily for sale to customers in
the ordinary course of business, will be treated as income from
a prohibited transaction that is subject to a 100% penalty tax.
Whether property is held primarily for sale to customers in the
ordinary course of a trade or business depends on all the facts
and circumstances surrounding the particular transaction. We do
not intend to engage in prohibited transactions.
Penalty
Tax
Any redetermined rents, redetermined deductions or excess
interest we generate will be subject to a 100% penalty tax. In
general, redetermined rents are rents from real property that
are overstated as a result of any services furnished to any of
our tenants by one of our TRSs, and redetermined deductions and
excess interest generally represent any amounts that are
deducted by a TRS for amounts paid to us that are in excess of
the amounts that would have been deducted based on
arms-length negotiations. Rents we receive will not
constitute redetermined rents if they qualify for certain safe
harbor provisions contained in the Code. These determinations
are inherently factual, and the IRS has broad discretion to
assert that amounts paid between related parties should be
reallocated to clearly reflect their respective incomes. If the
IRS successfully makes such an assertion, we would be required
to pay a 100% penalty tax on the excess of an arms-length
fee for tenant services over the amount actually paid.
Annual
Distribution Requirements
To maintain our qualification as a REIT, we are required to
distribute dividends (other than capital gain dividends) to our
shareholders each year in an amount at least equal to
(A) the sum of (i) 90% of our REIT taxable
income (computed before deductions for dividends paid and
excluding net capital gain) and (ii) 90% of our net
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income (after tax), if any, from foreclosure property; minus
(B) the excess of the sum of certain items of noncash
income (i.e., income attributable to leveled stepped rents,
original issue discount on purchase money debt, or a like-kind
exchange that is later determined to be taxable) over 5% of
REIT taxable income as described above.
In addition, if we dispose of any asset we acquired from a
corporation which is or has been a Subchapter C corporation in a
transaction in which our basis in the asset is determined by
reference to the basis of the asset in the hands of that
Subchapter C corporation, within the ten year period following
our acquisition of such asset, we would be required to
distribute at least 90% of the after-tax built in gain, if any,
we recognized on the disposition of the asset.
We must pay the distributions described above in the taxable
year to which they relate (current distributions),
or in the following taxable year if they are either
(i) declared before we timely file our tax return for such
year and paid on or before the first regular dividend payment
after such declaration (throwback distributions) or
(ii) paid during January to shareholders of record in
October, November or December of the prior year (deemed
current distributions). To the extent that we do not
distribute all of our net capital gain or distribute at least
90%, but less than 100%, of our REIT taxable income,
as adjusted, we will be subject to tax thereon at regular
ordinary and capital gain corporate tax rates. In addition, we
would be subject to a 4% excise tax to the extent we fail to
distribute during each calendar year (or in the case of
distributions with declaration and record dates falling in the
last three months of the calendar year, by the end of January
immediately following such year) at least the sum of 85% of our
REIT ordinary income for such year, 95% of our REIT capital gain
income for the year (other than certain long-term capital gains
for which we make a capital gains designation and on which we
pay the tax), and any undistributed taxable income from prior
periods. Any REIT taxable income and net capital gain on which a
REIT-level corporate income tax is imposed for any year is
treated as an amount distributed during that year for purposes
of calculating the excise tax.
We believe we have made, and intend to continue to make, timely
distributions sufficient to satisfy these annual distribution
requirements.
We generally expect that our REIT taxable income will be less
than our cash flow because of the allowance of depreciation and
other non-cash charges in computing REIT taxable income.
Accordingly, we anticipate that we generally will have
sufficient cash or liquid assets to enable us to satisfy the
distribution requirements described above. However, from time to
time, we may not have sufficient cash or other liquid assets to
meet these distribution requirements because of timing
differences between the actual receipt of income and actual
payment of deductible expenses, and the inclusion of income and
deduction of expenses in arriving at our taxable income.
Further, it is possible that from time to time we may be
allocated a share of net capital gain attributable to any
depreciated property we sell that exceeds our allocable share of
cash attributable to that sale. If these circumstances occur, we
may need to arrange for borrowings, or may need to pay dividends
in the form of taxable share dividends, in order to meet the
distribution requirements.
Under certain circumstances, we may be able to rectify a failure
(due to, for example, an IRS adjustment such as an increase in
our taxable income or a reduction in reported expenses) to meet
the 90% distribution requirement for a year by paying
deficiency dividends to shareholders in a later
year, which may be included in our deduction for dividends paid
for the earlier year. Thus, we may be able to avoid being taxed
on amounts distributed as deficiency dividends. However, we will
be required to pay interest to the IRS based on the amount of
any deduction taken for deficiency dividends.
Failure
to Qualify
If we fail to qualify for taxation as a REIT in any taxable
year, and the relief provisions do not apply, we will be subject
to tax (including any applicable alternative minimum tax) on our
taxable income at regular corporate rates. Distributions to
shareholders in any year in which we fail to qualify will not be
deductible by us, and we will not be required to distribute any
amounts to our shareholders. As a result, our failure to qualify
as a REIT would reduce the cash available for distribution by us
to our shareholders. In addition, if we fail to qualify as a
REIT, all distributions to shareholders would be taxable as
ordinary income to the extent of our current and accumulated
earnings and profits, and, subject to certain limitations of the
Code, corporate distributees may be eligible for the dividends
received deduction. Unless entitled to relief under specific
statutory provisions, we also would be disqualified from
39
taxation as a REIT for the four taxable years following the year
during which we lost our qualification. It is not possible to
state whether in all circumstances we would be entitled to this
statutory relief.
Commencing with our taxable year beginning January 1, 2005,
specified cure provisions are available to us in the event that
we violate a provision of the Code that would result in our
failure to qualify as a REIT. These cure provisions would reduce
the instances that could lead to our disqualification as a REIT
for violations due to reasonable cause and would instead
generally require the payment of a monetary penalty.
Taxation
of Taxable U.S. Shareholders
The following summary describes certain federal income tax
consequences to U.S. shareholders with respect to an
investment in our shares. This discussion does not address the
tax consequences to persons who receive special treatment under
the federal income tax law. Shareholders subject to special
treatment include, without limitation, insurance companies,
financial institutions or broker-dealers, tax-exempt
organizations, shareholders holding securities as part of a
conversion transaction, or a hedge or hedging transaction or as
a position in a straddle for tax purposes, foreign corporations
or partnerships and persons who are not citizens or residents of
the United States.
As used herein, the term U.S. shareholders
means a holder of shares who, for United States federal income
tax purposes:
(i) is a citizen or resident of the United States;
(ii) is a corporation, partnership or other entity
classified as a corporation or partnership for United States
federal income tax purposes, created or organized in or under
the laws of the United States or any political subdivision
thereof unless, in the case of a partnership, Treasury
Regulations provide otherwise;
(iii) is an estate the income of which is subject to United
States federal income taxation regardless of its source; or
(iv) is a trust whose administration is subject to the
primary supervision of a United States court and which has one
or more United States persons who have the authority to control
all substantial decisions of the trust.
Distributions
Generally
As long as we qualify as a REIT, distributions made out of our
current or accumulated earnings and profits (and not designated
as capital gain dividends), generally will constitute dividends
taxable to our U.S. shareholders as ordinary income. For
purposes of determining whether distributions to holders of
shares are out of current or accumulated earnings and profits,
our earnings and profits will be allocated first to our
outstanding preferred shares and then to our common shares.
These distributions will not be eligible for the
dividends-received deduction in the case of
U.S. shareholders that are corporations.
Because we generally are not subject to federal income tax on
the portion of our REIT taxable income distributed to our
shareholders, our ordinary dividends generally are not
qualified dividend income eligible for the reduced
15% rate available to most non-corporate taxpayers through 2010
under the Tax Increase Prevention and Reconciliation Act of
2006, and will continue to be taxed at the higher tax rates
applicable to ordinary income. However, the reduced 15% rate
does apply to our distributions:
(i) designated as long-term capital gain dividends (except
to the extent attributable to real estate depreciation, in which
case such distributions continue to be subject to tax at a 25%
rate);
(ii) to the extent attributable to dividends received by us
from non-REIT corporations or other taxable REIT
subsidiaries; and
(iii) to the extent attributable to income upon which we
have paid corporate income tax (for example, if we distribute
taxable income that we retained and paid tax on in the prior
year).
It is not likely that a significant amount of our dividends paid
to individual U.S. shareholders will constitute
qualified dividend income eligible for the current
reduced tax rate of 15%.
40
To the extent that we make distributions (not designated as
capital gain dividends) in excess of our current and accumulated
earnings and profits, these distributions will be treated as a
tax-free return of capital to each U.S. shareholder. This
treatment will reduce the adjusted basis which each
U.S. shareholder has in his or her shares of stock for tax
purposes by the amount of the distribution (but not below zero).
Distributions in excess of a U.S. shareholders
adjusted basis in his or her shares will be taxable as capital
gains (provided that the shares have been held as a capital
asset) and will be taxable as long-term capital gain if the
shares have been held for more than one year. Dividends we
declare in October, November, or December of any year and
payable to a shareholder of record on a specified date in any of
these months shall be treated as both paid by us and received by
the shareholders on December 31 of that year, provided we
actually pay the dividend on or before January 31 of the
following calendar year. Shareholders may not include in their
own income tax returns any of our net operating losses or
capital losses.
Capital
Gain Distributions
Distributions that we properly designate as capital gain
dividends (and undistributed amounts for which we properly make
a capital gains designation) will be taxable to
U.S. shareholders as gains (to the extent that they do not
exceed our actual net capital gain for the taxable year) from
the sale or disposition of a capital asset. Depending on the
period of time we have held the assets which produced these
gains, and on certain designations, if any, which we may make,
these gains may be taxable to non-corporate
U.S. shareholders at either a 15% or 25% rate, depending on
the nature of the asset giving rise to the gain. Corporate
U.S. shareholders may, however, be required to treat up to
20% of certain capital gain dividends as ordinary income.
Passive
Activity Losses and Investment Interest
Limitations
Distributions we make and gain arising from the sale or exchange
by a U.S. shareholder of our shares will be treated as
portfolio income. As a result, U.S. shareholders generally
will not be able to apply any passive losses against
this income or gain. A U.S. shareholder may elect to treat
capital gain dividends, capital gains from the disposition of
stock and qualified dividend income as investment income for
purposes of computing the investment interest limitation, but in
such case, the shareholders will be taxed at ordinary income
rates on such amounts. Other distributions we make (to the
extent they do not constitute a return of capital) generally
will be treated as investment income for purposes of computing
the investment interest limitation. Gain arising from the sale
or other disposition of our shares, however, will not be treated
as investment income under certain circumstances.
Retention
of Net Long-Term Capital Gains
We may elect to retain, rather than distribute as a capital gain
dividend, our net long-term capital gains. If we make this
election (a Capital Gains Designation) we would
pay tax on our retained net long-term capital gains. In
addition, to the extent we make a Capital Gains Designation, a
U.S. shareholder generally would:
(i) include its proportionate share of our undistributed
long-term capital gains in computing its long-term capital gains
in its return for its taxable year in which the last day of our
taxable year falls (subject to certain limitations as to the
amount that is includable);
(ii) be deemed to have paid the capital gains tax imposed
on us on the designated amounts included in the
U.S. shareholders long-term capital gains;
(iii) receive a credit or refund for the amount of tax
deemed paid by it;
(iv) increase the adjusted basis of its shares by the
difference between the amount of includable gains and the tax
deemed to have been paid by it; and
(v) in the case of a U.S. shareholder that is a
corporation, appropriately adjust its earnings and profits for
the retained capital gains in accordance with Treasury
Regulations to be promulgated.
41
Dispositions
of Shares
Generally, if you are a U.S. shareholder and you sell or
dispose of your shares, you will recognize gain or loss for
federal income tax purposes in an amount equal to the difference
between (i) the amount of cash and the fair market value of
any property you receive on the sale or other disposition and
(ii) your adjusted basis in the shares for tax purposes.
This gain or loss will be capital in nature if you have held the
shares as a capital asset and will be long-term capital gain or
loss if you have held the shares for more than one year.
However, if you are a U.S. shareholder and you recognize
loss upon the sale or other disposition of shares that you have
held for six months or less (after applying certain holding
period rules), the loss you recognize will be treated as a
long-term capital loss, to the extent you received distributions
from us or which were retained by us and which were required to
be treated as long-term capital gains.
The maximum tax rate for individual taxpayers on net long-term
capital gains (i.e., the excess of net long-term capital gain
over net short-term capital loss) is currently 15% for most
assets. In the case of individuals whose ordinary income is
taxed at a 10% or 15% rate, the 15% rate is reduced to 5%.
Absent future legislation, the maximum tax rate on long-term
capital gains will return to 20% in 2011.
Redemption
of Shares
If we redeem any of our shares held by you, the tax treatment of
the redemption must be determined based on facts at the time of
redemption. In general, you will recognize gain or loss (as
opposed to dividend income) equal to the difference between the
amount received by you in the redemption and your adjusted tax
basis in your shares redeemed if such redemption results in a
complete termination of your interest in all classes
of our equity securities, is a substantially
disproportionate redemption or is not essentially
equivalent to a dividend with respect to you. In applying
these tests, you must take into account your ownership of all
classes of our equity securities. You also must take into
account any equity securities that are considered to be
constructively owned by you.
If, as a result of a redemption by us of your shares, you no
longer own (either actually or constructively) any of our equity
securities or only own (actually and constructively) an
insubstantial percentage of our equity securities, then it is
likely that the redemption of your shares would be considered
not essentially equivalent to a dividend and, thus,
would result in gain or loss to you. Gain from the sale or
exchange of our shares held for more than one year is taxed at a
maximum long-term capital gain rate of 15% through 2010.
However, whether a distribution is not essentially
equivalent to a dividend depends on all of the facts and
circumstances, and if you rely on any of these tests at the time
of redemption, you should consult your tax advisor to determine
their application to your situation.
Generally, if the redemption does not meet the tests described
above, then the proceeds received by you from the redemption of
your shares will be treated as a distribution taxable as a
dividend to the extent of the allocable portion of current or
accumulated earnings and profits. If the redemption is taxed as
a dividend, your adjusted tax basis in the redeemed shares will
be transferred to any other shares in us that you own. If you
own no other shares in us, under certain circumstances, such
basis may be transferred to a related person, or it may be lost
entirely.
Backup
Withholding
We report to our U.S. shareholders and the IRS the amount
of dividends paid during each calendar year, and the amount of
any tax withheld. Under the backup withholding rules, a
shareholder may be subject to backup withholding with respect to
dividends paid at the fourth lowest rate of tax under
Section 1(c) of the Code (which is currently 28%) unless
the holder is a corporation or comes within 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, and otherwise
complies with applicable requirements of the backup withholding
rules. A U.S. shareholder that does not provide us with its
correct taxpayer identification number may also be subject to
penalties imposed by the IRS. Backup withholding is not an
additional tax. Any amount paid as backup withholding will be
creditable against the shareholders income tax liability.
In addition, we may be required to withhold a portion of capital
gain distributions to any shareholders who fail to certify their
non-foreign status. See Taxation of
Non-U.S. shareholders.
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Taxation
of Tax-Exempt Shareholders
The IRS has ruled that amounts distributed as dividends by a
REIT to a tax-exempt employees pension trust do not
constitute unrelated business taxable income (UBTI).
Based on that ruling, dividend income from us should not be UBTI
to a tax-exempt shareholder so long as the tax-exempt
shareholder (except certain tax-exempt shareholders described
below) has not held its shares as debt financed
property within the meaning of the Code (generally,
shares, the acquisition of which was financed through a
borrowing by the tax-exempt shareholders) and the shares are not
otherwise used in an unrelated trade or business of the
tax-exempt entity. Similarly, income from the sale of shares
will not constitute UBTI unless a tax-exempt shareholder has
held its shares as debt financed property within the
meaning of the Code or has used the shares in a trade or
business.
For shareholders which are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts
and qualified group legal services plans exempt from federal
income taxation under Code Sections 501(c)(7), (c)(9),
(c)(17) and (c)(20), respectively, income from an investment in
our shares will constitute UBTI unless the organization is able
to properly deduct amounts set aside or placed in reserve for
certain purposes so as to offset the income generated by its
investment in our shares. These prospective investors should
consult their own tax advisors concerning these set
aside and reserve requirements.
In addition to the above, a portion of the dividends paid by a
pension held REIT may be treated as UBTI certain
types of trusts that hold more than 10% (by value) of the
interests in the REIT. A pension held REIT is any REIT if more
than 25% (by value) of its shares are owned by at least one
pension trust, or one or more pension trusts, each of whom owns
more than 10% (by value) of such shares, and in the aggregate
such pension trusts own more than 50% (by value) of its shares.
We do not expect to be classified as a pension held
REIT, but because our shares are publicly traded. We
cannot guarantee this will always be the case.
Tax-exempt shareholders should consult their own tax advisors
concerning the U.S. federal, state, local and foreign tax
consequences of an investment in our shares.
Taxation
of
Non-U.S. Shareholders
The rules governing United States federal income taxation of the
ownership and disposition of shares by persons that are not
U.S. shareholders
(Non-U.S. shareholders)
are complex and no attempt is made herein to provide more than a
brief summary of such rules. Accordingly, this discussion does
not address all aspects of U.S. federal income taxation
that may be relevant to a
Non-U.S. shareholder
in light of its particular circumstances and does not address
any state, local or foreign tax consequences.
Non-U.S. shareholders
should consult their own tax advisors to determine the impact of
U.S. federal, state, local and foreign tax consequences to
them of an investment in our shares, including tax return filing
requirements.
Distributions
Distributions that are neither attributable to gain from our
sale or exchange of United States real property interests nor
designated by us as capital gain dividends will be treated as
dividends of ordinary income to the extent that they are made
out of our current or accumulated earnings and profits. Such
distributions ordinarily will be subject to
U.S. withholding tax at a 30% rate or such lower rate as
may be specified by an applicable income tax treaty unless the
distributions are treated as effectively connected with the
conduct by you of a United States trade or business (or, if an
income tax treaty applies, are attributable to a
U.S. permanent establishment of the
Non-U.S. shareholder).
Under certain treaties, however, lower withholding rates
generally applicable to dividends do not apply to dividends from
a REIT. Certain certification and disclosure requirements must
be satisfied to be exempt from withholding under the effectively
connected income exemption. In general,
Non-U.S. shareholders
will not be considered engaged in a U.S. trade or business
(or in the case of an income tax treaty, as having a
U.S. permanent establishment) solely by reason of their
ownership of shares.
Dividends that are treated as effectively connected with such a
trade or business (or, if an income tax treaty applies, is
attributable to a U.S. permanent establishment of the
Non-U.S. shareholder)
will be subject to tax on a net basis (that is, after allowance
for deductions) at graduated rates, in the same manner as
dividends paid to U.S. shareholders are subject to tax, and
are generally not subject to withholding. Any such dividends
received by a
43
Non-U.S. shareholder
that is a corporation also may be subject to an additional
branch profits tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
We expect to withhold United States income tax at the rate of
30% on any distributions made to a
Non-U.S. shareholder
unless:
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you file with us an IRS
Form W-8BEN
evidencing eligibility for a reduced treaty rate of withholding
under an applicable treaty; or
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you file an IRS
Form W-8ECI
with us claiming that the distribution is income effectively
connected with your trade or business.
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Return
of Capital Distributions
Distributions in excess of our current and accumulated earnings
and profits will not be taxable to you to the extent that such
distributions do not exceed your adjusted basis in our shares,
but rather will reduce the adjusted basis of such shares.
Distributions in excess of your adjusted basis in our shares
will give rise to gain from the sale or exchange of such shares.
The tax treatment of this gain is described below.
For withholding purposes, we expect to treat all distributions
as made out of our current or accumulated earnings and profits.
However, amounts withheld generally should be refundable if it
is subsequently determined that the distribution was, in fact,
in excess of our current and accumulated earnings and profits.
Capital
Gain Dividends and Distributions Attributable to a Sale or
Exchange of U.S. Real Property Interests
Distributions to you that we properly designate as capital gain
dividends, other than those arising from the disposition of a
U.S. real property interest, generally should not be
subject to U.S. federal income taxation, unless:
(1) the investment in our shares is treated as effectively
connected with your U.S. trade or business, in which case
you will be subject to the same treatment as
U.S. shareholders with respect to such gain, except that a
Non-U.S. shareholder
(or, if an income tax treaty applies, it is attributable to a
U.S. permanent establishment of the
Non-U.S. shareholder)
that is a foreign corporation may also be subject to the 30%
branch profits tax, as discussed above; or
(2) you are a nonresident alien individual who is present
in the U.S. for 183 days or more during the taxable
year and certain other conditions are met, in which case you
will be subject to a 30% tax on your capital gains.
For each year during which we qualify as a REIT, distributions
that are attributable to net capital gain from the sale or
exchange of U.S. real property interests, such as
properties beneficially owned by us, will be taxed to a
Non-U.S. shareholder
under the provisions of the Foreign Investment in Real Property
Tax Act of 1980 (FIRPTA). Under FIRPTA, such
distributions paid to a
Non-U.S. shareholder
who owns more than 5% of the value of our shares at any time
during the one-year period ending on the date of distribution
will be subject to U.S. federal income tax as income
effectively connected with a United States trade or business.
The FIRPTA tax will apply to these distributions whether or not
the distribution is designated as a capital gain dividend.
Generally, you will be taxed at the same capital gain rates
applicable to U.S. shareholders (subject to applicable
alternative minimum tax and a special alternative minimum tax in
the case of nonresident alien individuals). We will be required
to withhold and to remit 35% of any distribution to you that
could be treated as a capital gain dividend. The amount withheld
is creditable against your U.S. federal income tax
liability. However, any distribution with respect to any class
of shares which is regularly traded on an established securities
market located in the United States is not subject to FIRPTA,
and therefore, not subject to the 35% U.S. withholding tax
described above, if you did not own more than 5% of such class
of shares at any time during the one-year period ending on the
date of the distribution (the 5% Exception).
Instead, such distributions will be treated as ordinary dividend
distributions.
44
Retention
of Net Capital Gains
Although the law is not clear on the matter, it appears that
amounts designated by us as retained capital gains in respect of
the shares held by
Non-U.S. shareholders
generally should be treated in the same manner as actual
distributions by us of capital gain dividends. Under this
approach, you would be able to offset as a credit against your
U.S. federal income tax liability resulting from your
proportionate share of the tax paid by us on such retained
capital gains, and to receive from the IRS a refund to the
extent your proportionate share of such tax paid by us exceeds
your actual U.S. federal income tax liability.
Sale
of Shares
Gain recognized by a
Non-U.S. shareholder
upon the sale or exchange of our shares generally will not be
subject to U.S. taxation unless such shares constitutes a
U.S. real property interest. Our shares will not constitute
a U.S. real property interest so long as (i) we are a
domestically-controlled qualified investment entity, which
includes a REIT, if at all times during a specified testing
period less than 50% in value of its stock is held directly or
indirectly by
non-U.S. shareholders
or (ii) such class of our shares is regularly traded, as
defined by applicable Treasury regulations, on an established
securities market such as the NYSE; and you owned, actually and
constructively, 5% or less in value of such class of our shares
throughout the shorter of the period during which you held such
shares or the five-year period ending on the date of the sale or
exchange.
Notwithstanding the foregoing, gain from the sale or exchange of
our shares not otherwise subject to FIRPTA will be taxable to
you if either (1) the investment in our shares is treated
as effectively connected with your U.S. trade or business
or (2) you are a nonresident alien individual who is
present in the U.S. for 183 days or more during the
taxable year and certain other conditions are met. In addition,
even if we are a domestically controlled qualified investment
entity, upon disposition of our shares (subject to the 5%
exception applicable to regularly traded stock described above),
you may be treated as having gain from the sale or exchange of a
U.S. real property interest if you (1) dispose of our
shares within a
30-day
period preceding the ex-dividend date of a distribution, any
portion of which, but for the disposition, would have been
treated as gain from the sale or exchange of a U.S. real
property interest and (2) acquire, or enter into a contract
or option to acquire, or are deemed to acquire, substantially
identical shares within 30 days after such ex-dividend date.
If gain on the sale or exchange of our shares were subject to
taxation under FIRPTA, you would be subject to regular United
States federal income tax with respect to such gain in the same
manner as a taxable U.S. shareholder (subject to any
applicable alternative minimum tax and a special alternative
minimum tax in the case of nonresident alien individuals) and
the purchaser of the shares would be required to withhold and
remit to the IRS 10% of the purchase price.
Backup
Withholding Tax and Information Reporting
Generally, we must report annually to the IRS the amount of
dividends paid to you, your name and address, and the amount of
tax withheld, if any. A similar report is sent to you. Pursuant
to tax treaties or other agreements, the IRS may make its
reports available to tax authorities in your country of
residence.
Payments of dividends or of proceeds from the disposition of
shares made to you may be subject to information reporting and
backup withholding unless you establish an exemption, for
example, by properly certifying your
Non-U.S. shareholder
status on an IRS
Form W-8BEN
or another appropriate version of IRS
Form W-8.
Notwithstanding the foregoing, backup withholding and
information reporting may apply if either we have or our paying
agent has actual knowledge, or reason to know, that you are a
U.S. person.
Backup withholding is not an additional tax. Rather, the United
States income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund or
credit may be obtained, provided that the required information
is furnished to the IRS.
Possible
Legislative or Other Actions Affecting Tax
Consequences
Prospective investors should recognize that the present
U.S. federal income tax treatment of an investment in us
may be modified by legislative, judicial or administrative
action at any time, and that any such action may affect
45
investments and commitments previously made. The rules dealing
with U.S. federal income taxation are constantly under
review by persons involved in the legislative process and by the
IRS and the U.S. Treasury Department, resulting in
revisions of regulations and revised interpretations of
established concepts as well as statutory changes. Revisions in
U.S. federal tax laws and interpretations thereof could
adversely affect the tax consequences of an investment in us.
State and
Local Tax Consequences
We may be subject to state or local taxation or withholding in
various state or local jurisdictions, including those in which
we transact business, and our shareholders may be subject to
state or local taxation or withholding in various state or local
jurisdictions, including those in which they reside. The state
and local tax treatment of us may not conform to the federal
income tax treatment discussed above. Several states in which we
may own properties treat REITs as ordinary Subchapter C
corporations subject to tax at the corporate level. In addition,
your state and local tax treatment may not conform to the
federal income tax treatment discussed above. You should consult
your own tax advisors regarding the effect of state and local
tax laws on an investment in our shares.
PLAN OF
DISTRIBUTION
We may sell common shares, preferred shares, depositary shares,
warrants and debt securities:
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through underwriters or dealers
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through agents
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directly to one or more purchasers, including our affiliates
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directly to shareholders
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or through any combination of these methods
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We may effect the distribution of common shares, preferred
shares, depositary shares, warrants and debt securities from
time to time in one or more transactions either:
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at a fixed price or prices which may be changed
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at market prices prevailing at the time of sale
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at prices relating to those market prices
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at negotiated prices
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For each offering of common shares, preferred shares, depositary
shares, warrants or debt securities, the prospectus supplement
or other offering materials will describe:
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the plan of distribution
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the terms of the offering
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the names of any agents
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the name or names of any managing underwriter or underwriters
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the purchase price of the securities
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the net proceeds from the sale of the securities
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any delayed delivery arrangements
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any underwriting discounts, commissions and other items
constituting underwriters compensation
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any initial public offering price
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any discounts or concessions allowed or reallowed or paid to
dealers
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any commissions paid to agents
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If we use underwriters in the sale, they will buy the securities
for their own account. The underwriters may then resell from
time to time the securities in one or more transactions at a
fixed public offering price, at any market price in effect at
the time of sale or at a discount from any such market price.
The obligations of the underwriters to purchase the securities
will be subject to certain conditions. The underwriters will be
obligated to purchase all the securities offered if they
purchase any securities. Any discounts or concessions allowed or
re-allowed or paid to dealers may be changed by the underwriters
from time to time.
In order to facilitate the offering of securities, the
underwriters may engage in transactions that stabilize, maintain
or otherwise affect the price of securities. Specifically, the
underwriters may over-allot in connection with the offering,
creating a short position in the securities for their account.
In addition, to cover over-allotments or to stabilize the price
of the shares, the underwriters may bid for, and purchase,
shares in the open market. Finally, an underwriting syndicate
may reclaim selling concessions allowed to an underwriter or a
dealer for distributing the securities in the offering if the
syndicate repurchases previously distributed shares in
transactions to cover syndicate short positions, in
stabilization transactions, or otherwise. Any of these
activities may stabilize or maintain the market price of the
offered securities above independent market levels. The
underwriters are not required to engage in these activities and
may end any of these activities at any time.
Some or all of the securities that we offer through this
prospectus may be new issues of securities with no established
trading market. Any underwriters to whom we sell securities for
public offering and sale may make a market in those securities,
but they will not be obligated to and they may discontinue any
market making at any time without notice. Accordingly, we cannot
assure you of the liquidity of, or continued trading markets
for, any securities offered pursuant to this prospectus. If we
use dealers in the sale, we will sell securities to those
dealers as principals. The dealers may then resell the
securities to the public at any market price or other prices to
be determined by the dealers at the time of resale. If we use
agents in the sale, unless we inform you otherwise in the
prospectus supplement or other applicable offering materials
they will use their reasonable best efforts to solicit
purchasers for the period of their appointment. If we sell
directly, no underwriters or agents would be involved. In the
prospectus supplement or other applicable offering materials, we
will name any agent involved in the offer or sale of the offered
securities, and we will describe any commissions payable to the
agent. We are not making an offer of securities in any state
that does not permit such an offer.
Underwriters, dealers and agents that participate in the
distribution of securities may be deemed to be underwriters as
defined in the Securities Act. Any discounts, commissions or
profit they receive when they resell the securities may be
treated as underwriting discounts and commissions under the
Securities Act. We may have agreements with underwriters,
dealers and agents to indemnify them against certain civil
liabilities, including certain liabilities under the Securities
Act, or to contribute to payments they may be required to make.
We may authorize underwriters, dealers or agents to solicit
offers from institutions in which the institution contractually
agrees to purchase the securities from us on a future date at a
specified price. This type of agreement may be made only with
institutions that we specifically approve. These institutions
could include banks, insurance companies, pension funds,
investment companies and educational and charitable
institutions. The underwriters, dealers or agents will not be
responsible for the validity or performance of these agreements.
Underwriters, dealers or agents may engage in transactions with
us and may perform services for us in the ordinary course of
business.
We may sell the securities directly to institutional investors
or others who may be deemed to be underwriters within the
meaning of the Securities Act with respect to any sale of those
securities. We will describe the terms of any such sales in the
prospectus supplement or other applicable offering materials.
LEGAL
OPINIONS
Stinson Morrison Hecker LLP will issue an opinion about the
validity of the securities and EPRs qualification and
taxation as a REIT under the Code. In addition, the description
of EPRs taxation and qualification as a REIT
47
under the caption U.S. Federal Income Tax
Considerations is based upon the opinion of Stinson
Morrison Hecker LLP. Underwriters, dealers or agents who we
identify in a prospectus supplement or other applicable offering
materials may have their counsel give an opinion on certain
legal matters relating to the securities or the offering.
EXPERTS
Our consolidated financial statements and schedules as of
December 31, 2006 and December 31, 2005 and for each
of the years in the three-year period ended December 31,
2006 and managements assessment of the effectiveness of
internal control over financial reporting as of
December 31, 2006 have been incorporated by reference in
this prospectus and in the registration statement of which this
prospectus is a part, in reliance upon the reports of KPMG LLP,
independent registered public accounting firm, incorporated by
reference herein, and upon the authority of said firm as experts
in accounting and auditing. The audit report covering the
December 31, 2006 financial statements refers to a change
in the method of quantifying errors in 2006.
AVAILABLE
INFORMATION
We are subject to the informational requirements of the Exchange
Act, and in accordance with those requirements, we file reports
and other information with the SEC. The reports and other
information can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1580, 100 F
Street, N.E., Washington, D.C. 20549. Copies of this
material can be obtained by mail from the Public Reference
Section of the SEC at Room 1580, 100 F Street, N.E.,
Washington, D.C. 20549 at prescribed rates. The public may
obtain information on the operation of the public reference room
by calling the SEC at
1-800-SEC-0330.
The SEC maintains an Internet website (http://www.sec.gov) that
contains reports, proxy and information statements and other
materials that are filed through the SEC Electronic Data
Gathering Analysis and Retrieval (EDGAR) system. In addition,
our common shares, Series A Preferred Shares, Series B
Preferred Shares and Series C Preferred Shares are listed
on the New York Stock Exchange and we are required to file
reports, proxy and information statements and other information
with the New York Stock Exchange. These documents can be
inspected at the principal office of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
We have filed with the SEC a registration statement on
Form S-3,
of which this prospectus is a part, covering the securities
described in this prospectus. You should be aware that this
prospectus does not contain all of the information contained or
incorporated by reference in the registration statement and its
exhibits and schedules. You may inspect and obtain the
registration statement, including exhibits, schedules, reports
and other information that we have filed with the SEC, as
described in the preceding paragraph. Statements contained in
this prospectus concerning the contents of any document we refer
you to are not necessarily complete and in each instance we
refer you to the applicable document filed with the SEC for more
complete information.
48
4,500,000 Common
shares
Entertainment Properties
Trust
Prospectus supplement
,
2009
Joint book running managers
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J.P.
Morgan |
RBC Capital Markets |
Co-lead managers
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Citi |
Barclays Capital |
KeyBanc Capital Markets |
Co-manager
FBR Capital Markets