Filed Pursuant to Rule 424(b)(3)
Registration No. 333-83923
PROSPECTUS
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AMLI RESIDENTIAL PROPERTIES TRUST
373,041 Common Shares
This prospectus relates to the offer and sale by selling shareholders
of 373,041 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. . . . . . . . . . . . . . . . . . . . . . 19
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . 20
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . 21
Where You Can Find More Information . . . . . . . . . . . . . . 21
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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
We 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
. the price received from the sale or other disposition of the
excess shares.
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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.
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
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. 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.
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.
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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.
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
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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.
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.
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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.
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
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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.
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.
11
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.
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
12
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.
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;
13
. 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
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
14
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;
. 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.
15
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.
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
16
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.
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.
17
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;
(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.
18
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.
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.
19
Except for Brian K. Cranor and James E. Thomas, Jr., none of the persons
listed below has had in the past three years a material relationship with AMLI
or its affiliates. Mr. Cranor has served as an executive officer of AMLI and
of AMLI Institutional Advisors since January 2, 1998. Mr. Thomas has served
as an executive officer of AMLI and of AMLI Residential Construction since
December 22, 1997.
Number of Total Number
common shares of Common
which may be Shares Owned
offered using Before This
Name this prospectus Offering
- ---- --------------- ------------
CFP Residential, L.P. . . . . . . . . 72,716 6,382
Brian K. Cranor . . . . . . . . . . . 18,691 11,715
Trammell S. Crow. . . . . . . . . . . 56 --
David J. Elwell . . . . . . . . . . . 3,731 2,213
David J. Hubbard. . . . . . . . . . . 79,237 26,019
Leonard W. Wood Family
Limited Partnership . . . . . . . . . 73,689 39,194
Randy J. Pace . . . . . . . . . . . . 11,192 6,640
TCF Residential Partnership, Ltd. . . 2,666 --
J. Ronald Terwilliger . . . . . . . . 75,516 28,043
James E. Thomas, Jr.. . . . . . . . . 33,719 16,753
Leonard W. Wood . . . . . . . . . . . 1,828 1,084
PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale by selling shareholders of
373,041 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.
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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 $33,700, 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.
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;
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. 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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