Filed Pursuant to Rule 424(b)(3)
Registration No. 333-131595
PROSPECTUS
5,220,038 Shares
Winthrop Realty Trust
Common Shares of Beneficial Interest
Rights to Purchase up to 5,220,038 Common Shares
of Beneficial Interest at $5.25 per share
We are distributing at no charge to holders of our common shares of
beneficial interest and to holders of our Series B-1 Cumulative Convertible
Redeemable Preferred Shares, non-transferable subscription rights to purchase
our common shares of beneficial interest. You will receive one subscription
right for every 12 common shares owned, or in the case of the Series B-1
Preferred Shares, one subscription right for every 12 common shares issuable
upon conversion, at the close of business on March 22, 2006. We are distributing
subscription rights exercisable for up to 5,220,038 of our common shares.
Each subscription right will entitle you to purchase one common share at a
subscription price of $5.25 per share. The subscription rights will expire if
they are not exercised by 5:00 p.m., New York City time, on April 27, 2006,
unless we extend this offering period. You may revoke your subscription exercise
at any time until the offering period has expired. You should carefully consider
whether to exercise your subscription rights before the expiration of the rights
offering. Our board of trustees is making no recommendation regarding your
exercise of the subscription rights. The subscription rights may not be sold or
transferred except under the very limited circumstances described in this
prospectus.
If you exercise all of the rights distributed to you, you will also be
entitled to purchase additional shares not purchased by other shareholders
pursuant to the over-subscription rights described in this prospectus. We will
not issue fractional rights and will round all of the subscription rights down
to the nearest whole number.
If any common shares offered in this rights offering remain unsubscribed
after the rights offering, certain of our shareholders, whom we refer to
collectively as the standby purchasers, have agreed, subject to certain
conditions, to purchase all unsubscribed common shares at a price per share
equal to the rights offering subscription price.
We may cancel or terminate the rights offering at any time prior to the
expiration of the rights offering. If we terminate or cancel this offering, we
will return your subscription price, but without any payment of interest.
Our common shares are traded on the New York Stock Exchange, which we
refer to as the NYSE, under the symbol "FUR" and their last reported sales price
on March 21, 2006 was $5.34. The shares are being offered directly by us without
the services of an underwriter or selling agent. The common shares issued in the
rights offering will also be listed on the NYSE under the "FUR" symbol.
The exercise of your subscription rights for common shares involves risks.
You should carefully consider the risk factors described beginning on page 11 of
this prospectus before exercising your subscription rights.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is March 21, 2006.
TABLE OF CONTENTS
Page
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QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING................................1
SUMMARY........................................................................6
Our Company................................................................6
The Rights Offering........................................................6
RISK FACTORS..................................................................11
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.............................19
USE OF PROCEEDS...............................................................20
CAPITALIZATION................................................................21
THE RIGHTS OFFERING...........................................................22
Basic Subscription Rights; Over-Subscription Rights;
Limitation on Subscription................................................22
Basic Subscription Rights.................................................22
Over-Subscription Rights..................................................22
Limitation on Subscription................................................22
Commitments of Officers and Directors.....................................23
Standby Commitments.......................................................23
Subscription Price........................................................23
Determination of Subscription Price.......................................24
Expiration Date, Extensions and Termination...............................24
Reasons for the Rights Offering...........................................24
Non-transferability of the Subscription Rights............................25
Withdrawal and Amendment..................................................25
How to Exercise Your Rights...............................................25
Acceptance of Subscriptions...............................................26
Revocation................................................................27
Incomplete Forms; Insufficient Payment....................................27
Notice to Beneficial Holders..............................................27
Beneficial Owners.........................................................27
Instructions for Completing your Rights Certificate(s)....................28
Regulatory Limitation.....................................................28
Procedures for DTC Participants...........................................28
Foreign or Other Stockholders Located Outside the United States...........28
No Board Recommendation...................................................28
Common Shares Outstanding after the Rights Offering.......................28
Other Matters.............................................................29
Fees and Expenses.........................................................29
Issuance of Share Certificates............................................29
Information Agent.........................................................29
Subscription Agent........................................................29
If You Have Questions.....................................................30
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES........................31
Holders of Common Shares..................................................31
Holders of Series B-1 Preferred Shares....................................32
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY...............................32
Price Range of Common Stock...............................................32
Dividends.................................................................33
DESCRIPTION OF CAPITAL STOCK..................................................33
Common Shares.............................................................33
General...................................................................33
Shareholder Liability.....................................................34
Voting Rights.............................................................34
Transfer Agent and Registrar..............................................34
Restriction on Size of Holdings...........................................34
Trustee Liability.........................................................35
Description of our Preferred Shares.......................................35
General...................................................................35
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TABLE OF CONTENTS
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Terms of Our Series B-1 Preferred Shares..................................35
General...................................................................35
Rank......................................................................36
Distributions.............................................................36
Liquidation Rights........................................................36
Redemption................................................................36
Voting Rights.............................................................37
Conversion Rights.........................................................38
Conversion Price Adjustments..............................................38
Mandatory Conversion......................................................39
Restrictions on Ownership.................................................39
Agreements with Initial Holders of Series B-1 Preferred Shares............39
PLAN OF DISTRIBUTION..........................................................40
EXPERTS.......................................................................40
LEGAL MATTERS.................................................................40
WHERE YOU CAN FIND MORE INFORMATION...........................................40
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................41
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
additional or different information from that contained or incorporated by
reference in this prospectus. The information contained in this prospectus is
accurate only as of the date on the front cover of this prospectus and any
information we have incorporated by reference is accurate only as of the date of
the document incorporated by reference, regardless of the time of delivery of
this prospectus or any exercise of the rights.
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QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING
This section highlights information contained elsewhere or incorporated by
reference in this prospectus. This section does not contain all of the important
information that you should consider before exercising your subscription rights
and investing in our common shares. You should read this entire prospectus
carefully.
Q: What is the rights offering?
A: We are distributing, at no charge, non-transferable subscription rights to
purchase our common shares to holders of our common shares of beneficial
interest and Series B-1 Cumulative Redeemable Preferred Shares. We refer to
these shares as our common shares and Series B-1 Preferred Shares, respectively.
You will receive one subscription right for every 12 common shares you owned (or
in the case of Series B-1 Preferred Shares, one subscription right for every 12
common shares issuable upon conversion) at the close of business on March 22,
2006, the record date. The subscription rights will be evidenced by rights
certificates.
Q: What is a subscription right?
A: Each subscription right is a right to purchase one of our common shares. When
you "exercise" a subscription right, you choose to purchase one common share
that the subscription right entitles you to purchase. You may exercise any
number of your subscription rights, or you may choose not to exercise any
subscription rights. We will not distribute any fractional rights, but will
round down the aggregate number of rights you are issued to the nearest whole
number.
Q: What is the subscription price?
A: The subscription price for a subscription right is $5.25 per share. Our board
of trustees set all of the terms and conditions of the rights offering,
including the subscription price. The basis for determining the subscription
price was based upon consideration of the factors more fully described in "THE
RIGHTS OFFERING -- Determination of Subscription Price."
Q: Where will the common shares issued in the rights offering be listed?
A: Our common shares are traded on the New York Stock Exchange under the symbol
"FUR." The common shares issued in the rights offering will also be listed on
the NYSE under the same symbol. On February 6, 2006, the last trading day prior
to the initial filing of the registration statement relating to the rights
offering of which this prospectus forms a part, the closing price of our common
shares on the NYSE was $5.69 per share. On March 21, 2006, the date of this
Prospectus, the closing price of our common shares on the NYSE was $5.34 per
share. See "PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY."
Q: How long will the rights offering last?
A: You will be able to exercise your subscription rights only during a limited
period that will expire on April 27, 2006. If you do not exercise your
subscription rights at or before 5:00 p.m., New York City time, on April 27,
2006, your subscription rights will expire. We may, in our sole discretion,
decide to extend the rights offering from time to time, with such extension not
to exceed 30 business days. See "THE RIGHTS OFFERING -- Expiration Date,
Extensions and Termination."
Q: Why are we engaging in a rights offering?
A: We are making this rights offering in order to raise new capital that we
intend to use for general corporate purposes, which may include the acquisition
of additional investments and/or the repayment of outstanding indebtedness. See
"USE OF PROCEEDS," "CAPITALIZATION," and "THE RIGHTS OFFERING -- Reasons for the
Rights Offering."
Q: How much money will we receive from the rights offering?
A: If the rights offering is fully subscribed, we will receive gross proceeds of
approximately $27.4 million, less expenses. While we are offering shares in the
rights offering with no minimum purchase requirement, the standby purchasers
have agreed, subject to certain conditions, to purchase any unsubscribed common
shares at a price per share equal to the rights offering subscription price. In
addition, all of our officers and trustees have agreed to fully exercise the
basic subscription rights beneficially owned by them.
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Q: Am I required to subscribe in the rights offering?
A: No.
Q: Can I subscribe for any number of shares less than all of my subscription
rights?
A: Yes. You can subscribe for any whole number of shares by exercising less than
all of your subscription rights.
Q: What are the over-subscription rights?
A: If you fully exercise your basic subscription rights the over-subscription
rights entitle you to subscribe to additional common shares at the same
subscription price of $5.25 per share that applies to your basic subscription
rights
Q: What are the limitations on the over-subscription rights?
A: We will be able to satisfy your exercise of the over-subscription rights only
if other shareholders do not elect to purchase all of the shares offered under
their basic subscription rights. We will honor over-subscription requests in
full to the extent sufficient shares are available following the exercise of
rights under the basic subscription rights. If over-subscription requests exceed
shares available, we will allocate the available shares pro rata based on the
number of shares each oversubscribing shareholder purchased under the basic
subscription rights. See "THE RIGHTS OFFERING - Basic Subscription Rights;
Over-Subscription Rights; Limitation on Subscription - Over-Subscription
Rights."
Q: What effect will our 9.8% ownership limitation have on a holder's ability to
exercise a subscription right?
A. To help maintain our status as a real estate investment trust (REIT), our
by-laws restrict beneficial and constructive ownership of common shares by any
person or group of persons acting collectively to 9.8% of our outstanding common
shares. See "THE RIGHTS OFFERING -- Basic Subscription Rights; Over-Subscription
Rights; Limitation on Subscription" and "DESCRIPTION OF CAPITAL STOCK -- Common
Shares -- Restriction on Size of Holdings".
If you only exercise your basic subscription rights, your percentage ownership
interest in us will neither increase nor decrease. However, if you exercise your
over-subscription rights, your ownership interest in us will increase. If you
fail to exercise all or a portion of your subscription rights, your ownership
percentage in us will decrease. We intend to grant waivers from our 9.8%
limitation to any holder that exceeds the limit as a result of its exercise of
over-subscription rights and requests a waiver by checking the "9.8% Waiver
Request" box on the rights certificate, provided we can do so without
jeopardizing our REIT status and such holder enters into an ownership limitation
waiver agreement in a form that is reasonably satisfactory to us. Ownership
waiver agreements are designed to ensure that we preserve our status as a REIT.
The 9.8% limit for a person is computed based on the outstanding common shares,
including any common shares issuable to that person upon conversion of preferred
shares. For purposes of determining whether you will need to request a waiver
from us, you should assume that this offering will be fully subscribed and that
that there will therefore be 45,693,836 common shares outstanding following
completion of this offering, plus common shares issuable upon conversion of any
Series B-1 Preferred Shares that you may own.
If an ownership waiver cannot be granted, any rights exercised by a holder and
any common shares subscribed for by that holder through the exercise of its
basic or over-subscription privilege that would cause it to go over the 9.8%
ownership limit will not be considered exercised or subscribed for by that
holder. The total subscription price paid by a holder for rights that are not
considered exercised and for common shares not considered subscribed for will be
returned to that holder, without interest, as soon as practicable after
completion of this offering.
If a holder that is not granted a waiver subscribes for and, inadvertently or
otherwise, is issued a number of common shares that causes that holder to go
over the 9.8% ownership limit, the number of common shares in excess of the 9.8%
ownership limit will be "Excess Securities" under our by-laws and therefore will
not, in the hands of that holder, have dividend, voting and other rights or be
considered outstanding for quorum, voting and other purposes. See "DESCRIPTION
OF CAPITAL STOCK -- Common Shares -- Restriction on Size of Holdings".
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We have granted exemptions to our ownership limitation to certain purchasers of
our Series B-1 Preferred Shares. Those exemptions allow these holders of Series
B-1 Preferred Shares to fully subscribe for their basic subscription rights. We
intend to grant further waivers to these holders upon execution of satisfactory
ownership waiver agreements, to the extent such holders exercise their
over-subscription rights, provided that doing so does not jeopardize our REIT
status.
Q: What is the role of standby purchasers in this offering?
A: If any common shares offered in the rights offering remain unsubscribed under
the basic and over-subscription rights, the standby purchasers have agreed,
subject to certain conditions, to purchase any unsubscribed common shares at a
price per share equal to the rights offering subscription price. We refer to the
commitments of standby purchasers to purchase common shares as the standby
commitments. For a more complete description of the role of standby purchasers
in the rights offering, see "THE RIGHTS OFFERING -- Standby Commitments".
We have agreed to waive our 9.8% ownership limitation, to the extent necessary,
to enable standby purchasers to satisfy their standby commitments, provided that
doing so does not jeopardize our REIT status and such purchasers execute a
satisfactory ownership waiver agreement.
Q: Are there any conditions to the standby commitments?
A: Yes. The standby purchasers may terminate their standby commitments in the
event of a material adverse change in our business, financial condition or
results of operations, other than as a result of general economic conditions.
See "THE RIGHTS OFFERING -- Standby Commitments."
Q: What happens if I choose not to exercise my subscription rights?
A: If you do not exercise any rights, the number of shares you own will not
change, but your percentage ownership of our common shares (or in the case of
the Series B-1 Preferred Shares, your percentage ownership of our common shares
on an as-converted basis) will decline following the rights offering.
Q: How do I exercise my subscription rights?
A: You must properly complete the attached rights certificate and deliver it,
along with the subscription price for the shares you are subscribing for under
the basic subscription privilege, to National City Bank, the Subscription Agent,
at or before 5:00 p.m., New York City time, on April 27, 2006, unless the
offering period is extended. The address for the Subscription Agent is on page
26. For your convenience, we have enclosed a self-addressed envelope.
Alternatively, a holder may use the guaranteed delivery procedures described
below. See "THE RIGHTS OFFERING - How to Exercise Your Rights ."
Q: What should I do if I want to participate in the rights offering but my
shares are held in the name of my broker, custodian bank or other nominee?
A: If you hold shares through a broker, custodian bank or other nominee, we will
ask your broker, custodian bank or other nominee to notify you of the rights
offering. If you wish to exercise your subscription rights, you will need to
have your broker, custodian bank or other nominee act for you. To indicate your
decision, you should complete and return to your broker, custodian bank or other
nominee the form entitled "Beneficial Owner Election Form." You should receive
this form from your broker, custodian bank or other nominee with the other
rights offering materials. You should contact your broker, custodian bank or
other nominee if you believe you are entitled to participate in the rights
offering but you have not received this form.
Q: Will I be charged a sales commission or a fee by Winthrop Realty Trust if I
exercise my subscription rights?
A: No. We will not charge you a brokerage commission or a fee for exercising
your subscription rights. However, if you exercise your subscription rights
through a broker or nominee, you will be responsible for any fees charged by
your broker or nominee.
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Q: Are there risks in exercising my subscription rights?
A: Yes. The exercise of your subscription rights involves risks. Exercising your
subscription rights means buying additional common shares and should be
considered as carefully as you would consider any other equity investment. Among
other things, you should carefully consider the risks described under the
heading "RISK FACTORS," beginning on page 11.
Q: May I transfer my subscription rights if I do not want to purchase any
shares?
A: No. Should you choose not to exercise your subscription rights, you may not
sell, give away or otherwise transfer your subscription rights. However,
subscription rights will be transferable by operation of law (for example, upon
death of the recipient).
Q: After I exercise my subscription rights, can I change my mind and cancel my
purchase?
A: Yes. You can revoke your subscription exercise at any time until the offering
period has expired. See "THE RIGHTS OFFERING -- Revocation."
Q: Can the board of trustees withdraw the rights offering?
A: Yes. The board of trustees may decide to withdraw the rights offering at any
time on or before the expiration of the rights offering for any reason. If we
withdraw the rights offering, any money received from subscribing shareholders
will be refunded promptly, without interest. See "THE RIGHTS OFFERING --
Withdrawal and Amendment."
Q: If the rights offering is not completed, will my subscription payment be
refunded to me?
A: Yes. The Subscription Agent will hold all funds it receives in respect of
your basic subscription rights in a segregated bank account until completion of
the rights offering. If the rights offering is not completed, the Subscription
Agent will return promptly, without interest, all basic subscription payments.
Q: When must I pay for subscription rights that I exercise?
A. You must submit payment for shares you subscribe for under the basic
subscription rights at the time that you send in your rights certificate. If you
exercise your over-subscription rights you will be notified within five business
days after the expiration date of this offering of the number of shares, if any,
allocated to you. You will then be obligated to send in payment for such
additional shares subscribed for within five business days after such
notification.
Q: What is the board of trustees' recommendation regarding the rights offering?
A: Our board of trustees is not making any recommendation as to whether you
should exercise your subscription rights. You are urged to make your decision
based on your own assessment of the rights offering and Winthrop Realty Trust.
Q: How many common shares will be outstanding after the rights offering?
A: As of March 21, 2006, we had 40,473,798 common shares issued and outstanding.
We expect to issue 5,220,038 shares in the rights offering and, accordingly,
after the rights offering, we anticipate that we will have 45,693,836 shares
outstanding. Your ownership percentage of our common shares, without giving
effect to common shares issuable upon conversion of Series B-1 Preferred Shares,
will likely decrease as a result of the rights offering even if you exercise
your rights because we are also providing subscription rights to holders of our
Series B-1 Preferred Shares.
Q: What are the United States federal income tax consequences of exercising my
subscription rights as a holder of common shares?
A: A holder of common shares generally should not recognize income or loss for
federal income tax purposes in connection with the receipt or exercise of
subscription rights in the rights offering. A holder of Series B-1 Preferred
Shares may recognize dividend income for federal income tax purposes in
connection with the receipt of subscription rights in the offering, but should
not recognize income or loss for federal income tax purposes in connection with
the exercise of the subscription rights. We urge you to consult your own tax
advisor with respect to the particular tax consequences to you of the rights
offering and your exercise of the subscription rights. See "MATERIAL UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES."
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Q: When will I receive certificates for the shares purchased in the rights
offering?
A: We will issue certificates representing shares purchased in the rights
offering to you or to The Depository Trust Company on your behalf, as the case
may be, as soon as practicable after the completion of the rights offering.
Q: What should I do if I have other questions or need assistance?
A: If you have other questions or need assistance, please contact MacKenzie
Partners, Inc., the Information Agent for the rights offering, at the following
address and telephone number:
[LOGO OF MACKENZIE PARTNERS, INC.]
105 Madison Avenue
New York, New York 10016
Call Collect: (212) 929-5500
or
Toll Free: (800) 322-2885 or via email at proxy@mackenziepartners.com
For a more complete description of the rights offering,
see "THE RIGHTS OFFERING."
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SUMMARY
This summary highlights selected information from this prospectus. The
following summary information is qualified in its entirety by the information
contained elsewhere or incorporated by reference in this prospectus. This
summary may not contain all of the information that you should consider prior to
making a decision to exercise your subscription rights. You should read the
entire prospectus carefully, including the "RISK FACTORS" section beginning on
page 11 of this prospectus and the financial statements and notes to these
statements contained or incorporated by reference in this prospectus. Unless the
context otherwise requires, references to "we," "us," or "Company" refer to
Winthrop Realty Trust and its subsidiaries.
Our Company
We are a real estate investment trust, commonly referred to as a REIT,
formed under the laws of the State of Ohio. Our operations are managed by our
advisor, FUR Advisors LLC. Our common shares are traded on the NYSE under the
symbol "FUR". We conduct our business through WRT Realty L.P., a Delaware
limited partnership which we refer to as the "operating partnership". We are the
sole general partner of, and own all of the limited partnership interests in the
operating partnership. Our operating partnership structure, commonly referred to
as an umbrella partnership real estate investment trust or "UPREIT" structure,
enables us to acquire properties for cash and/or by issuing to sellers, as a
form of consideration, limited partnership interests in our operating
partnership. We believe that this structure facilitates our ability to acquire
portfolio and individual properties by enabling us to structure transactions
which may defer tax gains for a seller while preserving our available cash for
other purposes, including the payment of dividends and distributions.
Our primary business is making investments in a variety of real estate
related assets in three business segments: (i) operating properties; (ii) loans;
and (iii) securities. In general, rather than focus on a particular type of real
estate asset or a specific geographic sector, our investments will continue to
be based, at least for the foreseeable future, on our assessment that a
potential investment is significantly undervalued or presents an opportunity to
outperform the marketplace. Additionally, we will continue to make investments
in assets believed to be underperforming and in which we believe, through an
infusion of capital and improved management, an appropriate return on investment
can be realized. Consequently, with certain limitations, we will continue to
seek to invest in or acquire most types of real estate assets or securities. Our
future investments in assets leased to a single tenant or net leased assets will
likely be made indirectly through our ownership of shares in Newkirk Realty
Trust, Inc. (NYSE:NKT)
Our principal executive offices are located at 7 Bulfinch Place, Suite
500, Boston, Massachusetts 02114-9507, our telephone number is (617) 570-4614
and our Internet address is www.winthropreit.com. None of the information on our
website that is not otherwise expressly set forth in or incorporated by
reference in this prospectus is a part of this prospectus.
The Rights Offering
Further details concerning this part of the summary are set forth under
"THE RIGHTS OFFERING." Only holders of record of our common shares and Series
B-1 Preferred Shares on the record date stated below may exercise rights.
Securities Offered We are distributing to you, at no charge, one
non-transferable subscription right for every 12
common shares that you owned (or in the case of
Series B-1 Preferred Shares, one subscription
right for every 12 common shares issuable upon
conversion) at 5:00 p.m., New York City time, on
March 22, 2006, either as a holder of record or,
in the case of shares held of record by brokers,
banks or other nominees, on your behalf, as a
beneficial owner of such shares. We will not
distribute any fractional subscription rights but
will round down the number of subscription rights
you receive to the nearest whole number.
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Subscription Rights Each subscription right entitles you to purchase
one common share upon payment of the subscription
price.
Record Date March 22, 2006 at 5:00 p.m., New York City time.
Only holders of our common shares or Series B-1
Preferred Shares as of the record date will
receive rights to subscribe for shares in the
rights offering.
Expiration Date The rights expire on April 27, 2006 at 5:00 p.m.,
New York City time. Rights not exercised by the
expiration of the rights offering will be null and
void. We have the option, in our sole discretion,
to extend the expiration of the rights offering
for any reason, for a period not to exceed 30
business days.
Subscription Price $5.25 per share, payable in cash. You must make
payment for shares subscribed for under the basic
subscription rights at the time that you submit
your subscription rights.
Over-subscription Rights If you fully exercise your basic subscription
rights, the over-subscription rights entitle you
to subscribe to additional common shares at the
same subscription price that applies to your basic
subscription privilege.
We will be able to satisfy your exercise of the
over-subscription rights only if other
shareholders do not elect to purchase all of the
shares offered under their basic subscription
rights. We will honor over-subscription requests
in full to the extent sufficient shares are
available following the exercise of rights under
the basic subscription rights. If
over-subscription requests exceed shares
available, we will allocate the available shares
pro rata based on the number of shares each
oversubscribing shareholder purchased under the
basic subscription rights
You do not need to send payment for the exercise
of your over-subscription rights at the time you
return your rights certificate. We will notify you
within five business days after the expiration of
this offering as to how many, if any, additional
shares that you subscribed for under the
over-subscription privilege have been allocated to
you. You will then be obligated to send in full
payment for such additional shares within five
business days of such notification.
Effect of Ownership To help maintain our status as a real estate
Limitation investment trust (REIT), our by-laws restrict
beneficial and constructive ownership of common
shares by any person or group of persons acting
collectively to 9.8% of our outstanding common
shares.
If you only exercise your basic subscription
rights, your percentage ownership interest in us
will neither increase nor decrease. However, if
you exercise your over-subscription rights, your
ownership percentage will increase. If you fail to
exercise all or a portion of your subscription
rights, your ownership percentage in us will
decrease. We intend to grant waivers from our 9.8%
limitation to any holder that exceeds the limit as
a result of its exercise of over-subscription
rights and requests a waiver from us by checking
the "9.8% Waiver Request" box on the rights
subscription certificate, provided doing so does
not jeopardize our REIT status and such holder
enters into an ownership limitation waiver
agreement in a form that is reasonably
satisfactory to us. Ownership limitation waiver
agreements are designed to ensure that we preserve
our status as a REIT. For example, such agreements
will not permit a holder's ownership of our
outstanding common shares in excess of the 9.8%
limitation to cause us to become "closely held" in
violation of one of the requirements for REIT
status. In order for us to qualify as a REIT under
the Code, not more than 50% (by value) of our
outstanding shares of capital stock may be owned,
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directly or indirectly, by five or fewer
individuals (as defined in the Code to include
certain entities). We have previously granted
exemptions to our ownership limitation to certain
purchasers of our Series B-1 Preferred Shares.
Those exemptions allow these holders of Series B-1
Preferred Shares to fully subscribe for their
basic subscription rights. We intend to grant
future waivers to these holders upon execution of
satisfactory ownership waiver agreements, to the
extent such holders exercise their
over-subscription rights, provided that doing so
does not jeopardize our REIT status.
The 9.8% limit for a person is computed based on
the outstanding common shares, including any
common shares issuable to that person upon
conversion of preferred shares. For purposes of
determining whether you will need to request a
waiver from us you should assume that the rights
offering will be fully subscribed and that there
will therefore be 45,693,836 common shares
outstanding following completion of this offering,
plus common shares issuable upon conversion of any
Series B-1 Preferred Shares that you may own.
If an ownership waiver cannot be granted, any
rights exercised by a holder and any common shares
subscribed for by that holder through the exercise
of its over-subscription rights that would cause
it to go over the 9.8% ownership limit will not be
considered exercised or subscribed for by that
holder. The total subscription price paid by a
holder for rights that are not considered
exercised and for common shares not considered
subscribed for will be returned to that holder,
without interest, as soon as practicable after
completion of this offering.
Subscription commitment A number of current shareholders have agreed to be
of standby purchasers standby purchasers and purchase, in the aggregate,
all unsubscribed common shares, if any. In the
event that no shareholders other than our officers
and trustees exercise their basic subscription
privilege and the standby purchasers acquire their
full commitments, the collective ownership by the
standby purchasers of our common shares would
increase to approximately 47% (including our
preferred stock on an as-converted basis).
We have agreed to waive our 9.8% ownership
limitation, to the extent necessary, to enable
standby purchasers to satisfy their standby
commitments provided that doing so does not
jeopardize our REIT status and such purchaser
executes a satisfactory ownership waiver
agreement.
Use of proceeds We will use the net proceeds of this offering for
general corporate purposes, which include the
acquisition of additional investments and/or the
repayment of outstanding indebtedness.
Non-transferability of The subscription rights may not be sold,
rights transferred or assigned, and will not be listed
for trading on any stock exchange.
No board recommendation Our board of trustees makes no recommendation to
you about whether you should exercise any rights.
You are urged to make your decision based on your
own assessment of our business and the rights
offering. For more information regarding some of
the risks inherent in this rights offering, please
see "RISK FACTORS" beginning on page 11.
Revocation You can revoke your subscription exercise at any
time until the offering period has expired.
Material United States A holder of common shares generally should not
federal income tax recognize income or loss for federal income tax
purposes in connection with the receipt or
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8
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exercise of subscription rights in the rights
offering. A holder of Series B-1 Preferred Shares
may recognize dividend income for federal income
tax purposes in connection with the receipt of
subscription rights in the offering, but should
not recognize income or loss for federal income
tax purposes in connection with the exercise of
the subscription rights. We urge you to consult
your own tax advisor with respect to the
particular tax consequences to you of the rights
offering and your exercise of the subscription
rights. For more information, see "MATERIAL UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES."
Extension, withdrawal, We have the option, in our sole discretion, to
cancellation and extend the rights offering and the period for
cancellation and amendment exercising your subscription rights, for a period
not to exceed 30 business days, although we do not
presently intend to do so. Our board of trustees
may cancel the rights offering in its sole
discretion at any time prior to or on the
expiration of the rights offering for any reason
(including, without limitation, a change in the
market price of our common shares). We also
reserve the right to withdraw or terminate this
rights offering at any time for any reason. In the
event that this offering is cancelled, withdrawn
or terminated, all funds received from
subscriptions by shareholders will be returned.
Interest will not be payable on any returned
funds. We also reserve the right to amend the
terms of this rights offering.
Procedure for exercising To exercise rights, you must complete the rights
rights certificate and deliver it to the Subscription
Agent, National City Bank, together with full
payment for all the basic subscription rights you
elect to exercise. Alternatively, a holder may use
the guaranteed delivery procedures described
below. National City Bank must receive the proper
forms and payments on or before the expiration of
the rights offering. You may deliver the documents
and payments by mail or commercial courier. If
regular mail is used for this purpose, we
recommend using registered mail, properly insured,
with return receipt requested.
You do not need to send payment for the exercise
of your over-subscription rights at the time you
return your rights certificate. We will notify you
within five business days after the expiration of
this offering as to how many, if any, additional
shares that you subscribed for under the
over-subscription rights have been allocated to
you. You will then be obligated to send in full
payment for such additional shares within five
business days of such notification.
Questions Questions regarding the rights offering should be
directed to our Information Agent, at (800)
322-2885.
Shares outstanding before 40,473,798 of our common shares were outstanding
the rights offering as of March 21, 2006.
Shares outstanding after We anticipate that we will have 45,693,836 common
completion of the rights shares outstanding following the completion of the
offering rights offering.
Risk factors Shareholders considering making an investment in
the rights offering should consider the risk
factors described in "RISK FACTORS" beginning on
page 11.
Fees and expenses We will bear the fees and expenses relating to the
rights offering.
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9
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New York Stock Exchange Shares of our common stock are currently listed
trading symbol for quotation on the NYSE under the symbol "FUR".
You should carefully consider the information under "RISK FACTORS" and all
other information included in this prospectus prior to making a decision to make
an investment in the rights offering.
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10
RISK FACTORS
The exercise of your subscription rights for shares of our common stock
involves a high degree of risk. Prior to making an investment decision, you
should carefully consider all of the information in this prospectus and evaluate
the following risk factors.
Risks relating to this rights offering
As a Holder of Common Shares, You May Suffer Significant Dilution of Your
Percentage Ownership of Our Common Shares.
If you do not exercise your subscription rights and shares are purchased by
other shareholders in the rights offering or by the standby purchasers, your
proportionate voting and ownership interest will be reduced and the percentage
that your original shares represent of our expanded equity after exercise of the
subscription rights will be diluted. Even if the holders of our common shares
choose to exercise their subscription rights in full, their percentage ownership
of our common shares could still decrease because we are also providing
subscription rights to holders of our Series B-1 Preferred Shares. The magnitude
of the reduction of your percentage ownership will depend upon the extent to
which you subscribe in the rights offering. If you do not exercise your basic
subscription rights, you will experience an 11.4% dilution in your ownership
percentage of common shares and a 7.7% dilution in your ownership percentage of
common shares assuming the conversion of all Series B-1 Preferred Shares.
The Subscription Rights Are Not Transferable and There is No Market For the
Subscription Rights.
You may not sell, give away or otherwise transfer your subscription rights. The
subscription rights are only transferable by operation of law. Because the
subscription rights are non-transferable, there is no market or other means for
you to directly realize any value associated with the subscription rights. You
must exercise the subscription rights and acquire additional shares of our
common stock to realize any value.
We May Cancel the Rights Offering.
We may unilaterally withdraw or terminate this rights offering in our discretion
until the expiration of the rights offering. If we elect to withdraw or
terminate the rights offering, neither we nor the Subscription Agent will have
any obligation with respect to the subscription rights except to return, without
interest or penalty, any subscription payments.
To Exercise Your Subscription Rights, You Need To Act Promptly and Follow
Subscription Instructions.
If you desire to purchase shares in this rights offering, you must act promptly
to ensure that all required forms and basic subscription payments are actually
received by the Subscription Agent at or prior to 5:00 p.m., New York City time,
on April 27, 2006, the expiration of the rights offering. If you fail to
complete and sign the required subscription forms, send an incorrect payment
amount, or otherwise fail to follow the subscription procedures that apply to
your desired transaction, we may, depending on the circumstances, reject your
subscription or accept it to the extent of the payment received. If your
exercise is rejected, your payment of the exercise price will be promptly
returned. Neither we nor our Subscription Agent undertakes to contact you
concerning, or attempt to correct, an incomplete or incorrect subscription form
or payment. We have the sole discretion to determine whether a subscription
exercise properly follows the subscription procedures and to decide all
questions as to the validity, form and eligibility (including times of receipt
and beneficial ownership). Alternative, conditional or contingent subscriptions
will not be accepted. We reserve the absolute right to reject any subscriptions
not properly submitted. In addition, we may reject any subscription if the
acceptance of the subscription would be unlawful. We also may waive any defect
or irregularity, or permit a defect or irregularity to be corrected within such
tims as we may determine. We are not obligated to give you notification of
defects in your subscription. We will not consider an exercise to be made until
all defects have been cured or waived.
The Subscription Price is Not a Reflection of Our Value.
The subscription price of $5.25 per share was determined by our board of
trustees. Our board of trustees set the $5.25 per share subscription price after
considering a variety of factors discussed under "THE RIGHTS OFFERING --
Determination of Subscription Price", including the market price. The price,
however, does not necessarily bear any relationship to the book value of our
11
assets or our past operations, cash flows, earnings or financial condition or
any other established criteria for value. Our common shares may trade at prices
below the subscription price after the completion of this offering, and we
cannot assure you that you will be able to sell shares purchased during this
offering at a price equal to or greater than the $5.25 per share subscription
price.
Other Risks
Our Economic Performance and the Value of Our Real Estate Assets are Subject to
the Risks Incidental to the Ownership and Operation of Real Estate Properties
The value of an investment in us depends upon our economic performance and the
value of our real estate assets, both those presently held as well as future
investments, which are subject to the risks normally associated with the
ownership, operation and disposal of real estate properties and real estate
related assets, including:
o changes in the general and local economic climate;
o competition from other properties;
o trends in the retail industry, in employment levels and in consumer
spending patterns;
o changes in interest rates and the availability of financing;
o the cyclical nature of the real estate industry and possible oversupply
of, or reduced demand for, space in the markets in which our properties
are located;
o the attractiveness of our properties to tenants and purchasers;
o changes in market rental rates and our ability to rent space on favorable
terms;
o the bankruptcy or insolvency of tenants;
o the need to periodically renovate, repair and re-lease space and the costs
thereof;
o increases in maintenance, insurance and operating costs; and
o civil unrest, acts of terrorism, earthquakes and other natural disasters
or acts of God that may result in uninsured losses.
In addition, applicable federal, state and local regulations, zoning and tax
laws and potential liability under environmental and other laws may affect real
estate values. Further, throughout the period that we own real property,
regardless of whether a property is producing any income, we must make
significant expenditures, including property taxes, maintenance, insurance and
related charges and debt service. The risks associated with real estate
investments may adversely affect our operating results and financial position,
and therefore the funds available for distribution to you as dividends.
Ability of Our Advisor to Operate Properties Directly Affects Our Financial
Condition
The underlying value of our real estate investments, the results of our
operations and our ability to make distributions to our holders of beneficial
interests and to pay amounts due on our indebtedness will depend on the ability
of our advisor to operate our properties and manage our other investments in a
manner sufficient to maintain or increase revenues and to generate sufficient
revenues in excess of our operating and other expenses.
The Loss of Our Advisor's Key Personnel Could Harm Our Operations and Adversely
Affect the Value of Our Beneficial Interests
We are dependent on the efforts, diligence, skill, network of business contacts
and close supervision of all aspects of our business by FUR Advisors and, in
particular, Michael Ashner, chairman of our board of trustees and our chief
executive officer, and Peter Braverman, our president, as well as our other
executive officers, Carolyn Tiffany and Thomas Staples. While we believe that we
could find replacements for these key personnel, the loss of their services
could harm our operations and adversely affect the value of our shares of
beneficial interest.
12
We Face a Number of Significant Issues with Respect to the Properties We Own
Which May Adversely Affect our Financial Performance
Leasing Issues. With respect to our properties, we are subject to the risk that,
upon expiration, leases may not be renewed, the space may not be relet, or the
terms of renewal or reletting, including the cost of required renovations, may
be less favorable than the current lease terms. This risk is substantial with
respect to our net lease properties as single tenants lease 100% of each
property. Twenty-one of our properties, containing an aggregate of 3,493,575
square feet of space are net leased to seven different tenants. Leases
accounting for approximately 2% of the aggregate 2005 annualized base rents from
our properties, representing approximately 1% of the net rentable square feet at
the properties, expire without penalty or premium through the end of 2006, and
leases accounting for approximately 2% of aggregate 2005 annualized base rent
from the properties, representing approximately 1% of the net rentable square
feet at the properties, are scheduled to expire in 2007. Other leases grant
tenants early termination rights upon payment of a termination penalty. Lease
expirations will require us to locate new tenants and negotiate replacement
leases with tenants. The costs for tenant improvements, tenant inducements and
leasing commissions, with respect to new leases, are traditionally greater than
costs relating to renewal leases. If we are unable to promptly relet or renew
leases for all or a substantial portion of the space subject to expiring leases,
if the rental rates upon such renewal or reletting are significantly lower than
expected or if our reserves for these purposes prove inadequate, our revenue and
net income could be adversely affected.
Bankruptcy of Tenant. A tenant may experience a downturn in its business, which
could result in the tenant's inability to make rental payments when due. In
addition, a tenant may seek the protection of bankruptcy, insolvency or similar
laws, which could result in the rejection and termination of such tenant's lease
and cause a reduction in our cash flow. If this were to occur at a net leased
property, the entire property would become vacant.
We cannot evict a tenant solely because of its bankruptcy. A court, however, may
authorize a tenant to reject and terminate its lease. In such a case, our claim
against the tenant for past due rent and unpaid future rent would be subject to
a statutory cap that might be substantially less than the remaining rent owed
under the lease. In any event, it is unlikely that a bankrupt tenant will pay in
full the amount it owes us under a lease. The loss of rental payments from
tenants could adversely affect our cash flows and operations.
In November 2005, Winn-Dixie Stores, Inc., the tenant at our Jacksonville,
Florida property, elected to reject its lease in connection with its proceeding
under Chapter 11 of the United States Bankruptcy Code. Winn-Dixie had previously
sublet approximately 175,000 square feet of the approximately 550,000 total
rentable square feet at the property. That sublease remains in effect and we
have also leased approximately 300,000 square feet of additional space at the
property.
Tenant Concentration. Our Circle Tower property does not have any individual
tenant that occupies 10% or more of the space at the property or whose rental
payments account for 10% or more of the rental revenue at the property.
Accordingly, it is unlikely that the financial weakness or relocation of a
single tenant would adversely affect our cash flows. However, in the future it
is possible that a single tenant at the Circle Tower property could occupy a
significant portion of the leasable space or provide a substantial portion of
the property's rental revenue.
Our Ontario Property in which we hold an 80% interest has one tenant that
occupies 11% of the space at the property. We believe that the relocation or
future financial weakness of this tenant would not have a material adverse
effect on our rental revenue.
With respect to the net leased properties, leases with Viacom, Inc., The Kroger
Co. and Duke Energy represent approximately 29%, 17% and 18%, respectively, of
the total rentable square footage of the net leased properties. Accordingly, the
financial weakness of any of these tenants could negatively impact our
operations and cash flows. However, we presently own only an 8% interest in the
Duke Energy property.
Competition. We face substantial competition for our targeted investments. Our
ability to execute our business strategy, particularly the growth of our
investment portfolio, depends to a significant degree on our ability to
implement our investment policy. We compete with numerous other companies for
investments, including other REITs, insurance companies, real estate opportunity
funds, pension funds and a multitude of private investors. Many of our
competitors have greater resources than we do and for this and other reasons, we
may not be able to compete successfully for particular investments. We will
continue to capitalize on the acquisition and investment opportunities that our
advisor brings to us as a result of its acquisition experience. Through its
broad experience, our advisor's senior management team has established a network
13
of contacts and relationships, including relationships with operators,
financiers, commercial real estate brokers, potential tenants and other key
industry participants. In addition we believe that our advisor's significant
real estate management infrastructure gives us economies of scale that provides
us with a competitive advantage when bidding on investment opportunities.
A Significant Proportion of Our Investments are in the Chicago Metropolitan Area
and are Affected By the Economic Cycles And Risks Inherent To That Region.
At December 31, 2005 16.6% of our total assets represented investments made
directly in, or secured by, properties located in the Chicago, Illinois
metropolitan area. Excluding mortgage-backed securities available for sale and
real estate securities available for sale, our assets representing investments
made directly in or secured by properties located in this area increased to
22.3% at December 31, 2005. In addition, we may continue to concentrate a
significant portion of our future investments in the Chicago area. Like other
real estate markets, the real estate market in the Chicago metropolitan and
suburban area has experienced economic downturns in the past, and we cannot
predict how the current economic conditions will impact this market in both the
short and long term. Further declines in the economy or a decline in the real
estate market in this area could hurt our financial performance and the value of
our investments. The factors affecting economic conditions in this region
include: space needs of local industry; business layoffs or downsizing; industry
slowdowns; relocations of businesses; changing demographics; increased
telecommuting and use of alternative work places; financial performance and
productivity of the publishing, advertising, financial, technology, retail,
insurance and real estate industries; infrastructure quality; and oversupply of
or reduced demand for real estate.
It is impossible for us to assess the future effects of the current uncertain
trends in the economic and investment climates as well as real estate markets of
the Chicago region, and more generally of the United States.
The Mortgage Loans We Invest In Are Subject to Delinquency, Foreclosure and Loss
We seek to make commercial mortgage loans that may be secured by multi-tenant
income producing property. These loans are subject to risks of delinquency and
foreclosure, and risks of loss that are greater than similar risks associated
with loans made on the security of single-family residential property. The
ability of a borrower to repay a loan secured by an income-producing property
typically is dependent primarily upon the successful operation of such property
rather than upon the existence of independent income or assets of the borrower.
If the net operating income of the property is reduced, the borrower's ability
to repay the loan may be impaired. Net operating income of an income-producing
property can be affected by, among other things: tenant mix; success of tenant
businesses; property management decisions; property location and condition;
competition from comparable types of properties; changes in laws that increase
operating expense or limit rents that may be charged; the need to address
environmental contamination at the property; the occurrence of any uninsured
casualty at the property; changes in national, regional or local economic
conditions and/or specific industry segments; declines in regional or local real
estate values; declines in regional or local rental or occupancy rates;
increases in interest rates, real estate tax rates and other operating expenses;
changes in governmental rules, regulations and fiscal policies, including
environmental legislation; acts of God; terrorism; social unrest; and civil
disturbances.
In the event of a default under a mortgage loan held directly by us, we will
bear a risk of loss of principal to the extent of any deficiency between the
value of the collateral, including the overall financial condition of the
tenant, and the principal and accrued interest of the mortgage loan, which could
have a material adverse effect on our cash flow from operations. In the event of
the bankruptcy of a mortgage loan borrower to whom we have lent money, the loan
will be deemed to be secured only to the extent of the value of the underlying
collateral at the time of bankruptcy (as determined by the bankruptcy court),
and the lien securing the mortgage loan will be subject to the avoidance powers
of the bankruptcy trustee or debtor-in-possession to the extent the lien is
unenforceable under state law. Foreclosure of a mortgage loan can be an
expensive and lengthy process which could have a substantial negative effect on
our anticipated return on the foreclosed mortgage loan.
Our Mezzanine and Second Mortgage Loans Involve Greater Risks of Loss than
Senior Loans Secured by Income Producing Properties
Our investments include mezzanine and second mortgage loans with respect to
office and mixed-use buildings. These loans are secured by a pledge of the
ownership interests in the entity that owns the property or a second mortgage
lien on the property. These types of investments involve a higher degree of risk
than long-term senior mortgage lending secured by income producing real
property. In the event of a bankruptcy of the entity providing the pledge of its
ownership interests as security, we may not have full recourse to the assets of
such entity, or the assets of the entity may not be sufficient to satisfy our
14
mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to
our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be
satisfied only after the senior debt. As a result, we may not recover some or
all of our investment. In addition, mezzanine loans may have higher loan to
value ratios than conventional mortgage loans, resulting in less equity in the
property and increasing the risk of loss of principal.
Our Investments in REIT Securities Are Subject to Specific Risks Relating to the
Particular REIT Issuer of the Securities and to the General Risks of Investing
in Equity Real Estate Securities
Our investments in REIT securities, such as our investment in Newkirk Realty
Trust, Inc., Sizeler Property Investors and American First Apartment Investors,
Inc., involve special risks. REITs generally are required to substantially
invest in real estate or real estate-related assets and are subject to the
inherent risks described herein including: (i) risks generally incident to
interests in real property; (ii) risks associated with the failure to maintain
REIT qualification; and (iii) risks that may be presented by the type and use of
a particular commercial property.
Investing in Private Companies Involves a High Degree of Risk
We have ownership interests in, and may acquire additional ownership interests
in, private companies not subject to the reporting requirements of the
Securities and Exchange Commission. Investments in private businesses involve a
higher degree of business and financial risk, which can result in substantial
losses and accordingly should be considered very speculative. There is generally
no publicly available information about these private companies, and we will
rely significantly on the due diligence of our advisor to obtain information in
connection with our investment decisions.
We May Not Be Able to Invest Our Cash Reserves in Suitable Investments
Our cash and cash equivalents will increase by approximately $27.4 million, less
expenses, as a result of this offering. Our ability to generate increased
revenues is dependent upon our ability to invest these funds in real estate
related assets that will ultimately generate favorable returns.
We Have Significant Distribution Obligations to Holders of Our Preferred Stock
The provisions of our Series B-1 Preferred Shares currently require us to make
annual distributions aggregating approximately $6,500,000 before any
distributions may be made on our common shares.
We May Acquire or Sell Additional Assets or Additional Properties. Our Failure
or Inability to Consummate These Transactions or Manage the Results of These
Transactions Could Adversely Affect Our Operations and Financial Results
We may acquire properties or acquire other real estate companies when we believe
that an acquisition is consistent with our business strategies. We may not,
however, succeed in consummating desired acquisitions. Also, we may not succeed
in leasing newly acquired properties at rents sufficient to cover their costs of
acquisition and operation. Difficulties in integrating acquisitions may prove
costly or time-consuming and could consume a disproportionate share of
management's attention.
We May Not Be Able to Obtain Capital to Make Investments
At such time as we utilize our cash reserves, we will be dependent primarily on
external financing to fund the growth of our business. This is because one of
the requirements for a REIT is that it distribute 90% of its net taxable income,
excluding net capital gains, to its shareholders. There is also a separate
requirement to distribute net capital gains or pay a corporate level tax. Our
access to debt or equity financing depends on the willingness of third parties
to lend or make equity investments and on conditions in the capital markets
generally. We and other companies in the real estate industry have experienced
limited availability of financing from time to time. Although we believe that we
will be able to finance any investments we may wish to make in the foreseeable
future, requisite financing may not be available on acceptable terms.
15
Factors That May Cause Us to Lose Our New York Stock Exchange Listing
If we were to fail to qualify as a REIT, we might lose our listing on the NYSE.
Whether we would lose our NYSE listing would depend on a number of factors
besides REIT status, including the number of holders of beneficial interests and
amount and composition of our assets. If we were to lose our NYSE listing, we
would likely try to have our common shares listed on another national securities
exchange.
Future Issuances and Sales of Our Common Shares Pursuant to an Outstanding
Registration Statement May Affect the Market Price of Our Common Shares
We currently have an effective "shelf" registration statement on file covering
the issuance, from time to time, of up to approximately $358 million of our
common shares, preferred shares and/or debt securities. The registration
statement also covers the resale by certain selling shareholders of up to
23,222,223 common shares. Any such issuance or sale of our common shares may
decrease the market price of our common shares. We have also agreed to file a
registration statement covering the resale of 3,522,566 common shares recently
issued to one investor.
Dependence on Qualification As a REIT; Tax and Other Consequences If REIT
Qualification is Lost
Although we believe that we have been and will remain organized and have
operated and will continue to operate so as to qualify as a REIT for federal
income tax purposes, we cannot assure this result. Qualification as a REIT for
federal income tax purposes is governed by highly technical and complex
provisions of the Internal Revenue Code, which we refer to as the Code, for
which there are only limited judicial or administrative interpretations. Our
qualification as a REIT also depends on various facts and circumstances that are
not entirely within our control. In addition, legislation, new regulations,
administrative interpretations or court decisions might change the tax laws with
respect to the requirements for qualification as a REIT or the federal income
tax consequences of qualification as a REIT.
If, with respect to any taxable year, we fail to maintain our qualification as a
REIT and certain relief provisions do not apply, we could not deduct
distributions to our shareholders in computing our taxable income and would have
to pay federal corporate income tax (including any applicable alternative
minimum tax) on our taxable income. If we had to pay federal income tax, the
amount of money available to distribute to our shareholders would be reduced for
the year or years involved, but we would no longer be required to pay dividends
to our shareholders. In addition, we would be disqualified from treatment as a
REIT for the four taxable years following the year during which qualification
was lost, and thus our cash available for distribution to our shareholders would
be reduced in each of those years, unless we were entitled to relief under the
relevant statutory provisions.
Although we currently intend to operate in a manner designed to allow us to
continue to qualify as a REIT, future economic, market, legal, tax or other
considerations may cause us to revoke the REIT election. In that event, we and
our shareholders would no longer be entitled to the federal income tax benefits
applicable to a REIT.
Pursuant to an agreement with Vornado Realty Trust, we may be liable to pay
damages to Vornado Realty Trust in the event we fail to maintain our status as a
REIT.
In Order to Maintain Our Status As a REIT, We May Be Forced To Borrow Funds
During Unfavorable Market Conditions
As a REIT, we generally must distribute at least 90% of our annual REIT taxable
income, subject to certain adjustments, to our shareholders. To the extent that
we satisfy the REIT distribution requirement but distribute less than 100% of
our taxable income, we will be subject to federal corporate income tax on our
undistributed taxable income. In addition, we will be subject to a 4%
nondeductible excise tax if the actual amount that we pay to our shareholders in
a calendar year is less than a minimum amount specified under federal tax laws.
From time to time, we may generate taxable income greater than our cash flow
available for distribution to our shareholders (for example, due to substantial
non-deductible cash outlays, such as capital expenditures or principal payments
on debt). If we do not have other funds available in these situations, we could
be required to borrow funds, sell investments at disadvantageous prices or find
alternative sources of funds to make distributions sufficient to enable us to
pay out enough of our taxable income to satisfy the REIT distribution
requirement and to avoid income and excise taxes in a particular year. These
alternatives could increase our operating costs or diminish our rate of growth.
16
Liquidity of Real Estate
Real estate investments are relatively illiquid. Our ability to vary our real
estate portfolio in response to changes in economic and other conditions will
therefore be limited. If we decide to sell an investment, no assurance can be
given that we will be able to dispose of it in the time period we desire or that
the sales price of any investment will recoup or exceed the amount of our
investment.
Compliance with the Americans with Disabilities Act and fire, safety and other
regulations may require us to make unintended expenditures that adversely impact
our ability to pay dividends to you.
All of our properties are required to comply with the Americans with
Disabilities Act, or the ADA. The ADA has separate compliance requirements for
"public accommodations" and "commercial facilities," but generally requires that
buildings be made accessible to people with disabilities. Compliance with the
ADA requirements could require removal of access barriers and non-compliance
could result in imposition of fines by the U.S. government or an award of
damages to private litigants, or both. Although we believe that our properties
are in compliance with the ADA, it is possible that we may incur additional
expenditures which, if substantial, could adversely affect our results of
operations our financial condition and our ability to pay dividends to you.
In addition, we are required to operate our properties in compliance with fire
and safety regulations, building codes and other land use regulations, as they
may be adopted by governmental agencies and bodies and become applicable to our
properties. We may be required to make substantial capital expenditures to
comply with those requirements and these expenditures could have an adverse
effect on our ability to pay dividends to you. Additionally, failure to comply
with any of these requirements could result in the imposition of fines by
governmental authorities or awards of damages to private litigants. While we
intend to acquire only properties that we believe are currently in substantial
compliance with all regulatory requirements, these requirements could be changed
or new requirements could be imposed which would require significant
unanticipated expenditures by us and could have an adverse effect on our cash
flow and dividends paid.
Environmental Liabilities
The obligation to pay for the cost of complying with existing environmental
laws, ordinances and regulations, as well as the cost of complying with future
legislation, may affect our operating costs. Under various federal, state and
local environmental laws, ordinances and regulations, a current or previous
owner or operator of real property may be liable for the costs of removal or
remediation of hazardous or toxic substances on or under the property.
Environmental laws often impose liability whether or not the owner or operator
knew of, or was responsible for, the presence of such hazardous or toxic
substances and whether or not such substances originated from the property. In
addition, the presence of hazardous or toxic substances, or the failure to
remediate such property properly, may adversely affect our ability to borrow by
using such real property as collateral. We maintain insurance related to
potential environmental issues on our currently owned properties.
Certain environmental laws and common law principles could be used to impose
liability for releases of hazardous materials, including asbestos-containing
materials ("ACMs") into the environment. In addition, third parties may seek
recovery from owners or operators of real properties for personal injury
associated with exposure to released ACMs or other hazardous materials.
Environmental laws may also impose restrictions on the use or transfer of
property, and these restrictions may require expenditures. In connection with
the ownership and operation of any of our properties, we and the lessees of
these properties may be liable for any such costs. The cost of defending against
claims of liability or remediating contaminated property and the cost of
complying with environmental laws could materially adversely affect our ability
to pay amounts due on indebtedness and dividends to holders of beneficial
interests. This risk is mitigated for our net leased properties as the lease
agreements for those properties require the tenant to comply with all
environmental laws and indemnify us for any loss relating to environmental
liabilities. Prior to undertaking major transactions, we hire independent
environmental experts to review specific properties. We have no reason to
believe that any environmental contamination or violation of any applicable law,
statute, regulation or ordinance governing hazardous or toxic substances has
occurred or is occurring, except for the property located in Jacksonville,
17
Florida, previously net leased to Winn-Dixie. Under the terms of its lease,
Winn-Dixie was responsible for the remediation of petroleum-related
contamination encountered in the ground water during removal of underground
storage tanks. However, in light of Winn-Dixie's bankruptcy, it is probable that
Winn-Dixie will not honor its obligation and that we would not recover a
material amount by bringing a claim against Winn-Dixie. Given the nature of the
contamination at the Jacksonville property and the inclusion of a substantial
portion of the costs associated with the remediation being covered by a state
sponsored plan, we do not believe the costs to be borne by us would be material.
Our advisor also endeavors to protect us from acquiring contaminated properties
or properties with significant compliance problems by obtaining site assessments
and property reports at the time of acquisition when it deems such
investigations to be appropriate. There is no guarantee, however, that these
measures will successfully insulate us from all such liabilities.
Uninsured and Underinsured Losses
We may not be able to insure our properties against losses of a catastrophic
nature, such as terrorist acts, earthquakes and floods, because such losses are
uninsurable or are not economically insurable. We will use our discretion in
determining amounts, coverage limits and deductibility provisions of insurance,
with a view to maintaining appropriate insurance coverage on our investments at
a reasonable cost and on suitable terms. This may result in insurance coverage
that, in the event of a substantial loss, would not be sufficient to pay the
full current market value or current replacement cost of the lost investment and
also may result in certain losses being totally uninsured. Inflation, changes in
building codes, zoning or other land use ordinances, environmental
considerations, lender imposed restrictions and other factors also might make it
not feasible to use insurance proceeds to replace the property after such
property has been damaged or destroyed. Under such circumstances, the insurance
proceeds, if any, received by us might not be adequate to restore our economic
position with respect to such property. With respect to our net lease
properties, under the lease agreements for such properties the tenant is
required to adequately insure the property, but the tenant's failure to have
adequate coverage for catastrophic losses may adversely affect our economic
position with respect to such property.
Inability to Refinance
We are subject to the normal risks associated with debt and preferred stock
financings, including the risk that our cash flow will be insufficient to meet
required payments of principal, interest and distributions and the risk that
indebtedness on our properties, or unsecured indebtedness, will not be able to
be renewed, repaid or refinanced when due, or that the terms of any renewal or
refinancing will not be as favorable as the terms of such indebtedness. If we
were unable to refinance the indebtedness on acceptable terms, or at all, we
might be forced to dispose of one or more of our properties on disadvantageous
terms, which might result in losses to us, which losses could have a material
adverse effect on us and our ability to pay dividends to our holders of
beneficial interests and to pay amounts due on our indebtedness. Furthermore, if
a property is mortgaged to secure payment of indebtedness and we are unable to
meet mortgage payments, the mortgagor could foreclose upon the property, appoint
a receiver or obtain an assignment of rents and leases or pursue other remedies,
all with a consequent loss of revenues and asset value to us. Foreclosures could
also create taxable income without accompanying cash proceeds, thereby hindering
our ability to meet the REIT distribution requirements of the Code.
We Leverage Our Portfolio, Which May Adversely Affect Our Return on Our
Investments and May Reduce Cash Available for Distribution
We seek to leverage our portfolio through borrowings. Our return on investments
and cash available for distribution to holders of beneficial interests may be
reduced to the extent that changes in market conditions cause the cost of our
financing to increase relative to the income that can be derived from the
assets. Our debt service payments reduce the cash available for distributions to
holders of beneficial interests. We may not be able to meet our debt service
obligations and, to the extent that we cannot, we risk the loss of some or all
of our assets to foreclosure or forced sale to satisfy our debt obligations. A
decrease in the value of the assets may lead to a requirement that we repay
certain borrowings. We may not have the funds available to satisfy such
repayments.
Rising Interest Rates
We have incurred and may in the future incur indebtedness that bears interest at
variable rates. Accordingly, increases in interest rates would increase our
interest costs to the extent that the related indebtedness was not protected by
interest rate protection arrangements, which could have a material adverse
effect on us and our ability to pay dividends to our holders of beneficial
interests and to pay amounts due on our indebtedness or cause us to be in
default under certain debt instruments. In addition, an increase in market
interest rates may encourage holders to sell their common shares and reinvest
the proceeds in higher yielding securities, which could adversely affect the
market price for the common shares.
18
We May Engage in Hedging Transactions That May Limit Our Gains or Result in
Losses
We may use derivatives to hedge our liabilities and this has certain risks,
including:
o losses on a hedge position may reduce the cash available for distribution
to stockholders and such losses may exceed the amount invested in such
instruments;
o counterparties to a hedging arrangement could default on their
obligations; and
o we may have to pay certain costs, such as transaction fees or brokerage
costs.
Our board of trustees has adopted a general policy with respect to our use of
interest rate swaps, the purchase or sale of interest rate collars, caps or
floors, options, mortgage derivatives and other hedging instruments in order to
hedge as much of the interest rate risk as our manager determines is in the best
interest of our stockholders, given the cost of such hedges and the need to
maintain our status as a REIT. Our board's policy does not set forth specific
policies and procedures for the use of these instruments. We may use these
hedging instruments in our risk management strategy to limit the effects of
changes in interest rates on our operations. A hedge may not be effective in
eliminating all of the risks inherent in any particular position. Our
profitability may be adversely affected during the period as a result of the use
of derivatives.
Ownership Limitations in Our Bylaws May Adversely Affect the Market Price of Our
Common Shares
Our bylaws contain an ownership limitation that is designed to prohibit any
transfer that would result in our being "closely-held" within the meaning of
Section 856(h) of the Code. This ownership limitation, which may be waived by
our board of trustees, generally prohibits ownership, directly or indirectly, by
any single stockholder of more than 9.8% of the common shares. Our board has
waived this ownership limitation on a number of occasions described below under
"DESCRIPTION OF CAPITAL STOCK--Common Shares--Restriction on Size of Holdings".
Unless the board waives the restrictions or approves a bylaw amendment, common
shares owned by a person or group of persons in excess of 9.8% of our
outstanding common shares are not entitled to any voting rights; are not
considered outstanding for quorum or voting purposes; and are not entitled to
dividends, interest or any other distributions with respect to the common
shares. The ownership limit may have the effect of inhibiting or impeding a
change of control over us or a tender offer for our common shares.
We Must Manage Our Investments In A Manner That Allows Us To Rely On An
Exemption From Registration Under The Investment Company Act In Order To Avoid
The Consequences Of Regulation Under That Act
We intend to operate so that we are exempt from registration as an investment
company under the Investment Company Act of 1940, as amended. Therefore the
assets that we may invest in, or acquire, are limited by the provisions of the
Investment Company Act and the rules and regulations promulgated thereunder. The
investments that we must make for us to be exempt from registration, including
our whole pool mortgage-backed securities, may not represent an optimum use of
our investable capital when compared to the available investments we target
pursuant to our investment strategy.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Any statements included in this prospectus, including any statements in the
document that are incorporated by reference herein that are not strictly
historical are forward-looking statements within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Any such
forward-looking statements contained or incorporated by reference herein should
not be relied upon as predictions of future events. Certain such forward-looking
statements can be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "should," "seeks," "approximately," "intends,"
"plans," "pro forma," "estimates" or "anticipates" or the negative thereof or
other variations thereof or comparable terminology, or by discussions of
strategy, plans, intentions or anticipated or projected events, results or
conditions. Such forward-looking statements are dependent on assumptions, data
or methods that may be incorrect or imprecise and they may be incapable of being
realized. Such forward-looking statements include statements with respect to:
19
o the declaration or payment of distributions by us;
o the ownership, management and operation of properties;
o potential acquisitions or dispositions of our properties, assets or other
businesses;
o our policies regarding investments, acquisitions, dispositions, financings
and other matters;
o our qualification as a REIT under the Internal Revenue Code;
o the real estate industry and real estate markets in general;
o the availability of debt and equity financing;
o interest rates;
o general economic conditions;
o supply and customer demand;
o trends affecting us or our assets;
o the effect of acquisitions or dispositions on capitalization and financial
flexibility;
o the anticipated performance of our assets and of acquired properties and
businesses, including, without limitation, statements regarding
anticipated revenues, cash flows, funds from operations, earnings before
interest, depreciation and amortization, property net operating income,
operating or profit margins and sensitivity to economic downturns or
anticipated growth or improvements in any of the foregoing; and
o our ability, and that of our assets and acquired properties and businesses
to grow.
You are cautioned that, while forward-looking statements reflect our good faith
beliefs, they are not guarantees of future performance and they involve known
and unknown risks and uncertainties. Actual results may differ materially from
those in the forward-looking statements as a result of various factors. The
information contained or incorporated by reference in this prospectus and any
amendment hereof, including, without limitation, the information set forth in
"RISK FACTORS" or in any risk factors in documents that are incorporated by
reference in this prospectus, identifies important factors that could cause such
differences. We undertake no obligation to publicly release the results of any
revisions to these forward-looking statements that may reflect any future events
or circumstances.
USE OF PROCEEDS
The maximum proceeds to us from the sale of our common shares in this
rights offering and pursuant to the standby commitments are estimated to be
approximately $27.4 million before deducting offering expenses allocable to and
payable by us.
We intend to use the net proceeds of the rights offering for general
corporate purposes, including the acquisition of additional investments and the
repayment of outstanding indebtedness.
20
CAPITALIZATION
The following table shows our capitalization as of December 31, 2005 on a
historical basis (in thousands). The table also includes our capitalization on a
pro forma basis reflecting the conversion of the Series A Cumulative Convertible
Redeemable Preferred Shares, the partial conversion of the Series B-1 Cumulative
Convertible Redeemable Preferred Shares and assuming the completion of a
fully-subscribed rights offering.
Pro Forma Adjustments
---------------------
Conversion of Conversion of
Series A Series B-1
Cumulative Cumulative
Convertible Convertible
Redeemable Redeemable
Historical Preferred Preferred Rights
as Reported Shares (1) Shares (2) Offering (3) Pro Forma
----------- ----------- ----------- ----------- ------------
Repurchase agreements $ 121,716 $ -- $ -- $ -- $ 121,716
Mortgage loans payable 175,118 -- -- -- 175,118
Loans payable 30,025 -- -- -- 30,025
Revolving line of credit 16,000 -- -- 16,000
Minority interest 27,527 -- -- 27,527
SHAREHOLDERS' EQUITY:
Series A Cumulative Convertible Redeemable
Preferred Shares of Beneficial Interest, $25
per share liquidating preference, 2,300,000
shares authorized, 983,082 outstanding 23,131 (23,131) -- -- --
Series B-1 Cumulative Convertible Redeemable
Preferred Shares of Beneficial Interest, $25
per share liquidating preference, 4,000,000
shares authorized and outstanding 94,164 -- (235) -- 93,929
Common Shares of Beneficial Interest, $1 par
unlimited authorized, 35,581,479 outstanding 35,581 4,837 56 5,220 45,694
Additional paid in capital 221,386 18,294 179 21,809 261,668
Accumulated other comprehensive income 6,915 -- -- -- 6,915
Accumulated distributions in excess of net income (126,753) -- -- -- (126,753)
----------- ----------- ----------- ----------- ------------
Total Shareholders' Equity 254,424 -- -- 27,029 281,453
----------- ----------- ----------- ----------- ------------
Total capitalization $ 624,810 $ -- $ -- $ 27,029 $ 651,839
=========== =========== =========== =========== ===========
- ----------
(1) These Series A Cumulative Convertible Redeemable Preferred Shares of
Beneficial Interest were redeemed on February 7, 2006 for 4,836,763 Common
Shares.
(2) On February 2, 2006, a holder of the Series B-1 Cumulative Convertible
Redeemable Preferred Shares exercised its right to convert 10,000 of its
Series B-1 Cumulative Convertible Redeemable Preferred Shares. On February
14, 2006 the Trust issued 55,556 Common Shares to the holder requesting
the conversion.
(3) Based upon 5,220,038 common shares issued pursuant to this rights offering
at a subscription price of $5.25 less expenses related to the rights
offering.
21
THE RIGHTS OFFERING
Before exercising any subscription rights, you should read carefully the
information set forth under "RISK FACTORS."
Basic Subscription Rights; Over-Subscription Rights; Limitation on Subscription
Basic Subscription Rights
We are distributing to the holders of record of our common shares and
Series B-1 Preferred Shares on March 22, 2006, at no charge, one
non-transferable subscription right for every 12 common shares they own (or, in
the case of the Series B-1 Preferred Shares, one subscription right for every 12
common shares issuable upon conversion). The subscription rights will be
evidenced by rights certificates. Each subscription right will entitle the
holder to purchase one of our common shares. You are not required to exercise
any or all of your subscription rights.
If, pursuant to your exercise of your subscription rights, the number of
common shares you are entitled to receive would result in your receipt of
fractional shares, the aggregate number of shares issued to you will be rounded
down to the nearest whole number.
Over-Subscription Rights
Holders of rights who exercise their basic subscription rights in full
will have over-subscription rights, subject to the availability of shares
following exercise of the basic subscription rights. The over- subscription
rights entitle such rights holders to purchase, also at $5.25 per share, the
shares remaining available, if any, after exercise of the basic subscription
rights by the other rights holders. If there are not enough common shares to
satisfy all subscriptions made under the over-subscription rights, we will
allocate the remaining common shares pro rata, among those over-subscribing
rights holders. "Pro rata" means in proportion to the number of common shares
that over-subscribers have purchased by exercising their basic subscription
rights. If there is a pro rata allocation of the remaining common shares and you
receive an allocation of a greater number of shares than you subscribed for
under your over-subscription rights, then we will allocate to you only the
number of shares for which you subscribed. Any remaining shares will then be
allocated among holders who over-subscribed for more than their pro rata portion
of the over-subscription shares in the same manner until all over-subscription
shares have been allocated.
Limitation on Subscription
To help maintain our status as a real estate investment trust (REIT), our
by-laws restrict beneficial and constructive ownership of common shares by any
person or group of persons acting collectively to 9.8% of our outstanding common
shares. "DESCRIPTION OF CAPITAL STOCK -- Common Shares -- Restriction on Size of
Holdings".
If you only exercise your basic subscription rights, your percentage
ownership interest in us will neither increase nor decrease. However, if you
exercise your over-subscription rights, your percentage ownership will increase.
If you fail to exercise all or a portion of your subscription rights, your
ownership percentage in us will decrease. We intend to grant waivers from our
9.8% limitation to any holder that exceeds the limit as a result of its exercise
of over-subscription rights and requests a waiver from us by checking the "9.8%
Waiver Request" box on the rights certificate, provided such holder enters into
an ownership limitation waiver agreement in a form that is reasonably
satisfactory to us. Ownership waiver agreements are designed to ensure that we
preserve our status as a REIT. For example, such agreements will not permit a
holder's ownership of our outstanding common shares in excess of the 9.8%
limitation to cause us to become "closely held" in violation of one of the
requirements for REIT status. In order for us to qualify as a REIT under the
Code, not more than 50% (by value) of our outstanding shares of capital stock
may be owned, directly or indirectly, by five or fewer individuals (as defined
in the Code to include certain entities).
The 9.8% limit for a person is computed based on the outstanding common
shares, including any common shares issuable to that person upon conversion of
preferred shares. For purposes of determining whether you will need to request a
waiver from us, you should assume that this offering will be fully subscribed
and that there will therefore be 45,693,836 common shares outstanding following
this offering, plus common shares issuable upon conversion of any Series B-1
Preferred Shares that you may own.
22
If an ownership waiver cannot be granted, any rights exercised by a holder
and any common shares subscribed for by that holder through the exercise of its
over-subscription rights that would cause it to go over the 9.8% ownership limit
will not be considered exercised or subscribed for by that holder. The total
subscription price paid by a holder for rights that are not considered exercised
and for common shares not considered subscribed for will be returned to that
holder, without interest, as soon as practicable after completion of this
offering.
If a holder that is not granted a waiver subscribes for and, inadvertently
or otherwise, is issued a number of common shares that causes that holder to go
over the 9.8% ownership limit, the number of common shares in excess of the 9.8%
ownership limit will be "Excess Securities" under our by-laws and therefore will
not, in the hands of that holder, have dividend, voting and other rights or be
considered outstanding for quorum, voting and other purposes. See "DESCRIPTION
OF CAPITAL STOCK - Common Shares - Restriction on Size of Holdings."
Certain of the holders of our Series B-1 Preferred Shares were granted
exemptions to the 9.8% ownership limit at the time they purchased their Series
B-1 Shares. See "DESCRIPTION OF CAPITAL STOCK - Common Shares - Restriction on
Size of Holdings." The terms of these exemptions permit such holders to exercise
their basic subscription rights in full. We intend to grant further waivers to
these holders upon execution of satisfactory ownership waiver agreements, to the
extent such holders exercise their over-subscription rights, provided that doing
so does not jeopardize our REIT status.
Commitments of Officers and Directors
All of our officers and directors have agreed to fully exercise basic
subscription rights that they will be receiving with respect to common shares
and Series B-1 Preferred Shares beneficially owned by them.
Standby Commitments
Our current shareholders listed in the table below have agreed to be
standby purchasers and, subject to certain limitations, purchase all
unsubscribed common shares at the subscription price, subject to the right to
terminate in the event of a material adverse change in our business, financial
condition or results of operations, other than as a result of general economic
conditions.
We will agree to waive the 9.8% ownership limit to enable standby
purchasers to satisfy their obligations under the standby commitments, provided
that doing so does not jeopardize our REIT status and such purchaser executes a
satisfactory ownership waiver agreement.
The following is a list of the names of the standby purchasers and the
number of common shares to be purchased by them pursuant to the standby
commitments if the offering is not fully subscribed. The number of shares that
each standby purchaser will be required to purchase under the standby
commitments will be reduced to the extent such standby purchaser acquires common
shares by exercising its basic and oversubscription rights.
Name Number of Common Shares
---- -----------------------
FUR Investors LLC 1,666,832
Non-Management Directors (1) 95,868
Fairholme Capital Management L.L.C. 508,022
Kensington Investment Group Inc. 720,296
KIMCO Realty Corporation 643,269
Basso Multi-Strategy Holding Fund Ltd. 146,296
Halcyon Funds 433,333
Vornado Investors L.L.C. 1,006,122
---------
5,220,038
=========
- ----------
(1) Does not include Bruce R. Berkowitz who is affiliated with Fairholme
Capital Management L.L.C.
Subscription Price
The subscription price for an exercised subscription right is $5.25 per
share.
23
Determination of Subscription Price
Our board of trustees set all of the terms and conditions of the rights
offering. The board of trustees makes no recommendation to you about whether you
should exercise any of your subscription rights. The board of trustees
considered the following factors in establishing the subscription price:
o strategic alternatives for capital raising;
o the anticipated financial effect of the rights offering;
o the recent market price of our common shares;
o the pricing of similar transactions;
o how to incentivize participation in the rights offering;
o our business prospects; and
o general conditions in the securities markets.
The $5.25 per share subscription price, however, does not necessarily bear
any relationship to our past or expected future results of operations, cash
flows, current financial condition, the future market value of our common
shares, or any other established criteria for value. There can be no assurance
that you will be able to sell shares purchased in this offering at a price equal
to or greater than the $5.25 per share subscription price. On March 21, 2006,
the closing price of a common share on the New York Stock Exchange was $5.34. No
change will be made to the cash subscription price by reason of changes in the
trading price of our common shares prior to the closing of the rights offering.
We did not seek or obtain any opinion of financial advisors or investment
bankers in establishing the subscription price for the offering. You should not
consider the subscription price as an indication of the value of us or our
common shares. See "RISK FACTORS."
Expiration Date, Extensions and Termination
We will keep the rights offering open until April 27, 2006. You may
exercise your subscription right at any time at or before 5:00 p.m., New York
City time, on April 27, 2006, the expiration date for the rights offering.
However, we may extend the offering period for exercising your subscription
rights from time to time in our sole discretion, with such extension not to
exceed 30 business days. If you do not exercise your subscription rights before
the expiration of the rights offering, your unexercised subscription rights will
be null and void. We will not be obligated to honor your exercise of
subscription rights if the Subscription Agent receives the documents relating to
your exercise after the rights offering expires, regardless of when you
transmitted the documents.
We may, as mentioned above, extend the expiration of the rights offering
from time to time by giving oral or written notice to the Subscription Agent on
or before the scheduled expiration of the rights offering, for a period not to
exceed 30 business days. If we elect to extend the completion of the rights
offering, we will issue a press release announcing the extension no later than
9:00 a.m., New York City time, on the next business day after the most recently
announced expiration of the rights offering.
We may unilaterally terminate or withdraw the rights offering until the
expiration of the rights offering.
Reasons for the Rights Offering
In approving the rights offering, our board of trustees carefully
evaluated our need for financial flexibility and additional capital. The board
also considered alternative capital raising methods that are available to us,
some of which have also recently been employed by us, including, among other
things, the costs and expenses associated with such methods. In conducting its
analysis, the board of trustees also considered the effect on the ownership
percentage of the current holders of our common shares caused by the rights
offering, the pro-rata nature of a rights offering to our shareholders, the
market price of our common shares and general conditions of the securities
markets.
24
After weighing the factors discussed above and the effect of the rights
offering of generating approximately $27.4 million, before expenses, in
additional capital for us, we determined to initiate this rights offering. As
described in "USE OF PROCEEDS," the proceeds of the rights offering are intended
to be used for general corporate purposes including the acquisition of
additional investments and the repayment of outstanding indebtedness.
Non-transferability of the Subscription Rights
Except in the limited circumstances described below, only you may exercise
your subscription rights. You may not sell, give away or otherwise transfer your
subscription rights.
Notwithstanding the foregoing, your subscription rights may be transferred
by operation of law; for example, a transfer of subscription rights to the
estate of the recipient upon the death of the recipient would be permitted. If
the subscription rights are transferred as permitted, evidence satisfactory to
us that the transfer was proper must be received by us prior to the expiration
of the rights offering.
Withdrawal and Amendment
We reserve the right to withdraw or terminate this rights offering at any
time for any reason until the expiration of the rights offering. In the event
that this offering is withdrawn or terminated, all funds received from
subscriptions by stockholders will be returned. Interest will not be payable on
any returned funds.
We reserve the right to amend the terms of this rights offering. If we
make an amendment that we consider significant, we will:
o mail notice of the amendment to all stockholders of record as of the
record date; and
o if necessary, extend the expiration of the rights offering at least 10
days following the date of such amendment.
The extension of the expiration of the rights offering will not, in and of
itself, be treated as a significant amendment for these purposes.
You may exercise your subscription rights by delivering the following to
the Subscription Agent, at or prior to 5:00 p.m., New York City time, on April
27, 2006, the date on which the subscription rights expire:
o your properly completed and executed rights certificate with any required
supplemental documentation; and
o your full subscription price payment for each share subscribed for under
your basic subscription rights.
How to Exercise Your Rights
Rights holders may subscribe to purchase shares by:
o completing and signing the rights certificate which accompanies this
prospectus;
o mailing or delivering the rights certificate to National City Bank,
the Subscription Agent, at the appropriate address in the table
below; and
o sending with your rights certificate the required payment for the
exercise of your basic subscription rights.
For your convenience, a self-addressed envelope is enclosed with this
Prospectus which you may use if you return the rights certificate and payment by
mail.
You should carefully read and follow those instructions. In order for a
subscription to be accepted, the Subscription Agent must receive either the
rights certificate or the notice of guaranteed delivery described below and
payment for the shares (including clearance of personal checks used for payment)
before the expiration of the subscription period.
25
Rights holders are not required to pay for the shares subscribed for under
the over-subscription rights when they return the subscription certificate or
notice of guaranteed delivery. In order to exercise their over-subscription
rights, they must exercise in full their basic rights and indicate on the rights
certificate the amount of the over-subscription rights the holder wishes to
exercise. Within five business days after the expiration of the subscription
period, we will make such pro-rations as may be necessary to the
over-subscription requests and notify each over-subscribing rights holder as to
how many additional shares so subscribed for under the over-subscription rights,
if any, have been allocated to such holder. The over-subscribing rights holder
will then be obligated to pay for such over-subscription shares in full within
five business days after such notification.
You should make checks payable to: National City Bank, the Subscription
Agent for this rights offering. You should mail or deliver checks and completed
rights subscription certificates to the Subscription Agent at:
If by mail: If by hand: If by overnight courier:
- ----------- ----------- ------------------------
National City Bank c/o The Depository Trust Company National City Bank
Corporate Actions Processing Center Transfer Agent Drop Service Corporate Actions Processing
P.O. Box 859208 55 Water Street Center
Braintree, MA 02185-9208 Jeanette Park Entrance 161 Bay Street Drive
New York, NY 10041 Braintree, MA 02184
or
National City Bank
Corporate Trust Operations
3rd floor - North Annex
4100 West 150th Street
Cleveland, OH 44135
The Subscription Agent's facsimile number for eligible institutions only is
(781) 380-3388. The telephone number for confirmation of receipt of facsimiles
is (781) 843-1833, extension 200.
Any rights holder who has not submitted a properly completed rights
certificate (or notice of guaranteed delivery) along with payment of the basic
subscription price (including clearance of personal checks used for payment) to
the Subscription Agent by 5:00 p.m., New York City time, on April 27, 2006,
unless such subscription period is extended by us, shall forfeit all rights to
subscribe in the rights offering.
Funds paid by uncertified personal checks may take at least five business
days to clear and such checks must clear by the expiration of the subscription
period in order for the required payment to have been made. Accordingly, if any
rights holder wishes to pay the subscription price by means of an uncertified
personal check, the rights holder is urged to make payment sufficiently in
advance of the expiration of the subscription period to ensure that the payment
is received and clears before that time. Rights holders are also urged to
consider, any alternative payment by means of certified or cashier's check,
money order or wire transfer of funds.
If a rights holder wishes to exercise his or her subscription rights, but
there is not sufficient time to deliver the subscription certificate before the
time the rights expire, the holder may exercise the rights by delivering payment
in full for such holder's basic subscription right along with the notice of
guaranteed delivery in the form included as part of the subscription documents
sent with this prospectus on or prior to the expiration date. The notice of
guaranteed deliver must be guaranteed by a commercial bank, trust company or
credit union having an office branch or agency in the United States or by a
member of a Stock Transfer Association approved medallion program such as STAMP,
SEMP or MSP. Notices of guaranteed delivery should be mailed or delivered to the
appropriate addresses set forth above.
Acceptance of Subscriptions
We are entitled to resolve all questions concerning the timeliness,
validity, form and eligibility of any exercise of basic or over-subscription
rights. Our determination of these questions will be final and binding. In our
sole discretion, we may waive any defect or irregularity, or permit a defect or
irregularity to be corrected within such time as we may determine, or reject the
purported exercise of any right because of any defect or irregularity.
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Rights certificates will not be considered received or accepted until all
irregularities have been waived or cured within such time as we determine in our
sole discretion. Neither we nor the Subscription Agent has any duty to give
notification of any defect or irregularity in connection with the submission of
rights certificates or any other required document. Neither we nor the
Subscription Agent will incur any liability for failure to give such
notification.
We reserve the right to reject any exercise of basic or over-subscription
rights if the exercise does not fully comply with the terms of the rights
offering or is not in proper form or if the exercise of rights would be
unlawful.
Revocation
Any holder of subscription rights that has exercised its subscription
rights may revoke such exercise prior to the expiration date of this offering.
In order to effect such a revocation, a written or facsimile transmission notice
of revocation must be received by the Subscription Agent, at its address set
forth in this Prospectus, prior to the expiration date. Any such notice of
revocation must (i) specify the name of the person who has exercised the
subscription rights being revoked, (ii) identify the rights certificate(s) for
which a subscription exercise is being revoked (including the certificate number
or numbers and the number of common shares for which such rights certificate(s)
may be exercised) and (iii) be signed by the holder in the same manner as the
original signature on the rights certificate(s) previously tendered. All
questions as to the validity, form and eligibility (including time of receipt
thereof) of such notices will be determined by us in our sole discretion, which
determination shall be final and binding on all parties. Any rights certificate
for which a right of exercise has been revoked will be deemed not to have been
validly tendered for purposes of this offering and no common shares will be
issued with respect thereto unless such rights certificate is validly
retendered. Properly revoked rights certificates may be retendered by following
the procedures described above under "How to Exercise Your Rights" at any time
prior to the expiration date.
Incomplete Forms; Insufficient Payment
If you do not indicate the number of rights being exercised, or do not
forward sufficient payment for the number of basic subscription rights that you
indicate are being exercised, then we will accept the subscription forms and
payment only for the maximum number of basic subscription rights that may be
exercised based on the actual payment delivered. We will return any payment not
applied to the purchase of shares under the rights offering procedures to those
who made these payments as soon as practicable by mail. Interest will not be
payable on amounts refunded.
Notice to Beneficial Holders
If you are a broker, a trustee or a depository for securities who holds
common shares for the account of others at the close of business on March 22,
2006, the record date for the rights offering, you should notify the respective
beneficial owners of such shares on that date of the rights offering as soon as
possible to find out their intentions with respect to exercising their
subscription rights. You should obtain instructions from the beneficial owner
with respect to the subscription rights, as set forth in the instructions we
have provided to you for your distribution to beneficial owners. If the
beneficial owner so instructs, you should complete the appropriate rights
certificates and submit them to the Subscription Agent with the proper payment.
If you hold common shares for the account(s) of more than one beneficial owner,
you may exercise the number of subscription rights to which all such beneficial
owners in the aggregate otherwise would have been entitled had they been direct
record holders of our common shares on the record date for the rights offering,
provided that, you, as a nominee record holder, make a proper showing to the
Subscription Agent by submitting the form entitled "Nominee Holder
Certification" which we will provide to you with your rights offering materials.
Beneficial Owners
If you are a beneficial owner of common shares or will receive your
subscription rights through a broker, custodian bank or other nominee, we will
ask your broker, custodian bank or other nominee to notify you of this rights
offering. If you wish to exercise your subscription rights, you will need to
have your broker, custodian bank or other nominee act for you. If you hold
certificates of our common shares directly and would prefer to have your broker,
custodian bank or other nominee exercise your subscription rights, you should
contact your nominee and request it to effect the transaction for you. To
indicate your decision with respect to your subscription rights, you should
complete and return to your broker, custodian bank or other nominee the form
entitled "Beneficial Owner Election Form." You should receive this form from
your broker, custodian bank or other nominee with the other rights offering
materials. If you wish to obtain a separate rights certificate, you should
contact the nominee as soon as possible and request that a separate rights
certificate be issued to you.
27
Instructions for Completing your Rights Certificate(s)
You should read and follow the instructions accompanying the rights
certificate(s) carefully.
If you want to exercise your subscription rights, you should send your
rights certificate(s) with your basic subscription price payment to the
Subscription Agent at the addresses indicated above. A self-addressed envelope
is provided with this Prospectus which you may use if you send the rights
certificate and payment by mail. Do not send your rights certificate(s) or
subscription price payment to us.
YOU ARE RESPONSIBLE FOR THE METHOD OF DELIVERY OF YOUR RIGHTS
CERTIFICATE(S) WITH YOUR SUBSCRIPTION PRICE PAYMENT TO THE SUBSCRIPTION AGENT.
If you send your rights certificate(s) and subscription price payment by mail,
we recommend that you send them by registered mail, properly insured, with
return receipt requested. You should allow a sufficient number of days to ensure
delivery to the Subscription Agent prior to the time the rights offering
expires.
Regulatory Limitation
We will not be required to issue common shares to you pursuant to the
rights offering if, in our opinion, you would be required to obtain prior
clearance or approval from any state or federal regulatory authorities to own or
control such shares and if, at the time the subscription rights expire, you have
not obtained such clearance or approval.
Procedures for DTC Participants
If you are a participant in The Depository Trust Company, or DTC, and the
shares you own are held through DTC, we expect that your exercise of your basic
subscription rights and oversubscription rights may be made through the
facilities of DTC. Payment for each share subscribed for under the basic
subscription right must be made at the time the rights are exercised. You will
be obligated to pay for over-subscription shares within five business days after
receiving notice from us as to how many (if any) shares have been allocated to
you under the over-subscription rights.
Foreign or Other Stockholders Located Outside the United States
Rights certificates will be mailed to rights holders whose addresses are
outside the United States or who have an Army Post Office or Fleet Post Office
address. To exercise such subscription rights, you must notify the Subscription
Agent, and take all other steps that are necessary to exercise your subscription
rights, on or prior to the expiration of the rights offering. If the procedures
set forth in the preceding sentence are not followed prior to the expiration of
the rights offering, your subscription rights will expire.
No Board Recommendation
An investment in our common shares must be made according to each
investor's evaluation of its own best interests. Accordingly, our board of
trustees is not making any recommendation as to whether you should exercise your
subscription rights. In making the decision to exercise or not exercise your
subscription rights, you must consider your own best interests. You are urged to
make your decision based on your own assessment of our business and the rights
offering. Among other things, you should carefully consider the risks that are
described under the heading "RISK FACTORS."
Common Shares Outstanding after the Rights Offering
Upon the issuance of the common shares offered in the rights offering and
those purchased by the standby purchasers, 45,693,836 shares of common shares
will be issued and outstanding. This would represent an approximate 12.9%
increase in the number of common shares outstanding on the record date for the
rights offering and an approximate 8.3% increase assuming conversion of all
Series B-1 Preferred Shares.
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Other Matters
We are not making this rights offering in any state or other jurisdiction
in which it is unlawful to do so, nor are we selling or accepting any offers to
purchase any of our common shares from rights holders who are residents of those
states or other jurisdictions. We may delay the commencement of the rights
offering in those states or other jurisdictions, or change the terms of the
rights offering, in order to comply with the securities law requirements of
those states or other jurisdictions. We may decline to make modifications to the
terms of the rights offering requested by those states or other jurisdictions,
in which case, if you are a resident in those states or jurisdictions you will
not be eligible to participate in the rights offering.
Fees and Expenses
We will pay all fees charged by the Information Agent and the Subscription
Agent. You are responsible for paying any other commissions, fees, taxes or
other expenses incurred in connection with the exercise of the subscription
rights. Neither we, the Information Agent nor the Subscription Agent will pay
such expenses.
Issuance of Share Certificates
Share certificates for shares purchased in this rights offering through
the exercise of basic subscription rights will be issued as soon as practicable
after the expiration of the rights offering. Certificates representing the
over-subscription shares will be delivered as soon as practicable after the
expiration of the subscription period and after we have (1) made such
pro-rations as may be necessary in the event the over-subscription requests
exceed the number of remaining available shares in the rights offering, (2)
notified over-subscribing rights holders as to how many (if any) shares
over-subscribed have been allocated to them and (3) received payment for such
over-subscription shares from over-subscribing holders. Our Subscription Agent,
National City Bank, will deliver subscription payments to us only after
consummation of this rights offering and the issuance of share certificates to
our shareholders that exercised rights and the issuance through DTC of shares
subscribed for through DTC.
Information Agent
We have appointed MacKenzie Partners, Inc. as Information Agent for the
rights offering. We will pay the fees and certain expenses of the Information
Agent, which we estimate will total $20,000. Under certain circumstances, we may
indemnify the Information Agent from certain liabilities that may arise in
connection with the rights offering.
Subscription Agent
We have appointed National City Bank as Subscription Agent for the rights
offering. We will pay the fees and certain expenses of the Subscription Agent,
which we estimate will total $28,000. Under certain circumstances, we may
indemnify the Subscription Agent from certain liabilities that may arise in
connection with the rights offering.
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IMPORTANT
PLEASE CAREFULLY READ THE INSTRUCTIONS ACCOMPANYING THE SUBSCRIPTION
CERTIFICATE AND FOLLOW THOSE INSTRUCTIONS IN DETAIL. DO NOT SEND SUBSCRIPTION
CERTIFICATES DIRECTLY TO US. YOU ARE RESPONSIBLE FOR CHOOSING THE PAYMENT AND
DELIVERY METHOD FOR YOUR SUBSCRIPTION CERTIFICATE, AND YOU BEAR THE RISKS
ASSOCIATED WITH SUCH DELIVERY. IF YOU CHOOSE TO DELIVER YOUR SUBSCRIPTION
CERTIFICATE AND PAYMENT BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. WE ALSO RECOMMEND THAT YOU
ALLOW A SUFFICIENT NUMBER OF DAYS TO ENSURE DELIVERY TO THE SUBSCRIPTION AGENT
AND CLEARANCE OF PAYMENT PRIOR TO APRIL 27, 2006. BECAUSE UNCERTIFIED PERSONAL
CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, WE STRONGLY URGE YOU TO
PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY
ORDER OR WIRE TRANSFER OF FUNDS.
If You Have Questions
If you have questions or need assistance concerning the procedure for
exercising subscription rights, or if you would like additional copies of this
prospectus or the Instructions as to the Use of Rights Certificates, you should
contact the Information Agent at the following address and telephone number:
[LOGO OF MACKENZIE PARTNERS, INC.]
105 Madison Avenue
New York, New York 10016
Call Collect: (212) 929-5500
or
Toll Free: (800) 322-2885 or via email at proxy@mackenziepartners.com
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of certain U.S. federal income tax
consequences of the rights offering to holders of common shares and Series B-1
Preferred Shares who hold such shares as a capital asset for federal income tax
purposes. This discussion is based on laws, regulations, rulings and decisions
in effect on the date of this prospectus, all of which are subject to change
(possibly with retroactive effect) and to differing interpretations. This
discussion applies only to holders who are U.S. persons, which is defined as a
citizen or resident of the United States, a domestic partnership, a domestic
corporation, any estate the income of which is subject to U.S. federal income
taxation regardless of source, and any trust so long as a court within the
United States is able to exercise primary supervision over the administration of
the trust and one or more U.S. persons have the authority to control all
substantial decisions of the trust.
This discussion does not address all aspects of federal income taxation
that may be relevant to holders in light of their particular circumstances or to
holders who may be subject to special tax treatment under the Internal Revenue
Code of 1986, as amended, including holders of options or warrants, holders who
are dealers in securities or foreign currency, foreign persons (defined as all
persons other than U.S. persons), insurance companies, tax-exempt organizations,
banks, financial institutions, broker-dealers, holders who hold stock as part of
a hedge, straddle, conversion or other risk reduction transaction, or who
acquired stock pursuant to the exercise of compensatory stock options or
warrants or otherwise as compensation.
We have not sought, and will not seek, an opinion of counsel or a ruling
from the Internal Revenue Service regarding the federal income tax consequences
of the rights offering or the related share issuance. The following summary does
not address the tax consequences of the rights offering or the related share
issuance under foreign, state, or local tax laws. Accordingly, we urge each
holder of our common shares and Series B-1 Preferred Shares to consult his or
its own tax advisor with respect to the particular tax consequences to such
holder of the rights offering and the exercise of the subscription rights,
including state and local tax consequences.
Holders of Common Shares
The federal income tax consequences to a holder of common shares on the
receipt of subscription rights under the rights offering should be as follows:
o A holder should not recognize taxable income for federal income tax
purposes in connection with the receipt of subscription rights in
the rights offering.
o Except as provided in the following sentence, the tax basis of the
subscription rights received by a holder in the rights offering
should be zero. If either (a) the fair market value of the
subscription rights on the date such subscription rights are
distributed is equal to 15% or greater of the fair market value on
such date of the common shares with respect to which the
subscription rights are received or (b) the holder irrevocably
elects, by attaching a statement to its federal income tax return
for the taxable year in which the subscription rights are received,
to allocate part of the tax basis of such common shares to the
subscription rights, then upon exercise of the subscription rights,
the holder's tax basis in the common shares should be allocated
between the common shares and the subscription rights in proportion
to their respective fair market values on the date the subscription
rights are distributed.
o A holder who allows the subscription rights received in the rights
offering to expire should not recognize a tax loss, and the tax
basis of the common shares owned by such holder with respect to
which such subscription rights were distributed should be equal to
the tax basis of such common shares immediately before the receipt
of the subscription rights in the rights offering.
o A holder should not recognize any gain or loss upon the exercise of
the subscription rights received in the rights offering.
o The tax basis of the common shares acquired through exercise of the
subscription rights should equal the sum of the subscription price
for the common shares and the holder's tax basis, if any, in the
subscription rights as described above.
o The holding period for the common shares acquired through exercise
of the subscription rights should begin on the date the subscription
rights are exercised.
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Holders of Series B-1 Preferred Shares
The federal income tax consequences to a holder of Series B-1 Preferred
Shares on the receipt of subscription rights under the rights offering should be
as follows:
o A holder should be treated as receiving a distribution in an amount
equal to the fair market value of the subscription rights that it
receives.
o To the extent that the distribution is made out of our earnings and
profits, it will be a taxable dividend to the holder. If the amount
of the distribution received by the holder exceeds the holder's
proportionate share of our earnings and profits, the excess will
reduce the holder's tax basis in the Series B-1 Preferred Shares
that it holds, and to the extent that the excess is greater than the
holder's tax basis in its shares, it will be treated as gain from
the sale of the Series B-1 Preferred Shares. If the holder has held
the shares for more than one (1) year, the gain should be treated as
long-term capital gain.
o A holder's tax basis in the subscription rights that it receives
should equal the fair market value of the subscription rights on the
date of the distribution.
o A holder who allows the subscription rights received in the rights
offering to expire generally should recognize a capital loss, the
deductibility of which would be subject to applicable tax law
limitations.
o A holder should not recognize any gain or loss upon the exercise of
the subscription rights received in the rights offering.
o The tax basis of the common shares acquired through exercise of the
subscription rights should equal the sum of the subscription price
for the common shares and the holder's tax basis in the subscription
rights as described above.
o The holding period for the common shares acquired through exercise
of the subscription rights should begin on the date the subscription
rights are exercised.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Price Range of Common Stock
Our common shares trade on the New York Stock Exchange under the symbol
"FUR".
On February 6, 2006, the last trading day prior to the initial filing of
the registration statement relating to the proposed rights offering of which
this prospectus forms a part, the closing price of our common shares on the New
York Stock Exchange was $5.69 per share. On March 21, 2006, the date of this
Prospectus, the closing price of our common shares on the New York Stock
Exchange was $5.34 per share.
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The following table sets forth the high and low sales prices per common
share on the New York Stock Exchange for the quarterly periods indicated:
High Low
---- ---
Year Ended December 31, 2003:
First Quarter $1.78 $1.47
Second Quarter $1.89 $1.65
Third Quarter $1.89 $1.72
Fourth Quarter $2.32 $1.76
Year Ended December 31, 2004:
First Quarter $3.80 $2.16
Second Quarter $3.46 $2.66
Third Quarter $3.21 $2.85
Fourth Quarter $4.26 $3.06
Year Ended December 31, 2005:
First Quarter $4.58 $3.55
Second Quarter $4.10 $3.51
Third Quarter $4.78 $3.50
Fourth Quarter $5.85 $4.21
The number of holders of record of our common shares as of January 30, 2006 was
1,754.
Dividends
In order to maintain our status as a real estate investment trust (REIT),
we generally must pay dividends to our common and preferred shareholders equal
to at least 90% of our REIT taxable income each year, excluding taxable income.
The only dividend declared on our common shares in the last three fiscal years
was an $.11 per share dividend declared in the fourth quarter of 2005.
DESCRIPTION OF CAPITAL STOCK
Common Shares
The following summary of the material terms and provisions of our common
shares does not purport to be complete and is subject to the detailed provisions
of our declaration of trust and our bylaws, each of which is incorporated by
reference into this prospectus. You should carefully read each of these
documents in order to fully understand the terms and provisions of our common
shares. For information on incorporation by reference, and how to obtain copies
of these documents, see the sections entitled "WHERE YOU CAN FIND MORE
INFORMATION" on page 40 of this prospectus and "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" on page 41 of this prospectus.
General
We are authorized to issue an unlimited number of common shares. As of
March 21, 2006 there were 40,473,798 common shares outstanding. All our common
shares are entitled to participate equally in any distributions thereon declared
by us. Subject to the provisions of our bylaws regarding excess securities and
the provisions of our preferred shares described below, each outstanding common
share entitles the holder to one vote on all matters voted on by shareholders.
Shareholders have no preemptive rights. The outstanding common shares are fully
paid and non-assessable and have equal liquidation rights. The common shares are
fully transferable except that their issuance and transfer may be regulated or
restricted by us in order to assure our qualification for taxation as a REIT.
See "-- Restriction on Size of Holdings." The common shares are not redeemable
at our option or at the option of any shareholder. Our board of trustees is
33
generally authorized without shareholder approval to borrow money and issue
obligations and equity securities which may or may not be convertible into
common shares and warrants, rights or options to purchase common shares; and to
issue other securities of any class or classes which may or may not have
preferences or restrictions not applicable to our common shares. The issuance of
additional common shares or such conversion rights, warrants or options may have
the effect of diluting the interest of shareholders. Annual meetings of the
shareholders are held on the second Tuesday of the fourth month following the
close of each fiscal year at such place as the trustees may from time to time
determine. Special meetings may be called at any time and place when ordered by
a majority of the trustees, or upon written request of the holders of not less
than 25% of the outstanding common shares.
Shareholder Liability
Our declaration of trust provides that no shareholder shall be personally
liable in connection with our property or affairs, and that all persons shall
look solely to our property for satisfaction of claims of any nature arising in
connection with our affairs.
Under present Ohio law, no personal liability will attach to our
shareholders, but with respect to tort claims, contract claims where liability
of shareholders is not expressly negated, claims for taxes and certain statutory
liabilities, our shareholders may in some jurisdictions other than the State of
Ohio be held personally liable to the extent that such claims are not satisfied
by us, in which event the shareholders would, in the absence of negligence or
misconduct on their part, be entitled to reimbursement from our general assets.
We carry comprehensive general liability insurance in a form typically available
in the marketplace which our trustees consider adequate. To the extent our
assets and insurance would be insufficient to reimburse a shareholder who has
been required to pay a claim against us, the shareholder would suffer a loss.
The statements in this paragraph and the previous paragraph also apply to
holders of our preferred shares of beneficial interest, although any possible
liability of such holders would be further reduced by the greater limitations on
their voting power.
Voting Rights
Subject to the provisions of our bylaws regarding restrictions on transfer
and ownership of common stock, you will have one vote per share on all matters
submitted to a vote of shareholders. Shareholders are currently granted the
right by a majority vote or a supermajority vote, as the case may be, (i) to
elect trustees, (ii) to approve or disapprove certain transfers of our assets or
mergers involving us, (iii) to approve or disapprove amendments to our
declaration of trust, (iv) when removal is proposed by all other trustees, to
approve removal of any trustee, (v) to waive the ownership limit (see
"Restriction on Size of Holdings," below) if greater than a majority but less
than 70% of the trustees approve such waiver and (vi) to approve our incurrence
of indebtedness in excess of 83.33% of the value of our assets. We have no fixed
duration and will continue indefinitely, unless terminated as provided in our
declaration of trust.
As described below under "Description of our Preferred Shares", the
holders of our preferred shares have voting rights on various matters. These
include the right of holders of our Series B-1 Shares to elect one trustee and
an additional right to elect one-third of the trustees if we fail to comply with
specific provisions of the certificate of designations for the Series B-1
Preferred Shares. We are also required to obtain the approval of preferred
shareholders if we seek to take specific actions that are also described below.
Transfer Agent and Registrar
The transfer agent and registrar for our common shares is National City
Bank.
Restriction on Size of Holdings
Our bylaws restrict beneficial or constructive ownership of our
outstanding capital stock by a single person, or persons acting as a group, to
9.8% of our common shares, which limitation assumes that all securities
convertible into our common shares owned by such person or group of persons have
been converted. The purpose of these provisions is to protect and preserve our
REIT status. For us to qualify as a REIT under the Code, not more than 50% in
value of our outstanding capital stock may be owned by five or fewer individuals
(as defined in the Code) at any time during the last half of our taxable year.
The provision permits five persons each to acquire up to a maximum of 9.8% of
our common shares, or an aggregate of 49% of the outstanding common shares, and
thus, assists our trustees in protecting and preserving REIT status for tax
purposes.
34
Unless the board waives the restrictions or approves a bylaw amendment,
common shares owned by a person or group of persons in excess of 9.8% of our
outstanding common shares are not entitled to any voting rights; are not
considered outstanding for quorum or voting purposes; and are not be entitled to
dividends, interest or any other distributions with respect to the securities.
Waivers or bylaw amendments have been granted or approved for (i) FUR Investors
LLC which can hold up to 33% or our common and preferred shares, (ii) Kensington
Investment Group, Inc. which can hold up to 3,446,622 common shares, and (iii)
certain of the holders of our Series B-1 Preferred Shares. In each case we
conditioned the waivers and amendments on compliance with additional
requirements designed to preserve our REIT status.
Our declaration of trust provides that the share ownership limit contained
in the bylaws may be amended from time to time with the approval of either (i)
70% of the trustees then in office or (ii) a majority of the trustees then in
office and the approval of at least 70% of the holders of our outstanding common
shares.
Trustee Liability
Our declaration of trust provides that our trustees will not be
individually liable for any obligation or liability incurred by or on our behalf
or by trustees for our benefit and on our behalf. Under our declaration of trust
and Ohio law respecting business trusts, trustees are not liable to us or to our
shareholders for any act or omission except for acts or omissions which
constitute bad faith, willful misfeasance, gross negligence or reckless
disregard of duties to us and our shareholders.
Description of our Preferred Shares
The following summary of the material terms and provisions of our
preferred shares does not purport to be complete and is subject to the detailed
provisions of our declaration of trust, including any applicable articles
supplementary, amendment or annex to our declaration of trust designating the
terms of a series of preferred shares, and our bylaws, each of which is
incorporated by reference into this prospectus. You should carefully read each
of these documents in order to fully understand the terms and provisions of our
preferred shares. For information on incorporation by reference, and how to
obtain copies of these documents, see the sections entitled "WHERE YOU CAN FIND
MORE INFORMATION" on page 40 of this prospectus and "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" on page 41 of this prospectus.
General
Subject to limitations as may be prescribed by Ohio law and our bylaws and
declaration of trust, our board of trustees is authorized to issue without the
approval of our shareholders, preferred shares in series and to establish from
time to time the number of preferred shares to be included in such series and to
fix the designation and any preferences, conversion and other rights, voting
powers, restrictions, limitations as to distributions, qualifications and terms
and conditions of redemption of the shares of each such series. We currently
have outstanding Series B-1 Cumulative Convertible Redeemable Preferred Shares
of beneficial interest, $1.00 par value, which we refer to as the Series B-1
Preferred Shares. Please see "Terms of Our Series B-1 Preferred Stock" below for
more information of the terms of our Series B-1 Preferred Stock.
Terms of Our Series B-1 Preferred Shares
General
In February and June 2005 we issued 4,000,000 of our Series B-1 Preferred
Shares and there are currently outstanding 3,990,000 Series B-1 Preferred
Shares. The Series B-1 Preferred Shares are not listed for trading on any
securities exchange or national quotation market. The following description sets
forth certain general terms and provisions of the Series B-1 Preferred Shares.
The statements below describing the Series B-1 Preferred Shares do not purport
to be complete and are in all respects subject to, and qualified in their
entirety by reference to, the respective terms and provisions of the certificate
of designations authorizing the Series B-1 Preferred Shares, our declaration of
trust and our bylaws. Each Series B-1 Preferred Share has a $25.00 liquidation
preference.
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Rank
Our Series B-1 Preferred Shares are senior to our common shares and all
other preferred stock and other equity securities as to the payment of dividends
and distributions of assets on liquidation, dissolution or winding up. We refer
below to all shares ranking on a parity with our Series B-1 Preferred Shares as
parity shares and all shares ranking junior to our Series B-1 Preferred Shares
as junior shares.
Distributions
Holders of our Series B-1 Preferred Shares are entitled to receive, when,
as and if declared by our board of trustees, out of funds legally available for
the payment of distributions, cumulative preferential cash distributions in an
amount per share equal to the greater of $1.625 per share per annum which is
equivalent to 6.5% of the liquidation preference per annum, or the cash
distributions on our common shares into which a Series B-1 Preferred Share is
convertible.
If we fail to redeem Series B-1 Preferred Shares as described under
"Redemption" below, then dividends will thereafter accrue on Series B-1
Preferred Shares at a rate 250 basis points higher than the distribution rate
described above. Once we are again in compliance with our applicable
obligations, the dividend rate will revert back to the rate described above.
Distributions on our Series B-1 Preferred Shares accrue whether or not we
have earnings, whether or not there are funds legally available for the payment
of distributions and whether or not distributions are declared. Accrued but
unpaid distributions on our Series B-1 Preferred Shares do not bear interest.
Holders of the Series B-1 Preferred Shares are not entitled to any distributions
in excess of full cumulative distributions as described above.
Unless full cumulative distributions on our Series B-1 Preferred Shares
have been declared and paid or declared and an amount set apart for payment for
all past distribution periods and the then current distribution period, no
distributions, other than in common shares or other junior shares, will be
declared or paid or set aside for payment upon the common shares or any other
junior shares, nor will any common shares or any other junior shares be
redeemed, purchased or otherwise acquired for any consideration, or any money
paid for a sinking fund for the redemption of any such shares.
When distributions are not paid in full or set apart for payment on the
Series B-1 Preferred Shares and any parity shares, all distributions declared on
Series B-1 Preferred Shares and any parity shares will be declared ratably in
proportion to the respective amounts of dividends accumulated and unpaid on the
Series B-1 Preferred Shares and unaccumulated and unpaid on such parity shares.
Liquidation Rights
Upon any voluntary or involuntary liquidation, dissolution or winding up
of our affairs, the holders of Series B-1 Preferred Shares will be entitled to
receive their liquidation preference before any distribution or payment is made
to the holders of any junior shares. The liquidation preference is $25.00 per
share, plus an amount equal to all accrued and unpaid distributions. After
payment of the liquidation preference, the holders of Series B-1 Preferred
Shares will have no right to any of our remaining assets.
If liquidating distributions have been made in full to all holders of
Series B-1 Preferred Shares and all other parity shares, our remaining assets
will be distributed among the holders of any other classes of junior shares,
according to their respective rights and preferences and in each case according
to their respective number of shares. For such purposes, our consolidation or
merger with or into any other entity, the sale, lease or conveyance of all or
substantially all of our property or business or a statutory share exchange will
not be deemed to constitute our liquidation, dissolution or winding up.
Redemption
All Series B-1 Preferred Shares that are outstanding on February 28, 2012
will be redeemed for their liquidation preference of $25.00 per share, plus all
accrued and unpaid distributions.
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In the event of a "compliance failure", which we define below, each holder
of Series B-1 Preferred Shares will have the right to require us to redeem all
or any portion of their Series B-1 Preferred Shares at a price per share equal
to the higher of:
o the average current market price of the common shares issuable upon
conversion of such holder's Series B-1 Preferred Shares over the five
trading days preceding the day immediately before receipt by us of the
holder's redemption election notice; and
o 150% of the liquidation preference of such Series B-1 Preferred Shares if
such redemption election notice is given prior to February 28, 2008, or
110% of the liquidation preference of such Series B-1 Preferred Shares if
such redemption election notice is given on or after February 28, 2008 but
prior to February 28, 2010, or 100% of the liquidation preference of such
Series B-1 Preferred Shares if such redemption election notice is given on
or after February 28, 2010.
The occurrence of any of the following events will be considered a
"compliance failure":
(1) the sale, lease or conveyance to a third party of substantially all
our assets, our consolidation or merger with or into another entity if the
holders of our voting securities do not hold a majority of the voting securities
of the surviving entity or if Michael Ashner, our chief executive officer, does
not continue to serve as chief executive officer or of the surviving entity, or
the sale in a single transaction or series of related transactions of a majority
of our issued and outstanding common shares;
(2) the departure or termination, whether voluntarily or involuntarily, of
Michael Ashner, other than in the event of his death or disability, or a breach
by Mr. Ashner of his services agreement with us;
(3) any delay in the audit of our consolidated annual financial statements
for a given fiscal year for more than 180 calendar days after the end of such
fiscal year;
(4) our failure to file required reports or forms under the Sarbanes-Oxley
Act of 2002; and
(5) our failure to quality as a REIT or the delisting or our common shares
by the NYSE.
We refer to the events described above in clause (1) as a "change of
control". If a change of control takes place within 12 months after the death or
disability of Michael Ashner, then each holder of
Series B-1 Preferred Shares will also have the right to require us to
redeem their Series B-1 Preferred Shares at 100% or their liquidation
preference.
Voting Rights
Except as indicated below, or except as otherwise from time to time
required by applicable law, the holders of Series B-1 Preferred Shares have no
voting rights.
So long as at least 1,000,000 of the Series B-1 Preferred Shares are
outstanding, the holders of Series B-1 Preferred Shares will be entitled to
elect one trustee to serve on the board of trustees. Any trustee proposed to be
elected by the holders of Series B-1 Preferred Shares must meet the requirements
of the NYSE for independent directors.
Upon the occurrence of a "governance default", which we define below, our
board of trustees will be increased and the holders of Series B-1 Preferred
Shares, voting as a class, will be entitled to elect additional trustees, such
that the number of trustees elected by the holders of Series B-1 Preferred
Shares upon the occurrence of a governance default will equal one-third of the
total number of trustees. The additional trustees elected upon a governance
default will serve for so long as the governance default continues. A
"governance default" will have occurred if (i) we fail to declare and pay
dividends on the Series B-1 Preferred Shares following payment of dividends on
common shares, (ii) we default on our obligations under certain agreements we
entered into with the original holders of Series B-1 Preferred Shares (see
"Agreements with Initial Holders of Series B-1 Preferred Shares" below), (iii)
we fail to effect any required redemption of our Series B-1 Preferred Shares
(see "Redemption", above) or (iv) the aggregate fair market value of our common
shares falls below $71,200,000.
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The approval of two-thirds of the outstanding Series B-1 Preferred Shares,
voting as a single class, is required in order to:
o amend our declaration of trust, bylaws or the Series B-1 Preferred Shares
certificate of designations to adversely affect the rights, preferences or
voting power of the holders of the Series B-1 Preferred Shares;
o enter into a share exchange that affects the Series B-1 Preferred Shares,
permit us to consolidate with or merge into another entity, or permit
another entity to consolidate with or merge into us, unless in each such
case each Series B-1 Preferred Share remains outstanding without any
adverse change to its terms and rights or is converted into or exchanged
for convertible preferred stock of the surviving entity having
preferences, conversion and other rights, voting powers, restrictions,
limitations as to distributions, qualifications and terms or conditions of
redemption identical to that of a Series B-1 Preferred Share except for
changes that do not adversely affect the holders of the Series B-1
Preferred Shares;
o authorize, reclassify, create or increase the authorized amount of any
class of shares of beneficial interest having rights senior to or pari
passu with the Series B-1 Preferred Shares as to distributions or in the
distribution of assets. However, we may create additional classes of
shares ranking junior to the Series B-1 Preferred Shares as to
distributions or in the distribution of assets, increase the authorized
number of junior shares and issue additional series of junior shares
without the consent of any holder of Series B-1 Preferred Shares;
o take any action that would substantially alter our business; or
o redeem or purchase common shares, parity shares or junior shares other
than certain purchases of Series B-1 Preferred Shares, or purchases of
common shares in any dividend period at an aggregate purchase price, which
when added to the distributions paid on our common shares for such
dividend period, does not exceed the sum of the amount paid to purchase
common shares and the amount paid as distributions on the common shares
for the immediately preceding dividend period. Any purchase of Series B-1
Preferred Shares must be made in an offer to all holders of those shares
if the purchase is made at a time when the share issuable on conversion of
those shares have not been registered under the Securities Act of 1933.
In the event of a change of control referred to above under "--Redemption"
or in the event of a vote of holders of common shares on a matter that relates
to the potential dilution of the Series B-1 Preferred Shares, or in the event
that we propose to issue common shares and a vote of the holders of common
shares is required under applicable law to effect such issuance, the Series B-1
Preferred Shares will have the right to vote with the common shares as a class
on all matters on which a vote of common shares is taken, with each holder of
Series B-1 Preferred Shares entitled to one vote for every common share issuable
upon conversion of such holder's Series B-1 Preferred Shares.
Conversion Rights
Our Series B-1 Preferred Shares are convertible, in whole or in part, at
any time, unless previously redeemed, at the option of the holders, into common
shares at a conversion price of $4.50 per common share which means that 5.6
common shares would be issuable for each Series B-1 Preferred Share. This
conversion price is subject to adjustment as described below. See "--Conversion
Price Adjustments." The right to convert Series B-1 Preferred Shares called for
redemption will terminate at the close of business on the redemption date for
such Series B-1 Preferred Shares.
Conversion Price Adjustments
The conversion price is subject to adjustment upon certain events,
including:
o distributions payable in common shares;
o the issuance to all holders of common shares of certain rights, options or
warrants entitling them to subscribe for or purchase common shares at a
price per share less than the fair market value per common share which, as
defined, includes an adjustment for underwriting commissions avoided in
rights offerings to shareholders;
o subdivisions, combinations and reclassifications of common shares;
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o distributions to all holders of common shares of any of our capital stock,
other than common shares, evidences of our indebtedness or assets,
including securities, but excluding cash dividends required in order to
satisfy distribution requirements to maintain our status as a REIT under
Section 856 of the Code, and those rights, warrants and distributions
referred to above;
o payment in respect of a tender or exchange offer made by us or any
subsidiary of ours for common shares if the cash and value of any other
consideration included in such payment per common share as determined by
our board of trustees exceeds the current market price per common share on
the trading day next succeeding the last date tenders or exchanges may be
made pursuant to such tender or exchange offer; and
o below market issuances of common shares or securities convertible into
common shares other than pursuant to certain firm commitment underwritten
public offerings.
However, no adjustment to the conversion price will be made on account of
(i) issuances of common shares pursuant to dividend reinvestment plans, (ii)
issuances of common shares upon exercise of stock options granted under certain
equity compensation plans, (iii) issuances of common shares as consideration for
our acquisition of real property, real estate related assets or a business, (iv)
issuances of common shares in redemption of units in our operating partnership,
(v) issuances of common shares upon exercise of convertible securities that were
outstanding on the date the Series B-1 Preferred Shares were issued or (vi)
issuances of common shares upon conversion of Series B-1 Preferred Shares.
Mandatory Conversion
We can require holders of Series B-1 Preferred Shares to convert their
Series B-1 Preferred Shares into common shares if, at any time after February
28, 2008 (i) the market price for common shares for any consecutive 20
trading-day period beginning with the date we mail the mandatory conversion
notice and ending on the 25th trading day following our mailing of the mandatory
conversion notice equals or exceeds 125% of the conversion price and (ii) there
exists at such time a currently effective registration statement covering the
resale of common shares issuable upon conversion of Series B-1 Preferred Shares.
Restrictions on Ownership
The certificate of designations contains certain provisions restricting
the amount of our equity securities that any holder of Series B-1 Preferred
Shares can own in the aggregate and restricting certain transfers of our equity
securities by holders of Series B-1 Preferred Shares. The purpose of these
provisions is to protect and preserve our REIT status.
In addition, with limited exceptions, no person or persons acting as a
group may beneficially own more than 9.8% of our common shares, which limitation
is applied by assuming that all convertible securities, such as the Series B-1
Preferred Shares, owned by such person or group of persons have been converted.
Agreements with Initial Holders of Series B-1 Preferred Shares
At the time of our initial issuance of Series B-1 Preferred Shares we
entered into an Investor Rights Agreement and a Registration Rights Agreement
with the initial investors in Series B-1 Preferred Shares. The Investor Rights
Agreement grants the investors preemptive rights with respect to future
issuances of our securities, a co-investment right enabling them to participate
in certain future investments we make, tag-along rights, drag-along rights in
the event of a sale of substantially all of our securities and certain other
rights. The Registration Rights Agreement required us to register the resale of
the common shares issuable upon conversion of the Series B-1 Preferred Shares on
or before February 28, 2007 (which we have done pursuant to separate
registration statements) and permits the investors to participate in certain of
our registered offerings.
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PLAN OF DISTRIBUTION
We are offering shares of our common shares pursuant to this rights
offering directly to holders of our common shares and holders of our Series B-1
Series Preferred Shares on the record date. We have not employed any brokers,
dealers or underwriters in connection with the solicitation or exercise of
subscription privileges in this offering and no commissions, fees or discounts
will be paid in connection with it. Certain of our officers and other employees
may solicit responses from you, but such officers and other employees will not
receive any commissions or compensation for such services other than their
normal employment compensation.
We will pay the fees and expenses of National City Bank and MacKenzie
Partners, Inc., as subscription agent and information agent, respectively, and
have agreed to indemnify the subscription agent and the information agent from
any liability it may incur in connection with this offering.
On or about March 29, 2006, we will distribute the rights and copies of
this prospectus to the holders of record of our common shares and Series B-1
Preferred Shares as of the record date. If you wish to exercise your rights and
subscribe for new common shares, you should follow the procedures described
under "THE RIGHTS OFFERING - How to Exercise Your Rights." The rights generally
are non-transferable; please see "THE RIGHTS OFFERING - Non-transferability of
the Subscription Rights."
If any of our common shares remain unsubscribed after the rights offering,
certain existing shareholders have agreed to act as standby purchasers and to
purchase, subject to certain conditions, any unsubscribed common shares at a
price per share equal to the rights offering subscription price pursuant to the
standby commitments. For additional details regarding the standby purchasers'
standby commitments, see "THE RIGHTS OFFERING - Standby Commitments."
Common shares sold in this offering will, like our currently outstanding
common shares, be listed on the New York Stock Exchange under the symbol "FUR".
EXPERTS
The financial statements, the related financial statement schedule, and
management's report on the effectiveness of internal control over financial
reporting incorporated in this prospectus by reference from Winthrop Realty
Trust's Annual Report on Form 10-K for the year ended December 31, 2005, as
amended by Form 10-K/A, have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in their reports, which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The combined statements of operations and comprehensive income,
shareholders' equity and cash flows and related financial statement schedule of
First Union Real Estate Equity and Mortgage Investments and First Union
Management, Inc. (the former name of Winthrop Realty Trust) and subsidiaries for
the year ended December 31, 2003 have been incorporated by reference herein from
our Annual Report on Form 10-K for the year ended December 31, 2005, as amended
by Form 10-K/A, in reliance on the reports of KPMG LLP, an independent
registered public accounting firm, incorporated by reference herein, and upon
the authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters, including the legality of the securities offered
hereby, have been passed upon by Hahn Loeser & Parks LLP.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934 which requires us to file reports and other information
with the Securities and Exchange Commission. You can inspect and copy reports,
proxy statements and other information filed by us at the Public Reference Room
maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549.
You can obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. You can obtain copies of this material by
mail from the Public Reference Room of the SEC at Room 1580, 100 F Street, N.E.,
Washington, D.C. 20549, at prescribed rates. You can also obtain such reports,
proxy statements and other information from the web site that the SEC maintains
at http://www.sec.gov.
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Reports, proxy statements and other information concerning us may also be
obtained electronically at our website, http://www.winthropreit.com and through
a variety of databases, including, among others, the SEC's Electronic Data
Gathering and Retrieval ("EDGAR") program, Knight-Ridder Information Inc.,
Federal Filing/Dow Jones and Lexis/Nexis.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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
considered to be 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 we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, which is commonly referred to as
the Exchange Act:
o Annual Report on Form 10-K for the year ended December 31, 2005; as
amended by Form 10-K/A filed March 17, 2006, and
o Current Reports on Form 8-K filed March 15, 2006, March 13, 2006, March 3,
2006, February 17, 2006 (as amended on February 21, 2006), January 20,
2006 and January 4, 2006.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Carolyn Tiffany, Secretary and Chief Operating Officer
Winthrop Realty Trust
7 Bulfinch Place, Suite 500
Boston, MA 02114
(617) 570-4614
This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information or representations provided in or
incorporated by reference into this prospectus. We have not authorized anyone
else to provide you with different information. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in or
incorporated by reference in this prospectus in connection with the offer made
by this prospectus, and, if given or made, such information or representations
must not be relied upon as having been authorized by us. This prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy any
security other than the securities offered hereby, nor does it constitute an
offer to sell or a solicitation of any offer to buy any of the shares offered by
anyone in any jurisdiction in which such offer or solicitation is not
authorized, or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation.
Neither the delivery of this prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that the information contained
herein is correct as of any time subsequent to the date hereof.
The date of this prospectus is March 21, 2006.
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