Registration Statement No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
CEDAR REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
Maryland | ||||
(State or other jurisdiction of incorporation of | 44 South Bayles Avenue (516) 767-6492 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) | 42-1241468 |
Bruce J. Schanzer
Chief Executive Officer
Cedar Realty Trust, Inc.
44 South Bayles Avenue
Port Washington, NY 11050-3765
(516) 767-6492
(Address,Name, address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Copies to:
Yoel Kranz Goodwin Procter LLP 620 Eighth Avenue New York, NY 10018 (212) 813-8800 | Adina G. Storch, Esq. General Counsel Cedar Realty Trust, Inc. 44 South Bayles Avenue Port Washington, NY 11050-3765 (516) 767-6492 |
Approximate date of commencement of proposed sale to the public:
If the only securities being registered on this formForm are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ¨☐
If any of the securities being registered on this formForm are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. ý☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨☐
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon
filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box.If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☒ | ||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act. ☐
CALCULATION OF REGISTRATION FEE CHART
Title of Class of Securities to be Registered | Amount to be Registered (1) | Proposed Maximum Offering Price Per Unit (2) | Proposed Maximum Aggregate Offering Price (3) | Amount of Registration Fee (4) |
Common Stock, $.06 par value per share | ||||
Preferred Stock, $.01 par value per share | ||||
Depositary Shares representing Preferred Stock | ||||
Warrants | ||||
Stock Purchase Contracts | ||||
Units | ||||
Total | $1,000,000,000 | $116,200 |
Title of each class of securities to be registered | Amount to be registered/proposed maximum offering price per unit/proposed maximum aggregate offering price | Amount of | ||
Common Stock | (1)(2) | |||
Preferred Stock | (1)(2) | |||
Depositary Shares | (1) | |||
Warrants | (1) | |||
Stock Purchase Contracts | (1) | |||
Units | (1) | |||
Total | $750,000,000 (1) | $81,825.00 (3) | ||
(1) | There are being registered hereunder such indeterminate number of shares of Common Stock, Preferred Stock, Depositary Shares, Warrants, Stock Purchase Contracts and Units of the Registrant as shall have an aggregate initial offering price not to exceed |
(2) | Includes rights to acquire common stock or preferred stock of the Company under any shareholder rights plan then in |
(3) | The registration fee has been calculated in accordance with Rule 457(o) under the Securities |
The Registrantregistrant hereby amends this Registration Statementregistration statement on such date or dates as may be necessary to delay its effective date until the Registrantregistrant shall file a further amendment whichthat specifically states that this Registration Statementregistration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, of 1933as amended, or until the Registration Statementthis registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. Wechange. These securities may not sell these securitiesbe sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY 11, 2021
PROSPECTUS
$1,000,000,000
CEDAR REALTY TRUST, INC.
Common Stock
Preferred Stock
Depositary Shares
Warrants
Stock Purchase Contracts and
Units
This prospectus provides you with a general description of securities that Cedar Realty Trust, Inc. may offer and issuesell from time to time. Each time upwe sell securities, we will provide a prospectus supplement that will contain specific information about the terms of that sale and may add to $1,000,000,000 of:
Cedar Realty Trust, Inc. may offer and sell these securities to or through one or more underwriters, dealers and/or agents on a continuous or delayed basis.
Our common stock is tradedlisted on the New York Stock Exchange, or NYSE, under the symbol “CDR.”
Investing in our securities involves certainvarious risks. See “Risk Factors”“Risk Factors” beginning aton page 3 of4 as well as the risk factors contained in documents Cedar Realty Trust, Inc. files with the Securities and Exchange Commission and which are incorporated by reference in this Prospectus for a description of certain factors that you should consider prior to purchasing the securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or passed upon the adequacydetermined if this prospectus is truthful or accuracy of this prospectus.complete. Any representation to the contrary is a criminal offense.
The date of this Prospectusprospectus is , 2015.
TABLE OF CONTENTS
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CERTAIN PROVISIONS OF MARYLAND LAW AND OUR CHARTER AND BYLAWS | 11 | |||
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This prospectus is part of a “shelf” registration statement that we filed on Form S-3 with the SEC under the Securities and Exchange CommissionAct of 1933, as amended (the “SEC”“Securities Act”). By using a “shelf”shelf registration statement, we or continuous offering process. Weany selling securityholders may sell any combination of our common stock, preferred stock, depositary shares, warrants, stock purchase contracts or units from time to time sell any combination of the securities offered in this prospectusand in one or more offerings up to a total dollar amount of $1,000,000,000. In this prospectus, the terms “Cedar,” “Company,” “we,” “us” and “our” include Cedar Realty Trust, Inc., and its consolidated subsidiaries, including Cedar Realty Trust Partnership, L.P., or our operating partnership.
You should rely only on the information contained or incorporated by reference in this prospectus and in any prospectus supplement. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We will not make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus and any prospectus supplement is accurate as of the date on its respective cover, and that any information incorporated by reference is accurate only as of the date of the document incorporated by reference, unless we indicate otherwise. Our business, financial condition, results of operations and prospects may have changed since those dates.
Unless the context otherwise requires, or unless otherwise specified, all references in this prospectus to the terms “we,” “us,” “our” and “our company” refer to Cedar Realty Trust, Inc., a Maryland corporation, together with its consolidated subsidiaries.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document that we file at the public reference facilities of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 for further information about the public reference facilities. These documents may also be accessed through the SEC’s electronic data gathering, analysis and retrieval system, or EDGAR, via electronic means, including the SEC’s home page on the Internet (www.sec.gov).
We also maintain an internet site at www.cedarrealtytrust.com where you may find additional information about us and our business. The information included, or referenced to, on, or otherwise accessible through, our website is not intended to form a part of or be incorporated by reference into this prospectus.
The SEC allows us to “incorporate by reference” the information that we file with them,into this prospectus and any accompanying prospectus supplement, which means that we can disclose important information to you by referring you to those documents.another document filed separately with the SEC. The information incorporated by reference is an importantdeemed to be part of this prospectus.prospectus and any accompanying prospectus supplement, except for any information superseded by information contained directly in this prospectus, any accompanying prospectus supplement, any subsequently filed document deemed incorporated by reference or any free writing prospectus prepared by or on behalf of us. This prospectus incorporatesand any accompanying prospectus supplement incorporate by reference the documents and reports listed below:
our Annual Report on Form 10-K for the year ended December 31, 2020 filed on February 11, 2021;
our Current Reports on Form 8-K furnishedfiled on February 4, 2021; and
the description of our shares of common stock included in our Registration Statement on Form 8-A filed on October 1, 2003, including any amendments and reports filed for the purpose of updating such description.
All documents filed by us under Item 2.02Section 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of the initial filing of the registration statement of which this prospectus forms a part and Item 7.01 (including any financial statements prior to effectiveness of the registration statement and/or exhibits relating thereto furnished pursuant to Item 9.01))on or after the date of this prospectus. The information containedprospectus and prior to the date of the completion of the offering of the securities described in any such document willthis prospectus shall also be considereddeemed to be incorporated by reference in this prospectus and to be a part of this prospectus from the date the document is filed with the SEC.
The information relating to us contained in this prospectus should be read together with the information in the documents incorporated by reference.
You may request a copycan obtain any of these filings,the documents incorporated by reference in this document from us or the SEC through the SEC’s website at the address described above. Documents incorporated by reference are available from us without charge, excluding any exhibits to those documents, unless the exhibit is specifically incorporated by reference as an exhibit in this document. You can obtain documents incorporated by reference in this document at no cost by requesting them in writing or telephoningby telephone from us at our principal executive offices at the following address:
Cedar Realty Trust, Inc.
Investor Relations
44 South Bayles Avenue
Port Washington, New York 11050
Telephone (516) 767-6492
We make forward-looking statements in this prospectus, including the information incorporated by reference or provided in this prospectus, and any accompanying prospectus supplement, within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For these statements, we claim the protections of the safe harbor for forward-looking statements contained in such Section. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “contemplates,” “aims,” “continues,” “would” or any prospectus supplement.“anticipates” or similar words or phrases in the positive or negative. In particular, forward looking statements include those pertaining to our capital resources, portfolio performance, dividend policy, results of operations, anticipated growth in our portfolio from operations, acquisitions, and market conditions and demographics. Forward-looking statements involve numerous risks and uncertainties, many of which are difficult to predict and generally beyond our control. They depend on assumptions, data or methods which may be incorrect or imprecise, and we may not be able to realize them. We havedo not authorized anyone else to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. Do not assumeguarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
the economic, political and social impact of, and uncertainty relating to, the COVID-19 pandemic, including:
o | the effectiveness or lack of effectiveness of governmental relief in providing assistance to large and small businesses, particularly including our retail tenants and other retailers, that have suffered significant declines in revenues as a result of mandatory business shut-downs, “shelter-in-place” or “stay-at-home” orders and social distancing practices, as well as individuals adversely impacted by the COVID-19 pandemic, |
o | the duration of any such orders or other formal recommendations for social distancing and the speed and extent to which revenues of our retail tenants recover following the lifting of any such orders or recommendations, |
o | the potential impact of any such events on the obligations of the Company’s tenants to make rent and other payments or honor other commitments under existing leases, |
o | the potential adverse impact on returns from redevelopment projects, |
o | to the extent we were seeking to sell properties in the near term, significantly greater uncertainty regarding our ability to do so at attractive prices, and |
o | the broader impact of the severe economic contraction and increase in unemployment that has occurred in the short term and negative consequences that will occur if these trends are not quickly reversed; |
the ability and willingness of the Company’s tenants and other third parties to satisfy their obligations under their respective contractual arrangements with the Company;
the loss or bankruptcy of the Company’s tenants, particularly in light of the adverse impact to the financial health of many retailers that has occurred and continues to occur as a result of the COVID-19 pandemic;
the ability and willingness of the Company’s tenants to renew their leases with the Company upon expiration, the Company’s ability to re-lease its properties on the same or better terms in the event of nonrenewal or in the event the Company exercises its right to replace an existing tenant, and obligations the Company may incur in connection with the replacement of an existing tenant, particularly, in light of the adverse impact to the financial health of many retailers that has occurred and continues to occur as a result of the COVID-19 pandemic, and the significant uncertainty as to when and the conditions under which potential tenants will be able to operate physical retail locations in future;
macroeconomic conditions, such as a disruption of or lack of access to capital markets and the adverse impact of the recent significant decline in the Company’s share price from prices prior to the spread of the COVID-19 pandemic;
financing risks, such as the Company’s inability to obtain new financing or refinancing on favorable terms as the result of market volatility or instability; (vii) increases in the Company’s borrowing costs as a result of changes in interest rates and other factors, including the potential phasing out of LIBOR after 2021;
the impact of the Company’s leverage on operating performance;
risks related to the market for retail space generally, including reductions in consumer spending, variability in retailer demand for leased space, adverse impact of e-commerce, ongoing consolidation in the retail sector and changes in economic conditions and consumer confidence;
risks endemic to real estate and the real estate industry generally;
competitive risks;
risks related to the geographic concentration of the Company’s properties in the Washington, D.C. to Boston corridor;
damage to the Company’s properties from catastrophic weather and other natural events, and the physical effects of climate change;
the inability of the Company to realize anticipated returns from its redevelopment activities;
uninsured losses;
loss of key officers and executives;
the Company’s ability and willingness to maintain its qualification as a REIT in light of economic, market, legal, tax and other considerations; and
information intechnology security breaches.
Investors should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or to third parties making the forward-looking statements). We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date of this prospectus, or any prospectus supplement is accurateexcept as of any date other than the date on the front of these documents.
reports on Form 10-K and quarterly reports on Form 10-Q for future periods and current reports on Form 8-K as it files them with the SEC, and to other materials Cedar Realty Trust, Inc. may furnish to the public from time to time through Forms 8-K or otherwise.
We were organized in 1984 and elected to be taxed as a real estate investment trust, or REIT, in 1986. We are a fully-integrated real estate investment trust that focuses primarily on ownership and operation of grocery-anchored shopping centers straddling the Washington D.C. to Boston corridor. At December 31, 2014,2020, we owned and managed a portfolio of 5954 operating properties (excluding properties “held for sale/conveyance”) totaling approximately 9.2 million square feet of gross leasable area, or GLA.
We conduct our business and own all of our properties through our operating partnership, in which we owned at December 31, 20142020 an approximate 99.5%99.4% economic interest, and are its sole general partner.
Our principal executive offices are located at 44 South Bayles Avenue, Port Washington, NY 11050, our telephone number is (516) 767-6492 and our website address is www.cedarrealtytrust.com.www.cedarrealtytrust.com. The information included, or referenced to, on, or otherwise accessible through, our website is not intended to form a part of or be incorporated by reference into this prospectus.
You should carefully consider the risks described in our securities involves significant risks. Please see the risk factors under the heading “Risk Factors” in our periodic reports filed with the SEC under the Securities Exchange Act of 1934, which aredocuments incorporated by reference in this prospectus. Beforeprospectus before making an investment decision, you should carefully consider thesedecision. These risks as well as other information we include or incorporate by reference in this prospectus and any prospectus supplement. The risks and uncertainties we have described are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affectimpair our business operations.
When we offer particular securities, we will describe in a prospectus seesupplement relating to the section entitled “Risk Factors”securities offered how we intend to use the proceeds from their sale. We may invest funds not required immediately for such purposes in short-term investment grade securities.
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK
The following description of our common stock and preferred stock is not complete but is a summary of the rights and preferences of our common stock and preferred stock. While we believe that the following description covers the material terms of our common stock and preferred stock, the description may not contain all of the information that is important to you. We encourage you to read carefully our charter and bylaws and the applicable provisions of Maryland law for a more complete understanding of our common stock and preferred stock. Any series of preferred stock we issue will be governed by our charter (as amended and in effect as of the date of such issuance). Copies of our charter and bylaws are filed as exhibits to the registration statement of which this prospectus is a part and the following summary, to the extent it relates to those documents, is qualified in its entirety by reference thereto.
Authorized and Outstanding Securities.
Our authorized capital stock consists of 150 million shares of common stock with a par value of $.06 per share, and 12.5 million shares of preferred stock, with a par value of $.01 per share. As of December 31, 2020, there were (1) 13,529,969 shares of common stock outstanding, (2) 1,449,609 shares outstanding of our 7.25% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”), and (3) 5,000,000 shares outstanding of our 6.50% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”).
Description of Common Stock
Voting
Under our articles of incorporation, as amended, which we refer to as our “charter”, holders of our common stock are entitled to one vote per share on all matters submitted to the common stock holders for vote at all meetings of stockholders.
Dividends and Distributions
Subject to the preferential dividend rights of any sectionoutstanding preferred stock, holders of common stock are entitled “Risk Factors”to receive such dividends as may be declared by our board of directors. Upon the declaration of dividends, holders of common stock are entitled to share in supplementsall such dividends, pro rata, in accordance with the relative number of shares of common stock held by each such holder.
Subject to the preferential dividend rights of any outstanding preferred stock, dividends and distributions are declared by our board of directors and paid to the holders of common stock in cash, property or our other securities (including shares of any class or series whether or not shares of such class or series are already outstanding) out of funds legally available therefor. Each share of common stock has identical rights with respect to dividends and distributions.
Liquidation Rights
Subject to the preferential rights of any outstanding preferred stock, in the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of, the Company, each holder of common stock shall be entitled to receive, ratably with each other holder of common stock, that portion of the assets of the Company available for distribution to its stockholders as the number of shares of the common stock held by such holder bears to the total number of shares of common stock then outstanding.
Transferability
The common stock is freely transferable, and except for the 9.9% limit described below under “Restrictions on Ownership and Transfer” and federal and state securities laws restrictions on our directors, officers and other affiliates and on persons holding “restricted” stock, our stockholders are not restricted in their ability to sell or transfer shares of the common stock.
Sinking Fund, Preemptive, Subscription and Redemption Rights
The common stock does not carry any sinking fund, preemptive, subscription or redemption rights enabling a holder to subscribe for or receive shares of any class of our stock or any other securities convertible into shares of any class of our stock.
Listing
The common stock is listed on the New York Stock Exchange, which we refer to as the NYSE, under the symbol “CDR”.
Registrar and Transfer Agent
American Stock Transfer & Trust Company, LLC is the registrar and transfer agent for the common stock.
Description of Preferred Stock
Our charter authorizes our board of directors to authorize the issuance of preferred stock in one or more classes or series and may determine, with respect to any such class or series, the rights, preferences, privileges and restrictions of the preferred stock of that class or series, including:
distribution rights;
conversion rights;
voting rights;
redemption rights and terms of redemptions; and
liquidation preferences.
The preferred stock we may offer from time to time under this prospectus, when issued, will be duly authorized, fully paid and non-assessable, and holders of preferred stock will not have any preemptive rights.
The issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control or other transaction that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders. In addition, any preferred stock that we issue could rank senior to our common stock with respect to the payment of distributions, in which case we could not pay any distributions on our common stock until full distributions have been paid with respect to such preferred stock.
The preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of each class or series of preferred stock will be fixed by articles supplementary relating to the class or series. We will describe the specific terms of the particular series of preferred stock in the prospectus supplement relating to that series, which terms will include:
the designation and par value of the preferred stock;
the voting rights, if any, of the preferred stock;
the number of shares of preferred stock offered, the liquidation preference per share of preferred stock and the offering price of the preferred stock;
the distribution rate(s), period(s) and payment date(s) or method(s) of calculation applicable to the preferred stock;
whether distributions will be cumulative or non-cumulative and, if cumulative, the date(s) from which distributions on the preferred stock will cumulate;
the procedures for any auction and remarketing for the preferred stock, if applicable;
the provision for a sinking fund, if any, for the preferred stock;
the provision for, and any restriction on, redemption, if applicable, of the preferred stock;
the provision for, and any restriction on, repurchase, if applicable, of the preferred stock;
the terms and provisions, if any, upon which the preferred stock will be convertible into common stock, including the conversion price (or manner or calculation) and conversion period;
the terms under which the rights of the preferred stock may be modified, if applicable;
the relative ranking and preferences of the preferred stock as to distribution rights and rights upon the liquidation, dissolution or winding up of our affairs;
any limitation on issuance of any other series of preferred stock, including any series of preferred stock ranking senior to or on parity with the series of preferred stock as to distribution rights and rights upon the liquidation, dissolution or winding up of our affairs;
any listing of the preferred stock on any securities exchange;
if appropriate, a discussion of any additional material federal income tax considerations applicable to the preferred stock;
information with respect to book-entry procedures, if applicable;
in addition to those restrictions described below, any other restrictions on the ownership and transfer of the preferred stock; and
any additional rights, preferences, privileges or restrictions of the preferred stock.
In addition to any other class or series of preferred stock that we may offer, issue or sell pursuant to this prospectus and in the documents incorporated by reference into this prospectus. We do not intend, and disclaim any duty or obligation, to update or revise any forward-looking statements set forth or incorporated by reference in thisaccompanying prospectus to reflect any change in expectations, change in information, new information, future events or other circumstances on which such information maysupplement, we have been based.
Upon certain changes in control (as defined in our charter), the holders of each series of preferred stock shall be entitled to receive out of our assets legally available for distribution to stockholders liquidating distributions in the amount of the liquidation preference per share, plus an amount equal to all dividends accrued and unpaid on such series of preferred stock. Such preferred stockholders will receive these distributions before any distribution or payment shall be made to the holders of any common stock or any other class or series of our capital shares ranking junior to the preferred stock in the distribution of assets upon our liquidation, dissolution or winding up. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of preferred stock will have no right or claim to any of our remaining assets. If our available assets are insufficient to pay the amount of the liquidating distributions on all outstanding preferred stockSeries B Preferred Stock and the corresponding amounts payable on all shares of other classes or series of our capital shares ranking equally with the preferred stock in the distribution of assets, then the holders of the preferred stock and all other such classes or series of capital shares shall share on a pro rata basis in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be entitled.
Our Series B Preferred Stock is traded on the NYSE under the symbol “CDR-PrB” and our Series C Preferred Stock is traded on the NYSE under the symbol “CDR-PrC”. The transfer agent and registrar for our Series B Preferred Stock and Series C Preferred Stock is American Stock Transfer & Trust Company, LLC.
Restrictions on Ownership
In order for each series of preferred stock may contain provisions restricting the ownership and transfer of the preferred stock, including any depositary shares. The applicable prospectus supplement will specify any additional ownership limitation relating to the depositary shares being offered thereby.
Our charter provides that no person or entity may beneficially own, or be deemed to own by virtue of the applicable constructive ownership requirementsprovisions of the Code, more than 9.9% of the outstanding shares of our common stock. The articles supplementary designating the terms of the Series B Preferred Stock and certain other requirements for qualificationSeries C Preferred Stock provide that the 9.9% ownership limitation applies to ownership of these series of preferred stock as a REIT, our Articles of Incorporation contain a provision restricting theseparate classes. Any person who acquires or attempts to acquire beneficial or constructive ownership or acquisition of shares of common stock.
If our board of directors or a committee thereof determines that a transfer or proposed transfer of the shares of common stock or preferred stock violates or may violate the ownership limitation or certain other provisions of our charter prohibiting transfers that may have the effect of causing us to lose our REIT status, our board of directors or committee thereof is empowered to take any action it deems advisable to refuse to give effect to or to prevent such transfer, including (i) electing to purchase any shares owned by a person or group of affiliated persons in excess of the Registrarownership limitations or (ii) refusing to transfer or issue shares to a person if an acquisition of shares by such person or group would result in such person or group exceeding these ownership limits or jeopardizing our status as a REIT. Any transfer of shares that would result in a person or group exceeding ownership limits or in our disqualification as a REIT is deemed void as of the date of such transfer. Our board of directors has the right to waive the ownership limitations and Transfer Agent for theexcess share provisions of our charter relating to our common stock or preferred stock.
The following description containsof shares represented by depositary shares sets forth certain general terms and provisions of warrants to which any prospectus supplementdepositary agreements, depositary shares and depositary receipts. This summary does not contain all of the information that you may relate.find useful. The particular terms of the warrants offered by any prospectus supplementdepositary shares and the extent, if any, to which such general provisions may not apply to the warrants so offeredrelated agreements and receipts will be described in the prospectus supplement relating to those depositary shares. For more information, you should review the relevant form of deposit agreement and relevant form of depositary receipts, which will be filed with the SEC.
Interest in a Fractional Share, or Multiple Shares, of Preferred Stock
We may, at our option, elect to offer depositary shares, each of which would represent an interest in a fractional share, or multiple shares, of preferred stock instead of whole shares of preferred stock. If so, we will allow a depositary to issue depositary shares to the public, each of which will represent an interest in a fractional share, or multiple shares, of preferred stock as described in the prospectus supplement.
Deposit Agreement
The shares of preferred stock underlying any depositary shares will be deposited under a separate deposit agreement between us and a bank or trust company acting as depositary with respect to those shares of preferred stock. The prospectus supplement relating to a series of depositary shares will specify the name and address of the depositary. Under the deposit agreement, each owner of a depositary share will be entitled, in proportion of its interest in a fractional share, or multiple shares, of the preferred stock underlying that depositary share, to all the rights and preferences of that preferred stock, including dividend, voting, redemption, conversion, and exchange and liquidation rights.
Depositary shares will be evidenced by one or more depositary receipts issued under the deposit agreement. We will distribute depositary receipts to those persons purchasing such depositary shares in accordance with the terms of the offering made by the related prospectus supplement.
Dividends and Other Distributions
If we pay a cash distribution or dividend on a series of preferred stock represented by depositary shares, the depositary will distribute such dividends to the record holders of such depositary shares. If the distributions are in property other than cash, the depositary will distribute the property to the record holders of the depositary shares. However, if the depositary determines that it is not feasible to make the distribution of property, the depositary may, with our approval, sell such property and distribute the net proceeds from such sale to the record holders of the depositary shares.
Withdrawal of Preferred Stock
Upon surrender of depositary receipts at the office of the depositary and upon payment of the charges provided in the deposit agreement and subject to the terms thereof, a holder of depositary receipts is entitled to have the depositary deliver to such holder the applicable number of shares of preferred stock underlying the depositary shares evidenced by the surrendered depositary receipts. There may be no market, however, for the underlying preferred stock and once the underlying preferred stock is withdrawn from the depositary, it may not be redeposited.
Redemption and Liquidation
The terms on which the depositary shares relating to the preferred stock of any series may be redeemed, and any amounts distributable upon our liquidation, dissolution or winding up, will be described in the applicable prospectus supplement.
Voting
Upon receiving notice of any meeting at which the holders of preferred stock represented by depositary shares are entitled to vote, the depositary will mail the notice to the record holders of the depositary shares relating to such series of preferred stock. Each record holder of such depositary shares on the record date may instruct the depositary on how to vote the shares of preferred stock underlying that holder’s depositary shares. The depositary will vote the shares of preferred stock underlying those depositary shares according to those instructions, and we will take reasonably necessary actions to enable the depositary to do so. If the depositary does not receive specific instructions from the record holders of such depositary shares, it will abstain from voting those shares of preferred stock, unless otherwise discussed in the prospectus supplement.
Amendment and Termination of Deposit Agreement
We and the depositary may amend the form of depositary receipt evidencing the depositary shares and the related deposit agreement. However, any amendment that significantly affects the rights of the holders of depositary shares will not be effective unless holders of a majority of the then outstanding depositary shares approve that amendment. No amendment, however, may impair the right of any holder of depositary shares to receive any money or other property to which he or she may be entitled under the terms of the deposit agreement at the times and in the manner and amount provided for therein. We or the depositary may terminate a deposit agreement only if:
• | we redeemed or reacquired all outstanding depositary shares relating to the deposit agreement; | ||
• | if applicable, all outstanding depositary shares have been converted into shares of Common stock or another series of preferred stock; or | ||
• | there has been a final distribution with respect to the preferred stock of any series in connection with our liquidation, dissolution or winding up and such distribution has been made to the related depositary shareholders. |
The following description sets forth certain general terms and provisions of the warrants that we may offer from time to time. This summary does not contain all of the information that you may find useful. The particular terms of any of the warrants that we may offer and the related agreements will be described in the prospectus supplement relating to those warrants. For more information, please refer toyou should review the provisions of the warrant, arelevant form of warrant agreement and the relevant form of warrant certificate, if any, which we will filebe filed with the SEC at or prior to the time of the sale of the warrant. For information on incorporation by reference, and how to obtain copies of these documents, see the sections of this prospectus entitled “Incorporation of Certain Documents by Reference” and “Where You Can Find More Information.”
We may issue warrants for the purchase of one or more of the other securities described in this prospectus. Warrants may be issued independently, together with any other securities offered by any prospectus supplement and may be attached to or separately, warrants to purchase our common stock or preferred stock.separate from such securities. We willmay issue the warrants under a warrant agreementsagreement to be entered into between us and a warrant agent. We will name any warrant agent or as shall be set forth in the applicable prospectus supplement. The warrant agent will act solely as our agent in connection withYou should review the warrants of the series being offered and will not assume any obligation or relationship of agency or trust for or with any holders or beneficial owners of warrants. The applicable prospectus supplement will describefor the followingspecific terms where applicable, of any warrants in respect of which this prospectus is being delivered:
• | the title of such warrants; | ||
• | the | ||
• | |||
the price or prices at which the warrants will be issued; | |||
• | the |
• | |||
the date, if any, on and after which the warrants and the | |||
• | the price at which each security that can be purchased upon exercise of | ||
• | |||
the date on which the right to exercise the warrants will commence and the date on which |
• | the minimum or maximum | ||
• | information with respect to book-entry procedures, if | ||
• | a discussion of certain federal income tax considerations; and | ||
• | any other terms of such warrants, including terms, procedures and limitations relating to the transferability, exchange and exercise of such warrants. |
DESCRIPTION OF STOCK PURCHASE CONTRACTS
The following description sets forth certain general terms and provisions of the stock purchase contracts that we may offer from time to this prospectustime. This summary does not contain all of the information that you may find useful. The particular terms of any purchase contract that we also may issue warrants to underwriters or agents as additional compensation in connection with a distribution of our securities.
If we offer any time up to the closestock purchase contracts, certain terms of business on the expiration date set forth in the applicable prospectus supplement. After the closethat series of business on the expiration date, unexercised warrantsstock purchase contracts will become void.
• | the price of the securities or other property subject to the stock purchase contracts (which may be determined by reference to a specific formula described in the stock purchase contracts); | ||
• | any requirement for us to make periodic payments to holders or vice versa, and whether the payments are unsecured or pre-funded; | ||
• | any provisions relating to any security provided for the stock purchase contracts; | ||
• | whether the stock purchase contracts obligate the holder or us to purchase or sell, or both purchase and sell, | ||
• | whether the stock purchase contracts are to be prepaid or not; | ||
• | whether the stock purchase contracts are to be settled by delivery, or by reference or linkage to the value, performance or level of | ||
• | any acceleration, cancellation, termination or other provisions relating to the settlement of the stock purchase contracts; | ||
• | whether the stock purchase contracts will be issued in fully registered or global | ||
• | a discussion of certain federal income tax considerations; and | ||
• | any other terms of such stock purchase contracts and any securities subject to such stock purchase contracts. |
The applicable prospectus supplement will describefollowing description sets forth certain general terms and provisions of the units that we may offer from time to time. This summary does not contain all of the information that you may find useful. The particular terms of any stock purchase contracts. The preceding descriptionof the units that we may offer and any description of stock purchase contractsthe related agreements will be described in the applicable prospectus supplement does not purportrelating to be complete and is subject to and is qualified in its entirety by reference to
those units. For more information, you should review the stock purchase contractrelevant form of unit agreement and the relevant form of unit certificate, if applicable, collateral arrangements and depository arrangements relating to such stock purchase contracts.
We may issue units comprised of one or more of the other securities described in this prospectus in any combination. Each unit will be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities included in the unit may not be held or transferred separately, at any time or at any time before a specified date.
• | the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances | ||
• | a description of the terms of any unit agreement governing the units; | ||
• | a description of the provisions for the | ||
• | the applicable U.S. federal income tax considerations relating to the units; and | ||
• | any other terms of the units | ||
CERTAIN PROVISIONS OF MARYLAND LAW AND OUR CHARTER AND BYLAWS
The applicable prospectus supplement will describefollowing description of the terms of any units. The precedingour stock and of certain provisions of Maryland law is only a summary. Copies of our charter and bylaws are filed as exhibits to the registration statement of which this prospectus is a part and the following description and any description of units in the applicable prospectus supplement does not purport to be complete and is subject to and is qualified in its entiretyentirely by reference to our charter and bylaws and the unit agreementapplicable provisions of Maryland law.
Number of Directors; Vacancies
Our charter provides that the number of directors will be set only by the board of directors in accordance with our bylaws. Our bylaws provide that a majority of our entire board of directors may at any time increase or decrease the number of directors. However, the number of directors may never be less than three.
Whenever any vacancy occurs on the board of directors by reason of death, resignation, removal, or increase in the authorized number of directors, or otherwise, it may be filled by the board of directors or by the stockholders at a special meeting of the stockholders called for that purpose.
Annual Elections; Majority Voting
Each of our directors will be elected by our stockholders to serve until our next annual meeting of stockholders and until his or her successor is duly elected and qualifies. Our bylaws provide for majority voting in uncontested director elections. Pursuant to our bylaws, in a contested election, directors are elected by a plurality of all of the votes cast in the election of directors, and in an uncontested election, a director is elected if he or she receives more votes for his or her election than votes against his or her election.
Removal of Directors
Our charter provides that, subject to the rights, if any, of holders of any class or series of preferred stock to elect or remove one or more directors, a director may be removed only for cause, and then only by the affirmative vote of at least a majority of the votes entitled to be cast generally in the election of directors. “Cause” is defined in our charter to mean the willful and continuous failure of a director to substantially perform such director’s duties (other than any such failure resulting from temporary incapacity due to physical or mental illness) or the willful engaging by a director in gross misconduct materially and demonstrably injurious to the corporation.
Calling of Special Meetings of Stockholders
Our bylaws provide that special meetings of stockholders may be called by our chairman of the board. Additionally, our bylaws provide that, subject to the satisfaction of certain procedural and informational requirements by the stockholders requesting the meeting, a special meeting of stockholders to act on any matter that may properly be considered at a meeting of stockholders shall be called by the chairman of the board or the secretary of the
corporation upon the written request of (x) a majority of the directors or (y) the holders of 25 percent or more of all the votes entitled to be cast on such matter at such meeting.
Business Combinations
The MGCL provides that “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:
any person who beneficially owns 10% or more of the voting power of the corporation’s voting stock; or
an affiliate or associate of the corporation who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding stock of the corporation.
After the five-year prohibition, any business combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by two super-majority stockholder votes, unless, among other conditions, the holders of the corporation’s common stock receive a minimum price, as defined by Maryland law, for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares. None of these provisions of Maryland law will apply, however, to business combinations that are approved or exempted by the board of directors of the corporation before the time that the interested stockholder becomes an interested stockholder. Furthermore, a person is not an interested stockholder if the transaction by which he or she would otherwise have become an interested stockholder is approved in advance by the board of directors.
As permitted by Maryland law, our charter contains an election exempting any business combinations between us and any other person or entity from the business combination provisions of the MGCL and, consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between us and any person as described above. As a result, any person described above may be able to enter into business combinations with us that may not be in the best interest of our stockholders without compliance by our company with the supermajority vote requirements and other provisions of the statute.
The MGCL provides that the acquirer of certain levels of voting power in electing directors of a Maryland corporation (one-tenth or more, but less than one-third, one-third or more but less than a majority, and a majority or more) is not entitled to vote the shares in excess of the applicable collateral arrangementsthreshold unless voting rights for the shares are approved at a meeting by holders of two-thirds of the votes entitled to be cast on the matter, excluding shares of stock owned by the acquiror or by an officer or director of the corporation who is an employee of the corporation, or unless the acquisition of the shares has been specifically or generally approved or exempted from the statute by a provision in the corporation’s charter or bylaws adopted before the acquisition of the shares.
As permitted by Maryland law, our charter contains an election exempting from the control share acquisition statute any and depositary arrangementsall acquisitions by any person of shares of our stock.
Appraisal Rights
The MGCL provides that stockholders may exercise appraisal right, subject to certain exceptions, including if appraisal rights are eliminated under a company’s charter or if the company’s common stock is listed on a national securities exchange. Because the common stock is listed on the NYSE, our stockholders will not be entitled to exercise appraisal rights in the event of our consolidation, merger, transfer or business combination, the acquisition of the stockholder’s stock in a share exchange, amendment of our charter in a way that substantially adversely affects the stockholders’ rights, or our conversion to a different form of entity.
Subtitle 8
Under Subtitle 8 of Title 3 of the MGCL, a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three directors who are not officers or employees of the corporation, and who are not
affiliated with a person who is seeking to acquire control of the corporation, may elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any or all of the following five provisions:
a classified board requirement;
a two-thirds vote requirement for removing a director;
a requirement that the number of directors be fixed only by vote of the board of directors;
a requirement that a vacancy on the board be filled only by the affirmative vote of a majority of the remaining directors and for the remainder of the full term of the class of directors in which the vacancy occurred and until a successor is elected and qualifies; or
a requirement for the calling of a special meeting of stockholders only at the written request of stockholders entitled to cast at least a majority of the votes entitled to be cast at the meeting.
We have not elected to create a classified board; however, our board of directors may elect in the future, without stockholder approval, to create a classified board or elect to be subject to one or more of the other provisions of Subtitle 8.
Amendments to Our Charter and Bylaws
Other than amendments permitted to be made without stockholder approval under Maryland law or by a specific provision in our charter, our charter may be amended only if such amendment is declared advisable by our board of directors and approved by the affirmative vote of stockholders entitled to cast two-thirds of all of the votes entitled to be cast on the matter. Our board of directors, without stockholder approval, has the power under our charter to amend our charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we are authorized to issue, to authorize us to issue authorized but unissued shares of our common stock or preferred stock and to classify any unissued shares of our preferred stock, or reclassify any unissued shares of our common stock or preferred stock, into one or more classes or series of stock and set the terms of such newly classified or reclassified shares.
Our board of directors may amend or repeal our bylaws or adopt new by laws. In addition, stockholders, by the affirmative vote of a majority of all votes entitled to be cast on the matter, may amend or repeal our bylaws or adopt new bylaws, provided, that stockholders may not alter or repeal the section of our bylaws providing for director, officer and employee indemnification or the provisions relating to amendment of the bylaws, in either case without the approval of our board of directors
Transactions Outside the Ordinary Course of Business
We generally may not merge with or into or consolidate with another company, sell all or substantially all of our assets or engage in a statutory share exchange or convert unless such units.
Anti-Takeover Effect of Certain Provisions of Maryland Law and of Our Charter and Bylaws
The provisions of the MGCL, our charter and our bylaws described above including, among others, and the restrictions on ownership and transfer of our stock, could delay, defer or prevent a transaction or a change of control of our company that might involve a premium price for holders of our common stock or otherwise be in their best interests.
Indemnification and Limitation of Directors’ and Officers’ Liability
Our charter and bylaws provide for indemnification of directors and officers to the fullest extent permitted by Maryland law.
The MGCL generally permits indemnification of any director or officer with respect to any proceedings unless it is established that: (a) the act or omission of the director or officer was material to the matter giving rise to the proceeding and was either (i) committed in bad faith or (ii) the result of active and deliberate dishonesty; (b) the director or officer
actually received an improper personal benefit in money, property or services; or (c) in the case of a criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. The indemnity may include judgments, penalties, fines, settlements, and reasonable expenses actually incurred by the director or officer in connection with the proceedings. However, a corporation may not indemnify a director or officer who shall have been adjudged to be liable to the corporation, or who instituted a proceeding against the corporation (unless such proceeding was brought to enforce the indemnification provisions of the MGCL, or the charter, bylaws, a resolution of the board of directors of the corporation or an agreement approved by the board of directors). In addition, a director may not be indemnified under the MGCL in respect of any proceeding charging improper personal benefit to the director, whether or not involving action in the director’s official capacity, in which the director was adjudged to be liable on the basis that personal benefit was improperly received. The termination of any proceeding by judgment, order or settlement does not create a presumption that the director or officer did not meet the requisite standard of conduct required for permitted indemnification. The termination of any proceeding by conviction, or plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the director or officer did not meet that standard of conduct. A director or officer who has been successful on the merits or otherwise, in the defense of any proceeding referred to above shall be indemnified against any reasonable expenses incurred by the director or officer in connection with the proceeding.
We have also entered into indemnity agreements with several of our officers and directors that provide that we will, subject to certain conditions, pay on behalf of the indemnified party any amount which the indemnified party is or becomes legally obligated to pay because of any act or omission or neglect or breach of duty, including any actual or alleged error or misstatement or misleading statement, which the indemnified party commits or suffers while acting in the capacity as an officer or director. Once an initial determination is made by the registrant that a director or officer did not act in bad faith or for personal benefit, the indemnification provisions contained in the charter, bylaws, and indemnity agreements would require us to advance any reasonable expenses incurred by the director or officer, and to pay the costs, judgments, and penalties determined against a director or officer in a proceeding brought against them.
Insofar as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under the Securities Act, we have been informed that in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
The following is a summary ofdiscusses certain materialU.S. federal income tax considerations relating toassociated with our qualification and taxation as a REIT and the acquisition, holding,ownership and disposition of our common stock, preferred stock, and depositary shares (such depository shares, together with ourof common stock and preferred stock, our “Stock”, and holders thereof, “Stockholders”), as well as our warrants. This summary is based on current law, is for general information only, and is not tax advice.
Special rules that are not discussed below may apply to you if, for example you are a broker-dealer, a trust, an estate, a regulated investment company, a REIT, a financial institution, an insurance company, a person who holds 10% or more (by vote or value) of our stock, a partnership or other pass-through entity or an investor in such an entity, treateda person subject to the alternative minimum tax provisions of the Code, a person holding our common stock or preferred stock as part of a “straddle,” “hedge,” “short sale,” “conversion transaction,” “synthetic security” or other integrated investment, a person required to accelerate any item of gross income as a corporationresult of such income being recognized on an applicable financial statement, a person who marks-to market our common stock or preferred stock, a U.S. expatriate, a U.S. Stockholder (as defined below) whose functional currency is not the U.S. dollar, a tax‑exempt entity, a Non‑U.S. Stockholder (as defined below) or are otherwise subject to special tax treatment under the Code.
This summary does not discuss the impact that any U.S. federal taxes other than income taxes (such as estate and gift taxes), U.S. state and local taxes, alternative minimum taxes, estate taxes, and taxes imposed by non-U.S. jurisdictions could have on the matters discussed in this summary. In addition, this summary assumes that security holders hold our stock as capital assets, which generally means as property held for investment. In addition, the following summary does not address any U.S. federal income tax purposes) createdconsequences to holders of our outstanding stock that could result if we issue any redeemable preferred stock at a price that exceeds its redemption price by more than a de minimis amount or organized under the lawsthat otherwise provides for dividends that are economically a return of the United States, any of its States orstockholders investment (rather than a return on the District of Columbia; (iii) an estate whose income is subject to federal income taxation regardless of its source; or (iv) any trust if (a) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisionsstockholder’s investment), which preferred stock could be considered “fast-pay stock” under Treasury Regulations promulgated under Section 7701(l) of the trust or (b) it has a valid election in place to beCode and treated under such regulations as a U.S. person. If a partnership (including any entity or arrangement treated as a partnership for federal income tax purposes) holds our Stock or warrants,financing instrument among the federal income tax treatment of a partner in the partnership will generally depend on the statusholders of the partnerfast-pay stock and the activities of the partnership. If you are a partner in a partnership holding our Stock or warrants, youother stockholders.
Prospective investors should consult yourtheir tax advisor regardingadvisors in order to determine the U.S. federal, state, local, foreign and other tax consequences to them of the purchase, ownership and disposition of our Stockshares, the tax treatment of a REIT and the effect of potential changes in the applicable tax laws.
For purposes of this discussion, references to “our company,” “we,” “us,” and “our” refer solely to Cedar Realty Trust, Inc. and do not include the Operating Partnership or warrants byany of our other subsidiaries. For purposes of this discussion, the partnership.
General
We have elected to be taxed as a REIT under Sections 856 through 860the applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”)and the Treasury regulations promulgated thereunder, or Treasury Regulations, commencing with theour taxable year ended December 31, 1986. We believe that we have been organized and have operated in such a manner as to qualify for taxation as a REIT and intend to continue to operate in such a manner. However, qualification and taxationoperating as a REIT depend uponso long as our ability to meet on a continuing basis, through actual annual operating results, asset composition, distribution levels and diversityBoard of stock ownership, the variousDirectors determines that REIT qualification tests and organizational requirements imposed under the Code, as discussed below. Accordingly, no assurance can be givenremains in our best interest. However, we cannot assure you that we have been organized and have operated, or will continue to be organized and operate, in a manner so as to remain qualified as a REIT.
In brief, a corporation that complies with the provisions in Code Sections 856 through 860 and qualifies as a REIT generally is qualified innot taxed on its entirety by the applicable Code provisions, the Treasury Regulations, and administrative and judicial interpretations thereof.
Goodwin Procter LLP has acted as our tax counsel in connection with this registration statement. Goodwin Procter LLP is of the opinion that commencing with our taxable year ended on December 31, 1998,2016, we have been operatedorganized in conformity with the requirements for qualification as a REIT under the Code and our actual method of operation from January 1, 2015 through the date of the opinionhereof (as represented by us to Goodwin Procter LLP) has enabled us to meet, and our proposed method of operation as described in this prospectus and as(as represented by us to Goodwin Procter LLP) will enable us to continue to so qualify throughmeet, the endrequirements for qualification and taxation as a REIT under the Code. This opinion has been filed as an exhibit to the registration statement of our current taxable year and thereafter. It must be emphasized that thewhich this prospectus is a part.
Goodwin Procter LLP’s opinion of Stroock & Stroock & Lavan LLP is based on various assumptionsrepresentations made by us as to certain factual matters relating to our prior and intended and expected organization, ownership and operation,method of operation. Goodwin Procter LLP has not verified those representations, and is conditioned upontheir opinion assumes that such representations and covenants madeare accurate and complete, that we have been owned, organized and operated and will continue to be owned, organized and will continue to operate in accordance with such representations and covenants and that we will take no action inconsistent with our status as a REIT. In addition, this opinion is based on the law existing and in effect as of its date (and to the extent applicable, the law in effect for prior periods covered by their opinion). Our qualification and taxation as a REIT will depend on our management regarding our organization, income, assets,ability to have met and to meet on a continuing basis, through actual operating results, the asset composition, distribution levels, diversity of share ownership and various other qualification tests imposed under the past, present and future conduct of our business operations, the compliance with whichCode discussed below. Goodwin Procter LLP has not reviewed and will not be reviewed by Stroock & Stroock & Lavan LLP. In addition,review our compliance with these tests on a continuing basis. Accordingly, the opinion of our tax counsel does not guarantee our ability to qualify as a REIT depends in part upon the operating results, organizational structure and entity classification for federal income tax purposes of certain affiliated entities, and also requires that we satisfy certain asset tests, some of which depend upon the fair market values of assets directly or indirectly owned by us which may not be susceptible to a precise determination. Accordingly, while we intend to operate so that we will qualifyremain qualified as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given by Stroock & Stroock & Lavan LLP or us that we have satisfied and will so qualifysatisfy such tests for our taxable year ended December 31, 2016 or for any particular year. Thesubsequent period. Also, the opinion of Goodwin Procter LLPis expressed asnot binding on the IRS, or any court, and could be subject to modification or withdrawal based on future legislative, judicial or administrative changes to U.S. federal income tax laws, any of the date issued and counselwhich could be applied retroactively. Goodwin Procter LLP will have no obligation to advise us or the holders of our Stockstock or warrantsdebt of any subsequent change in the matters stated, representedaddressed in its opinion, the factual representations or assumed,assumptions on which the conclusions in the opinion are based, or of any subsequent change in the applicable law. You should be aware that opinions of counsel
Taxation
We are subject to tax at normal corporate rates on our “REIT taxable income.” The term “REIT taxable income” means the taxable income as computed for a corporation which is not binding ona REIT:
without the Internal Revenue Service, or IRS,deductions allowed by Code Sections 241 through 247, and 249 (relating generally to the deduction for dividends received);
excluding amounts equal to: the net income from foreclosure property and the net income derived from prohibited transactions;
deducting amounts equal to: the net loss from foreclosure property, the net loss derived from prohibited transactions, the tax imposed by Code Section 857(b)(5) upon a failure to meet the 95% or the courts,75% gross income tests, the tax imposed by Code Section 856(c)(7)(C) upon a failure to meet the quarterly asset tests, the tax imposed by Code Section 856(g)(5) for otherwise avoiding REIT disqualification, and no assurance can be given that the IRS will not challengetax imposed by Code Section 857(b)(7) on non-arm's length transactions between REITs and their taxable REIT subsidiaries, or TRSs;
deducting the conclusions set forthamount of dividends paid under Code Section 561, computed without regard to the amount of the net income from foreclosure property (which is excluded from REIT taxable income); and
without regard to any change of annual accounting period pursuant to Code Section 443(b).
Because we are allowed the deduction for dividends paid in such opinions or that a court would not sustain such a challenge.
Although we can eliminate or substantially eliminates the “double taxation” (at the corporate and Stockholder levels) that generally results from investment in a corporation. However, we will still be required to payreduce our U.S. federal income tax as follows:
We will be required to pay taxtaxed at regularnormal corporate rates on any undistributed REIT taxable income including undistributedand/or net capital gains.gain.
If we fail to satisfy either the 95% Gross Income Test or the 75% Gross Income Test (each of which is described below), but our failure is due to reasonable cause and not willful neglect, and we therefore maintain our REIT qualification, we will be subject to a tax equal to the product of (a) the amount by which we failed the 75% or 95% Gross Income Test (whichever amount is greater) multiplied by (b) a fraction intended to reflect our profitability.
We maywill be subject to an excise tax if we fail to currently distribute sufficient income. In order to make the “required distribution” with respect to a calendar year, we must distribute the sum of (1) 85% of our REIT ordinary income for the calendar year, (2) 95% of our REIT capital gain net income for the calendar year, and (3) the excess, if any, of the grossed up required distribution (as defined in the Code) for the preceding calendar year over the distributed amount for that preceding calendar year. Any excise tax liability would be equal to 4% of the difference between the amount required to paybe distributed under this formula and the “alternative minimum tax” on our items of tax preference under some circumstances.amount actually distributed and would not be deductible by us.
If we have (1) net income from the saleprohibited transactions (generally, gain from inventory or other disposition of “foreclosure“dealer property” which is held primarily for sale) such income would be subject to customers in the ordinary course of business or (2) other nonqualifying income from foreclosure property, wea 100% tax. See “- REIT Qualification Tests - Prohibited Transactions.”
We will be requiredsubject to payU.S. federal income tax at the highest corporate rate on this income.
If we fail to satisfy any of the REIT asset tests, (otheras described below, other than ade minimis failure of the 5% asset test,or 10% vote test or the 10% value test),REIT assets tests that does not exceed a statutory de minimis amount as described more fully below, but our failure is due to reasonable cause and not due to willful neglect and we nonetheless maintain our REIT qualification because of specified cure provisions, we will be required to pay a tax equal to the greater of $50,000 or the amount determined by multiplying the highest corporate tax rate multiplied(currently 21%) by the net income generated by the nonqualifyingnon‑qualifying assets that caused usduring the period in which we failed to fail such test.satisfy the asset tests.
If we fail to satisfy any other provision of the Code that would result in our failure to continue to qualify as a REIT (other than a violation of the REIT gross income tests or certain violations of the asset tests described below)test requirement) and thethat violation is due to reasonable cause and not due to willful neglect, we may retain our REIT qualification butif we will be required to pay a penalty of $50,000 for each such failure.
We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record-keepingrecord‑keeping requirements intended to monitor our compliance with rules relating to the composition of our Stockholders, as described below in “— Requirementsstockholders. Such penalties generally would not be deductible by us.
If we fail to qualify for Qualificationtaxation as a REIT.”REIT because we have accumulated non-REIT earnings and profits at the end of the relevant year (i.e., any earnings and profits that we inherit from a taxable C corporation during the year, such as through tax-free merger or tax-free liquidation with a taxable C corporation, and that are not distributed or otherwise offset during the taxable year), and the presence of non-REIT earnings and profits at year-end is not due to fraud with intent to evade tax, we generally may retain our REIT status by paying a special distribution, but we will be required to pay an interest charge on 50% of the amount of undistributed non-REIT earnings and profits.
If we acquire any asset from a corporation that is subject to full corporate‑level U.S. federal income tax in a transaction in which our basis in the asset is determined by reference to the transferor corporation’s basis in the asset, such as through a tax-free merger or other tax-free reorganization, and we recognize gain on the
disposition of such asset during the 5‑year recognition period beginning on the date we acquired such asset, then such gain up to the amount of the excess of the fair market value of such asset as of the beginning of such recognition period over our adjusted basis in such asset at the beginning of such recognition period will be subject to U.S. federal income tax at the highest regular corporate U.S. federal income tax rate (currently 21%). The results described in this paragraph assume that the non‑REIT corporation does not elect, in lieu of this treatment, to be subject to an immediate tax when the asset is acquired by us. |
We will be subject to a 100% penalty tax on some payments we receive or on certain other amounts (or on certain expenses deducted by our TRSs) if arrangements among us, our tenants and/or our TRSs are not comparable to similar arrangements among unrelated parties.
The earnings of our subsidiaries that are C corporations, including any subsidiary we have elected to treat as a TRS, will generally be subject to U.S. federal corporate income tax.
We may elect to retain and pay income tax on our net capital gain. In that case, a stockholder would include his, her or its proportionate share of our undistributed net capital gain (to the extent we make a timely designation of such gain to the stockholder) in his, her or its income as long‑term capital gain, would be deemed to have paid the tax that we paid on such gain, and would be allowed a refund or credit as the case may be for his, her or its proportionate share of the tax deemed to have been paid, and an adjustment would be made to increase the stockholder’s basis in our stock. Stockholders that are U.S. corporations will also appropriately adjust their earnings and profits for the retained capital gain in accordance with Treasury Regulations to be promulgated.
In addition, notwithstanding our qualification as a REIT, we and our subsidiaries may be subject to a variety of taxes other than federal income taxes, including payroll taxesstate and state, local and foreign income, property, orpayroll and other taxes on our assets and operations.
REIT Qualification as a REIT
Organizational Requirements. The Code defines a REIT as a corporation, trust or association:
(1) | that is managed by one or more trustees or directors; |
(2) | the beneficial ownership of which is evidenced by transferable shares or by transferable certificates |
(3) | that would be taxable as a domestic corporation but for |
(4) | that is |
(5) | that meets the gross income requirements (the “Gross Income Tests”), asset requirements (the “Asset Tests”) and annual distribution requirements summarized below; |
(6) | the beneficial ownership of which is |
(7) | generally in which, at any time during the last half of each taxable year, no more than 50% in value of the outstanding stock |
(8) | that makes an election to be taxable as a REIT for the current taxable year, or has made this election for a previous taxable year, which election has not been revoked or terminated, and satisfies all relevant filing and other administrative requirements established by the IRS that must be met to maintain qualification as a REIT; and |
(9) | that |
Organizational requirements (1) to (4), inclusive, must be met during the entire taxable year, that conditionthrough (5) must be met during at least 335 days of aeach taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months,for which REIT qualification is sought, while requirements (6) and condition (6) must be met during the last half of the taxable year. Conditions (5) and (6)(7) do not applyhave to be met until after the first taxable year for which ana REIT election is made to be taxed as a REIT. For purposes of condition (6), specified tax-exempt entities generally are treated as individuals and a “look-through” rule applies with respect to pension funds.made.
We believe that we have been organized, have operated and have issued sufficient shares of capital stock with sufficient diversity of ownership to allow us to satisfy conditions (1) through(6) and (7) inclusive, during the relevant time periods.above. In addition, our charter provides for restrictions regarding ownership andthe transfer of shares of our shares whichcapital stock that are intended to assist us in continuing to satisfysatisfying the share ownership requirements described in (5)conditions (6) and (6)(7) 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. If we fail to satisfy these share ownership requirements, except as provided in the next sentence, our status asrequirements.
To monitor its compliance with condition (7) above, a REIT will terminate.is required to send annual letters to its stockholders requesting information regarding the actual ownership of its shares. If however, we comply with the rules contained in applicable Treasury Regulations that require us to ascertain the actual ownership of our sharesannual letters requirement and we do not know or, exercising reasonable diligence, would not have known through the exercise of reasonable diligence, that we failedour failure to meet the requirement described in condition (6)(7) above, then we will be treated as having met this requirement. To comply with these rules, we must demand written statements each year from the record holders of significant percentages of our capital stock in which the record holders are to disclose the actual owners of the shares, i.e., the persons required to include in gross income the dividends paid by us. A list of those persons failing or refusingcondition (7) above. Failure to comply with this demand must be maintained as part of our records. Failure by us to comply with these record keepingsuch requirements could subject us to monetary penalties. A Stockholder that failsIf you fail or refusesrefuse to comply with the demand isletters, you will be required by the Treasury Regulations to submit a statement with itsyour tax return disclosing theyour actual ownership of theour shares and other information.
We have complied with condition (8) above by making our statusREIT election as a REIT unlesspart of our U.S. federal income tax return for our taxable year isended December 31, 1986.
For purposes of satisfying condition (9), we have adopted December 31 as our year end, and we intend to comply with the calendar year. We have and will continue to have a calendar taxable year.
Ownership of Interests in Partnerships Limited Liability Companies and Qualified REIT Subsidiaries.
The assets and gross income of thea partnership or limited liability companyof which a REIT is a partner retain the same character in the hands of the REIT as in the partnership for purposes of Section 856 of the Code, including satisfying the gross income tests and the asset tests.REIT. Thus, our pro rata share of the assets and items of income of our operatingany partnership including our operating partnership’s share of these items of any entity treated as a partnership or disregarded entity for federal income tax purposes in which it ownswe own an interest is treated as our assets and items of income for purposes of applying the requirements describedAsset Tests and Gross Income Tests.
If we become a partner in this discussion, including the incomeany partnership that we do not control and asset tests described below. A brief summary of the rules governing the federal income taxation of partnerships and limited liability companies is set forth below in “Tax Aspects of Our Operating Partnership, the Subsidiary Partnerships and the Limited Liability Companies.”
We may from time to time own and operate certain propertiesassets through wholly-owned subsidiaries that we intend to be treated as “qualified REIT subsidiaries” under the Code.subsidiaries.” A corporation will qualify as our qualified REIT subsidiary if we own 100% of the corporation’s outstanding stock and if we do not elect with the subsidiary to treat it as a “taxable REIT subsidiary,”TRS, as described below. A corporation that is a qualified REIT subsidiary is not treated as a separate corporation, and all assets, liabilities and items of income, gain, loss, deduction and credit of a qualified REIT subsidiary are treated as assets, liabilities and items of income, gain, loss, deduction and credit (as the case may be) of the parent REIT for all purposes underof the Code (including all REIT qualification tests). Thus, in applying the federal tax requirements described in this discussion, any corporations in which we own a 100% interest (other than any taxable REIT subsidiaries) are ignored,Asset Tests and all assets, liabilities and items of income, gain, loss, deduction and credit of such corporations are treated as our assets, liabilities and items of income, gain, loss, deduction and credit.Gross Income Tests. A qualified REIT subsidiary is not requiredsubject to payU.S. federal income tax, but may be subject to state or local tax, and our ownership of the stock of a qualified REIT subsidiary doeswill not violate the restrictions on ownership of securities, as described below under “—“- Asset Tests.” While we currently hold all of our investments through the Operating Partnership, we also may hold investments separately, through qualified REIT subsidiaries. Because a qualified REIT subsidiary must be wholly owned by a REIT, any such subsidiary utilized by us would have to be owned by us, or another qualified REIT subsidiary, and could not be owned by the Operating Partnership unless we own 100% of the equity interest in the Operating Partnership.
Certain other wholly-owned entities also may be treated as disregarded as separate from their owners for U.S. federal income tax purposes, generally including any domestic unincorporated entity that would be treated as a partnership if it had more than one owner for U.S. federal income tax purposes. For U.S. federal income tax purposes, all assets, liabilities and items of income, deduction and credit of any such disregarded entity will be treated as assets, liabilities and items of income, deduction and credit of the owner of the disregarded entity.
If a disregarded subsidiary or qualified REIT subsidiary ceases to be wholly owned by us (for example, if any equity interest in the subsidiary is acquired by a person other than us or another one of our disregarded subsidiaries), the subsidiary’s separate existence would no longer be disregarded for U.S. federal income tax purposes. Instead, it would have multiple owners and would be treated as either a partnership (if not formerly a qualified REIT subsidiary) or a taxable corporation (if formerly a qualified REIT subsidiary). Such an event could, depending on the circumstances, adversely affect our ability to satisfy the Asset Tests and Gross Income Tests, including the requirement that REITs generally may not own, directly or indirectly, more than 10% of the value or voting power of the outstanding securities of another corporation. See “- Asset Tests” and “- Income Tests.”
Ownership of Interests in Taxable REIT Subsidiaries
A taxable REIT subsidiarydomestic TRS is subject to U.S. federal income tax as a regular C corporation. In addition,corporation (and a taxable REIT subsidiarynon-U.S. TRS would be subject to U.S. federal income tax on certain U.S. source income and income effectively connected with a U.S. trade or business, if any). We may conduct material activities through a TRS and the amount of such taxes paid by our TRS(s) could be prevented from deducting interest on debt funded directly or indirectly by its parent REIT if certain tests regarding the taxable REIT subsidiary’s debt to equity ratio and interest expense are not satisfied. substantial.
A REIT’s ownership of securities of taxable REIT subsidiaries willa TRS is not be subject to the 5% or 10% vote or valueasset tests or 5% asset test described below. However, no more than 20% of the gross value of a REIT’s assets may be represented by securities of one or more TRSs (or 25% for our taxable years beginning before January 1, 2018).
Share Ownership Requirements
The common stock and any other stock we issue must be held by a minimum of 100 persons (determined without attribution to the owners of any entity owning our stock) for at least 335 days in each full taxable year, proportionately adjusted for partial taxable years. In addition, we cannot be “closely‑held,” which means that at all times during the second half of each taxable year, no more than 50% in value of our stock may be owned, directly or indirectly, by five or fewer “individuals” as specifically defined for this purpose (determined by applying certain attribution rules under the Code to the owners of any entity owning our stock). However, these two requirements do not apply until after the first taxable year an entity elects REIT status.
Our charter contains certain provisions intended, among other purposes, to enable us to meet these share ownership requirements. First, subject to certain exceptions, our charter provides that no person may beneficially or constructively own (applying certain attribution rules under the Code) more than 9.9% in value of the aggregate of our outstanding shares of stock or more than 9.9% (in value or in number of shares, whichever is more restrictive) of any class or series of shares of our stock, as well as in certain other circumstances. See “—the Section entitled “Description of Capital Stock - Restrictions on Ownership and Transfer” in this prospectus. Additionally, our charter contains provisions requiring each holder of our shares to disclose, upon demand, constructive or beneficial ownership of shares as deemed necessary to comply with the requirements of the Code. Furthermore, stockholders failing or refusing to comply with our disclosure request will be required, under Treasury Regulations promulgated under the Code, to submit a statement containing information regarding the beneficial ownership of our stock to the IRS at the time of filing their annual income tax returns for the year in which the request was made.
Asset Tests
At the close of each calendar quarter of the taxable year, we must satisfy five tests based on the composition of our assets, or the Asset Tests. After initially meeting the Asset Tests at the close of any quarter, we will not lose our qualification as a REIT for failure to satisfy the Asset Tests at the end of a later quarter solely due to changes in value of our assets. In addition, if the failure to satisfy the Asset Tests results from an acquisition during a quarter, the failure generally can be cured by disposing of non‑qualifying assets within 30 days after the close of that quarter. We will continue to maintain adequate records of the value of our assets to ensure compliance with these tests and intend to act within 30 days after the close of any quarter as may be required to cure any noncompliance.
75% Asset Test. At least 75% of the value of our assets must be represented by “real estate assets,” cash, cash items (including receivables) and government securities, which we refer to as the 75% Asset Test. Real estate assets include (1) real property (including interests in real property and interests in mortgages on real property or on interests in real property); (2) for taxable years beginning on or after January 1, 2016, personal property leased with real property if the rents attributable to the personal property would be rents from real property under the income tests discussed below; (3) shares in other qualifying REITs; (4) for taxable years beginning on or after January 1, 2016, debt instruments issued by publicly offered REITs; and (5) any stock or debt instrument (not otherwise a real estate asset) attributable to the temporary investment of “new capital,” but only for the one‑year period beginning on the date we received the new capital. A stock or debt instrument will qualify as being attributable to the temporary investment of new capital if the money used to purchase the stock or debt instrument is received by us in exchange for our stock (other than through a dividend reinvestment plan) or in a public offering of debt obligations that have a maturity of at least five years. Assets that do not qualify for purposes of the 75% test are subject to the additional asset tests described below under “- 25% Asset Test.”
We are currently own interestsinvested in a number of real properties. In addition, we have invested and intend to invest funds not used to acquire properties in cash sources, “new capital” investments or other liquid investments which allow us to continue to qualify under the 75% Asset Test. Therefore, our investment in real properties should constitute “real estate assets” and should allow us to meet the 75% Asset Test. A real estate mortgage loan that we own generally will be treated as a real estate asset for purposes of the 75% Asset Test if, on the date that we acquire or originate the mortgage loan, the value of the real property securing the loan is equal to or greater than the principal amount of the loan. Notwithstanding the foregoing, for taxable years beginning after December 31, 2015, a mortgage loan secured by both real property and personal property shall be treated as a wholly qualifying real estate asset (and all interest and gain from such loan may be qualifying income for purposes of the 75% income test) if the fair market value of such personal property does not exceed 15% of the total fair market value of all such property, even if the real property collateral value is less than the outstanding principal balance of the loan.
25% Asset Test. Except as described below, the remaining 25% of our assets generally may be invested without regard to the 75% Asset Test, which we refer to as the 25% Asset Test. However, if we invest in any securities that do not qualify under the 75% Asset Test, other than securities of our TRS, such securities may not exceed either (1) 5% of the value of our assets as to any one issuer; or (2) 10% of the outstanding securities by vote or value of any one issuer. The 10% value test does not apply to certain “straight debt” and other excluded securities, as described in the Code, including but not limited to any loan to an individual or estate, any obligation to pay rents from real property, and any security issued by a REIT. In addition, a partnership interest held by a REIT is not considered a “security” for purposes of the 10% value test; instead, the REIT is treated as owning directly its proportionate share of the partnership’s assets, which is based on the REIT’s proportionate interest in any securities issued by the partnership (disregarding for this purpose the general rule that a partnership interest is not a security), but excluding certain securities described in the Code.
For purposes of the 10% value test, “straight debt” means a written unconditional promise to pay on demand or on a specified date a sum certain in money if (i) the debt is not convertible, directly or indirectly, into stock, and (ii) the interest rate and interest payment dates are not contingent on profits, the borrower’s discretion, or similar factors other than certain contingencies relating to the timing and amount of principal and interest payments, as described in the Code. In the case of an issuer which is a corporation or a partnership, securities that otherwise would be considered straight debt will not be so considered if we, and any of our “controlled taxable REIT subsidiaries and may acquire securities in additional taxable REIT subsidiariessubsidiaries” as defined in the future.
TRS Ownership Test. As described above, no more than 20% of the gross value of our assets may be represented by securities of one or more TRSs (or 25% for taxable years beginning before January 1, 2018).
25% Debt Test. Not more than 25% of the value of our total assets may be represented by debt instruments of publicly offered REITs that are not secured by mortgages on real property or interests in real property.
We believe that our holdings of real estate assets and other securities comply with the foregoing REIT asset requirements, and we intend to monitor compliance on an ongoing basis.
A REIT is able to cure certain asset test violations. As noted above, a REIT cannot own securities of any one issuer representing more than 5% of the total value of the REIT’s assets or more than 10% of the outstanding securities, by vote or value, of any one issuer. However, a REIT would not lose its REIT qualification for itsfailing to satisfy these 5% or 10% asset tests in a quarter if the failure is due to the ownership of assets the total value of which does not exceed the lesser of (1) 1% of the total value of the REIT’s assets at the end of the quarter for which the measurement is done, or (2) $10 million; provided, that in either case the REIT either disposes of the assets within six months after the last day of the quarter in which the REIT identifies the failure (or such other time period prescribed by the Department of the Treasury, or the Treasury), or otherwise meets the requirements of those rules by the end of that period.
If a REIT fails to meet any of the asset test requirements for a quarter and the failure exceeds the de minimis threshold described above, then the REIT still would be deemed to have satisfied the requirements if (1) following the REIT’s identification of the failure, the REIT files a schedule with a description of each asset that caused the failure, in accordance with regulations prescribed by the Treasury; (2) the failure was due to reasonable cause and not to willful neglect; and (3) the REIT disposes of the assets within six months after the last day of the quarter in which the identification occurred or such other time period as is prescribed by the Treasury (or the requirements of the rules are otherwise met within that period). A REIT that relies on this cure provision must pay a tax on the failure equal to the greater of (1) $50,000, or (2) an amount determined (under regulations) by multiplying (x) the highest rate of tax for corporations under Code Section 11, by (y) the net income generated by the assets that caused the failure for the period beginning on the first taxable year ended December 31, 2009 (the “Affiliated REIT”), although itdate of the failure and ending on the date the REIT has subsequently sold such interest.
Income Tests
For each calendar year, we must satisfy two separate tests based on the composition of our gross income, requirements annually to maintainas defined under our qualification as a REIT. First, in each taxable year we must derive directlymethod of accounting, or indirectly atthe Gross Income Tests.
75% Gross Income Test. At least 75% of our gross income for the taxable year (excluding gross income from prohibited transactions and certain hedging transactions entered into after July 30, 2008,other items) must result from (1) rents from real property, (2) interest on obligations secured by mortgages on real property or on interests in real property, (3) gains from the sale or other disposition of real property (including interests in real property and interests in mortgages on real property, and including gain from the sale of certain foreign currency gains recognized after July 30, 2008personal property ancillary to such real property) other than property held primarily for sale to customers in the ordinary course of our trade or business, (4) dividends from other qualifying REITs and cancellationgain (other than gain from prohibited transactions) from the sale of indebtedness income) from investmentsshares of other qualifying REITs, (5) other specified sources relating to real property or mortgages on real property, including “rentsthereon, and (6) for a limited time, income from real property,” interest derived from mortgage loans secured by real property (including certain qualified mezzanine financings secured by interests in entities owning real property), dividends from other REITs (suchtemporary investments of “new capital” (as described under the 75% Asset Test above). We refer to this requirement as the Affiliated REIT), gains from the sale of real estate assets and income from certain types of temporary investments. Second, in each taxable year we must derive at75% Gross Income Test.
95% Gross Income Test. At least 95% of our gross income (excluding gross income from prohibited transactions and certain hedging transactions entered into onother items) for the taxable year must be derived from (1) sources which satisfy the 75% Gross Income Test, (2) dividends, (3) interest, or after January 1, 2005, certain foreign currency gains recognized after July 30, 2008 and cancellation of indebtedness income) from the real property investments described above or dividends, interest and(4) gain from the sale or disposition of stock or other securities that are not assets held primarily for sale to customers in the ordinary course of our trade or business. We refer to this requirement as the 95% Gross Income Test.
Rents from any combinationReal Property. Income attributable to a lease of the foregoing. For these purposes, the term “interest”real property generally does not include any amount received or accrued, directly or indirectly, if the determination of all or some 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.
Generally, rent will not qualify as “rents from real property” if it is based in any waywhole, or in part, on the income or profits ofderived by any person.person from the underlying property. However, an amount we receive or accrue generallyrent will not be excludedfail to so qualify if it is based on a fixed percentage (or designated varying percentages) of receipts or sales, including amounts above a base amount
so long as the base amount is fixed at the time the lease is entered into, the provisions are in accordance with normal business practice and the arrangement is not an indirect method for basing rent on income or profits.
If a REIT furnishes or renders certain “impermissible tenant services” to the tenants at the property, and the income derived from the termservices exceeds 1% of the total amount received by that REIT with respect to the property, then no amount received by the REIT with respect to the property will qualify as “rents from real property” solely
In addition, we intend to permit our operating partnershipstructure, and, to take actionsthe extent applicable, we believe willwe have structured, our leasing activities so that any non-qualifying rent (i) based in whole or in part on the income or profits of any person (excluding rent based on a percentage of receipts or sales, as described above), (ii) attributable to personal property in an amount greater than 15% of the total rent received under the applicable lease, and (iii) from any lease with a related party tenant does not cause us to fail the Gross Income Tests.
Amounts received as rent from a TRS are not excluded from rents from real property by reason of the related party rules described above, if the activities of the TRS and the nature of the properties it leases meet certain requirements (generally relating to satisfyleases of less than 10% of the rental conditions described above. However, there can be no assurancetotal leased space in a building and leases of hotels and health care facilities). The TRSs must pay regular corporate tax rates on any taxable income they earn. Further, the rules impose a 100% excise tax on transactions between a TRS and its parent REIT or the REIT’s tenants whose terms are not on an arm’s‑length basis.
Interest Income. All interest income qualifies under the 95% Gross Income Test, and interest on loans secured by real property or by interests in real property qualifies under the 75% Gross Income Test; provided, that in both cases, the IRS will agree with our determination that we have satisfiedinterest does not depend, in whole or in part, on the rental conditions described above.
Dividend Income. Distributions from TRSs or other types of income with respectcorporations that are not REITs or qualified REIT subsidiaries are generally classified as dividends to the properties it owns that will not qualify for eitherextent of these tests. We believe, however, that the aggregate amountearnings and profits of these fees and other non-qualifyingthe distributing corporation. Such distributions generally constitute qualifying income in any taxable year will not cause us to exceed the limits on non-qualifying income under either the 75% gross income test or the 95% gross income test.
We intend to structure any hedging transactions in a manner that does not jeopardize our status as a REIT.
Foreclosure Property. Foreclosure property is real property and any personal property incident to such real property (1) that is acquired by a REIT as a result of the REIT having bid on the property at foreclosure or having otherwise reduced the property to ownership or possession by agreement or process of law after there was a default (or default was imminent) on a lease of the property or a mortgage loan held by the REIT and secured by the property, (2) for which the related loan or lease was acquired by the REIT at a time when the REIT did not know or have reason to know that default would occur, and (3) for which such REIT makes a proper election to treat the property as foreclosure property. REITs generally are subject to tax at the maximum U.S. federal corporate tax rate (currently 21%) on any net income from foreclosure property, including any gain from the disposition of the foreclosure property, other than income that would otherwise be qualifying income for purposes of the 75% Gross Income Test. Any gain from the sale of property for which a foreclosure property election has been made will not be subject to the 100% tax on gains from prohibited transactions described above, even if the property would otherwise constitute inventory or dealer property in the hands of the selling REIT. If we believe we will receive any income from foreclosure property that is not qualifying income for purposes of the 75% Gross Income Test, we intend to elect to treat the related property as foreclosure property.
Satisfaction of the Gross Income Tests. Our share of income from the Operating Partnership’s properties primarily gives rise to rental income and gains on sales of the properties, substantially all of which generally has qualified and will qualify under the 75% Gross Income and 95% Gross Income Tests. However, we have TRSs through which we may provide certain services, engage in activities that would give rise to non-qualifying income for either Gross Income Test, make sales that we believe could be subject to the 100% tax on prohibited transactions if made outside a TRS, and/or otherwise conduct certain activities or hold certain properties. The gross income generated by our TRSs would not be included in our gross income. However, any dividends from our TRSs to us would be included in our gross income and qualify for the 95% Gross Income Test, but not the 75% Gross Income Test. Because the activities of our TRSs are/could be substantial, the amount of such dividends also could be substantial.
If we fail to satisfy one or both ofeither the 75% Gross Income or 95% gross income testsGross Income Tests for any taxable year, we may nevertheless qualifyretain our qualification as a REIT for thesuch 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:
Annual Distribution Requirements
In addition to the other tests described above, we are required to distribute dividends other(other than capital gain dividends,dividends) to our Stockholdersstockholders each year in an amount at least equal to the excess of: (1) the sum of:
For taxable years beginning before January 1, 2015, in order for purposes ofour distributions to be counted as satisfying the 90%annual distribution requirement. The amount distributedrequirements for REITs, and to provide us with a REIT‑level tax deduction, the distributions must not be “preferential dividends.” A dividend is not a preferential — i.e., every Stockholderdividend if the distribution is (1) pro rata among all outstanding shares of stock within a particular class, and (2) in accordance with the preferences among
different classes of stock as set forth in our organizational documents. Any non-publicly offered REIT in which we invest would be subject to the preferential dividend rule regardless of the classdate of Stock to which a distribution is made must be treated the same as every other Stockholder of that class, and no class of Stock may be treated otherwise than according to its dividend rights as a class. To the extent thatdistribution.
If we do not distribute all100% of our net capital gain, or distribute at least 90%, but less than 100%, of our “REITREIT taxable income,” as adjusted, we will be requiredsubject to payU.S. federal income tax on the undistributed portion. We also will be subject to an excise tax if we fail to currently distribute sufficient income. In order to make the “required distribution” with respect to a calendar year and avoid the excise tax, we must distribute the sum of (1) 85% of our REIT ordinary income for the calendar year, (2) 95% of our REIT capital gain net income for the calendar year, and (3) the excess, if any, of the grossed up required distribution (as defined in the Code) for the preceding calendar year over the distributed amount at regular corporatefor that preceding calendar year. Any excise tax rates. liability would be equal to 4% of the difference between the amount required to be distributed and the amount actually distributed and would not be deductible by us.
We believe we have made,paid and intend to continue to make, timely distributionspay sufficient dividends each year to satisfy thesethe annual distribution requirements and avoid U.S. federal income and excise taxes on our earnings; however, it may not always be possible to minimize our corporate tax obligations.
“residual interests” in REMICs or taxable mortgage pools;
loans or mortgage‑backed securities held as assets that are issued at a discount and require the accrual of taxable economic interest in advance of receipt in cash; and
loans on which the borrower is permitted to defer cash payments of interest, distressed loans on which we may be required to accrue taxable interest income even though the borrower is unable to make current servicing payments in cash, and debt securities purchased at a discount.
We will closely monitor the relationship between our REIT taxable income and cash flow, and if necessary to comply with the annual distribution requirements, will attempt to borrow funds to pay dividendsfully provide the necessary cash flow or to pay dividends in the form of taxable Stock dividends or taxable in-kindin‑kind distributions of property, including taxable stock dividends. The insufficiency of our cash flow to cover our distribution requirements could require us to (1) sell assets in adverse market conditions, (2) borrow on unfavorable terms, (3) distribute amounts that would otherwise be invested in future acquisitions or capital expenditures or used for the repayment of debt, (4) pay dividends in the form of taxable stock dividends or (5) use cash reserves, in order to meetcomply with the REIT distribution requirements.
We may seek to satisfy our distribution requirements by making taxable stock dividends. Moreover, we may determine to utilize certain stock dividends the 90% distribution test with taxable distributionsproper treatment of our Stock or debt securities. The IRS has issuedwhich is not entirely clear without obtaining a private letter rulings to other REITs treating certain distributions that are paid partly in cash and partly in stock as dividends that would satisfy the REIT annual distribution requirement and qualify for the dividends paid deduction for federal income tax purposes. Those rulings may be relied upon only by the taxpayers to whom they were issued, although we could request a similar ruling from the IRS. Accordingly,IRS confirming the treatment of the stock dividend as a taxable stock dividend. In that case, it is unclear whether and to what extent we will be able to make taxable dividends payable in cash and Stock. We have no current intention to makepossible that the IRS could challenge our treatment of the stock dividend as a taxable stock dividend, payable inand if such challenge were successful the stock dividend would not count towards satisfying our Stock.
Non-REIT Accumulated Earnings and Profits. As a REIT, at the end of a taxable year (including our first REIT taxable year ending December 31, 1986), we may be able to rectify an inadvertent failure to meet the 90% distribution requirement for a year by paying “deficiency dividends” to our Stockholdersnot have any earnings and profits accumulated in a laternon-REIT year which may be included(sometimes referred to as “non-REIT earnings and profits”). Such non-REIT earnings and profits include any accumulated earnings and profits of non-REIT corporations whose assets we acquire (or are deemed to have acquired) through tax-free mergers and other tax-free reorganizations and through tax-free liquidations.
We believe that we have operated, and we intend to continue to operate, so that we have not had and will not have any earnings and profits accumulated in our deduction for dividends paid fora non-REIT year at the earlier year. Thus, we may be able to avoid being taxed on amounts distributed as deficiency dividends, subject to the 4% excise tax described below. However, we will be required to pay interest to the IRS based upon the amountclose of any deduction claimed for deficiency dividends.
Failure to Qualify
If we fail to continue to qualify, for taxationU.S. federal income tax purposes, as a REIT in any taxable year, and thewe may be eligible for relief provisions doif the failures are due to reasonable cause and not apply,willful neglect and if a penalty tax is paid with respect to each failure to satisfy the applicable requirements. If the applicable relief provisions are not available or cannot be met, we will not be requiredable to pay tax, including any applicable alternative minimumdeduct our dividends and will be subject to U.S. federal income tax on our taxable income at regular corporate rates. Distributions to Stockholders in any year in which we fail to qualify as a REIT will not be deductible by us, and we will not be required to distribute any amounts to our Stockholders. As a result, we anticipate that our failure to qualify as a REIT would reduce therates, thereby reducing cash available for distribution by us to our Stockholders.distributions. In addition, if we fail to qualify as a REIT,such event, all distributions to Stockholders will be taxable as regular corporate dividends tostockholders (to the extent of our current and accumulated earnings and profits. In this event, corporate distributees mayprofits) will be eligible for the dividends-received deduction. In addition, individuals may be eligible for the preferential rates ontaxable as qualified dividend income. This “double taxation” results from our failure to continue to qualify as a REIT. Unless entitled to relief under specific statutory provisions, we will alsonot be ineligibleeligible to elect to be treated as a REIT qualification for the four taxable years following the year during which qualification was lost.
Recordkeeping Requirements
We are required to maintain records and request on an annual basis information from specified stockholders. These requirements are designed to assist us in determining the actual ownership of our outstanding stock and maintaining our qualification as a REIT.
Prohibited Transactions
As discussed above, we lostwill be subject to a 100% U.S. federal income tax on any net income derived from “prohibited transactions.” Net income derived from prohibited transactions arises from the sale or exchange of property held for sale to customers in the ordinary course of our qualification. Itbusiness which is not possibleforeclosure property. There is an exception to state whetherthis rule for a sale of property that meets the following requirements:
the property is a real estate asset under the 75% Asset Test;
we have held the property for not less than 2 years;
the aggregate expenditures made by us or any of our partners during the 2-year period preceding the date of the sale which are includable in the basis of the property do not exceed 30% of the net selling price of the property;
in the case of property consisting of land or improvements not acquired through foreclosure (or deed in lieu of foreclosure) or lease termination, we held the property for not less than 2 years for production of rental income;
if we do not satisfy the not more than 7 sale requirement in the next bullet, substantially all circumstancesof the marketing and development expenditures with respect to the property were made through an independent contractor from whom we do not derive income or a TRS; and
we satisfy one of the following with respect to the taxable year of the sale: (i) we do not make more than 7 sales of property during the taxable year (excluding sales of foreclosure property or in connection with an involuntary conversion); (ii) the sale occurs in a year when we dispose of less than 10% of our assets (measured by U.S. federal income tax basis or fair market value, and ignoring involuntary dispositions and sales of foreclosure property); or (iii) for tax years beginning after December 18, 2015, the sale occurs in a year when we dispose of less than 20% of our assets and less than 10% of the three-year average of our assets (measured by U.S. federal income tax basis or fair market value, and ignoring involuntary dispositions and sales of foreclosure property).
Although we may eventually sell any property, our primary intention in acquiring and operating the properties is the production of rental income and we do not expect to hold any property for sale to customers in the ordinary course of our business unless held through a TRS or we structure the sale of such property to comply with the above safe harbor. The 100% tax will not apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will be subject to tax in the hands of the corporation at regular corporate income tax rates.
Hedging Transactions. We have entered into hedging transactions with respect to one or more of our assets or liabilities and may enter into additional hedging transactions in the future. Hedging transactions could take a variety of forms, including interest rate swaps or cap agreements, options, futures contracts, forward rate agreements or similar financial instruments. Except to the extent provided by Treasury Regulations, any income from a hedging
transaction (1) made in the normal course of our business primarily to manage risk of interest rate or price changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred by us to acquire or own real estate assets, (2) entered into primarily to manage the risk of currency fluctuations with respect to any item of income or gain that would be entitled to this statutory relief.
Characterization of Net Leases. We have acquired and intend to acquire and own commercial properties subject to net leases. We believe we have structured and currently intend to structure our leases so that they qualify as true leases for U.S. federal income tax purposes.If, however, the IRS were to recharacterize our leases as service contracts, loans, partnership agreements or otherwise, rather than true leases, or disregard the leases altogether for tax purposes, all or part of the payments that we receive from the lessees would not be considered rent and might not otherwise satisfy the various requirements for qualification as “rents from real property.” In general, entities that are classifiedcase, we would not be able to satisfy either the 75% or 95% Gross Income Tests and, as a result, could lose our REIT qualification.
Tax on Built-in Gains of Former C Corporation Assets. If a REIT acquires an asset from a C corporation in a transaction in which the REIT’s tax basis in the asset is determined by reference to the basis of the asset in the hands of the C corporation (e.g., a tax-free reorganization under Section 368(a) of the Code), the REIT may be subject to an entity-level tax upon a taxable disposition during a 5-year period following the acquisition date. The amount of the tax is determined by applying the highest regular corporate tax rate, which is currently 21%, to the lesser of (i) the excess, if any, of the asset’s fair market value over the REIT’s tax basis in the asset on the acquisition date, or (ii) the gain recognized by the REIT in the disposition. The amount described in clause (i) is referred to as “built-in gain.”
Tax Aspects of Investments in Partnerships
General. We currently hold and anticipate holding direct or indirect interests in one or more partnerships, including the Operating Partnership. We operate as an Umbrella Partnership REIT, or UPREIT, which is a structure whereby we own a direct interest in the Operating Partnership, and the Operating Partnership, in turn, directly or indirectly owns our properties (generally through lower-tier partnerships and disregarded entities, forbut the Operating Partnership also may hold properties through lower-tier REITs or TRSs or other taxable corporations).
The following is a summary of the U.S. federal income tax purposes are “pass-through” entities which are not required to payconsequences of our investment in the Operating Partnership if the Operating Partnership is treated as a partnership for U.S. federal income tax.tax purposes. This discussion should also generally apply to any investment by the Operating Partnership in a lower-tier property partnership.
A partnership (other than a publicly traded partnership taxed as a corporation) is generally not subject to tax as an entity for U.S. federal income tax purposes. Rather, partners or members of such
Generally, a domestic entity with two or more members formed as a partnership or other non-corporate entity under state law will be taxed as a partnership for U.S. federal income tax purposes ofunless it specifically elects otherwise or is treated as a corporation under special rules for “publicly traded partnerships.” Because the REIT asset tests, weOperating Partnership was formed as a partnership under state law, for U.S. federal income tax purposes, the Operating Partnership will include our pro rata share of assets heldbe treated as a partnership if it has two or more partners and is not treated as a corporation under the publicly traded
partnership rules, or as a disregarded entity if it is treated as having one partner. As a result, if the Operating Partnership becomes wholly owned by our operatingus, it will cease to be a partnership including its share of the assets of its subsidiary partnershipsfor U.S. federal income tax purposes and limited liability companies, based on our capital interests. See “Taxation of Our Company.”
Domestic unincorporated entities as partnerships (or disregarded entities), as opposed to associations taxablewith more than one owner may be treated as corporations for U.S. federal income tax purposes. If our operatingpurposes in certain circumstances, including if the entity is a “publicly traded partnership” that does not qualify for an exemption based on the character of its income. A partnership is a “publicly traded partnership” under Section 7704 of the Code if:
interests in the partnership are traded on an established securities market; or
interests in the partnership are readily tradable on a “secondary market” or the “substantial equivalent” of a subsidiarysecondary market.
A partnership or limited liability company werewill not be treated as an association,a publicly traded partnership if it qualifies for certain safe harbors. We intend that the Operating Partnership (and any partnership invested in by the Operating Partnership) has complied and will comply with a “safe harbor” for partnerships with fewer than 100 partners to avoid being classified as a publicly traded partnership. However, no assurance can be given that any such partnership will at all times satisfy such safe harbor. We reserve the right to not satisfy any safe harbor.
There is a risk that the right of a holder of Operating Partnership common units to redeem the units for cash (or common stock at our option) could cause Operating Partnership common units to be considered readily tradable on the substantial equivalent of a secondary market, and we may not be eligible for a safe harbor at all times. If the Operating Partnership is a publicly traded partnership, it will be taxed as a corporation unless at least 90% of its gross income has consisted and will consist of “qualifying income” under Section 7704 of the Code. Qualifying income generally includes real property rents and certain other types of passive income. We believe that the Operating Partnership has had and will continue to have sufficient qualifying income so that it would be taxed as a partnership, even if it were classified as a publicly traded partnership. The income requirements applicable to REITs under the Code and the definition of qualifying income under the publicly traded partnership rules are very similar. Although differences exist between these two income tests, we do not believe that these differences will cause the Operating Partnership to fail the 90% gross income test applicable to publicly traded partnerships. However, there is sparse guidance as to the proper interpretation of this 90% gross income test, and thus it is possible that differences will arise that prevent us from satisfying the 90% gross income test.
If for any reason the Operating Partnership (or any partnership invested in by the Operating Partnership) is taxable as a corporation and would be required to pay an entity-levelfor U.S. federal income tax on its income. In this situation,purposes, the character of our assets and items of gross income would change, and could prevent us from satisfying the REIT asset tests and possibly the REIT income tests. See “Taxation of Our Company — Asset Tests” and “— Income Tests.” This, in turn, could prevent us from qualifying as a REIT. See “Taxation of Our Company — Failureresult, we would most likely be unable to Qualify” for a discussion ofsatisfy the effect of our failure to meet these tests.applicable REIT requirements under U.S. federal income tax laws discussed above. In addition, aany change in the tax status of our operatingany partnership a subsidiary partnership or limited liability company mightmay be treated as a taxable event. If so,event, in which case we mightcould incur a tax liability without anya related cash distributions. We believe our operatingdistribution. Further, if any partnership was treated as a corporation, items of income, gain, loss, deduction and eachcredit of our other partnerships and limited liability companies willsuch partnership would be classified as partnerships or disregarded entities for federalsubject to corporate income tax, purposes.
Income Gain, LossTaxation of Partnerships and Deduction
In some cases, special allocations of net profits or net losses will be required to comply with the Properties
such difference (as adjusted for amortization) may be referred to as adjusted from time to time.a “book-tax difference.” These allocations are solely for federal income designed to eliminate book‑tax purposes and do not affect the book capital accounts or other economic or legal arrangements among the partners.
Some expenses incurred in the conduct of the Operating Partnership’s activities may not be deducted in the year they were paid. To the extent this occurs, the taxable income of the Operating Partnership may exceed its cash receipts for the year in which the expense is paid. As discussed above, the costs of acquiring properties must generally be recovered through depreciation deductions over a number of years. Prepaid interest and loan fees, and prepaid management fees are other examples of expenses that may not be deducted in the year they were paid.
If a partnership (including the Operating Partnership) is audited by the IRS with respect to tax returns for taxable years beginning after December 31, 2017, unless such partnership qualifies for and affirmatively elects an alternative procedure, the partnership will be liable for the hypothetical increase in partner-level taxes (including interest and penalties) resulting from an adjustment of partnership (or partnership-related) tax items on audit. Such hypothetical tax liability, or “imputed underpayment,” will be determined based on the highest rate of tax applicable to corporations or individuals, subject to certain potential adjustments that may reduce the amount. Under the default rule, this imputed underpayment generally must be paid in the year of the adjustment, resulting in a potential shift of the cost of an assessment to those persons that are partners in such partnership in the year of the assessment, and away from those who were partners in the year of the underpayment. The partnership audit rules create procedures to modify (or reduce) a proposed imputed underpayment if certain conditions are satisfied, but no assurances can be provided that such procedures can, or will, be used to reduce or eliminate imputed underpayments.
Under an alternative “push out” procedure, if elected, the partnership would issue statements to persons who were partners in the audited year setting forth each partner’s share of any adjustments. Each partner is then required to take into account any increases or decreases in taxes that would result from such adjustments, including any adjustments to subsequent years before the year in which the statement is received resulting from the adjustment to the reviewed year, for the taxable year in which the partner receives the statement, rather than filing amended returns for the years adjusted. If any of our subsidiary partnerships or limited liability companies (including the Operating Partnership) is able to and in fact elects the alternative push out procedure for a given adjustment, the amount of taxes for which the persons who were partners in the year audited will be liable will be increased by any applicable penalties and a special interest charge. There can be no assurance that any such entities will be eligible to make such an election or that it will, in fact, make such an election for any given adjustment.
Taxation of U.S. Stockholders
Taxation of Taxable U.S. Stockholders. As long as we qualify as a REIT, distributions paid to our U.S. stockholders out of current or accumulated earnings and profits (and not apply.
Generally, for purposes of this discussion, a “U.S. Stockholder” is a person (other than a partnership or entity treated as a partnership for U.S. federal income tax purposes as if they are holders of our preferred stock represented by such depositary shares. Accordingly, such holders will be entitledor a person subject to take into account,special treatment under the Code) that is, for U.S. federal income tax purposes,purposes:
an individual who is a citizen or resident of the United States;
a corporation created or organized under the laws of the United States, any state thereof or the District of Columbia;
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust if (1) a court within the United States is able to exercise primary supervision over its administration and deductionsone or more U.S. persons have the authority to which they wouldcontrol all substantial decisions of the trust or (2) the trust has a valid election in effect under current Treasury Regulations to be entitled if they were holders of such preferredtreated as a U. S. person.
If a partnership holds our stock, in accordance with the rules discussed below. In addition, upon a surrender of depositary shares for only preferred stock as described in this prospectus under “Description of Depositary Shares — Withdrawal of Stock,” (i) no gain or loss will be recognized for U.S. federal income tax purposestreatment of a partner generally will depend upon the status of the partner and the activities of the partnership. A partner of a partnership holding our stock should consult its own tax advisor regarding the U.S. federal income tax consequences to the surrendering holder, (ii) the tax basispartner of the preferredacquisition, ownership and disposition of our stock acquired will beby the same as the aggregate tax basis of the depositary shares surrendered therefor, and (iii) the holding period for the preferred stock in the hands of the surrendering holder will include the period during which such holder owned such depositary shares.
Distributions in Respectexcess of Our Stock.
Distributions that are designated as capital gain dividends that will be allocable to a particular class of Stock will be equal to the totaltaxed as long‑term capital gain dividends multiplied by a fraction, the numerator of which will be the total dividends paid on that particular class of Stock for that taxable year, and the denominator of which shall be the total dividends paid on all classes of our Stock for that taxable year. We can designate a dividend as a capital gain dividend if and to the extent we have athey do not exceed our actual net capital gain (i.e., our net long-term capital gain for the year exceeds our net short-term capital loss for such year) for such taxable year. A U.S. Stockholder generally will take into account distributions that we designate as capital gain dividends as long-term capital gainyear, without regard to the period for which the U.S. Stockholder that receives such distribution has held our Stock. Aits stock. However, corporate U.S. Stockholderstockholders may however, be required to treat up to 20% of certainsome types of capital gain dividends as ordinary income. We also may decide to retain, rather than distribute, our net capital gain and pay any tax thereon. In such instances, U.S. Stockholders would include their proportionate shares of such gain in income as long‑term capital gain, receive a refund or credit on their returns for their proportionate share of our tax payments, and increase the tax basis of their shares of stock by the after‑tax amount of such gain.
With respect to U.S. Stockholders who are taxed at the rates applicable to individuals, we may elect to designate a portion of our distributions paid to such U.S. Stockholders as “qualified dividend income.” A portion of a distribution that is properly designated as qualified dividend income is taxable to non‑corporate U.S. Stockholders at the preferential rates applicable to long-term capital gain; provided, that the U.S. Stockholder has held the stock with respect to which the distribution is made for more than 60 days during the 121 day period beginning on the date that is 60 days before the date on which such stock became ex‑dividend with respect to the relevant distribution. The maximum amount of our distributions eligible to be designated as qualified dividend income for a taxable year is equal to the sum of:
(1) | the qualified dividend income received by us during such taxable year from C corporations (including TRSs); |
(2) | the excess of any “undistributed” REIT taxable income recognized during the immediately preceding year over the U.S. federal income tax paid by us with respect to such undistributed REIT taxable income; and |
(3) | the excess of any income recognized during the immediately preceding year attributable to the sale of a built‑in‑gain asset that was acquired in a carry‑over basis transaction from a non‑REIT corporation over the U.S. federal income tax paid by us with respect to such income. |
Generally, dividends that we receive will be treated as qualified dividend income for purposes of Our Preferred Stock. (1) above if the dividends are received from a regular, domestic C corporation (such as any TRS) or certain foreign corporations, and specified holding period and other requirements are met.
Dividend income is characterized as “portfolio” income under the passive loss rules and cannot be offset by a stockholder’s current or suspended passive losses. Corporate stockholders cannot claim the dividends‑received deduction for such dividends unless we lose our REIT qualification. In addition, taxable distributions from us generally will be treated as investment income for purposes of the investment interest limitations. A redemptionU.S. stockholder that elects to treat capital gain dividends, capital gains from the disposition of stock or qualified
dividend income as investment income for purposes of the investment interest limitation will be taxed at ordinary income rates on such amounts.
Although U.S. Stockholders generally will recognize taxable income in the year that a distribution is received, any dividend we declare in October, November or December of any year and is payable to a U.S. Stockholder of record on a specific date in any such month will be treated as both paid by us and received by the U.S. Stockholder on December 31st of the year it was declared if we pay it during January of the following calendar year. Because we are not a pass‑through entity for U.S. federal income tax purposes, U.S. Stockholders may not use any of our operating or capital losses to reduce their tax liabilities.
We may have the ability to declare a large portion of a dividend in shares of our stock. As long as a portion of such dividend is payable in cash or other property and certain requirements are met, the entire distribution may be treated as a dividend for U.S. federal income tax purposes. As a result, U.S. Stockholders could be taxed on 100% of the dividend in the same manner as a cash dividend, even though most of the dividend was paid in shares of our stock. In general, any dividend on shares of our preferred stock will be treated under Section 302 of the Code as a distribution and hence taxable as a dividend, toregardless of whether any portion is paid in stock.
In general, the extentsale of our currentstock held for more than 12 months will produce long‑term capital gain or accumulated earnings and profits, unless the redemption satisfies one of the tests set forth in Section 302(b) of the Code and is therefore treated as a saleloss. All other sales will produce short‑term gain or exchange of the redeemed preferred shock. The redemption will be treated as a sale or exchange if it (1) is “substantially disproportionate” with respect to your ownership in us, (2) results in a “complete termination” of your Stock interest in us, or (3) is “not essentially equivalent to a dividend” with respect to you, all
Information reporting (transfer statements) on other transactions may also be required under these rules. Generally, these reports are made for certain transactions. Transfer statements are issued between “brokers” and are not issued to the IRS or to you.
Stockholders should consult their tax advisors regarding the U.S. federalconsequences of these rules.
Capital Gains and Losses. The tax rate differential between capital gain and ordinary income tax treatment of the consideration received upon such conversion.
The Medicare Tax. For taxable years beginning after December 31, 2012, certainIf a U.S. Stockholders and certain U.S. Holders who are individuals, estates or trusts and whose income exceeds certain thresholds are required to paystockholder recognizes a 3.8% Medicare tax. The Medicare tax will apply to, among other things, dividends and other income derived from certain trades or business and net gains from the sale or other disposition of property, subject to certain exceptions. Dividends on our Stock and any gain from theloss upon a subsequent disposition of our Stockcommon stock or preferred stock in an amount that exceeds a prescribed threshold, it is possible that the provisions of certain Treasury Regulations involving “reportable transactions” could apply, with a resulting requirement to separately disclose the loss generating transactions to the IRS. While these regulations are directed towards “tax shelters,” they are written quite broadly and apply to transactions that would not typically be considered tax shelters. Significant penalties
apply for failure to comply with these requirements. You should consult your tax advisors concerning any possible disclosure obligation with respect to the receipt or disposition of our warrants generally willcommon stock or preferred stock, or transactions that might be the type of gainundertaken directly or indirectly by us. Moreover, you should be aware that iswe and other participants in transactions involving us (including our advisors) might be subject to the Medicare tax.
Taxation of Tax-ExemptTax‑Exempt Stockholders
Special “pension held REIT” rules apply to the ownership of the Code and REIT shares by some tax‑exempt from tax under Section 501(a) of the Code) that holds more than 10% of the value of the shares of a REIT may be required, under certain circumstances, to treat a portion of distributions from the REIT as UBTI. This requirement will apply for a taxable year only if (i) the REIT satisfies the requirement that not more than 50% of the value of its shares bepension trusts. If, treating stock held by five or fewer individuals (the “five or fewer requirement”) only by relying on a special “look-through” rule under
Backup Withholding and Information Reporting. The amount of dividends treated as paid during each calendar year and the proceeds of any year.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against such U.S. Stockholder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Medicare Tax. Certain net investment income earned by U.S. citizens and resident aliens and certain estates and trusts is subject to treat a portion3.8% Medicare tax. Net investment income includes, among other things, dividends on and capital gains from the sale or other disposition of REIT distributions as UBTI will not applyshares of stock. Holders of shares of our stock should consult their tax advisors regarding the effect, if the REIT is able to satisfy the “five or fewer” requirement without relyingany, of this tax on the “look-through” rule. The restrictions ontheir ownership and transfer of shares in our charter should prevent application of the foregoing provisions to qualified trusts purchasing our Stock, absent a waiver of the restrictions by the board of directors.
Taxation of Non-U.S.Non‑U.S. Stockholders and Non-U.S. Holders of Warrants
General. The rules governing the U.S. federal income taxation of nonresident alien individuals, foreign corporations, foreign partnerships and other foreignNon‑U.S. Stockholders or warrant holders (which we refer to collectively as Non-U.S. Stockholders or Non-U.S. Holders, respectively) are complex, and no attempt will be made herein to provide more thanas such, only a limited summary of such rules. The discussionrules is provided in this prospectus. A “Non‑U.S. Stockholder” means a nonresident alien individual or foreign corporation for U.S. federal income tax purposes that is not otherwise subject to special treatment under the Code. This disclosure does not consider any specific factsaddress stockholders that are non-U.S. trusts or circumstances thatestates, and
additional considerations may apply to a particular Non-U.S. Stockholderstockholders that are non-U.S. trusts or Non-U.S. Holder. Prospective Non-U.S. Stockholdersestates and Non-U.S. Holdersto the beneficiaries of any such non-U.S. trusts or estates. Non‑U.S. investors should consult with their own tax advisors and financial planners to determine the impact ofthat U.S. federal, state and local income tax or similar laws with regard towill have on such investors as a result of an investment in our Stock or warrants, including any reporting requirements.
Distributions - In General. Distributions paid by us that are not attributable to gain from our sales or exchanges by us of United States real property interests, or USRPIs (discussed further below), and not designated by us as capital gain dividends or retained capital gains, such distributions 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 distributionsdividends to Non‑U.S. Stockholders ordinarily will be subject to a withholding tax equal to 30% of the gross amount of the distributiondividend unless an applicable tax treaty reduces such rate or eliminates thethat tax. However, ifUnder some treaties, however, lower rates generally applicable to dividends do not apply to dividends from REITs. If income from the investment in our Stockstock is treated as effectively connected with the Non-U.S.Non‑U.S. Stockholder’s conduct of a United StatesU.S. trade or business, the Non-U.S.Non‑U.S. Stockholder generally will be subject to aU.S. federal income tax at the graduated rates applicable to ordinary income, in the same manner as U.S. Stockholders are taxed with respect to such dividends, unless an applicable income tax treaty provides otherwise (and also may also be subject to a 30% branch profits tax on its effectively connected earnings and profits in the case of up to 30% if the Non-U.S. Stockholdera stockholder that is a foreign corporation)corporation that is not entitled to the benefits of a treaty that exempts it from such tax). We expectIn general, Non‑U.S. Stockholders will not be considered to withhold United States federal income tax at the rate of 30% on the gross amount of any dividends paid tobe engaged in a Non-U.S. Stockholder that are not designated as capital gain dividends, unless (i) a lower treaty rate applies and the Non-U.S. Stockholder files with us an IRS Form W-8BEN or IRS Form W-8BEN-E evidencing eligibility for that reduced rate or (ii) the Non-U.S. Stockholder files an IRS Form W-8ECI with us claiming that the distribution is income treated as effectively connected to a United StatesU.S. trade or business.
Distributions to dividends. However, thea Non-U.S. Stockholder may seek a refund of such amountsthat do not arise from the IRS if it is subsequently determineddisposition of a USRPI and that such distribution was, in fact, in excess of our current and accumulated earnings and profits.
Distributions Attributable to Sale or Exchange of capital gain dividends. Under this approach, a Non-U.S. Stockholder would be ableReal Property. Except as discussed below with respect to offset as a credit against its United States federal income tax liability its proportionate share10% or less holders of the tax treated as paid by it on such retained capital gains,regularly traded classes of stock, “qualified shareholders” and to receive from the IRS a refund to the extent its proportionate share of such tax treated as paid by it exceeds its actual United States federal income tax liability.
U.S. Federal Income Tax Withholding on Distributions not Subject to FIRPTA. For U.S. federal income tax withholding purposes, we generally will withhold tax at the rate of 30% on the amount of any distribution (other than distributions of USRPI gain subject to FIRPTA as discussed above) made to a Non‑U.S. Stockholder, unless the Non‑U.S. Stockholder provides us with appropriate documentation (1) evidencing that such Non‑U.S. Stockholder is eligible for an exemption or reduced rate under an applicable income tax treaty, generally an IRS
Form W‑8BEN or W-8BEN-E (in which case we will withhold at the lower treaty rate) or (2) claiming that the dividend is effectively connected with the Non‑U.S. Stockholder’s conduct of a trade or business within the U.S., generally an IRS Form W‑8ECI (in which case we will not withhold tax). We also may be required to withhold tax at the rate of 21% on the portion of any dividend to a Non‑U.S. Stockholder that is or could be designated by us as a capital gain dividend, even if not attributable to USRPI gain. Such withheld amounts of tax do not represent actual tax liabilities, but rather, represent payments in respect of those tax liabilities described in the preceding two paragraphs. Therefore, such withheld amounts are creditable by the Non‑U.S. Stockholder against its actual U.S. federal income tax liabilities, including those described in the preceding two paragraphs. The Non‑U.S. Stockholder would be entitled to a refund of any amounts withheld in excess of such Non‑U.S. Stockholder’s actual U.S. federal income tax liabilities, provided the required information is timely furnished to the IRS.
Additional withholding regulations may require us to withhold 15% of any distribution that exceeds our current and accumulated earnings and profits.
In light of potential difficulties in properly characterizing a distribution for purposes of the above withholding rules, we may determine to withhold at the highest rate that we determine could apply.
Sales of Shares. A Non-U.S. Stockholder generally will not incur tax under FIRPTA with respect to gain on a disposition of our common stock or preferred stock as long as at all times during the five-year period ending on the date of disposition non-U.S. persons hold, directly or indirectly, less than 50% in value of our stock.For these purposes, in the case of any class of our stock that is regularly traded on an established securities market a person holding less than 5% of such class of stock for five years will be treated as a U.S. person unless we have actual knowledge that such person is not a U.S. person.Because our common stock is publicly traded, we cannot assure you that our non-U.S. ownership will be less than 50% at any time.Even if our non-U.S. ownership remains under 50% for five years and we otherwise meet the requirements of this rule, pursuant to “certain wash sale” rules under FIRPTA, a Non-U.S. Stockholder may incur tax under FIRPTA to the extent such stockholder disposes of our stock within a certain period prior to a distribution attributable to USRPI gain and directly or indirectly (including through certain affiliates) reacquires our stock within certain prescribed periods, provided that this rule will not apply to a disposition and reacquisition of our common stock by a Non-U.S. Stockholder owning, actually or constructively, 5% or less of our common stock at any time during the one-year period ending on the date of such distribution. Capital gain dividends received bydistribution attributable to USRPI gain.
Regardless of the extent of our non-U.S. ownership, a Non-U.S. Stockholder fromwill not incur tax under FIRPTA on a REITdisposition of shares of a class of our publicly traded stock if such Non-U.S. Stockholder owned, actually or constructively, at all times during a specified testing period, 10% or less of the total fair market value of such class of stock. The testing period is the shorter of (1) the period during which the Non-U.S. Stockholder held the shares and (2) the five-year period ending on the disposition date. For as long as our common stock is regularly traded on an established securities market, a Non-U.S. Stockholder should not incur tax under FIRPTA with respect to gain on a sale of our common stock unless it owns, actually or constructively, more than 10% of our common stock during such testing period. If we issue a class of preferred stock that are attributableis regularly traded on an established securities market, the rules described in the previous sentence will also apply to dispositionssales of such preferred stock. Provided that our common stock continues to be regularly traded on an established securities market, a Non-U.S. Stockholder will not incur tax under FIRPTA on a disposition of the shares of our non-publicly traded preferred stock if the fair market value of all of the shares of such class of preferred stock acquired by such Non-U.S. Stockholder did not exceed 5% of the fair market value of our regularly traded class of stock with the lowest fair market value, determined as of the most recent acquisition date.
If the gain on the sale of our stock were taxed under FIRPTA, a Non-U.S. Stockholder would be taxed on that REIT of assets other than United States real property interests aregain in the same manner as U.S. Stockholders, subject to any applicable alternative minimum tax. Furthermore, a Non-U.S. Stockholder generally will incur U.S. federal income tax on gain not subject to U.S. income or withholding tax.
•the sale or exchange of our Stock generally would not be subject to United States federal income taxation unless:
•the Non-U.S. Stockholder is a non-residentnonresident alien individual who iswas present in the United States for 183 days or more during the taxable year and has a tax home in the United States,meets certain other criteria, in which case the non-resident alien individualNon-U.S. Stockholder will be subject toincur a 30% tax on the individual’s nethis or her capital gains forderived from sources within the taxable year; or
Qualified Shareholders. To the extent our sharesstock is held directly (or indirectly through one or indirectlymore partnerships) by Non-U.S. Stockholders. We believe that, currently, we are a domestically-controlled REIT and, therefore, that the sale of our Stock would“qualified shareholder,” it will not be subject to taxation under FIRPTA. Because our Stock is publicly traded, however, we cannot guarantee that we are or will continue to be a domestically-controlled REIT.
Qualified Foreign Pension Funds. For FIRPTA purposes neither a “qualified foreign tax consequences of an investment in our warrants.
pension fund (or subsidiary or qualified controlled entity) generally will be subject to a tax at the same graduated rates applicable to U.S. Stockholders, unless an exception applies.
Information Reporting and Backup Withholding. The applicable withholding agent will report to our Non-U.S. Stockholders and the IRS the amount of dividends on our Stock will be required to backup withholdtreated as paid during each calendar year and the amount of any tax at a rate of 28% if (i) there has been a notified payee under-reportingwithheld with respect to interest, dividends or original issue discount described in Section 3406(c)such payments. Copies of the Code,information returns reporting such payments and withholding may also be made available to the tax authorities in the country in which the Non-U.S. Stockholder resides or (ii) there has been a failure of the payee to certifyis established under the penaltyprovisions of perjury that the payee is notan applicable income tax treaty or agreement. In addition, a Non-U.S. Stockholder may be subject to backup withholding underwith respect to dividends paid on shares of our stock, unless the Code.
Foreign Accounts and “FATCA”
FATCA Withholding on Certain Foreign Accounts and Entities. The Foreign Account Tax Compliance Act, or FATCA, provisions of the Code, together with administrative guidance and certain intergovernmental agreements entered into thereunder, impose a 30% withholding tax on "withholdable payments" (as defined below) made to “foreign financial institutions” (as defined below) and certain other non-U.S. entities (whether or not such foreign financial institutions or non-U.S. entities receive the payment as a beneficial owner or intermediary) unless (1) the foreign financial institution undertakes certain diligence and reporting, and withholding obligations or (2) the foreign non-financial entity either certifies it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner. “Withholdable payment” generally includes any payment of interest, dividends, and certain other types of generally passive income if such payment is from sources within the United States person or otherwise establishes an exemption and,States. “Foreign financial institution generally means any non-U.S. entity that (i) accepts deposits in the caseordinary course of a banking or similar business, (ii) as a substantial portion of its business holds financial assets for the FATCA tax, satisfies other requirements pursuantaccount of others, or (iii) is engaged or holds itself out as being engaged primarily in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest in such assets. If the payee is a foreign financial institution that is not exempt under the administrative guidance or an intergovernmental agreement or not subject to recently finalized regulations (which requirements may include enteringspecial treatment under certain intergovernmental agreements, it must enter into an agreement with the IRS).
Other Tax Considerations
State, Local and Foreign Taxes
should consult theiryour own tax advisors and financial planners regarding the effect of state, local and foreign income and other tax laws uponon an investment in the shares of our Stockstock.
Legislative Proposals. You should recognize that our and warrants.your present U.S. federal income tax treatment may be modified by legislative, judicial or administrative actions at any time, which may be retroactive in effect. The rules dealing with U.S. federal income taxation are constantly under review by Congress, the IRS and the Treasury Department, and statutory changes as well as promulgation of new regulations, revisions to existing statutes, and revised interpretations of established concepts occur frequently.
We may sell the securities in any one or more of the following ways:
• | directly to investors; | ||
• | to investors through agents; | ||
• | to dealers; | ||
• | through a special offering, an exchange distribution or a secondary distribution in accordance with applicable NYSE or other stock exchange rules; | ||
• | through underwriting syndicates led by one or more managing underwriters; and | ||
• | through one or more underwriters acting alone. |
If we sell securities to a dealer acting as principal, the dealer may resell such securities at varying prices to be determined by such dealer in its discretion at the time of resale without consulting with us and such resale prices may not be disclosed in the applicable prospectus supplement.
Any underwritten offering may be on a best efforts or a firm commitment basis. We may also make direct sales through subscription rights distributed to our shareholders on a pro rata basis, which may or may not be transferable. In any distribution of subscription rights to shareholders, if all of the underlying securities are not subscribed for, we may then sell the unsubscribed securities directly to third parties or engage the services of one or more underwriters, for public offering and sale by themdealers or mayagents, including standby underwriters, to sell the unsubscribed securities to investors directly or through agents. We will name, in the applicable prospectus supplement, any such underwriter or agent involved in the offer and salethird parties.
The distribution of the securities.
• | at a fixed price or prices, which may be changed; | ||
• | at market prices prevailing at the time of sale; | ||
• | at prices related to such prevailing market prices; or | ||
• | at negotiated prices. |
Any of the securities uponprices may represent a discount from the terms and conditions as are set forth in the applicable prospectus supplement. prevailing market prices.
In connection with the sale of the securities, underwriters or agents may be deemed to have receivedreceive compensation from us in the form of underwriting discounts or commissions and may also receive commissions from purchasers of the securities, for whom they may act as agent.agents, in the form of discounts, concessions or commissions. Underwriters may sell the securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agent.
• | identify any such underwriter or agent; | ||
• | describe any compensation in the form of discounts, concessions, commissions or otherwise received from us by each such underwriter or agent and in the aggregate to all underwriters and agents; | ||
• | identify the amounts underwritten; and | ||
• | identify the nature of the underwriter’s obligation to take the securities. |
Unless otherwise specified in the related prospectus supplement, each series of securities will be a new issue with no established trading market, other than the Common stock, which is listed on the NYSE. Common stock sold pursuant to a prospectus supplement will be listed on the NYSE, subject to the NYSE’s approval of the listing of the
additional shares of Common stock sold. We may elect to list any series of securities other than Common stock on an exchange, but we are not obligated to do so. It is possible that one or more underwriters may make a market in a series of securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. Therefore, no assurance can be given as to the liquidity of, or the trading market for, any series of securities.
Until the distribution of the securities is completed, rules of the SEC may limit the ability of any underwriters and selling group members to bid for and purchase the securities. As an exception to these rules, underwriters are permitted to engage in some transactions that stabilize the price of the securities. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the securities.
If any underwriters create a short position in the securities in an offering in which they sell more securities than are set forth on the cover page of the applicable prospectus supplement, the underwriters may reduce that short position by purchasing the securities in the open market.
The lead underwriters may also impose a penalty bid on other underwriters and selling group members participating in an offering. This means that if the lead underwriters purchase securities in the open market to reduce the underwriters’ short position or stabilize the price of the securities, they may reclaim the amount of any selling concession from the underwriters and selling group members who sold those securities as part of the offering.
In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. The imposition of a penalty bid might also have an effect on the price of a security to the extent that it discourages resales of the security before the distribution is completed.
We do not make any representation or prediction as to the direction or magnitude of any effect that the transactions described above might have on the price of the securities. In addition, we do not make any representation that underwriters will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice.
Under agreements into which we may enter, underwriters, dealers and agents who participate in the distribution of the securities may be entitled under agreements entered into with us, to indemnification by us against and contribution toward certain civilsome liabilities, including liabilities under the Securities Act.
Underwriters, dealers and agents in at-the-market offerings, we will do so pursuant to the terms of a distribution agreement between us and the underwriters or agents. If we engage in at-the-market sales pursuant to a distribution agreement, we will issue and sell our securities to or through one or more of the named underwriters or agents, which may act on an agency basis or on a principal basis. During the term of any such agreement, we may sell securities on a daily basis in exchange transactions or otherwise as we agree with the underwriters or agents. The distribution agreement will provide that any securities sold will be sold at prices related to the then prevailing market prices for our securities. Therefore,
If indicated in any such stabilization transactions.
To comply with and perform services for us.
some states unless they have been registered or qualified for ussale in the applicable state or an exemption from the registration or qualification requirement is available and certain federal income tax matters.
The consolidated financial statements of Cedar Realty Trust, Inc. appearing in Cedar Realty Trust, Inc.’s Annual Report (Form 10 K)10-K) for the year ended December 31, 20142020 (including the schedule appearing therein), and the effectiveness of Cedar Realty Trust, Inc.’s internal control over financial reporting as of December 31, 2014,2020 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in theirits reports thereon, included therein, and incorporated herein by reference. Such consolidated financial statements are and audited financial statements to be included in subsequently filed documents will be, incorporated herein by reference in reliance upon thesuch reports of Ernst & Young LLP pertaining to such financial statements and the effectiveness of our internal control over financial reporting as of the respective dates (to the extent covered by consents filed with the Securities and Exchange Commission) given on the authority of such firm as experts in accounting and auditing.
Certain legal matters in connection with the SEC. You may read and copy any document we file at the SEC’s public reference facility at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of the documents at prescribed ratesthis offering will be passed upon for us by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference facility. Our SEC filings are also available to the public from the SEC’s website at http://www.sec.gov, and at our website at http://www.cedarrealtytrust.com. Information on or accessible through our website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus unless we specifically so designate and file with the SEC.
CEDAR REALTY TRUST, INC.
Common Stock
Preferred Stock
Depositary Shares
Debt Securities
Warrants
Stock Purchase Contracts
Units
PROSPECTUS
FEBRUARY 11, 2021
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. | Other Expenses of Issuance and Distribution |
The following sets forth the estimated expenses in connection with the issuance and distribution of the securities being registered hereby, other than underwriting discounts and commissions, all of which will be borne byare set forth in the Registrant:
SEC Registration Fee | $ | 81,825.00 | |||
Accounting fees and expenses | * | ||||
Blue Sky fees and expenses | * | ||||
Legal fees and expenses (other than Blue Sky) | * | ||||
Printing fees and expenses | * | ||||
Transfer Agent, Depositary and Trustee fees and expenses | * | ||||
Miscellaneous (including listing and rating agency fees) | * | ||||
Total | $ | 81,825.00* |
* | Estimated expenses not presently known. Each prospectus supplement will reflect estimated expenses based on the amount of the related offering. | |
Item 15. | Indemnification of Directors and Officers |
Maryland law permits a Maryland corporation. Our Articles of Incorporation containcorporation to include in its charter a provision limiting the liability of theits directors and officers to the corporation and its shareholders for money damages, except to the extent that (i) it is proved that the person actually received an improper benefit or profit in money, property or services for the amount of the benefit or profit in money, property or services actually received; or (ii) a judgment or other final adjudication adverse to the person is entered in a proceeding based on a finding in the proceeding that the person’s action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding. Our charter contains a provision that eliminates such liability to the maximum extent permitted by Maryland law.
Our charter authorizes us, to the maximum extent that Maryland law in effect from time to time permits, to obligate us to indemnify any present or former director or officer or any individual who, while a director or officer of our company and at our request, serves or has served another corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise as a director, officer, partner, member, manager or trustee, from and against any claim or liability to which that individual may become subject or which that individual may incur by reason of his or her service in any such capacity and to pay or reimburse his or her reasonable expenses in advance of final disposition of a proceeding. Our bylaws obligate us, to the fullest extent permitted by Section 5-349Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of the Courts and Judicial Proceedings Codeultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of Maryland (orfinal disposition of a proceeding to:
• | any present or former director who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity; or | ||
• | any individual who, while a director of our company and at our request, serves or has served another corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner, member, manager or trustee of such corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise and who is made a party to the proceeding by reason of his or her service in that capacity. |
The MGCL requires a corporation (unless its successor), as amended. Our Articles of Incorporation also containcharter provides otherwise, which our charter does not) to indemnify a provision permitted under Maryland General Corporation Law eliminating (with limited exceptions) each director’s personal liability for monetary damages for breachdirector or officer who has been successful, on the merits or otherwise, in the defense of any duty asproceeding to which he or she is made or threatened to be made a director. In addition, our Articlesparty by reason of Incorporation and Bylaws allow ushis or her service in that capacity, or in the defense of any claim, issue or matter in the proceeding, against reasonable expenses incurred by the director or officer in connection with the proceeding, claim, issue or matter. The MGCL permits a corporation to indemnify ourits present and former directors and officers, from certain liabilitiesamong others, against judgments, penalties, fines, settlements and reasonable
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expenses as well as advancementactually incurred by them in connection with any proceeding to which they may be made or are threatened to be made a party by reason of costs, expensestheir service in those or other capacities unless it is established that:
• | the act or omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith or (2) was the result of active and deliberate dishonesty; | ||
• | the director or officer actually received an improper personal benefit in money, property or services; or | ||
• | in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. |
However, under the MGCL, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that personal benefit was improperly received. A court may order indemnification if it determines that the director or officer is fairly and attorneys’ fees,reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct, was adjudged liable to the fullest extent permittedcorporation or was adjudged liable on the basis that personal benefit was improperly received. However, indemnification for an adverse judgment in a suit by or in the right of the corporation, or for a judgment of liability on the basis that personal benefit was improperly received, is limited to expenses.
In addition, the MGCL permits a corporation to advance reasonable expenses to a director or officer upon the corporation’s receipt of:
• | a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation; and | ||
• | a written undertaking by the director or officer or on the director’s or officer’s behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the director or officer did not meet the standard of conduct. |
Insofar as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under Maryland General Corporation Law. Such rightsthe Securities Act, we have been informed that in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
We also maintain liability insurance for our officers and directors.
Item 16. Exhibits
The exhibit index in this registration statement identifies the exhibits that are contract rights fully enforceable by each beneficiary thereof,included in this registration statement and are in addition to, and not exclusive of, any other right to indemnification.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post‑effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post‑effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
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(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
provided, however, that subparagraphsparagraphs (i), (ii) and (iii) above do not apply if the information required to be included in a post-effectivepost‑effective amendment by those paragraphs is contained in the periodic reports filed with or furnished to the CommissionSEC by the Registrantregistrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post‑effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post‑effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
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(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
Exhibit | Description | |
*1.1 | Form of Underwriting Agreement. | |
4.1 | ||
4.2 | ||
4.3 | ||
4.4 | ||
4.5 | ||
4.6 | ||
4.7 | ||
4.8 | ||
*4.9 | Form of Articles Supplementary for Preferred Stock | |
*4.10 | Form of Deposit Agreement | |
*4.11 | Form of Warrant | |
*4.12 | Form of Deposit Agreement | |
*4.13 | Form of Stock Purchase Contract | |
*4.14 | Form of Unit Agreement | |
*5.1 | Opinion of Goodwin Procter LLP as to the |
*8.1 | Opinion of Goodwin Procter LLP regarding certain federal income tax considerations | |
+23.1 | ||
*23.2 | Consent of Goodwin Procter LLP (included in Exhibits 5.1 and 8.1 hereto). |
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* | To be filed by amendment or in a Current Report on Form 8-K, as applicable. |
+ | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Port Washington, State of New York, on April 27, 2015.
CEDAR REALTY TRUST, INC. | ||
By: | /S/ BRUCE J. SCHANZER | |
Bruce J. Schanzer | ||
President and |
KNOW ALL MEN BY THESE PRESENTS that each personindividual whose signature appears below constitutes and appoints Bruce J. Schanzer, Philip R. Mays and Adina G. Storch, and each of them, hissuch person’s true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for himsuch person and in hissuch person’s name, place and stead, in any and all capacities, to sign any orand all amendments (including post-effective amendments) of and supplements to this Registration Statement, and any Registration Statement relating to any offering made pursuant to this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act, and to file the same, with all exhibits thereto, and otherall documents in connection therewith, with the Securities and Exchange Commission, granting unto such attorneys-in-facteach said attorney-in-fact and agents and each of themagent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes and as fully as theysuch person might or could do in person, hereby ratifying and confirming all that such attorneys-in-factany said attorney-in-fact and agents,agent, or theirany substitute or substitutes of any of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the datesdate indicated.
/s/ | President, Chief Executive Officer | February 11, 2021 | |||
Bruce J. Schanzer | (Principal Executive Officer) | ||||
/s/ PHILIP R. MAYS | Senior Executive Vice President, | February 11, 2021 | |||
Philip R. Mays | Chief Financial Officer (Principal Financial Officer) | ||||
/s/ GASPARE J. SAITTA, II | Vice President and Chief Accounting Officer | February 11, 2021 | |||
Gaspare J. Saitta, II | (Principal Accounting Officer) | ||||
/s/ | Director | February 11, 2021 | |||
Abraham Eisenstat | |||||
/s/ GREGG A. GONSALVES | Director | February 11, 2021 | |||
Gregg A. Gonsalves | |||||
/s/ PAMELA N. HOOTKIN | Director | February 11, 2021 | |||
Pamela N. Hootkin | |||||
/s/ | Director | February 11, 2021 | |||
Sabrina L. Kanner | |||||
/s/ STEVEN G. | Director | February 11, 2021 | |||
Steven G. | |||||
/s/ ROGER WIDMANN | Director | February 11, 2021 |
Roger Widmann