Filed Pursuant to Rule 424(b)(3)
Registration No. 333-70076
PROSPECTUS
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AMLI RESIDENTIAL PROPERTIES TRUST
569,988 Common Shares
This prospectus relates to the offer and sale by selling shareholders
of 569,988 common shares of AMLI Residential Properties Trust from time to
time. We have registered the common shares to enable the holders of units
of partnership interest in AMLI Residential Properties, L.P. to resell the
common shares into which those units may be converted, but the registration
of the common shares does not necessarily mean that those selling
shareholders will offer or sell any of the common shares.
The selling shareholders may from time to time offer and sell the
common shares on the New York Stock Exchange or otherwise and they may sell
the common shares at market prices or at negotiated prices. They may sell
the common shares in ordinary brokerage transactions, in block
transactions, in privately negotiated transactions, pursuant to Rule 144
under the Securities Act of 1933 or otherwise. If the selling shareholders
sell the common shares through brokers, they expect to pay customary
brokerage commissions and charges.
We will not receive any of the proceeds when the selling shareholders
sell any of the common shares. However, we have agreed to pay certain
expenses of the registration and sale of the common shares.
Our common shares are listed on the New York Stock Exchange under the
symbol "AML". On October 1, 2003, the last reported sale price of our
common shares on the NYSE was $26.32 per share.
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
passed on the adequacy or accuracy of this prospectus. Any representation
to the contrary is a criminal offense.
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The date of this prospectus is October 15, 2003
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We have not authorized any person to give any information or to make
any representation not contained in this prospectus in connection with any
offering of these common shares. This prospectus is not an offer to sell
any security other than these common shares and it is not soliciting an
offer to buy any security other than these common shares. This prospectus
is not an offer to sell these common shares to any person and it is not
soliciting an offer from any person to buy these common shares in any
jurisdiction where the offer or sale to that person is not permitted. You
should not assume that the information contained in this prospectus is
correct on any date after the date of this prospectus, even though this
prospectus is delivered or these common shares are offered or sold on a
later date.
TABLE OF CONTENTS
Page
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The Company . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 3
Description of Common Shares. . . . . . . . . . . . . . . . . . 3
Description of Provisions of Maryland Law and
of Our Declaration of Trust and Bylaws. . . . . . . . . . . . . 8
Federal Income Tax Considerations . . . . . . . . . . . . . . . 10
Selling Shareholders. . . . . . . . . . . . . . . . . . . . . . 20
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . 22
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . 22
Where You Can Find More Information . . . . . . . . . . . . . . 23
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THE COMPANY
We are a self-administered and self-managed real estate investment
trust (a "REIT") engaged in the development, acquisition and management of
upscale, institutional quality multifamily apartment communities in eight
major metropolitan markets in the Southeast, Southwest, Midwest and
Mountain regions of the United States, and were founded in 1980.
We are the sole general partner of, and own a majority of the
partnership interests in, Amli Residential Properties, L.P., a Delaware
limited partnership (the "Operating Partnership"), through which we own our
interests in our apartment communities. As of October 1, 2003, we owned
approximately 86% of the outstanding partnership interests ("OP Units") in
the Operating Partnership. OP Units are convertible into our common shares
on a one-for-one basis and are entitled to distributions equal to
distributions received on common shares. We conduct all our business
through the Operating Partnership and its subsidiaries and affiliates.
Our executive offices are located at 125 South Wacker Drive,
Suite 3100, Chicago, Illinois 60606 and its telephone number is (312) 443-
1477. In addition, we maintain regional offices in Atlanta, Dallas,
Indianapolis and Kansas City.
USE OF PROCEEDS
AMLI will not receive any of the proceeds from the sale of any of the
common shares by the selling shareholders. The selling shareholders will
receive all proceeds from the sale of the common shares.
DESCRIPTION OF COMMON SHARES
GENERAL
Our declaration of trust authorizes us to issue up to 150,000,000
shares of beneficial interest, par value $0.01 per share, consisting of
common shares, preferred shares and such other types or classes of shares
of beneficial interest as our board of trustees may create and authorize
from time to time. Our board of trustees may amend our declaration of
trust without shareholder consent to increase or decrease the shares of any
class which we have authority to issue. At October 1, 2003, approximately
19,421,735 common shares of beneficial interest were issued and outstanding
and held of record by approximately 314 shareholders. At October 1, 2003,
100,000 Series A cumulative convertible preferred shares, 3,125,000
Series B cumulative convertible preferred shares, and 800,000 Series D
cumulative convertible preferred shares were issued and outstanding.
The following description of certain general terms and provisions of
the common shares is not complete and you should refer to our declaration
of trust and bylaws for more information.
The outstanding common shares are fully paid and, except as described
below under "--Shareholder Liability," non-assessable. Each common share
entitles the holder to one vote on all matters requiring a vote of
shareholders, including the election of trustees. Holders of common shares
do not have the right to cumulate their votes in the election of trustees,
which means that the holders of a majority of the outstanding common shares
can elect all of the trustees then standing for election.
Holders of common shares are entitled to those distributions that our
board of trustees may declare from time to time out of funds legally
available for the payment of distributions. Holders of common shares have
no conversion, redemption, preemptive or exchange rights to subscribe to
any of our securities. If there is a liquidation, dissolution or winding
up of our affairs, the holders of the common shares are entitled to share
equally in our assets remaining after we pay, or set aside assets to pay,
all liabilities to our creditors and subject to the rights of the holders
of our preferred shares.
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PURCHASE RIGHTS
On November 2, 1998, our board of trustees declared a dividend of one
preferred share purchase right for each common share outstanding, which was
made to holders of common shares of record at the close of business on
November 13, 1998. The holders of any additional common shares issued
after that date and before the redemption or expiration of the preferred
share purchase rights also receive one preferred share purchase right for
each additional common share. Each preferred share purchase right entitles
the holder under certain circumstances to purchase from us one one-
thousandth of a share of a series of participating preferred shares, par
value $0.01 per share, at a price of $70.00 per one one-thousandth of a
participating preferred share. We will adjust that price from time to time
to prevent dilution. Preferred share purchase rights will be exercisable
if:
. a person or group of persons acquires 15% or more of the
outstanding common shares, or files a document with a
governmental agency indicating an intention to acquire 15% or
more of the outstanding common shares, or
. a person or group of persons announces a tender offer or
exchange offer for 15% or more of the outstanding common
shares.
Under specified circumstances, each preferred share purchase right
will entitle the holder to purchase, at the preferred share purchase
right's then current exercise price, a number of common shares having a
market value at the time equal to twice the preferred share purchase
right's exercise price. If any person or group acquires us in a merger or
other business transaction, each holder will have the right to purchase, at
the preferred share purchase right's then current exercise price, a number
of the acquiring company's common shares having a market value at the time
equal to twice the preferred share purchase right's exercise price. The
preferred share purchase rights will expire on November 2, 2008 and we may
redeem them in whole, but not in part, at a price of $0.01 per preferred
share purchase right payable in cash, our shares or any other form of
consideration determined by our board of trustees.
The preferred share purchase rights have certain anti-takeover
effects. The preferred share purchase rights will cause substantial
dilution to a person or group that attempts to acquire us on terms not
approved by our board of trustees. The preferred share purchase rights
should not interfere with any merger or other business combination approved
by our board of trustees since the preferred share purchase rights may be
redeemed by us at the redemption price prior to the time that a person or
group has acquired 15% or more of our outstanding common shares.
TRANSFER AGENT
The transfer agent and registrar for the common shares is EquiServe
Trust Company, N.A. The common shares are listed on the NYSE under the
symbol "AML."
RESTRICTIONS ON SIZE OF HOLDINGS OF SHARES
For us to qualify as a REIT under the Internal Revenue Code of 1986,
no more than 50% in value of our shares, after taking into account options
to acquire shares, may be owned, directly or indirectly, by five or fewer
individuals during the last half of each taxable year or during a
proportionate part of any short taxable year. "Individuals" are defined in
the Internal Revenue Code to include certain entities and constructive
ownership among specified family members. Our shares must also be
beneficially owned by 100 or more persons during at least 335 days of each
taxable year or during a proportionate part of any short taxable year.
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Our declaration of trust prohibits any shareholder from owning, or
being deemed to own by virtue of the attribution provisions of the Internal
Revenue Code, more than 5% in number of shares or value of our outstanding
shares. Our board of trustees, upon receipt of a ruling from the Internal
Revenue Service or an opinion of counsel or other evidence satisfactory to
our board of trustees and on any other conditions as our board of trustees
may direct, may exempt a proposed transferee from the ownership limit. The
proposed transferee must give written notice to us of the proposed transfer
at least 15 days prior to any transfer which, if consummated, would result
in the proposed transferee owning our shares in excess of the ownership
limit. Our board of trustees may require any opinions of counsel,
affidavits, undertakings or agreements that it believes are necessary or
advisable in order to determine or ensure our status as a REIT. Any
transfer of our shares that would:
. create a direct or indirect ownership of shares in excess of
the ownership limit;
. result in our shares being beneficially owned by fewer than
100 persons, determined without reference to any rules of
attribution, as provided in Section 856(a) of the Internal
Revenue Code; or
. result in us being "closely held" within the meaning of
Section 856(h) of the Internal Revenue Code,
will not have any effect, and the intended transferee will acquire no
rights to the shares. These restrictions on transferability and ownership
will not apply if our board of trustees determines, and our shareholders
approve that determination, that it is no longer in the best interests of
us to attempt to qualify, or to continue to qualify, as a REIT.
Our declaration of trust excludes from these ownership restrictions
some of the investors and their transferees who received our shares, or
units in AMLI, L.P., in exchange for apartment communities in connection
with our formation. Our board of trustees by resolution has excluded from
the ownership restrictions UICI, a Delaware corporation, and Gregory T.
Mutz to the extent that:
. UICI individually beneficially owns 29.9% or less of our
outstanding shares,
. Mr. Mutz individually beneficially owns 24.9% or less of our
outstanding shares, and
. UICI and Mr. Mutz collectively beneficially own 34.9% or less
of our outstanding shares as a group.
If there is any purported transfer of our shares which would result
in a person owning our shares in excess of the ownership limit, except as
permitted above, or would cause us to become "closely held" under Section
856(h) of the Internal Revenue Code, those shares will constitute "excess
shares." These excess shares will be transferred pursuant to our
declaration of trust to us as the trustee of a trust for the benefit of the
person or persons to whom the excess shares are ultimately transferred,
until the excess shares are transferred to a person whose ownership will
not violate the restrictions on ownership. While held in trust, the excess
shares will not be entitled to vote or to share in any dividends or other
distributions. Subject to the ownership limit, the trustee will transfer
the excess shares at the direction of the purported transferee to any
person if the excess shares would not be excess shares in the hands of that
person. The purported transferee will receive the lesser of:
. the price paid by the purported transferee for the excess
shares or, if no consideration was paid, the fair market value
of the excess shares on the day of the event which caused the
excess shares to be held in trust; or
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. the price received from the sale or other disposition of the
excess shares.
Any amount received by the purported transferee in excess of that
price will be paid to us. In addition, we will have the right to purchase
the excess shares held in trust for a 90-day period at a purchase price
equal to the lesser of:
. the price paid by the purported transferee for the excess
shares or, if no consideration was paid, the fair market value
of the excess shares on the day of purchase by us; or
. the fair market value of the excess shares on the date we elect
to purchase them.
Fair market value, for these purposes, means the last reported sales
price on the NYSE on the trading day immediately preceding the relevant
date, or if those shares are not then traded on the NYSE, the last reported
sales price on the trading day immediately preceding the relevant date as
reported on any exchange or quotation system on which those shares are then
traded. If the shares are not then traded on any exchange or quotation
system, the fair market value will be the market price on the relevant date
as determined in good faith by our board of trustees.
From and after the purported transfer to the purported transferee of
the excess shares, the purported transferee will cease to be entitled to
distributions, voting rights and other benefits with respect to the excess
shares except the right to payment on the transfer of the excess shares as
described above. If the purported transferee receives any distributions on
excess shares prior to our discovery that those excess shares have been
transferred in violation of the provisions of our declaration of trust, the
purported transferee must repay those distributions to us upon demand.
If the restrictions on transferability and ownership are determined
to be void, invalid or unenforceable by any court of competent
jurisdiction, then we may treat the purported transferee of any excess
shares to have acted as our agent in acquiring those excess shares and to
hold those excess shares on our behalf.
All certificates evidencing shares will bear a legend referring to
the restrictions described above.
All persons who own, directly or by virtue of the attribution
provisions of the Internal Revenue Code, more than 5%, or such other
percentage between 0.5% and 5%, as provided in the rules and regulations of
the Internal Revenue Code, of the number or value of our outstanding shares
must give a written notice containing certain information to us by January
31 of each year. In addition, each shareholder is upon demand required to
disclose to us in writing information with respect to its direct, indirect
and constructive ownership of our shares as our board of trustees deems
reasonably necessary to comply with the provisions of the Internal Revenue
Code applicable to a REIT, to determine our status as a REIT, to comply
with the requirements of any taxing authority or governmental agency or to
determine any such compliance.
The restrictions on share ownership in our declaration of trust are
designed to protect our REIT status. The restrictions could have the
effect of discouraging a takeover or other transaction in which holders of
some, or a majority, of the common shares might receive a premium for their
shares over the then prevailing market price or which such holders might
believe to be otherwise in their best interest.
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INDEMNIFICATION OF TRUSTEES AND OFFICERS
As permitted by Maryland law, our declaration of trust provides that
our trustees or officers will not be liable for money damages to us or our
shareholders for any act or omission in the performance of his or her
duties, except to the extent that
. the person actually received an improper benefit, or
. 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.
Our officers and trustees are and will be indemnified under our
declaration of trust and bylaws and the partnership agreement of AMLI, L.P.
against certain liabilities. Our declaration of trust requires us to
indemnify our trustees and officers against claims and liabilities and
reasonable expenses actually incurred by them in connection with any claim
or liability by reason of their services in those or other capacities
unless it is established that:
. the act or omission of the trustee or officer was material to
the matter giving rise to the proceeding and was committed in
bad faith or was the result of active and deliberate
dishonesty;
. the trustee or officer actually received an improper personal
benefit; or
. in the case of any criminal proceeding, the trustee had
reasonable cause to believe that the act or omission was
unlawful.
However, we may not indemnify for an adverse judgment in a suit by or
in our right. As permitted by Maryland law, our declaration of trust
allows us to advance reasonable expenses to a trustee upon our receipt of
. a written affirmation by the trustee of his or her good faith
belief that he or she has met the standard of conduct necessary
for indemnification by us, and
. a written undertaking by or on his or her behalf to repay the
amount paid or reimbursed by us if it is ultimately determined
that the trustee did not meet the standard of conduct.
Additionally, we have entered into indemnification agreements with our
officers and trustees providing substantially the same scope of coverage
afforded by the provisions in our declaration of trust.
The partnership agreement of AMLI, L.P. also provides for
indemnification of us and our officers and trustees to the same extent
indemnification is provided to our officers and trustees in our declaration
of trust. In addition, the partnership agreement of AMLI, L.P. limits our
liability to AMLI, L.P. and its partners to the same extent the liability
of our officers and trustees to us and our shareholders is limited under
our declaration of trust.
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SHAREHOLDER LIABILITY
Both the Maryland statutory law governing REITs and our declaration
of trust provide that shareholders shall not be personally or individually
liable for any debt, act, omission or obligation of ours or our board of
trustees. Our declaration of trust further provides that we shall
indemnify and hold each shareholder harmless from all claims and
liabilities to which the shareholder may become subject by reason of his or
her being or having been a shareholder. We shall reimburse each
shareholder for all legal and other expenses reasonably incurred by the
shareholder in connection with any such claim or liability, provided that
the claim or liability did not arise from the shareholder's bad faith,
willful misconduct or gross negligence, and the shareholder gives us prompt
notice of the claim or liability and permits us to conduct the defense of
the claim or liability.
In addition, our policy is to include a clause in our contracts,
including the partnership agreement of AMLI, L.P., providing that
shareholders assume no personal liability for obligations entered into on
behalf of us. Nevertheless, with respect to tort claims, contractual
claims where shareholder liability is not so negated, claims for taxes and
some statutory liabilities, the shareholders may, in some jurisdictions, be
personally liable to the extent that those claims are not satisfied by us.
Inasmuch as we carry public liability insurance which we consider adequate,
any risk of personal liability to shareholders is limited to situations in
which our assets plus our insurance coverage would be insufficient to
satisfy the claims against us and our shareholders.
DESCRIPTION OF PROVISIONS OF MARYLAND LAW
AND OF OUR DECLARATION OF TRUST AND BYLAWS
The following description of some general provisions of Maryland law
and of our declaration of trust and bylaws is not complete and you should
refer to Maryland law, our declaration of trust and our bylaws for more
information.
BOARD OF TRUSTEES
Our declaration of trust provides that our board of trustees will
have not less than three nor more than fifteen trustees, as determined from
time to time by our board of trustees. Our declaration of trust further
provides that a majority of our trustees must be "disinterested trustees."
Disinterested trustees are persons who are not affiliated with AMLI Realty
Co., which has been succeeded by UICI, and its affiliates and successors.
The trustees are divided into three classes. Each trustee will hold office
for three years and until his or her successor is duly elected and
qualified. At each annual meeting of shareholders, the successors to the
class of trustees whose term expires at that meeting will be elected to
hold office for three years.
A majority of the trustees then in office, even if less than a
quorum, may fill vacancies on our board of trustees, except that a vacancy
resulting from an increase in the number of trustees will be filled by a
majority of the entire board of trustees. In the event that a majority of
our board of trustees are not disinterested trustees, the remaining
disinterested trustees, or, if there are no disinterested trustees, the
remaining members of our board of trustees, must promptly appoint that
number of disinterested trustees necessary to cause the board to include a
majority of disinterested trustees. Any trustees so appointed by the
trustees then in office will hold office until the next annual meeting of
shareholders.
The classified board provision may have the effect of making it more
difficult for a third party to acquire control of us without the consent of
our board of trustees, even if a change in control would be beneficial to
us and our shareholders.
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BUSINESS COMBINATIONS
Under Maryland law, certain "business combinations," including a
merger, consolidation, share exchange, or, in certain circumstances, an
asset transfer or issuance or reclassification of equity securities,
between a Maryland REIT and an "interested shareholder" or an affiliate of
an interested shareholder are prohibited for five years after the most
recent date on which the interested shareholder became an interested
shareholder. After the five-year period, these business combinations must
be recommended by the board of trustees of the REIT and approved by at
least 80% of the votes entitled to be cast by shareholders of the REIT,
including at least two-thirds of the votes entitled to be cast by
shareholders other than the interested shareholder with whom the business
combination is to be effected, unless, among other things, the REIT's
common shareholders receive a minimum price (as defined under Maryland law)
for their shares and they receive the consideration in cash or in the same
form as previously paid by the interested shareholder for its shares. An
"interested shareholder" is a person who either beneficially owns 10% or
more of the voting power of the REIT's outstanding shares or is an
affiliate of the REIT and, at any time during the prior two years,
beneficially owned 10% or more of the voting power of the REIT's then
outstanding shares. These provisions of Maryland law do not apply, however,
to business combinations which are approved or exempted by the board of
trustees of the REIT prior to the time that the interested shareholder
becomes an interested shareholder.
Our declaration of trust exempts any business combination with
Gregory T. Mutz, Baldwin & Lyons, Inc., an Indiana corporation, AMLI Realty
Co., which has been succeeded by UICI, and their affiliates and successors
from these provisions of Maryland law.
CONTROL SHARE ACQUISITIONS
Maryland law provides that "control shares" of a Maryland REIT
acquired in a "control share acquisition" have no voting rights except to
the extent approved by a vote of two-thirds of the votes entitled to be
cast by shareholders other than the acquirer or officers or trustees who
are employees of the REIT. "Control shares" are voting shares which, if
aggregated with all other voting shares previously acquired by the acquirer
or in respect of which the acquirer is able to exercise voting power, would
entitle the acquirer to exercise at least one-tenth of the voting power in
electing trustees. Control shares do not include shares the acquiring
person is then entitled to vote as a result of having previously obtained
shareholder approval. A "control share acquisition" means the acquisition
of control shares, subject to specified exceptions.
A person who has made or proposes to make a control share
acquisition, upon satisfaction of certain conditions, including an
undertaking to pay expenses, may compel the board of trustees of the REIT
to call a special meeting of shareholders to be held within 50 days of
demand to consider voting rights for the shares. If no request for a
meeting is made, the REIT may itself present the question at any
shareholders' meeting.
If the shareholders do not approve voting rights at the meeting or if
the acquiring person does not deliver an acquiring person statement as
required by Maryland law, then, subject to certain conditions and
limitations, the REIT may redeem any or all of the control shares, except
those for which voting rights have previously been approved, for fair
market value. Fair market value will be determined without regard to the
absence of voting rights for the control shares as of the date of the last
control share acquisition by the acquirer or of any meeting of shareholders
at which the voting rights of those shares were considered and not
approved. If the shareholders approve voting rights for control shares and
the acquirer becomes entitled to exercise a majority of the voting power in
electing trustees, all other shareholders may exercise appraisal rights.
The fair value of the shares for purposes of the appraisal rights may not
be less than the highest price per share paid by the acquirer for the
control shares.
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The control share acquisition law does not apply to shares acquired
in a merger, consolidation or share exchange if the REIT is a party to the
transaction, or to acquisitions approved or exempted by the declaration of
trust or bylaws of the REIT. Our declaration of trust exempts Gregory T.
Mutz, Baldwin & Lyons, AMLI Realty Co., which has been succeeded by UICI,
and their affiliates and successors from these provisions of Maryland law.
In February 2003, our bylaws were amended to exclude AMLI from the
application of the control share acquisition provisions of Maryland law.
AMENDMENTS TO OUR DECLARATION OF TRUST
Maryland law requires the shareholder of a REIT to approve any
amendment to its declaration of trust, with certain exceptions. As
permitted by Maryland law, our declaration of trust permits our board of
trustees, by a two-thirds vote, to amend our declaration of trust to enable
us to qualify as a REIT. A majority of the votes entitled to be cast by
shareholders must approve any other amendment to our declaration of trust.
OUR TERMINATION
We have a perpetual term and intend to continue our operations for an
indefinite time period. However, our declaration of trust permits our
termination after the holders of a majority of our outstanding shares
approve the termination.
ADVANCE NOTICE OF TRUSTEE NOMINATIONS AND NEW BUSINESS
For a shareholder to properly bring nominations or other business
before an annual meeting of shareholders, our bylaws require the
shareholder to deliver a notice to the secretary, absent specified
circumstances, not less than 60 days nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting setting forth:
. as to each person whom the shareholder proposes to nominate for
election or reelection as a trustee, all information relating
to that person that is required to be disclosed in
solicitations of proxies for the election of trustees pursuant
to Regulation 14A of the Securities Exchange Act of 1934;
. as to any other business that the shareholder proposes to bring
before the meeting, a brief description of that business, the
reasons for conducting that business at the meeting and any
material interest of that shareholder and of the beneficial
owner, if any, on whose behalf the proposal is made; and
. as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is
made, the name and address of that shareholder as they appear
on our share records and of that beneficial owner and the
number of shares which are owned beneficially and of record by
that shareholder and that beneficial owner.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the federal income tax consequences to
us and our shareholders of our treatment as a REIT. Since these provisions
are highly technical and complex, each prospective purchaser of the common
shares is urged to consult his or her own tax advisor with respect to the
federal, state, local, foreign and other tax consequences of the purchase,
ownership and disposition of the common shares.
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Based upon certain of our representations, in the opinion of Mayer,
Brown, Rowe & Maw LLP, our counsel, beginning with our taxable year ended
December 31, 1994, we have been organized in conformity with the
requirements for qualification as a REIT under the Internal Revenue Code,
and our actual and proposed method of operation described in this
prospectus supplement and as represented by management has enabled and will
continue to enable us to satisfy the requirements for qualification and
taxation as a REIT. This opinion is conditioned upon representations made
by us as to factual matters relating to our organization and intended or
expected manner of operation. In addition, this opinion is based on the
law existing and in effect on the date hereof. Our qualification and
taxation as a REIT will depend on our ability to meet on a continuing
basis, through actual operating results, asset composition, distribution
levels and diversity of share ownership, the various qualification tests
imposed under the Internal Revenue Code discussed below. Mayer, Brown,
Rowe & Maw LLP will not review compliance with these tests on a continuing
basis. No assurance can be given that we will satisfy these tests on a
continuing basis.
In brief, if certain detailed conditions imposed by the REIT
provisions of the Internal Revenue Code are met, entities such as us that
invest primarily in real estate and that otherwise would be treated for
federal income tax purposes as corporations, are generally not taxed at the
corporate level on their "REIT taxable income" that is currently
distributed to shareholders. This treatment substantially eliminates the
"double taxation", at both the corporate and shareholder levels, that
generally results from the use of corporations. However, as discussed in
greater detail below, such an entity remains subject to tax in specified
circumstances even if it qualifies as a REIT.
If we fail to qualify as a REIT in any year, however, we will be
subject to federal income taxation as if we were a domestic corporation,
and our shareholders will be taxed in the same manner as shareholders of
ordinary corporations. In this event, we could be subject to potentially
significant tax liabilities, and therefore the amount of cash available for
distribution to our shareholders would be reduced or eliminated.
Our board of trustees believes that we have been organized and
operated and currently intends that we will continue to operate in a manner
that permits us to qualify as a REIT. There can be no assurance, however,
that this expectation will be fulfilled, since qualification as a REIT
depends on our continuing to satisfy numerous asset, income, distribution
and shareholder diversification tests described below, which in turn will
be dependent in part on our operating results.
The following summary is based on the Internal Revenue Code, its
legislative history, administrative pronouncements, judicial decisions and
Treasury regulations, subsequent changes to any of which may affect the tax
consequences described in this section, possibly on a retroactive basis.
The following summary is not exhaustive of all possible tax considerations
and does not give a detailed discussion of any state, local, or foreign tax
considerations, nor does it discuss all of the aspects of federal income
taxation that may be relevant to a prospective shareholder in light of his
or her particular circumstances or to various types of shareholders
(including insurance companies, tax-exempt entities, financial institutions
or broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) subject to special treatment under the
federal income tax laws.
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TAXATION OF THE COMPANY
GENERAL. In any year in which we qualify as a REIT, we will not, in
general, be subject to federal income tax on that portion of our REIT
taxable income or capital gain which is distributed to shareholders. We
may, however, be subject to tax at normal corporate rates upon any taxable
income or capital gain that is not distributed. To the extent that we
elect to retain and pay income tax on our net long-term capital gain,
shareholders are required to include their proportionate share of our
undistributed long-term capital gain in income but receive a credit for
their share of any taxes paid on the gain by us.
Notwithstanding our qualification as a REIT, we may also be subject
to taxation in other circumstances. If we should fail to satisfy either
the 75% or the 95% gross income test, as discussed below, and nonetheless
maintain our qualification as a REIT because other requirements are met, we
will be subject to a 100% tax on the greater of the amount by which we fail
to satisfy either the 75% test or the 95% test, multiplied by a fraction
intended to reflect our profitability. We will also be subject to a tax of
100% on net income from any "prohibited transaction," as described below,
and if we have net income from the sale or other disposition of
"foreclosure property" which is held primarily for sale to customers in the
ordinary course of business or other non-qualifying income from foreclosure
property, we will be subject to tax on the income from foreclosure property
at the highest corporate rate. We will also be subject to a tax of 100% on
the amount of any rents from real property, deductions or excess interest
paid to us by any of our "taxable REIT subsidiaries" that would be reduced
through reapportionment under section 482 of the Internal Revenue Code in
order to more clearly reflect income of a taxable REIT subsidiary. A
taxable REIT subsidiary includes any corporation for which a joint election
has been made by a REIT and such corporation to treat such corporation as a
taxable REIT subsidiary with respect to such REIT. See "Other Tax
Considerations--Investments in Taxable REIT Subsidiaries." In addition, if
we should fail to distribute during each calendar year at least the sum of:
(1) 85% of our REIT ordinary income for the year;
(2) 95% of our REIT capital gain net income for the year, other
than capital gains we elect to retain and pay tax on as
described below; and
(3) any undistributed taxable income from prior years,
we would be subject to a 4% excise tax on the excess of the required
distribution over the sum of (i) the amounts actually distributed, plus
(ii) retained amounts on which corporate level tax is paid by us.
A REIT is permitted to designate in a notice mailed to shareholders
within 60 days of the end of the taxable year, or in a notice mailed with
our annual report for the taxable year, such amount of undistributed net
long-term capital gains it received during the taxable year, which our
shareholders are to include in their taxable income as long-term capital
gains. Thus, if we made this designation, our shareholders would include in
their income as long-term capital gains their proportionate share of the
undistributed net capital gains as designated by us and we would have to
pay the tax on such gains within 30 days of the close of our taxable year.
Each of our shareholders would be deemed to have paid the shareholder's
share of the tax paid by us on such gains, which tax would be credited or
refunded to the shareholder. A shareholder would increase his tax basis in
his shares by the difference between the amount of income to the holder
resulting from the designation less the holder's credit or refund for the
tax we paid. We may also be subject to the corporate "alternate minimum
tax," as well as tax in various situations and on some types of
transactions not presently contemplated. We will use the calendar year
both for federal income tax purposes and for financial reporting purposes.
12
In order to qualify as a REIT, we must meet, among others, the
following requirements:
SHARE OWNERSHIP TEST. Our shares must be held by a minimum of 100
persons for at least 335 days in each taxable year, or a proportional
number of days in any short taxable year. In addition, at all times during
the second half of each taxable year, no more than 50% in value of our
shares (taking into account options to acquire shares) may be owned,
directly or indirectly and by applying constructive ownership rules, by
five or fewer individuals, which for this purpose includes some tax-exempt
entities. Any shares held by a qualified domestic pension or other
retirement trust will be treated as held directly by its beneficiaries in
proportion to their actual interest in such trust rather than by such
trust. If we comply with the Treasury regulations for ascertaining our
actual ownership and did not know, or exercising reasonable diligence would
not have reason to know, that more than 50% in value of our outstanding
shares were held, actually or constructively, by five or fewer individuals,
then we will be treated as meeting such requirement.
In order to ensure compliance with the share ownership tests, our
declaration of trust places restrictions on the transfer of our shares to
prevent additional concentration of ownership. For more information, see
"Description of Common Shares--Restrictions on Transfer" in the prospectus.
We intend to enforce the 5% limitation on ownership of our shares to assure
that our qualification as a REIT will not be compromised. Moreover, to
evidence compliance with these requirements, Treasury regulations require
that we maintain records which disclose the actual ownership of our
outstanding shares of beneficial interest. In fulfilling our obligations
to maintain records, we must and will demand written statements each year
from the record holders of designated percentages of shares disclosing the
actual owners of the shares as prescribed by Treasury regulations. A list
of those persons failing or refusing to comply with the demand must be
maintained as a part of our records. A shareholder failing or refusing to
comply with our written demand must submit with his or her tax returns a
similar statement disclosing the actual ownership of our shares and other
information.
ASSET TESTS. At the close of each quarter of our taxable year, we
must satisfy several tests relating to the nature of our assets determined
in accordance with generally accepted accounting principles. Where we
invest in a partnership (such as AMLI, L.P.), limited liability company or
trust taxed as a partnership or as a disregarded entity, we will be deemed
to own a proportionate share of the partnership, limited liability company
or trust's assets. In addition, when we own 100% of a corporation that is
not a taxable REIT subsidiary, we will be deemed to own 100% of the
corporation's assets. First, at least 75% of the value of our total assets
must be represented by interests in real property, interests in mortgages
on real property, shares in other REITs, cash, cash items, government
securities and qualified temporary investments. Second, although the
remaining 25% of our assets generally may be invested without restriction,
we are prohibited from owning securities representing more than 10% of
either the vote or value of the outstanding securities of any issuer other
than a qualified REIT subsidiary, another REIT or a taxable REIT subsidiary
(the "10% vote and value test"). Further, no more than 20% of the value of
our total assets may be represented by securities of one or more taxable
REIT subsidiaries and no more than 5% of the value of our total assets may
be represented by securities of any non-government issuer other than a
qualified REIT subsidiary, another REIT or a taxable REIT subsidiary (the
"20% and 5% asset tests"). We currently have two taxable REIT Subsidiaries
(AMLI Management Company and AMLI Institutional Advisors, Inc.). We
believe that the 10% vote and value test and the 20% and 5% asset tests on
the date hereof should be satisfied. In rendering its opinion as to our
qualification as a REIT, Mayer, Brown, Rowe & Maw LLP is relying on our
representations with respect to the value of our shares and assets and our
conclusion that we satisfy each of the 10% vote and value test and the 20%
and 5% asset tests.
13
GROSS INCOME TESTS. There are two separate percentage tests relating
to the sources of our gross income which must be satisfied for each taxable
year. For purposes of these tests, where we invest in a partnership (such
as AMLI, L.P.), limited liability company or trust taxed as a partnership
or as a disregarded entity, we will be treated as receiving our pro rata
share of the income and loss of the partnership or disregarded entity, and
the gross income of the partnership or disregarded entity will retain the
same character in our hands as it has in the hands of the partnership. In
addition, when we own 100% of a corporation that is not a taxable REIT
subsidiary, the corporation is treated as a disregarded entity and the same
rule applies.
1. THE 75% TEST. At least 75% of our gross income for the taxable
year must be "qualifying income." Qualifying income generally includes:
. rents from real property, except as modified below;
. interest on obligations collateralized by mortgages on, or
interests in, real property;
. gains from the sale or other disposition of "non-dealer
property," which means interests in real property and real
estate mortgages, other than gain from property held primarily
for sale to customers in the ordinary course of our trade or
business;
. dividends or other distributions on shares in other REITs, as
well as gain from the sale of REIT shares;
. abatements and refunds of real property taxes;
. income from the operation, and gain from the sale, of
"foreclosure property," which means property acquired at or in
lieu of a foreclosure of the mortgage collateralized by the
property;
. commitment fees received for agreeing to make loans
collateralized by mortgages on real property or to purchase or
lease real property; and
. certain qualified temporary investment income attributable to
the investment of new capital received by us in exchange for
our shares during the one-year period following the receipt of
the capital.
Rents received by AMLI, L.P. from a tenant will not qualify as rents from
real property in satisfying the 75% gross income test described above, or
the 95% gross income test described below, if we, or a 10% owner of us,
directly or constructively owns 10% or more of the tenant, unless the
tenant is one of our taxable REIT subsidiaries and certain other
requirements are met. In addition, if rent attributable to personal
property leased in connection with a lease of real property is greater than
15% of the total rent received under the lease, then the portion of rent
attributable to the personal property will not qualify as rents from real
property. Moreover, an amount received or accrued will not qualify as
rents from real property or as interest income for purposes of the 75% and
95% gross income tests if it is based in whole or in part on the income or
profits of any person, although an amount received or accrued generally
will not be excluded from "rents from real property" solely by reason of
being based on a fixed percentage or percentages of receipts or sales.
Finally, for rents received to qualify as rent from real property, we
generally must not operate or manage the property or furnish or render
services to residents, other than through a taxable REIT subsidiary or an
"independent contractor" from whom we derive no income, except that we may
14
provide services that are "usually or customarily rendered" in connection
with the rental of multifamily units for occupancy only, or are not
otherwise considered "rendered to the occupant for his convenience." A
REIT is permitted to render a de minimis amount of impermissible services
to tenants, or in connection with the management of property, and still
treat amounts received with respect to that property as rent from real
property. The amount received or accrued by the REIT during the taxable
year for the impermissible services with respect to a property may not
exceed one percent of all amounts received or accrued by the REIT directly
or indirectly from the property. The amount received for any service or
management operation for this purpose shall be deemed to be not less than
150% of the direct cost of the REIT in furnishing or rendering the service
or providing the management or operation.
2. THE 95% TEST. In addition to deriving 75% of our gross income
from the sources listed above, at least 95% of our gross income for the
taxable year must be derived from the above-described qualifying income, or
from dividends, interest or gains from the sale or disposition of shares or
other securities that are not dealer property. Dividends, other than on
REIT shares, and interest on any obligations not collateralized by an
interest in real property are included for purposes of the 95% test, but
not for purposes of the 75% test. In addition, payments to us under an
interest rate swap, cap agreement, option, futures contract, forward rate
agreement or any similar financial instrument entered into by us to hedge
indebtedness incurred or to be incurred, and any gain from the sale or
other disposition of these instruments, are treated as qualifying income
for purposes of the 95% test, but not for purposes of the 75% test.
We believe that, for purposes of both the 75% and the 95% gross
income tests, our investment in the communities and the co-investment
communities through AMLI, L.P. will, in major part, give rise to qualifying
income in the form of rents from real property, and that gains on the sales
of the communities and the co-investment communities, or our interest in
AMLI, L.P., generally will also constitute qualifying income.
AMLI Management Company receives and anticipates continuing to
receive fee income in consideration of the performance of property
management and other services with respect to properties not owned by us or
AMLI, L.P. and receives and anticipates continuing to receive fee income in
consideration of the performance of general contracting and construction
management services. AMLI Institutional Advisors receives and anticipates
continuing to receive fee income for providing investment advisory
services. Substantially all the income derived by us from these service
companies will be in the form of dividends and interest on the securities
of each of the service companies owned by AMLI, L.P. The dividends and
interest income will satisfy the 95% gross income test, but not the 75%
gross income test, as discussed above.
For purposes of determining whether we comply with the 75% and 95%
income tests, gross income does not include income from prohibited
transactions. A "prohibited transaction" is a sale of dealer property,
excluding foreclosure property, unless the property is held by us for at
least four years and certain other requirements relating to the number of
properties sold in a year, their tax bases, and the cost of improvements
made thereto are satisfied. For more information, see "--Taxation of the
Company--General."
Even if we fail to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, we may still qualify as a REIT for such year if
we are entitled to relief under provisions of the Internal Revenue Code.
These relief provisions will generally be available if:
. our failure to comply was due to reasonable cause and not to
willful neglect;
15
. we report the nature and amount of each item of income included
in the income tests on a schedule attached to our tax return;
and
. any incorrect information on this schedule is not due to fraud
with intent to evade tax.
If these relief provisions apply, however, we will nonetheless be subject
to a 100% tax upon the greater of the amount by which we fail either the
75% or 95% gross income test for that year multiplied by a fraction
intended to reflect our profitability.
ANNUAL DISTRIBUTION REQUIREMENTS. In order to qualify as a REIT, we
are required to make distributions, other than capital gain dividends, to
our shareholders each year in an amount at least equal to
. 90% of our REIT taxable income, computed without regard to the
dividends paid deduction and REIT net capital gain, plus
. 90% of our net income after tax, if any, from foreclosure
property, minus
. the sum of some items of excess non-cash income.
These distributions must be paid in the taxable year to which they
relate, or in the following taxable year if declared before we timely file
our tax return for the year and if paid on or before the first regular
dividend payment after that declaration. To the extent that we do not
distribute all of our net capital gain or distribute at least 90% but less
than 100%, of our REIT taxable income, as adjusted, we will be subject to
tax on the undistributed amount at regular capital gains or ordinary
corporate tax rates, as the case may be.
We intend to make timely distributions sufficient to satisfy the
annual distribution requirements. It is possible that we may not have
sufficient cash or other liquid assets to meet the 90% distribution
requirement, due to timing differences between the actual receipt of income
and actual payment of expenses on the one hand, and the inclusion of such
income and deduction of such expenses in computing our REIT taxable income
on the other hand. To avoid any problem with the 90% distribution
requirement, we will closely monitor the relationship between our REIT
taxable income and cash flow and, if necessary, we intend to borrow funds
in order to satisfy the distribution requirement. However, there can be no
assurance that such borrowing would be available at such time.
Distributions must generally be made during the taxable year to which
they relate. Dividends may be paid in the following year in two
circumstances. First, dividends may be declared in the following year if
the dividends are declared before we timely file our tax return for the
year and if made before the first regular dividend payment made after such
declaration. Second, if we declare a dividend in October, November, or
December of any year with a record date in one of these months and pay the
dividend on or before January 31 of the following year, we will be treated
as having paid the dividend on December 31 of the year in which the
dividend was declared.
If we fail to meet the 90% distribution requirement as a result of an
adjustment to our tax return by the Internal Revenue Service, we may
retroactively cure the failure by paying a "deficiency dividend," plus
applicable penalties and interest, within a specified period.
16
FAILURE TO QUALIFY. If we fail to qualify for taxation as a REIT in
any taxable year and relief provisions do not apply, we will be subject to
tax, including applicable alternative minimum tax, on our taxable income at
regular corporate rates. Distributions to shareholders in any year in
which we fail to qualify as a REIT will not be deductible by us, nor
generally will they be required to be made under the Internal Revenue Code.
In that event, to the extent of current and accumulated earnings and
profits, all distributions to shareholders will be taxable as ordinary
income, and subject to limitations in the Internal Revenue Code, corporate
distributees may be eligible for the dividends-received deduction. Unless
entitled to relief under specific statutory provisions, we also will be
disqualified from reelecting taxation as a REIT for the four taxable years
following the year during which qualification was lost.
TAXATION OF OUR SHAREHOLDERS
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS. As long as we qualify as
a REIT, distributions made to our taxable domestic shareholders out of
current or accumulated earnings and profits, and not designated as capital
gain dividends, will be taken into account by them as ordinary income and
will not be eligible for the dividends-received deduction for corporations.
With limited exceptions, dividends received from REITs are not eligible for
taxation at the preferential income tax rates for qualified dividends
received by individuals from taxable C corporations pursuant to the Jobs
and Growth Tax Relief Reconciliation Act of 2003. See "Other Tax
Considerations--New Tax Law" discussion below. Distributions and
undistributed amounts that are designated as capital gain dividends will be
taxed as long-term capital gains, to the extent they do not exceed our
actual net capital gain for the taxable year, without regard to the period
for which the shareholder has held its shares. However, corporate
shareholders may be required to treat up to 20% of some capital gain
dividends as ordinary income. To the extent that we make distributions in
excess of current and accumulated earnings and profits, these distributions
are treated first as a tax-free return of capital to the shareholder,
reducing the tax basis of a shareholder's shares by the amount of the
distribution, but not below zero, with distributions in excess of the
shareholder's tax basis taxable as capital gains, if the shares are held as
a capital asset. In addition, any dividend declared by us in October,
November or December of any year and payable to a shareholder of record on
a specific date in those months shall be treated as both paid by us and
received by the shareholder on December 31 of that year, provided that the
dividend is actually paid by us during January of the following calendar
year. Shareholders may not include in their individual income tax returns
any of our net operating losses or capital losses. Federal income tax
rules may also require that minimum tax adjustments and preferences be
apportioned to our shareholders.
In general, any loss upon a sale or exchange of our shares by a
shareholder who has held the shares for six months or less, after applying
holding period rules, will be treated as a long-term capital loss, to the
extent of distributions from us that were required to be treated by the
shareholder as long-term capital gains.
Gain from the sale or exchange of shares held for more than one year
is taxed at a maximum capital gain rate of 15% (until 2009 and then 20% to
the extent there is no future Congressional action - see "Other Tax
Considerations--New Tax Law" discussion below). Pursuant to Internal
Revenue Service guidance, we may classify portions of our capital gain
dividends as gains eligible for the 15% capital gains rate or as
unrecaptured Internal Revenue Code section 1250 gain taxable at a maximum
rate of 25%.
Shareholders should consult their own tax advisor with respect to
taxation of capital gains and capital gain dividends and with regard to
state, local and foreign taxes on capital gains.
17
BACKUP WITHHOLDING. We will report to our domestic shareholders and
to the Internal Revenue Service the amount of distributions paid during
each calendar year, and the amount of applicable tax withheld, if any.
Under the backup withholding rules, a shareholder may be subject to backup
withholding at applicable rates with respect to distributions paid unless
the shareholder is a corporation or comes within other exempt categories
and, when required, demonstrates this fact or provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the
backup withholding rules. A shareholder that does not provide us with its
correct taxpayer identification number may also be subject to penalties
imposed by the Internal Revenue Service. Any amount paid as backup
withholding will be credited against the shareholder's income tax
liability. In addition, we may be required to withhold a portion of
capital gain distributions made to any shareholders who fail to certify
their non-foreign status to us.
OTHER TAX CONSIDERATIONS
INVESTMENTS IN TAXABLE REIT SUBSIDIARIES
Taxable REIT subsidiaries are subject to full corporate level
taxation on their earnings, but are permitted to engage in certain types of
activities, which cannot be performed directly by REITs without
jeopardizing their REIT status. Taxable REIT subsidiaries are subject to
limitations on the deductibility of payments made to the associated REIT
which could materially increase the taxable income of the taxable REIT
subsidiary and are subject to prohibited transaction taxes on certain other
payments made to the associated REIT. We will be subject to a tax of 100%
on the amount of any rents from real property, deductions or excess
interest paid by any of our taxable REIT subsidiaries to us that would be
reduced through reapportionment under Internal Revenue Code section 482 in
order to more clearly reflect income of any taxable REIT subsidiary.
Under the taxable REIT subsidiary provisions, any entity in which we
own an interest that is treated as a corporation for tax purposes is
allowed with us to jointly elect to be treated as a "taxable REIT
subsidiary." In addition, if one of our taxable REIT subsidiaries owns,
directly or indirectly, securities representing 35% or more of the vote or
value of an entity treated as a corporation for tax purposes, that
subsidiary will also be treated as our subsidiary.
Both AMLI Management Company and AMLI Institutional Advisors are
treated as taxable REIT subsidiaries. Both entities will pay federal and
state income taxes at the full applicable corporate rates on its income
prior to payment of any dividends. Each of the companies will attempt to
minimize the amount of the taxes, but there can be no assurance whether or
to the extent to which measures taken to minimize taxes will be successful.
NEW TAX LAW
Pursuant to the Jobs and Growth Tax Relief Reconciliation Act of
2003, the maximum individual tax rate for long-term capital gains was
reduced from generally 20% to 15% (for sales occurring after May 6, 2003
through December 31, 2008) and for dividends generally from 38.6% to 15%
(for tax years from 2003 through 2008). Because REITs are not generally
subject to federal income tax on the portion of their REIT taxable income
or capital gains distributed to their stockholders, REIT dividends would
generally not be eligible for the new 15% tax rate on dividends. As a
result, ordinary REIT dividends would continue to be taxed at the higher
tax rates applicable to ordinary income. However, the 15% tax rate for
long-term capital gains and dividends would generally apply to:
(1) long-term capital gains, if any, recognized on the disposition
of REIT shares;
18
(2) distributions from the REIT designated as long-term capital
gain dividends (except to the extent attributable to real
estate depreciation, in which case such distributions would
continue to be subject to a 25% tax rate);
(3) dividends attributable to dividends received by the REIT from
non-REIT corporations, such as taxable REIT subsidiaries; and
(4) dividends to the extent attributable to income upon which the
REIT has paid corporate income tax (e.g., to the extent that
the REIT distributes less than 100% of its taxable income).
Without future congressional action, the maximum tax rate on long-term
capital gains would return to 20% in 2009, and the maximum rate on
dividends would move to 35% in 2009 and 39.6% in 2011.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING TAX CONSEQUENCES.
Prospective shareholders should recognize that the present federal income
tax treatment of an investment in us may be modified by legislative,
judicial or administrative action at any time and that any such action may
affect investments and commitments previously made. The rules dealing with
federal income taxation are constantly under review by persons involved in
the legislative process and by the Internal Revenue Service and the
Treasury, resulting in revisions of regulations and revised interpretations
of established concepts as well as statutory changes. Revisions in federal
tax laws and interpretations of these laws could adversely affect the tax
consequences of an investment in us, possibly on a retroactive basis.
STATE AND LOCAL TAXES. We and our shareholders may be subject to
state or local taxation in various jurisdictions, including those in which
it or they transact business or reside. The state and local tax treatment
of us and our shareholders may not conform to the federal income tax
consequences discussed above. Consequently, you should consult your own
tax advisor regarding the effect of state and local tax laws on an
investment in our common shares.
You are advised to consult this prospectus supplement and the
accompanying prospectus, as well as your tax advisor regarding the specific
tax consequences to you of the purchase, ownership and sale of the common
shares described in this prospectus supplement, including the federal,
state, local, foreign, and other tax consequences of the purchase,
ownership, sale and election and of potential changes in applicable tax
laws.
TAXATION OF FOREIGN SHAREHOLDERS
Distributions of cash generated by our real estate operations, but
not by the sale or exchange of our properties, that are paid to foreign
persons generally will be subject to U.S. withholding tax at a rate of 30%,
unless an applicable tax treaty reduces that tax and the foreign
shareholder files an Internal Revenue Service Form W-8BEN with us or unless
the foreign shareholder files an Internal Revenue Service Form W-8ECI with
us claiming that the distribution is "effectively connected" income. Under
applicable Treasury regulations, foreign shareholders generally have to
provide the Internal Revenue Service Form W-8ECI or Form W-8BEN beginning
January 1, 2000 and every three years thereafter unless the information on
the form changes before that date. A foreign shareholder may seek a refund
from the Internal Revenue Service if it is subsequently determined that a
distribution was in excess of our current and accumulated earnings and
profits.
19
Distributions of proceeds attributable to the sale or exchange by of
our U.S. real property interests are subject to income and withholding
taxes pursuant to the Foreign Investment in Real Property Tax Act of 1980,
("FIRPTA"). Under FIRPTA, gains are considered effectively connected with
a U.S. trade or business of the foreign shareholder and are taxed at the
normal graduated rates applicable to U.S. shareholders. Moreover, gains
may be subject to branch profits tax in the hands of a shareholder that is
a foreign corporation if it is not entitled to treaty relief or exemption.
We are required by applicable Treasury regulations to withhold 35% of any
distribution to a foreign person that could be designated by us as a
capital gain dividend; this amount is creditable against the foreign
shareholder's FIRPTA tax liability.
We will qualify as a "domestically controlled real estate investment
trust" so long as less than 50% in value of our shares are held by foreign
persons, for example, nonresident aliens and foreign corporations,
partnerships, trust and estates. It is currently anticipated that we will
qualify as a domestically controlled real estate investment trust. Under
these circumstances, gain from the sale of the shares by a foreign person
should not be subject to U.S. taxation, unless such gain is effectively
connected with such person's U.S. business or, in the case of an individual
foreign person, such person is present within the U.S. for 183 days or more
in such taxable year.
The federal income taxation of foreign shareholders is a highly
complex matter that may be affected by many other considerations.
Accordingly, our foreign investors are particularly urged to consult their
own tax advisors regarding the income and withholding tax considerations
with respect to their investment in us.
SELLING SHAREHOLDERS
The table below lists (1) each person who may receive common shares
covered by this prospectus in exchange for units and offer to resell those
common shares using this prospectus, (2) the number of common shares which
each person may receive in exchange for their units and offer to resell
using this prospectus and (3) the total number of common shares which each
person owned before this offering, which includes common shares they could
receive by exchanging their units. Since the holders of units may exchange
all, some or none of their units for common shares and may then sell all,
some or none of their common shares, we cannot determine the number of
common shares which each person will own after this offering. If, however,
any person listed below converted all of their units into common shares,
none of them would hold one percent or more of our outstanding shares. None
of the persons listed below has had in the past three years a material
relationship with us or our affiliates.
Number of Total Number
common shares of Common
which may be Shares Owned
offered using Before This
Name this prospectus Offering
- ---- --------------- ------------
David H. Addis and Hemda Z. Addis,
as joint tenants with
right of survivorship . . . . . . . 10,298 1,000
Jeremy A. Addis . . . . . . . . . . . 5,427 --
Preston Butcher . . . . . . . . . . . 45,262 --
William Debruler. . . . . . . . . . . 79,749 --
Morton J. Harris,
as Trustee of the Mort Trust. . . . 20,068 --
Herbert A. Kaufman. . . . . . . . . . 60,757 --
20
Number of Total Number
common shares of Common
which may be Shares Owned
offered using Before This
Name this prospectus Offering
- ---- --------------- ------------
Robert T. Kaufman,
as Trustee of the
Robert T Kaufman Living Trust . . . 60,757 --
Robert J. Krull . . . . . . . . . . . 21,152 --
NWP Family Partnership. . . . . . . . 9,968 --
James Pickus. . . . . . . . . . . . . 9,968 --
Jeffrey Pickus. . . . . . . . . . . . 9,968 --
Joel Pickus . . . . . . . . . . . . . 9,968 --
Louis Pickus. . . . . . . . . . . . . 9,968 --
Theodore Pickus . . . . . . . . . . . 9,968 --
Diane Pilibosian,
as Trustee of the Allan and
Meline Pickus 1995
Children's Trust. . . . . . . . . . 1,993 --
Diane Pilibosian,
as Trustee of the Allan
and Meline Pickus 1995
Grandchildren's Trust . . . . . . . 7,974 --
Michael B. Susman,
as Trustee of the
Michael B. Susman Trust . . . . . . 15,726 --
TMC Apartments, L.L.C.. . . . . . . . 109,748 --
Morris Weiser,
as Trustee of the Morris Trust. . . 20,068 --
Robert Witcuki,
as Trustee of the
Robert A. Witucki Trust . . . . . . 9,968 --
Michael Zoellner. . . . . . . . . . . 41,232 --
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PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale by selling shareholders
of 569,988 common shares from time to time. We have registered the common
shares to enable the holders of units to resell the common shares into
which those units may be converted, but the registration of the common
shares does not necessarily mean that those shareholders will offer or sell
any of the common shares.
We will not receive any of the proceeds when the selling shareholders
sell any of those common shares. The selling shareholders and any agents or
broker-dealers that participate in the distribution of those common shares
may be deemed to be underwriters under the Securities Act of 1933, and any
commissions they receive and any profits they earn from selling the common
shares may be deemed to be underwriting commissions or discounts under the
Securities Act of 1933.
Persons who receive common shares when they exchange their units may
use this prospectus and the registration statement of which this prospectus
is a part to offer and sell those common shares. The selling shareholders
may sell the common shares from time to time at varying prices determined
at the time of sale or at negotiated prices.
We are registering the shares pursuant to or as required by the
provisions of the registration rights agreements among us, AMLI, L.P. and
each of the selling shareholders.
We have agreed to pay all expenses incurred in registering the common
shares, including fees and disbursements of our counsel. However, the
selling shareholders must pay their own brokerage discounts and commissions
and the costs, fees and disbursements of their own counsel. We estimate
that the expenses in connection with the registration and sale of the
shares registered hereby will be approximately 34,771, all of which we will
pay.
Each holder of units must indemnify us and our trustees, officers and
any person who controls us against some losses, liabilities, claims,
damages and expenses arising under the securities laws with respect to
written information furnished to us by that holder of units.
EXPERTS
Our consolidated financial statements and related financial statement
schedule as of December 31, 2002 and 2001, and for each of the years in the
three-year period ended December 31, 2002, have been incorporated by
reference herein and in the registration statement in reliance upon the
report of KPMG LLP, independent accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
LEGAL MATTERS
Mayer, Brown, Rowe & Maw LLP has issued an opinion for us on the
validity of the common shares offered. Mayer, Brown, Rowe & Maw LLP has in
the past represented and is currently representing us and some of our
affiliates.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. Our SEC filings are available to the
public over the Internet at the SEC's web site at http://www.sec.gov. You
may also read and copy any document we file with the SEC at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. You may also read any document we file with the SEC at the
offices of the NYSE. Our outstanding common shares are listed on the NYSE
under the symbol "AML", and all our reports, proxy material and other
information filed by us with the NYSE may be inspected at their offices at
20 Broad Street, New York, New York 10005.
We filed a registration statement on Form S-3 with the SEC. This
prospectus does not contain all of the information in the registration
statement. Please refer to the registration statement for more information
about us and our common shares. Statements in this prospectus about any
other document are not necessarily complete and you should refer to the
copy of that document which we filed as an exhibit to the registration
statement. You may read a copy of the registration statement at any of the
sources described above.
The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is an important part of this prospectus, and information that we
file later with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and
any future filings made with the SEC (SEC File Number 1-12784) under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until this offering is terminated.
. Our annual report on Form 10-K for the year ended December 31,
2002;
. Our quarterly reports on Form 10-Q for the fiscal quarters
ended March 31, 2003 and June 30, 2003;
. Our current reports on Form 8-K dated August 7, 2003 (filed
August 8, 2003);
. The description of our common shares contained in our
registration statement on Form 8-A (filed February 1, 1994);
and
. The description of our preferred share purchase rights
contained in our registration statement on Form 8-A (filed
November 12, 1998).
Any statement contained in a document incorporated or deemed to be
incorporated by reference into this prospectus shall be deemed to be
modified or superseded to the extent that a statement contained in this
prospectus, or in any other subsequently filed document which is or is
deemed to be incorporated by reference into this prospectus, modifies or
supersedes any such statement. Any such statement so modified or
superseded will not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Secretary
AMLI Residential Properties Trust
125 South Wacker Drive
Chicago, IL 60606
(312) 443-1477
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