As filed with the Securities and Exchange Commission on December 18, 2002
Registration No. 333-70753
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE
AMENDMENT NO. 6
ON FORM S-2
TO
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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B.F. Saul Real Estate Investment Trust
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(Exact name of registrant as specified in its charter)
Maryland
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(State or other jurisdiction of incorporation or organization)
6712
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(Primary standard industrial classification code number)
52-6053341
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(I.R.S. employer identification number)
7501 Wisconsin Avenue, Bethesda, Maryland 20814 301-986-6000
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(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
Henry Ravenel, Jr.
7501 Wisconsin Avenue, Bethesda, Maryland 20814 301-986-6000
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(Name, address including zip code, and telephone number,
including area code, of agent for service)
Copies of correspondence to:
Thomas H. McCormick, Esq.
Shaw Pittman LLP 2300 N
Street, N.W.
Washington, D.C. 20037
(202) 663-8000
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant files a
further amendment which specifically states that this registration statement is
to become effective in accordance with Section 8(a) of the Securities Act or
until the registration statement becomes effective on the date the SEC, acting
under Section 8(a), determines.
The information in this prospectus is not complete and may be changed. We
may not sell these securities 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 where the offer or sale is not permitted.
PROSPECTUS SUBJECT TO COMPLETION DATED DECEMBER 18, 2002
$70,704,000
B.F. SAUL REAL ESTATE INVESTMENT TRUST
UNSECURED NOTES
Due one year to ten years from date of issue
Interest payable each six months from date of issue and at maturity
Minimum Investment: $5,000
Note Maturities Interest Rate
From Issue Date Per Annum
One Year 3.5%
Two Years 4.0%
Three Years 5.0%
Four Years 5.5%
Five Years 6.5%
Six Years 7.0%
Seven Years 7.0%
Eight Years 8.0%
Nine Years 8.0%
Ten Years 8.0%
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Per Note Total
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Public Offering Price 100% $70,704,000
Proceeds to Trust Before Expenses 100% $70,704,000
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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There is no established trading market for the notes, and the Trust does not
anticipate that an active trading market will be established. These notes are
unsecured obligations and are not guaranteed or insured by the FDIC or any other
government agency. Furthermore, an investment in the notes involves significant
risks.
See "Risk Factors" beginning on page 5 for a discussion of material risks that
you should consider before you invest in the notes being sold by this
prospectus.
The date of this prospectus is ______________.
TABLE OF CONTENTS
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................... 3
B.F. SAUL REAL ESTATE INVESTMENT TRUST................................... 3
PROSPECTUS SUMMARY ...................................................... 4
RISK FACTORS ............................................................ 5
FORWARD LOOKING STATEMENTS DISCLOSURE.................................... 12
USE OF PROCEEDS ......................................................... 12
PLAN OF DISTRIBUTION .................................................... 12
HOW TO PURCHASE NOTES ................................................... 12
DESCRIPTION OF NOTES .................................................... 12
EXPERTS ................................................................. 16
LEGAL MATTERS ........................................................... 16
WHERE YOU CAN FIND MORE INFORMATION ..................................... 17
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Our Annual Report on Form 10-K for the fiscal year ended September 30, 2002,
which has been filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, which accompanies this Prospectus, is
incorporated in this Prospectus by reference and made a part hereof.
We will provide without charge to each person to whom a copy of this Prospectus
is delivered, upon the written or oral request of such person, a copy of our
Annual Report on Form 10-K for the fiscal year ended September 30, 2002, except
for the exhibits to such document. Such request should be directed to B.F. Saul
Real Estate Investment Trust, 7501 Wisconsin Avenue, Suite 1500, Bethesda,
Maryland 20814, Attention: Henry Ravenel, Jr. (telephone number (301) 986-6207).
B.F. SAUL REAL ESTATE INVESTMENT TRUST
We operate as a Maryland statutory real estate investment trust. Our principal
business activity is the ownership and development of income-producing
properties. In addition, we own 80% of the outstanding common stock of Chevy
Chase Bank, F.S.B., whose assets accounted for 96% of our consolidated assets at
September 30, 2002. By virtue of our ownership of a majority interest in Chevy
Chase Bank, we are considered to be a savings and loan holding company subject
to certain government regulations.
References to the "Trust," "we," "us," and "our" used in this Prospectus refers
to the combined entity, which includes B.F. Saul Real Estate Investment Trust
and its subsidiaries, including Chevy Chase Bank and it's subsidiaries. The term
"Real Estate Trust" refers to B.F. Saul Real Estate Investment Trust and its
subsidiaries, excluding Chevy Chase Bank and it's subsidiaries. The operations
conducted by the Real Estate Trust are designated as "Real Estate," while the
business conducted by Chevy Chase and its subsidiaries is identified as
"Banking."
Real Estate. Our long-term business objectives are to increase cash flow from
operations and to maximize the capital appreciation of our real estate. Our
properties are located predominantly in the mid-atlantic and southeastern
regions of the United States and consist principally of hotels, office and
industrial projects and undeveloped land parcels.
The Real Estate Trust has significant relationships with B.F. Saul Company (the
"Saul Company") and two of its wholly owned subsidiaries, B.F. Saul Advisory
Company L.L.C., formerly known as B.F. Saul Advisory Company (the "Advisor"),
and B. F. Saul Property Company, formerly known as Franklin Property Company.
Saul Company, founded in 1892, specializes in real estate investment services
including acquisitions, financing, management and leasing, and insurance.
Certain of our officers and trustees are also officers and/or directors of Saul
Company, the Advisor and B. F. Saul Property Company.
The Advisor acts as the Real Estate Trust's investment advisor and manages the
day-to-day financial, accounting, legal and administrative affairs of the Real
Estate Trust. B. F. Saul Property Company acts as leasing and management agent
for the income-producing properties owned by the Real Estate Trust, and plans
and oversees the development of new properties and the expansion and renovation
of existing properties.
Banking. Chevy Chase Bank is a federally chartered and federally insured stock
savings bank which conducts business primarily in the metropolitan Washington,
D.C. area. The bank has its home office in McLean, Virginia and its executive
offices in Bethesda, Maryland. At September 30, 2002, the bank had total assets
of $11.3 billion and total deposits of $7.4 billion. Based on total consolidated
assets at September 30, 2002, Chevy Chase Bank is the largest bank headquartered
in the Washington, D.C. metropolitan area.
Our executive offices of are located at 7501 Wisconsin Avenue, Suite 1500,
Bethesda, Maryland 20814 and the sales office for the notes offered pursuant to
this Prospectus is located at 3 Bethesda Metro Center, Suite 700, Bethesda,
Maryland 20814. Our telephone number is 301-986-6207.
THE OFFERING
This section highlights information contained elsewhere in this prospectus. To
understand this offering fully, you should read the entire prospectus carefully,
including the "Risk Factors" section and the financial statements and the notes
to those statements.
Securities Offered..... We are offering $70,704,000 in principal amount of notes
with varying interest rates as fixed from time to time
by us. As of November 30, 2002, we had $23,087,000 in
principal amount of notes available to be issued.
Maturity Date.......... The notes will mature from one to ten years from the
date of issue, as selected by you.
Interest Payment Dates. Interest on the notes will be payable each six months
after the date of issue and at maturity.
Seniority.............. The notes will be unsecured obligations and will rank
junior to the Real Estate Trust's secured debt, which at
September 30, 2002 totaled $529.2 million. In addition,
the notes will rank equally with all of the Real Estate
Trust's other unsecured debt, which, including
outstanding notes previously issued pursuant to the
Registration Statement of which this Prospectus form a
part, totaled $55.2 million at September 30, 2002.
Set Asides............. We have not set aside any money for the purpose of
paying principal and interest on the notes.
Independent Review..... No independent rating agency has reviewed the terms of
the notes to determine whether they are a suitable
investment.
Redemption............. At our sole option, we can repurchase from you for the
same price you paid us any note that has been
outstanding for more than one year. We can redeem the
note on the first anniversary of the date of issue or on
any interest payment date afterwards.
Covenants.............. The indenture under which the notes will be sold does
not impose any restrictions on our ability to pay
dividends, make distributions to our shareholders, incur
debt or issue additional securities.
Claims of Noteholders.. You will not have any claim on the assets of Chevy Chase
Bank and you may look only to our earnings and assets
for the payment of interest and principal on your notes.
Use of Proceeds........ We will use the net proceeds of the offering of these
notes primarily to repay maturing notes. Any proceeds
not used to repay maturing notes will be used for other
general corporate purposes.
RISK FACTORS
An investment in these notes involves significant risks and therefore is
suitable only for persons who understand those risks and their consequences and
who are able to lose their entire investment. You should consider the following
risks in addition to the other information set forth in this prospectus before
making your investment decision.
Risks Relating to these Notes
The notes are not secured by the Real Estate Trust or Chevy Chase Bank and you
will only be paid principal and interest on your notes after other debts have
been paid.
Because the notes are unsecured, they will be effectively subordinated to any of
our secured debt and other senior obligations to the extent of the value of the
assets securing the debt. As a result, you are only entitled to receive payments
of principal and interest on your notes from the funds and assets of the Real
Estate Trust available after our secured debt and other senior obligations have
been paid. You will not have any claim on the assets of Chevy Chase Bank. As of
September 30, 2002, the Real Estate Trust's secured debt was $529.2 million,
including $200 million of debt secured by the common stock of Chevy Chase Bank
owned by us. In addition, we will pay principal and interest on your notes at
the same time we make payments on the Real Estate Trust's other unsecured debt,
including outstanding notes previously issued pursuant to the Registration
Statement of which this Prospectus forms a part, which totaled $55.2 million as
of September 30, 2002.
We are using the proceeds from the sale of these notes primarily to repay
maturing notes. As a result, we will need to rely on other sources of funds to
pay principal and interest on your notes.
We are using the proceeds from the sale of these notes primarily to repay
maturing notes and are not investing the proceeds in the Real Estate Trust's
business or setting aside money to pay principal and interest on the notes. As a
result, we will need to rely on other sources of funds to pay principal and
interest on your notes. In the future, our ability to make these payments will
depend on our available cash and our ability to borrow additional funds. In
addition, we may sell additional notes in the future as a source of funds to pay
principal and interest on your notes. However, we cannot guarantee that we will
have sufficient funds in the future to make payments of principal and interest
on your notes. In fiscal 2002, the Real Estate Trust sold $12.5 million in new
notes and repaid principal on $8.0 million in maturing notes.
The terms of the notes do not limit our ability to distribute our equity
interest in chevy chase bank to our shareholders, which may diminish our ability
to make payments on your notes and diminish your recourse as an unsecured
creditor.
The indenture under which the notes will be issued does not include covenants
that prohibit the Trust from distributing to its shareholders the Trust's equity
interest in Chevy Chase Bank in a transaction commonly referred to as a
"spin-off." In the event we were to complete such a spin-off, we would no longer
consolidate Chevy Chase Bank into our financial statements and no longer receive
dividend or tax sharing payments from Chevy Chase Bank, both of which are used
to meet our current cash needs. However, in connection with any spin-off, we
would also transfer $200 million of debt currently secured by the common stock
of Chevy Chase Bank owned by us to Chevy Chase Bank or any newly formed holding
company of the bank. Accordingly, we would no longer have to pay $19.5 million
of annual interest payments. In addition, following any such spin-off, the Trust
would no longer own 80% of the outstanding common stock of the bank. Therefore,
any residual value of our ownership interest in the bank in excess of the $200
million of debt transferred by the Trust will no longer be available to
unsecured creditors of the bank, including you as a noteholder.
The following chart sets forth certain historical financial information for the
year ended September 30, 2002 and certain unaudited pro forma financial
information for the year ended September 30, 2002 presented as if the spin-off
had been completed as of October 1, 2001. As a result, the unaudited pro forma
financial information gives effect to:
o the elimination of approximately $21.7 million of dividend and tax sharing
payments received from the bank during fiscal 2002, and
o the elimination of $19.5 million of interest payments on the $200 million of
debt transferred by the Trust to the bank on October 1, 2001.
FOR THE YEAR ENDED
SEPTEMBER 30, 2002
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(Dollars in thousands) HISTORICAL PRO FORMA
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CASH FLOW DATA (REAL ESTATE ONLY):
Net cash provided by operating activities $ 7,657 $ 5,490
Net cash provided by investing activities 5,461 5,461
Net cash used in financing activities (13,015) (13,015)
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Net decrease in cash and cash equivalents 103 (2,064)
Cash and cash equivalents at beginning of year 13,860 13,860
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Cash and cash equivalents at end of year $ 13,963 $ 11,796
================ ================
OPERATING DATA:
Operating income (loss) $ 87,177 $ (48)
Net income (loss) $ 27,427 $ (102)
Fixed charges (included in operating income (loss)) (1) $339,247 $ 31,561
Available earnings (2) $413,576 $ 33,665
(1) Fixed charges (included in operating income (loss)):
Real estate
Interest and debt expense $ 51,061 $ 31,561
Banking
Preference security dividend requirements of
consolidated subsidiary 15,000 --
Interest expense 273,186 --
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Total fixed charges (included in operating income (loss)) $339,247 $ 31,561
================ ================
(2) Available earnings:
Operating income (loss) $ 87,177 $ (48)
Equity in earnings of unconsolidated entities (9,057) (9,057)
Distributions from unconsolidated entities 11,496 11,496
Capitalized interest (287) (287)
Preference security dividend requirements of
consolidated subsidiary (15,000) --
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74,329 2,104
Total fixed charges (included in operating income (loss)) 339,247 31,561
---------------- ----------------
Total available earnings $413,576 $ 33,665
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The terms of the notes do not limit our ability to pay dividends, make
distributions, issue additional securities or borrow money, any of which may
diminish our ability to make payments on your notes.
The indenture under which the notes will be issued does not include certain
covenants intended to protect the rights of investors which are customary in
indentures for similar public debt securities. In particular, the indenture does
not limit our ability to pay dividends, make distributions, issue additional
securities or borrow money. However, our ability to pay dividends, make
distributions, issue additional securities and borrow money is limited by
various other agreements to which we are a party, including the indenture for
our outstanding 9 3/4% Senior Secured Notes due 2008. For more information about
the terms of the notes, see the disclosure under the subheading "Description of
the Notes."
We can repurchase the notes from you before you have received the full benefit
of your investment.
At our option, we can repurchase from you at the same price you paid us any note
that has been outstanding for more than one year. If market interest rates are
lower at the time we repurchase your notes than they were when you bought the
notes, you may not be able to reinvest your money at the same rate as your note.
Furthermore, if we choose to repurchase any of the notes prior to maturity, we
will have less money available to pay principal and interest on the remaining
outstanding notes.
No independent rating agency, underwriter, broker or dealer has reviewed the
terms of the notes to determine if they are a suitable investment for you.
We have not used and do not intend to use an underwriter or selling agent to
sell these notes. In addition, the notes have not been rated by an independent
rating agency. As a result, you will not have the benefit of an independent
review of us, the terms of the notes and the accuracy and completeness of the
information contained in the prospectus that a rating agency, underwriter or
other selling agent might provide if they were involved in selling the notes.
The officers of the Trust who will be selling these notes to you are not
registered with the Securities and Exchange Commission as brokers or dealers, so
they will not be in a position to determine the suitability of these notes for
your investment profile and objectives. You must decide for yourself or seek
investment advice to determine whether these notes represent a suitable
investment for you.
Risks Relating to Our Business
Our ability to raise enough money to pay principal and interest on your notes is
limited by several factors.
We primarily rely on external sources of funds to repay principal on maturing
debt, including on the notes, and to make capital improvements. In the past,
these external sources of funds have included sales of debt securities,
including sale of the notes, refinancings of maturing mortgage debt, asset
sales, dividends paid by Chevy Chase Bank and tax sharing payments from Chevy
Chase Bank under a tax sharing agreement. In 2002 and beyond, we will be
required to raise substantial additional amounts of cash from these external
sources. Our ability to raise that cash depends on various factors including:
o Our ability to sell these notes. At present, we are selling these notes
principally to pay outstanding notes as they mature. If we do not sell enough
new notes to repay maturing notes, we will need to raise funds from other
sources. In fiscal 2002, the Real Estate Trust sold $12.5 million in new notes
and repaid principal on $8.0 million in maturing notes.
o Our continued receipt of dividends and tax sharing payments from Chevy Chase
Bank. To meet our cash needs, we rely, in part, on dividends paid on the common
stock of Chevy Chase Bank, of which we own 80%, and payments made by Chevy Chase
Bank under the tax sharing agreement. The availability and amount of tax sharing
payments and/or dividends in the future depends primarily on (1) Chevy Chase
Bank's operating performance and income, (2) restrictions imposed by Chevy Chase
Bank's regulators, and (3) in the case of tax sharing payments, the continued
consolidation of Chevy Chase Bank and its subsidiaries with the Real Estate
Trust for federal income tax purposes. If Chevy Chase Bank does not pay
sufficient dividends or make sufficient payments under the tax sharing
agreement, we will need to raise funds from other sources. In fiscal 2002, Chevy
Chase Bank paid us $16.0 million in dividends and $5.7 million in tax sharing
payments. In addition, at September 30, 2002, the amount of tax sharing payments
due to us from the bank was $2.2 million.
The Real Estate Trust has historically experienced losses, before taking into
account asset sales, which may affect our ability to pay principal and interest
on the notes.
Historically, in prior fiscal years, we have had losses before accounting for
gains from the sale of properties and before the consolidation of Chevy Chase
Bank into our financial statements. For fiscal 2002, this loss was $12.8
million. If we did not consolidate Chevy Chase Bank into our financial
statements, our overall operating results in fiscal 2002 and prior years would
have been worse. If we continue to operate at a loss and we do not receive
dividends and tax sharing payments from Chevy Chase Bank or funds from other
sources, our ability to pay principal and interest on the notes will be
significantly diminished.
Historically, the fixed expenses of our real estate operations have been greater
than our earnings generated by our real estate operations available to pay those
expenses, which may hurt our ability to pay principal and interest on the notes.
During the past five fiscal years, we had sufficient funds available to pay our
required interest, debt and ground rent expenses. On a consolidated basis, our
total available earnings exceeded our fixed charges by $74.3 million, $84.3
million, $55.2 million, $71.6 million, and $156.4 million in fiscal years 2002,
2001, 2000, 1999 and 1998, respectively. However, the fixed charges of our real
estate operations exceeded the earnings generated by our real estate operations
for four of our last five fiscal years, including fiscal year 2002. We cannot
assure that, in future fiscal years, the revenues generated by our real estate
operations will exceed the fixed charges of our real estate operations. As a
result, during each of the past five fiscal years, except fiscal year 2001, the
Real Estate Trust depended on the receipt of dividends and tax sharing payments
from Chevy Chase Bank to pay its fixed charges, including payment of principal
and interest on the notes. Excluding the dividend and tax sharing payments from
Chevy Chase Bank, the Real Estate Trust's fixed charges would have exceeded its
available earnings by $17.4 million, $2.5 million, $7.1 million, and $12.0
million in fiscal years 2002, 2000, 1999 and 1998, respectively. If the Real
Estate Trust is unable to fund any future shortfall between available earnings
and required payments with payments from Chevy Chase Bank or from other sources,
its ability to pay principal and interest on the notes will be significantly
diminished.
Our business of owning and developing real estate properties is inherently risky.
Most of our operating expenses and almost all of our debt service payments
associated with the operation of our income-producing properties are fixed,
while the income generated from these properties can significantly fluctuate,
for example by reductions in occupancy and rental rates. In addition, the
operating expenses of income-producing properties can increase due to inflation,
increases in real estate taxes and other general economic factors or
governmental actions outside our control. As a result, our ability to pay the
fixed costs with cash flow produced by our income-producing properties is highly
dependent on our ability to maintain or increase rental income and hotel sales
revenue.
Rental income, which is a major source of our revenues, is susceptible to
numerous risks, including adverse changes in national or local economic
conditions and other factors which might impair the ability of existing tenants
to make rental payments and reduce the demand of new tenants for vacant space.
Hotel income, another major source of our revenues, is also susceptible to rapid
declines if customer demand decreases because advance bookings represent only a
small portion of overall revenues and can be cancelled.
In addition, rental and hotel income was, and may continue to be, affected by
the terrorist attacks of September 11, 2001. The attacks resulted in a sharp
reduction in travel affecting the overall financial performance of our hotel
properties. We were directly affected by the terrorist attacks of September 11
because of our concentration of hotels in the Washington, DC metropolitan area,
one of the sites of the attacks. Eleven of our 18 hotels are located in the
Washington, DC metropolitan area. In addition, five of these 11 hotels are
within minutes from either Washington Reagan National Airport or Dulles
International Airport, and thus, were more directly affected by the sharp
decline in air travel. The two hotels located close to Reagan National were
especially affected by Reagan National's prolonged closure and limited flight
schedule for a period following reopening.
Real estate investments, including ours, tend to be relatively illiquid, meaning
that they can not be sold quickly for cash. This lack of liquidity limits our
ability to promptly change the types of properties we own in response to changes
in economic, demographic, social, financial and investment conditions.
Risks Relating to the Business of Chevy Chase Bank
The following risk factors relate to the business of Chevy Chase Bank. This
information is important because it affects Chevy Chase Bank's ability to pay
dividends and to make tax sharing payments to the Trust.
Chevy Chase Bank's operating results may be negatively affected by changes in
interest rates, which may affect the ability of the bank to pay dividends to the
Real Estate Trust.
Chevy Chase Bank's operating results depend in large part on the difference
between the interest the bank receives from its loans, leases, securities and
other assets and the interest it pays on its deposits and liabilities. In
general, the bank's liabilities have shorter terms and adjust more quickly to
changes in market interest rates than its assets. In recent periods, the bank
has emphasized the origination of assets with shorter terms or which have
interest rates which adjust more quickly to changes in market interest rates.
However, the interest rates on the bank's assets and liabilities generally do
not change at the same time or based on the same market interest rate index.
Moreover, in the current interest rate environment, if interest rates decline
further, the bank may not be able to reduce the interest rates on its deposits
to the same extent that the interest rates on its assets are reduced.
Accordingly, increases or decreases in market interest rates could negatively
affect the operating results of the bank and may hurt the bank's ability to pay
us dividends.
Chevy Chase Bank continues to grow its residential mortgage, automobile and
commercial loan portfolios; automobile and commercial loans are riskier than
residential mortgage loans.
Chevy Chase Bank continues to grow its consumer and commercial lending business.
Automobile and commercial loans have shorter terms and higher interest rates
than residential mortgage loans, but are generally riskier than residential
mortgage loans. The bank, through one of its subsidiaries, previously made
automobile loans to applicants who have adverse credit events in their credit
history. Although the bank stopped making these loans in November 2000, some of
these loans remain outstanding. These loans typically experience higher rates of
delinquencies, repossessions and losses than loans originated under the bank's
traditional lending program and are subject to additional regulatory
limitations. If the remaining loans are unprofitable or further additions to the
bank's allowance for loan losses or regulatory capital levels become necessary,
the ability of the bank to pay dividends to us may be adversely affected.
Chevy Chase Bank's allowance for losses might not be sufficient to cover its
actual losses from its loan, lease and real estate portfolios. If the losses are
greater than expected, the bank may not be able to pay dividends to us and, as a
result, we will have less money available to pay principal and interest on the
notes.
Chevy Chase Bank records on its financial statements an allowance for possible
losses from its loan, lease and real estate portfolios. It is possible that the
bank will suffer losses in excess of its allowance for losses, or that future
evaluations of the bank's asset portfolios will require significant increases in
the allowance for losses as a result of changes in economic conditions,
regulatory examinations or the bank's own internal review process. As a result,
the bank may be unable to pay us the same amount of, or any, dividends in the
future.
Chevy Chase Bank's ability to pay dividends to us is limited by government
regulations.
Federal regulations provide that Chevy Chase Bank may not pay dividends to us
unless the bank is at least "adequately capitalized" as defined in the
regulations. At September 30, 2002, the bank was "well capitalized" and thus
exceeded the tests established for "adequately capitalized" institutions.
However, the Office of Thrift Supervision ("OTS") has discretion to lower the
bank's capital adequacy status. The bank's ability to maintain its capital
ratios at the required levels depends on a number of factors, including general
economic conditions and conditions in the local markets in which the bank
operates. OTS retains the discretion to limit or condition the bank's dividends
based on general concerns over the safety and soundness of the bank and
conditioned the bank's recent payments of common stock dividends on the bank
maintaining its well capitalized status.
The indentures for the bank's outstanding subordinated debt place restrictions
on the bank's ability to pay dividends to us, which may result in less money
available to the Real Estate Trust to pay principal and interest on the notes.
The indentures for the bank's outstanding 9 1/4% Subordinated Debentures due
2005 and 9 1/4% Subordinated Debentures due 2008 restrict the bank's ability to
pay dividends on its common stock to us.
OTS may require us to make cash payments to Chevy Chase Bank.
In an agreement with the predecessor agency to OTS, we agreed to maintain the
regulatory capital of Chevy Chase Bank at certain minimum levels and to
contribute additional capital to the bank if necessary to meet those
requirements. If the bank is unable to maintain its capital at the prescribed
levels, OTS could require us to contribute capital to the bank. Such a payment
would reduce the funds available to us to pay principal and interest on the
notes.
In addition, if Chevy Chase Bank becomes "undercapitalized" as defined by
federal regulations, the bank would be required to file a capital restoration
plan outlining the steps it will take to become "adequately capitalized." OTS
could choose not to accept the plan unless we guaranteed in writing the bank's
compliance with the plan. If we refused to provide such a guarantee, the bank
could be subject to more restrictive regulatory actions and would not be able to
pay us dividends.
We may be required to make payments to Chevy Chase Bank under the tax sharing
agreement.
If, in any fiscal year, Chevy Chase Bank has a net operating loss, we would be
required under the tax sharing agreement with the bank to make payments to the
bank if we or any of our affiliated companies use that loss to offset our
taxable income. If Chevy Chase Bank has a net operating loss that is not used by
us in that year to offset our taxable income, Chevy Chase Bank can use those
losses to obtain a refund from the IRS of taxes paid in previous years or to
obtain a refund from us of tax sharing payments paid by the bank to us, or both,
depending on the amount of losses and the taxable year in which they occurred.
At September 30, 2002, no carryback potential existed for the recovery of income
taxes paid by the bank in prior years. Therefore, as described above, the Real
Estate Trust has no obligation to repay the bank for income taxes paid in prior
years. Additionally, Chevy Chase Bank owes us $2.2 million in tax sharing
payments as of September 30, 2002. The tax sharing payment will be made during
fiscal 2003. After this payment is made to the Trust, the Trust could be
required to repay it as a result of future carrybacks of bank losses, if any. If
we are required to make this payment, our funds available to pay principal and
interest on the notes will be reduced.
Chevy Chase Bank's business is concentrated in the metropolitan Washington, D.C.
area and would be negatively impacted by an economic downturn in the local
economy.
Chevy Chase Bank's principal deposit and lending market is concentrated in the
metropolitan Washington, D.C. area. Accordingly, an economic downturn in the
local economy would negatively impact the overall financial performance of the
bank and its ability to pay dividends to us. If the bank is unable to pay
dividends to us, we will have less money available to pay principal and interest
on the notes.
Other Risks
Our Declaration of Trust does not contain investment or borrowing limitations
which protect your investment in the notes.
With certain minor exceptions, our Declaration of Trust does not require us to
invest our assets in any particular manner. The Board of Trustees, in their
discretion, may change the mix of our investment portfolio at any time or make
new types of investments, so long as the investments are not prohibited by the
Declaration of Trust or by any indentures, loan documents or other agreements
applicable to us. In addition, the Declaration of Trust does not limit the
amount of money we can borrow or the types of debt securities we can issue,
including additional notes or debt securities which are senior to the notes.
FORWARD LOOKING STATEMENTS DISCLOSURE
This prospectus contains forward looking statements which can be identified by
the use of terminology such as "may," "will," expect," "anticipate," "estimate,"
"continue," or other similar words. Although we believe that our expectations
reflected in the forward-looking statements are based on reasonable assumptions,
these expectations may not prove to be correct. Important factors that could
cause our actual results to differ materially from the expectations reflected in
these forward-looking statements include those set forth in the "Risk Factors"
section of this prospectus, as well as general economic, business and market
conditions, changes in Federal and local laws and regulations and increased
competitive pressures.
USE OF PROCEEDS
We will use the net proceeds from the sale of these notes primarily to retire
maturing notes, including the notes offered hereby. At September 30, 2002, $12.4
million principal amount of notes were scheduled to mature in fiscal 2003. The
interest rates on outstanding notes scheduled to mature during this period vary
from 5% to 12% per annum. Any proceeds not used to pay maturing notes will be
used for other general corporate purposes. This offering is not contingent on
the sale of any minimum amount of notes.
PLAN OF DISTRIBUTION
The notes will not be distributed through underwriters, brokers or dealers and
will be sold only by us acting through one or more of our duly authorized
officers. Such officers are salaried employees of Saul Company and do not
receive any compensation in connection with their participation in the offering
and sale of the notes in the form of commissions or other remuneration based
either directly or indirectly on sales of the notes. Although we do not pay the
officers who participate in the offering and sale of the notes, we do pay the
Advisor a fee of 2% of the principal amount of the notes as they are issued to
offset its costs of administering the note program. Notes will be available for
sale only at our office in Bethesda, Maryland. See "How to Purchase Notes." The
offering of the notes by this prospectus will terminate when all of the notes
have been sold. See "Description of Notes -- General." We may also terminate the
offering of the notes at any time without notice.
HOW TO PURCHASE NOTES
You may purchase notes in person at our sales office. Please call 301-986-6207
or 301-986-6271 for an appointment. You may purchase notes by mail by completing
the applicable Note Order Form, which may be found at the end of this
prospectus, and mailing the form and a check payable to the Trust in the
enclosed envelope. In either case, the note, in registered form, will be mailed
directly to you by U.S. Bank Trust National Association, the Indenture Trustee
for the notes. For further information on how to purchase notes, please
telephone (301) 986-6207.
DESCRIPTION OF NOTES
The notes will be issued under an Indenture dated as of September 1, 1992, as
supplemented by the First Supplemental Indenture dated as of January 16, 1997,
as further supplemented by the Second Supplemental Indenture dated January 13,
1999 between the Trust and U.S. Bank Trust National Association, referred to in
this prospectus as the "Indenture Trustee". Included below is a summary of the
material terms of the notes and the material provisions of the indenture. The
summary does not purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by express reference to, the
cited sections and articles of, and definitions contained in, the indenture as
supplemented, a copy of which has been filed with the Commission as Exhibit
4(a), (b) and (l) to the registration statement of which this prospectus forms a
part, and which is available as described under "Available Information."
General
The notes are limited to the aggregate principal amount of $70,704,000 offered
hereby (Section 3.01). The Trust from time to time may enter into one or more
supplemental indentures providing for the issuance of additional notes without
the consent of the holders of outstanding notes (Section 9.01).
The notes will be issued in denominations of $5,000 or any amount in excess
thereof which is an integral multiple of $1,000. They will be issued in
registered form only, without coupons, to mature one to ten years from the date
of issue, as selected by the investor. The notes will be unsecured general
obligations of the Trust and will be identical except for interest rate, issue
date and maturity date (Section 3.02). Except as described below under
"Redemption of Certain Notes," the notes will not contain any provisions for
conversion, redemption, amortization, sinking fund or retirement prior to
maturity.
The notes are not guaranteed or insured and are not secured by any mortgage,
pledge or lien. The notes will rank on a parity in right of payment with all
unsecured debt of the Real Estate Trust. At September 30, 2002, the Real Estate
Trust's unsecured debt totaled $55.2 million.
Each note will bear interest from the date of issue to the date of maturity at
the annual rate stated on the face thereof. Such interest will be payable
semiannually, six months from the date of issue and each six months thereafter,
and at maturity, to the persons in whose names the notes are registered at the
close of business on the 20th day preceding such interest payment dates.
Interest rates applicable to notes will be subject to change by the Trust from
time to time, but no such change will affect any notes issued prior to the
effective date of such change (Section 3.01). Based on the amount of a proposed
investment in notes or the aggregate principal amount of the Real Estate Trust's
outstanding unsecured notes held by a prospective investor, the Trust may offer
to pay interest on a note of any maturity at an annual rate of up to 2% in
excess of the interest rate shown on the cover page of this prospectus for a
note of such maturity.
At maturity of any note, principal will be payable upon surrender of such note
without endorsement at U.S. Bank Trust National Association, 100 Wall Street
Suite 1600, New York, New York 10005. Interest payments will be made by the
Trust by check mailed to the person entitled thereto (Sections 3.01 and 10.02).
Notes must be presented at the above office of the Indenture Trustee for
registration of transfer or exchange and for payment at maturity. No service
charge will be imposed for any transfer or exchange of notes, but the Trust may
require payment to cover taxes or other governmental charges that may be
assessed in connection with any such transfer or exchange (Section 3.05).
The indenture does not impose any restrictions on the Trust's ability to pay
dividends or other distributions to its shareholders, to incur debt or to issue
additional securities.
There is no established trading market for the notes, and the Trust does not
anticipate that an active trading market will be established.
Redemption of Notes
The Trust may, at its sole election, redeem any of the notes having a stated
maturity of more than one year from date of issue on any interest payment date
with respect to such note on or after the first anniversary of the date of issue
of such note at a redemption price, exclusive of the installment of interest due
on the redemption date, payment of which shall have been made or duly provided
for to the registered holder on the relevant record date, equal to the principal
amount of the note so redeemed. (Section 11.01). Notes called for redemption
will not bear interest after the redemption date. (Section 11.07).
If fewer than all of the notes having a stated maturity of more than one year
and the same interest payment date as the redemption date are to be redeemed,
the particular notes to be redeemed will be selected by such method as the Trust
shall deem appropriate and may include redemption of notes with higher interest
rates first. (Section 11.04).
Events of Default and Notice Thereof
The indenture provides that an "Event of Default" with respect to the notes will
result upon the occurrence of any of the following:
o default in the payment of any interest upon any note when it becomes due and
payable, and continuance of such default for a period of 30 days;
o default in the payment of the principal of and premium, if any, on any note at
its maturity;
o default in the performance, or breach, of any covenant or warranty of the
Trust in the indenture, other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in the indenture specifically dealt
with, and continuance of such default or breach for a period of 60 days after
there has been given, by registered or certified mail, to the Trust by the
Indenture Trustee or to the Trust and the Indenture Trustee by the holders of at
least 10% in principal amount of the notes outstanding, a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" under the indenture;
o certain events of bankruptcy or insolvency affecting the Trust; or
o The Advisor ceases to be the investment advisor to the Trust without being
immediately replaced by another entity the majority voting interest of which is
owned by the Saul Company or B. Francis Saul II, our Chairman and Chief
Executive Officer (Section 5.01).
Within 90 days after the occurrence of a default, the Indenture Trustee is
required to give the noteholders notice of all defaults known to it; provided
that, except in the case of a default in the payment of principal of, and
premium if any, or interest on, any of the notes, the Indenture Trustee will be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of the noteholders (Section 6.02).
If an Event of Default occurs and is continuing, the Indenture Trustee or the
holders of not less than 25% in principal amount of the notes outstanding may
declare the principal of all the notes to be due and payable immediately, by a
notice in writing to the Trust, and to the Indenture Trustee if given by
noteholders, and upon any such declaration such principal will become
immediately due and payable (Section 5.02). At any time after such a declaration
of acceleration has been made and before a judgment or decree for payment of the
money due has been obtained by the Indenture Trustee, the holders of a majority
in principal amount of the notes outstanding, by written notice to the Trust and
the Indenture Trustee, may rescind and annul such declaration and its
consequences if
(1) the Trust has paid or deposited with the Indenture Trustee a sum sufficient
to pay:
o all overdue installments of interest on all notes;
o the principal of and premium, if any, on any notes which have become due
otherwise than by such declaration of acceleration and interest thereon at the
rate borne by the notes;
o to the extent that payment of such interest is lawful, interest upon overdue
installments of interest at the rate borne by the notes; and
o all sums paid or advanced by the Indenture Trustee under the indenture and the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee, its agents and counsel; and
(2) all Events of Default, other than the nonpayment of the principal of notes
which have become due solely by such acceleration, have been cured or have been
waived as provided in the indenture (Section 5.02).
The indenture provides that if (1) default is made in the payment of any
interest on any note when such interest becomes due and payable and such default
continues for a period of 30 days, or (2) default is made in the payment of the
principal of or premium, if any, on any note at the maturity thereof, the Trust
will, upon demand of the Indenture Trustee, pay to it, for the benefit of the
holders of such notes, the whole amount then due and payable on such notes for
principal and premium, if any, and interest, with interest upon the overdue
principal and premium, if any and, to the extent that payment of such interest
is legally enforceable, upon overdue installments of interest, at the rate borne
by the notes. (Section 5.03).
In the case of an Event of Default which is not cured or waived, the Indenture
Trustee will be required to exercise such of its rights and powers under the
indenture, and to use the degree of care and skill in their exercise, that a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs, but it otherwise need only perform such duties as are specifically
set forth in the indenture (Section 6.01). Subject to such provisions, the
Indenture Trustee will be under no obligation to exercise any of its rights or
powers under the indenture at the request of any of the noteholders unless they
offer to the Indenture Trustee reasonable security or indemnity (Section 6.03).
Modification of Indenture
The indenture, the rights and obligations of the Trust and the rights of the
noteholders may be modified by the Trust and the Indenture Trustee without the
consent of the noteholders:
o to evidence the succession of a corporation or other entity to the Trust, and
the assumption by any such successor of the covenants of the Trust in the
indenture and the notes;
o to add to the covenants of the Trust, for the benefit of the noteholders, or
to surrender any right or power conferred in the indenture upon the Trust;
o to cure any ambiguity, to correct or supplement any provision of the indenture
which may be defective or inconsistent with any other provisions, or to make any
other provisions with respect to matters or questions arising under the
indenture which are not inconsistent with the indenture, provided such action
does not adversely affect the interests of the noteholders;
o to create, from time to time, notes in addition to the notes initially
issuable under the indenture and any supplemental indenture thereto, which
subsequently created notes are identical to the notes initially issuable under
the indenture and any supplemental indenture thereto, except for interest rate,
issue date and maturity date; or
o to modify, amend or supplement the indenture to effect the qualification of
the indenture under the Trust Indenture Act of 1939 and to add to the indenture
specified provisions permitted by such Act (Section 9.01).
With certain exceptions, the indenture, the rights and obligations of the Trust
and the rights of the noteholders may be modified in any manner by the Trust
with the consent of the holders of not less than 66-2/3% in aggregate principal
amount of the outstanding notes; but no such modification may be made without
the consent of each noteholder affected thereby which would (1) change the
maturity of the principal of, or any installment of interest on, any note or
reduce the principal amount thereof or the interest thereon, or impair the right
of such noteholder to institute suit for the enforcement of any such payment on
or after the maturity thereof, or (2) reduce the percentage in principal amount
of the outstanding notes, the consent of whose holders is required for any
modification of the indenture, or the consent of whose holders is required for
any waiver of compliance with certain provisions of the indenture or certain
defaults thereunder and the consequences thereof provided for in the indenture
(Section 9.02).
Compliance Reports
The Trust and each other obligor on the notes, if any, must deliver annually to
the Indenture Trustee, within 120 days after the end of each fiscal year, an
officers' certificate stating whether the Trust is in default in the performance
and observance of any of the conditions or covenants of the indenture, and if
the Trust is in default, specifying all such defaults and the nature and status
thereof (Section 10.06).
Reports to Noteholders
The Trust will furnish to the holders of notes such summaries of all quarterly
and annual reports which it files with the Commission as may be required by the
rules and regulations of the Commission to be furnished to holders of any notes
(Section 7.04).
EXPERTS
The consolidated financial statements and schedules of B.F. Saul Real Estate
Investment Trust appearing in B.F. Saul Real Estate Investment Trust's Annual
Report (Form 10-K) for the year ended September 30, 2002, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
LEGAL MATTERS
The legality of the securities offered by this prospectus has been passed upon
for the Trust by the firm of Shaw Pittman LLP, Washington, D.C., a partnership
including professional corporations. George M. Rogers, Jr., currently a senior
counsel of that firm and who was a member of that firm until January, 1999, is a
trustee of the Trust and a director of Saul Company and of Chevy Chase Bank.
WHERE YOU CAN FIND MORE INFORMATION
The Trust has filed with the Securities and Exchange Commission a Registration
Statement on Form S-2 pursuant to the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder, covering the notes being
offered hereby. This prospectus does not contain all the information set forth
in the registration statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission, and to which reference is
hereby made. Statements made in this prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the registration statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. This prospectus is also
being accompanied by a copy of our Annual Report on Form 10-K for the fiscal
year ended September 30, 2002.
The Trust is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports and
other information with the Commission. Information as of particular dates
concerning the Trust's Trustees, officers and principal holders of securities
and any material interest of such persons in transactions with the Trust is set
forth in annual reports on Form 10-K, quarterly reports on Form 10-K and current
reports on Form 8-K filed with the Commission. Such reports and other
information filed by the Trust with the Commission may be inspected and copied
at the public reference facilities of the Commission, located at 450 Fifth
Street, N.W., Washington, D.C. 20549; 233 Broadway, New York, New York 10279;
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this
material may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, certain of these materials are publicly available through the
Commission's web site located at http://www.sec.gov. Because the Trust does not
have publicly traded equity or debt securities, the Trust has determined that it
is not necessary to maintain a web site. However, as soon as reasonably
practicable after with file documents with, or furnish document to, the
Commission, we will provide without charge to any person, upon the written or
oral request of such person, copies of such filings. Such request should be
directed to B.F. Saul Real Estate Investment Trust, 7501 Wisconsin Avenue, Suite
1500, Bethesda, Maryland 20814, Attention: Henry Ravenel, Jr. (telephone number
(301) 986-6207).
NOTE ORDER FORM
B.F. SAUL REAL ESTATE INVESTMENT TRUST
PLEASE ISSUE A NOTE EXACTLY AS INDICATED BELOW AT THE INTEREST RATE SHOWN
ON YOUR CURRENT PROSPECTUS OR SUPPLEMENT THERETO. MY CHECK FOR 100% OF THE
PRINCIPAL AMOUNT IS ENCLOSED. I UNDERSTAND THAT MY NOTE WILL BE ISSUED AS OF THE
DATE THIS ORDER IS RECEIVED (IF RECEIVED BY NOON) AND THAT YOUR OFFER MAY BE
WITHDRAWN WITHOUT NOTICE.
Owner's Name:
-----------------------------------------------------------------
Address:
-----------------------------------------------------------------
-----------------------------------------------------------------
Taxpayer Identification
(Social Security) Number:
-----------------------------------------------------
Principal Amount of Note Maturity from date of issue
(Minimum $5,000): (circle one): 1 2 3 4 5 6 7 8 9 10 year(s)
--------
If the maturity date falls on a Saturday, Sunday, or holiday, it will be changed
to the nearest business day. This change will not alter the interest rate.
Under penalties of perjury, I certify (1) that the number shown on this form is
my correct taxpayer identification number, and (2) that I am not subject to
backup withholding because (a) I have not been notified that I am subject to
backup withholding as a result of a failure to report all interest or dividends,
or (b) the Internal Revenue Service has notified me that I am no longer subject
to backup withholding; or all of the account owners are neither citizens nor
residents of the United States and therefore exempt from withholding.
Note: Strike out the language certifying that you are not subject to backup
withholding due to notified payee underreporting if the Internal Revenue Service
has notified you that you are subject to backup withholding and you have not
received notice from the Internal Revenue Service advising that backup
withholding has terminated.
- -------------- -------------------------------------------------
Date Signature
For office use only:
- -------------------- -------------------------------------------------
Date rec'd Print Name
---------
-------------------------------------------------
Issue date Address (if different from above)
---------
-------------------------------------------------
Interest rate City, State and Zip Code
------
-------------------------------------------------
(Area Code) Telephone Number
B.F. SAUL REAL ESTATE INVESTMENT TRUST
Gentlemen:
I (We) hold a Note,
number
------------------------------
For the principal amount of $
------------------------------
which matures on
------------------------------
CHECK ONE OF THE FOLLOWING BOXES:
1. I (We) wish to receive a check for the principal amount -
if so, please send note to U.S. Bank Trust National
Association
2. I (We) wish to reinvest the principal amount in a new Note as follows:
Principal Amount of Note Maturity from date of issue
(Minimum $5,000): (circle one): 1 2 3 4 5 6 7 8 9 10 year(s)
--------
The principal amount of the new note may be either increased or decreased in
increments of $1,000. In no can case the new principal be less than $5,000. If
increased, please send a check payable to B.F. Saul Real Estate Investment Trust
for the amount of the increase.
PLEASE ENCLOSE THE MATURING NOTE AND RETURN TO US
IF THE NEW NOTE TO BE ISSUED IS TO BE REGISTERED IN A NAME
OTHER THAN THAT OF THE PRESENT HOLDER(S), OR IF ANY OTHER
ALTERATIONS IN THE FORM OF THE
REGISTRATION ARE REQUIRED, PLEASE PRINT OR TYPE IN THE NEW
INFORMATION BELOW.
Name of Owner(s)
--------------------------------------------
Print Name
--------------------------------------------
Print Name
Address:
--------------------------------------------
No. Street Apt.
--------------------------------------------
City State Zip Code
Telephone Number
--------------------------------------------
Area Code
Federal Identification or
Social Security
--------------------------------------------
- ----------------------------------- ---------------
Signature Date
ACKNOWLEDGEMENT
B.F. SAUL REAL ESTATE INVESTMENT TRUST
Gentlemen:
I understand and acknowledge that (1) the Note I am purchasing is not a
savings account or a deposit and (2) the Note is not insured or guaranteed any
federal government agency, including the Federal Deposit Insurance Corporation,
or by any state governmental agency.
- -------------------- --------------------------------------
Date Signature
--------------------------------------
Print Name
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Declaration of Trust (Article III) provides that no Trustee or officer of
the Trust shall be liable for any action or failure to act except for his own
bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties, and, except as stated, Trustees and officers are entitled to be
reimbursed and indemnified for all loss, expenses, and outlays which they may
suffer because they are Trustees or officers of the Trust.
ITEM 16.
(a) EXHIBITS.
EXHIBITS DESCRIPTION
---------- ------------------------------------------------------------------
3. ORGANIZATIONAL DOCUMENTS
(a) Second Amended and Restated Declaration of Trust filed with the
Maryland State Department of Assessments and Taxation on May 23,
2002 as Exhibit 3(a) to Registration Statement 333-70753 is
hereby incorporated by reference.
(b) Second Amended and Restated By-Laws of the Trust dated as of
May 23, 2002 as Exhibit 3(b) to Registration Statement 333-70753
is hereby incorporated by reference.
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
(a) Indenture dated as of March 25, 1998 between the Trust and
Norwest Bank Minnesota, National Association, as Trustee, with
respect to the Trust's 9 3/4% Series B Senior Secured Notes due
2008, as filed as Exhibit 4(a) to Registration Statement
333-49937 is hereby incorporated by reference.
(b) Indenture with respect to the Trust's Senior Notes Due from One
Year to Ten Years from Date of Issue as filed as Exhibit 4(a) to
Registration No. 33-19909 is hereby incorporated by reference.
(c) First Supplemental Indenture with respect to the Trust's Senior
Notes due from One Year to Ten Years from Date of Issue as filed
as Exhibit T-3C to the Trust's Form T-3 Application for
Qualification of Indentures under the Trust Indenture Act of 1939
(File No. 22-20838) is hereby incorporated by reference.
(d) Indenture with respect to the Trust's Senior Notes due from One
Year to Ten Years from Date of Issue as filed as Exhibit 4(a) to
Registration Statement No. 33-9336 is hereby incorporated by
reference.
(e) Fourth Supplemental Indenture with respect to the Trust's Senior
Notes due from One Year to Ten Years from Date of Issue as filed
as Exhibit 4(a) to Registration Statement No. 2-95506 is hereby
incorporated by reference.
(f) Third Supplemental Indenture with respect to the Trust's Senior
Notes due from One Year to Ten Years from Date of Issue as filed
as Exhibit 4(a) to Registration Statement No. 2-91126 is hereby
incorporated by reference.
(g) Second Supplemental Indenture with respect to the Trust's Senior
Notes due from One Year to Ten Years from Date of Issue as filed
as Exhibit 4(a) to Registration Statement No. 2-80831 is hereby
incorporated by reference.
(h) Supplemental Indenture with respect to the Trust's Senior Notes
due from One Year to Ten Years from Date of Issue as filed as
Exhibit 4(a) to Registration Statement No. 2-68652 is hereby
incorporated by reference.
(i) Indenture with respect to the Trust's Senior Notes due from One
Year to Five Years from Date of Issue as filed as Exhibit T-3C to
the Trust's Form T-3 Application for Qualification of Indentures
under the Trust Indenture Act of 1939 (file No. 22-10206) is
hereby incorporated by reference
(j) Indenture dated as of September 1, 1992 with respect to the
Trust's Notes due from One to Ten Years form Date of Issue filed
as Exhibit 4(a) to Registration Statement No. 33-34930 is hereby
incorporated by reference.
(k) First Supplemental Indenture dated as of January 16, 1997 with
respect to the Trust's Notes due from One to Ten years from Date
of Issue filed as Exhibit 4(b) to Registration Statement No.
33-34930 is hereby incorporated by reference.
(l) Second Supplemental Indenture dated as of January 13, 1999 with
respect to the Trust's Notes due from One to Ten Years from Date
of Issuance as filed as Exhibit 4(l) to Registration Statement
No. 333-70753 is hereby incorporated by reference.
**5. Opinion of Shaw Pittman LLP with respect to legality of the
Notes.
10. MATERIAL CONTRACTS
* (a) Amended and Restated Advisory Contract dated as of October 1,
1982, by and among the Trust, B.F. Saul Company and B.F. Saul
Advisory Company, as subsequently amended.
(b) Assignment and Guaranty Agreement effective May 1, 1972 by and
among the Trust, B.F. Saul Company and B.F. Saul Advisory
Company, as filed as Exhibit 10(b) to the Trust's Annual Report
on Form 10-K (File No. 1-7184) for the fiscal year ended
September 30, 2001 is hereby incorporated by reference.
(c) Commercial Property Leasing and Management Agreement effective
October 1, 1982 between the Trust and B.F. Saul Property Company
filed as Exhibit 10(b) to Registration Statement No. 2-80831 is
hereby incorporated by reference.
(d) Amendments to Commercial Property Leasing and Management
Agreement between the Trust and B.F. Saul Property Company dated
as of December 31, 1992 (Amendment No. 5), July 1, 1989
(Amendment No. 4), October 1, 1986 (Amendment No. 3), January 1,
1985 (Amendment No. 2) and July 1, 1984 (Amendment No. 1) filed
as Exhibit 10(o) to Registration Statement No. 33-34930 is hereby
incorporated by reference.
(e) Tax Sharing Agreement dated June 28, 1990 among the Trust, Chevy
Chase Bank F.S.B. and certain of their subsidiaries filed as
Exhibit 10(c) to Registration Statement No. 33-34930 is hereby
incorporated by reference.
(f) First Amendment to Tax Sharing Agreement effective May 16, 1995
among the Trust, Chevy Chase Bank F.S.B. and certain of their
subsidiaries, as filed as Exhibit 10(f) to the Trust's Annual
Report on Form 10-K (File No. 1-7184) for the fiscal year ended
September 30, 2001 is hereby incorporated by reference.
(g) Agreement dated June 28, 1990 among the Trust, B.F. Saul Company,
Franklin Development Co., Inc., The Klingle Corporation and
Westminster Investing Corporation relating to the transfer of
certain shares of Chevy Chase Bank, F.S.B. and certain real
property to the Trust in exchange for Preferred Shares of the
Trust filed as Exhibit 10(d) to Registration Statement No.
33-34930 is hereby incorporated by reference.
(h) Regulatory Capital Maintenance/Dividend Agreement dated May 17,
1988 among B.F. Saul Company, the Trust and the Federal Savings
and Loan Insurance Corporation filed as Exhibit 10(e) to the
Trust's Annual Report on Form 10-K (File No. 1-7184) for the
fiscal year ended September 30, 1991 is hereby incorporated by
reference.
(i) Registration Rights and Lock-Up Agreement dated August 26, 1993
by and among Saul Centers, Inc. and the Trust, Westminster
Investing Corporation, Van Ness Square Corporation, Dearborn,
L.L.C., B.F. Saul Property Company and Avenel Executive Park
Phase II, Inc. as filed as Exhibit 10.6 to Registration Statement
No. 33-64562 is hereby incorporated by reference.
(j) First Amendment to Registration Rights and Lock-Up Agreement
dated September 29, 1999 by and among Saul Centers, Inc., the
Trust, Westminster Investing Corporation, Van Ness Square
Corporation, Dearborn Corporation, Franklin Property Company and
Avenel Executive Park Phase II, Inc., as filed as Exhibit 10(b)
to the Trust's Annual Report on Form 10-K (File No. 1-7184) for
the fiscal year ended September 30, 2001 is hereby incorporated
by reference.
(k) Exclusivity and Right of First Refusal Agreement dated August 26,
1993 among Saul Centers, Inc., the Trust, B.F. Saul Company,
Westminster Investing Corporation, B.F. Saul Property Company,
Van Ness Square Corporation, and Chevy Chase Savings Bank, F.S.B.
as filed as Exhibit 10.7 to Registration Statement No. 33-64562
hereby incorporated by reference.
(l) Fourth Amended and Restated Reimbursement Agreement dated as of
April 25, 2000 by and among Saul Centers, Inc., Saul Holdings
Limited Partnership, Saul Subsidiary I Limited Partnership, Saul
Subsidiary II Limited Partnership, Saul QRS, Inc., B.F. Saul
Property Company, Westminster Investing Corporation, Van Ness
Square Corporation, Dearborn, L.L.C., Avenel Executive Park
Phase II, L.L.C., and the Trust, as filed as Exhibit 10(k) to the
Trust's Quarterly Report on Form 10-Q (File No. 1-7184) for the
fiscal quarter ended March 31, 2000 is hereby incorporated by
reference.
(m) Bank Stock Registration Rights Agreement dated as of March 25,
1998 between the Trust and Norwest Bank Minnesota, National
Association, as Trustee, as filed as Exhibit 4(d) to Registration
Statement No. 333-49937 is hereby incorporated by reference.
(n) Note Administration Fee Agreement dated as of February 8, 2002,
between the Trust and B.F. Saul Advisory Company L.L.C., as filed
as Exhibit 10(n) to the Trust's Quarterly Report on Form 10-Q
(File No. 1-7184) for the fiscal quarter ended December 31, 2001
is hereby incorporated by reference.
*12. Statement re: Computation of Ratio of Earnings to Fixed Charges -
Real Estate Trust.
*12.1 Statement re: Computation of Ratio of Consolidated Earnings to
Fixed Charges - Trust.
21. List of Subsidiaries of the Trust, filed as Exhibit 21 to the
Trust's 10-K (File No. 1-7184) for the fiscal year ended
September 30, 2002, is hereby incorporated by reference.
*23. (a) Consent of Ernst & Young LLP.
** (b) Consent of Shaw Pittman LLP.
**25. Statement of Eligibility on Form T-1 of U.S. Bank
Trust National Association.
- -------------------
* Filed herewith.
** Previously filed.
ITEM 17. UNDERTAKINGS.
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 Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
(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.
(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 therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
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 provision, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in Chevy Chase,
Maryland on this 18th day of December 2002.
B.F. SAUL REAL ESTATE INVESTMENT TRUST
By: B. FRANCIS SAUL II
----------------------------
B. Francis Saul II
Chairman of the Board
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
below on this 18th day of December 2002.
Signature Capacity
- --------------------------- --------------------------------------
B. Francis Saul II
- --------------------------- Trustee, Chairman of the Board
B. Francis Saul II and Principal Executive Officer
Stephen R. Halpin, Jr.
- --------------------------- Vice President and Chief
Stephen R. Halpin, Jr. Financial Officer (Principal
Financial Officer)
Bill D. Tzamaras
- --------------------------- Vice President
Bill D. Tzamaras (Principal Accounting Officer)
Garland J. Bloom, Jr.*
- --------------------------- Trustee
Garland J. Bloom, Jr.
Gilbert M. Grosvenor*
- --------------------------- Trustee
Gilbert M. Grosvenor
B. Francis Saul III*
- --------------------------- Trustee
B. Francis Saul III
John R. Whitmore*
- --------------------------- Trustee
John R. Whitmore
*Signed by Ross E. Heasley as attorney-in-fact
EXHIBIT INDEX
EXHIBITS DESCRIPTION
---------- ------------------------------------------------------------------
3. ORGANIZATIONAL DOCUMENTS
(a) Second Amended and Restated Declaration of Trust filed with the
Maryland State Department of Assessments and Taxation on May 23,
2002 as Exhibit 3(a) to Registration Statement 333-70753 is
hereby incorporated by reference.
(b) Second Amended and Restated By-Laws of the Trust dated as of
May 23, 2002 as Exhibit 3(b) to Registration Statement 333-70753
is hereby incorporated by reference.
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
(a) Indenture dated as of March 25, 1998 between the Trust and
Norwest Bank Minnesota, National Association, as Trustee, with
respect to the Trust's 9 3/4% Series B Senior Secured Notes due
2008, as filed as Exhibit 4(a) to Registration Statement
333-49937 is hereby incorporated by reference.
(b) Indenture with respect to the Trust's Senior Notes Due from One
Year to Ten Years from Date of Issue as filed as Exhibit 4(a) to
Registration No. 33-19909 is hereby incorporated by reference.
(c) First Supplemental Indenture with respect to the Trust's Senior
Notes due from One Year to Ten Years from Date of Issue as filed
as Exhibit T-3C to the Trust's Form T-3 Application for
Qualification of Indentures under the Trust Indenture Act of 1939
(File No. 22-20838) is hereby incorporated by reference.
(d) Indenture with respect to the Trust's Senior Notes due from One
Year to Ten Years from Date of Issue as filed as Exhibit 4(a) to
Registration Statement No. 33-9336 is hereby incorporated by
reference.
(e) Fourth Supplemental Indenture with respect to the Trust's Senior
Notes due from One Year to Ten Years from Date of Issue as filed
as Exhibit 4(a) to Registration Statement No. 2-95506 is hereby
incorporated by reference.
(f) Third Supplemental Indenture with respect to the Trust's Senior
Notes due from One Year to Ten Years from Date of Issue as filed
as Exhibit 4(a) to Registration Statement No. 2-91126 is hereby
incorporated by reference.
(g) Second Supplemental Indenture with respect to the Trust's Senior
Notes due from One Year to Ten Years from Date of Issue as filed
as Exhibit 4(a) to Registration Statement No. 2-80831 is hereby
incorporated by reference.
(h) Supplemental Indenture with respect to the Trust's Senior Notes
due from One Year to Ten Years from Date of Issue as filed as
Exhibit 4(a) to Registration Statement No. 2-68652 is hereby
incorporated by reference.
(i) Indenture with respect to the Trust's Senior Notes due from One
Year to Five Years from Date of Issue as filed as Exhibit T-3C to
the Trust's Form T-3 Application for Qualification of Indentures
under the Trust Indenture Act of 1939 (file No. 22-10206) is
hereby incorporated by reference
(j) Indenture dated as of September 1, 1992 with respect to the
Trust's Notes due from One to Ten Years form Date of Issue filed
as Exhibit 4(a) to Registration Statement No. 33-34930 is hereby
incorporated by reference.
(k) First Supplemental Indenture dated as of January 16, 1997 with
respect to the Trust's Notes due from One to Ten years from Date
of Issue filed as Exhibit 4(b) to Registration Statement No.
33-34930 is hereby incorporated by reference.
(l) Second Supplemental Indenture dated as of January 13, 1999 with
respect to the Trust's Notes due from One to Ten Years from Date
of Issuance as filed as Exhibit 4(l) to Registration Statement
No. 333-70753 is hereby incorporated by reference.
**5. Opinion of Shaw Pittman LLP with respect to legality of the
Notes.
10. MATERIAL CONTRACTS
* (a) Amended and Restated Advisory Contract dated as of October 1,
1982, by and among the Trust, B.F. Saul Company and B.F. Saul
Advisory Company, as subsequently amended.
(b) Assignment and Guaranty Agreement effective May 1, 1972 by and
among the Trust, B.F. Saul Company and B.F. Saul Advisory
Company, as filed as Exhibit 10(b) to the Trust's Annual Report
on Form 10-K (File No. 1-7184) for the fiscal year ended
September 30, 2001 is hereby incorporated by reference.
(c) Commercial Property Leasing and Management Agreement effective
October 1, 1982 between the Trust and B.F. Saul Property Company
filed as Exhibit 10(b) to Registration Statement No. 2-80831 is
hereby incorporated by reference.
(d) Amendments to Commercial Property Leasing and Management
Agreement between the Trust and B.F. Saul Property Company dated
as of December 31, 1992 (Amendment No. 5), July 1, 1989
(Amendment No. 4), October 1, 1986 (Amendment No. 3), January 1,
1985 (Amendment No. 2) and July 1, 1984 (Amendment No. 1) filed
as Exhibit 10(o) to Registration Statement No. 33-34930 is hereby
incorporated by reference.
(e) Tax Sharing Agreement dated June 28, 1990 among the Trust, Chevy
Chase Bank F.S.B. and certain of their subsidiaries filed as
Exhibit 10(c) to Registration Statement No. 33-34930 is hereby
incorporated by reference.
(f) First Amendment to Tax Sharing Agreement effective May 16, 1995
among the Trust, Chevy Chase Bank F.S.B. and certain of their
subsidiaries, as filed as Exhibit 10(f) to the Trust's Annual
Report on Form 10-K (File No. 1-7184) for the fiscal year ended
September 30, 2001 is hereby incorporated by reference.
(g) Agreement dated June 28, 1990 among the Trust, B.F. Saul Company,
Franklin Development Co., Inc., The Klingle Corporation and
Westminster Investing Corporation relating to the transfer of
certain shares of Chevy Chase Bank, F.S.B. and certain real
property to the Trust in exchange for Preferred Shares of the
Trust filed as Exhibit 10(d) to Registration Statement No.
33-34930 is hereby incorporated by reference.
(h) Regulatory Capital Maintenance/Dividend Agreement dated May 17,
1988 among B.F. Saul Company, the Trust and the Federal Savings
and Loan Insurance Corporation filed as Exhibit 10(e) to the
Trust's Annual Report on Form 10-K (File No. 1-7184) for the
fiscal year ended September 30, 1991 is hereby incorporated by
reference.
(i) Registration Rights and Lock-Up Agreement dated August 26, 1993
by and among Saul Centers, Inc. and the Trust, Westminster
Investing Corporation, Van Ness Square Corporation, Dearborn,
L.L.C., B.F. Saul Property Company and Avenel Executive Park
Phase II, Inc. as filed as Exhibit 10.6 to Registration Statement
No. 33-64562 is hereby incorporated by reference.
(j) First Amendment to Registration Rights and Lock-Up Agreement
dated September 29, 1999 by and among Saul Centers, Inc., the
Trust, Westminster Investing Corporation, Van Ness Square
Corporation, Dearborn Corporation, Franklin Property Company and
Avenel Executive Park Phase II, Inc., as filed as Exhibit 10(b)
to the Trust's Annual Report on Form 10-K (File No. 1-7184) for
the fiscal year ended September 30, 2001 is hereby incorporated
by reference.
(k) Exclusivity and Right of First Refusal Agreement dated August 26,
1993 among Saul Centers, Inc., the Trust, B.F. Saul Company,
Westminster Investing Corporation, B.F. Saul Property Company,
Van Ness Square Corporation, and Chevy Chase Savings Bank, F.S.B.
as filed as Exhibit 10.7 to Registration Statement No. 33-64562
hereby incorporated by reference.
(l) Fourth Amended and Restated Reimbursement Agreement dated as of
April 25, 2000 by and among Saul Centers, Inc., Saul Holdings
Limited Partnership, Saul Subsidiary I Limited Partnership, Saul
Subsidiary II Limited Partnership, Saul QRS, Inc., B.F. Saul
Property Company, Westminster Investing Corporation, Van Ness
Square Corporation, Dearborn, L.L.C., Avenel Executive Park
Phase II, L.L.C., and the Trust, as filed as Exhibit 10(k) to the
Trust's Quarterly Report on Form 10-Q (File No. 1-7184) for the
fiscal quarter ended March 31, 2000 is hereby incorporated by
reference.
(m) Bank Stock Registration Rights Agreement dated as of March 25,
1998 between the Trust and Norwest Bank Minnesota, National
Association, as Trustee, as filed as Exhibit 4(d) to Registration
Statement No. 333-49937 is hereby incorporated by reference.
(n) Note Administration Fee Agreement dated as of February 8, 2002,
between the Trust and B.F. Saul Advisory Company L.L.C., as filed
as Exhibit 10(n) to the Trust's Quarterly Report on Form 10-Q
(File No. 1-7184) for the fiscal quarter ended December 31, 2001
is hereby incorporated by reference.
*12. Statement re: Computation of Ratio of Earnings to Fixed Charges -
Real Estate Trust.
*12.1 Statement re: Computation of Ratio of Consolidated Earnings to
Fixed Charges - Trust.
21. List of Subsidiaries of the Trust, filed as Exhibit 21 to the
Trust's 10-K (File No. 1-7184) for the fiscal year ended
September 30, 2002, is hereby incorporated by reference.
*23. (a) Consent of Ernst & Young LLP.
** (b) Consent of Shaw Pittman LLP.
**25. Statement of Eligibility on Form T-1 of U.S. Bank
Trust National Association.
- -------------------
* Filed herewith.
** Previously filed.
