As filed with the Securities and Exchange Commission on July 7, 2004
Registration Statement No. 333-115997
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RECKSON ASSOCIATES REALTY CORP. AND
RECKSON OPERATING PARTNERSHIP, L.P.
(Exact name of each registrant as specified in its charter)
Reckson Associates Realty Corp. - Maryland Reckson Associates Realty Corp. - 11-3233650
Reckson Operating Partnership, L.P. - Delaware Reckson Operating Partnership, L.P. -11-3233647
(State or other jurisdiction of incorporation or organization) (I.R.S. employer identification number)
225 Broadhollow Road
Melville, New York 11747
(631) 694-6900
(Address, including zip code, and telephone number, including area code, of each registrant's principal executive office)
Scott H. Rechler
President and Chief Executive Officer
Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, New York 11747
(631) 694-6900
(Name, address, including zip code, and telephone number, including area code, of agent for service)
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Copy to:
Edward F. Petrosky, Esq.
J. Gerard Cummins, Esq.
Sidley Austin Brown & Wood LLP
787 Seventh Avenue
New York, N.Y. 10019
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Approximate Date of Commencement of Proposed Sale to Public:
From time to time after this Registration Statement becomes effective.
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If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Securities Act"), other than
securities offered only in connection with dividend or interest reinvestment
plans, please check the following box. / X/
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / X/
CALCULATION OF REGISTRATION FEE
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Title of Class of Proposed Maximum Amount of
Securities to be Registered(1) Aggregate Offering Price(1) Registration Fee
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Common Stock, $.01 par value per share(2)..............................]
Common Stock Warrants of Reckson Associates Realty Corp................]
Preferred Stock(3).....................................................] $594,314,654(5) $175,293(5)
Depositary Shares representing Preferred Stock(4)......................]
Preferred Stock Warrants of Reckson Associates Realty Corp.............]
Debt Securities(6)(7).................................................. $750,000,000 $95,025(9)(10)
Guarantees(8).......................................................... --
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(1) Estimated solely for purposes of calculating the registration fee.
(2) Such indeterminate number of shares of common stock of Reckson
Associates Realty Corp. as may from time to time be issued at
indeterminate prices, upon exercise of common stock warrants of Reckson
Associates Realty Corp. or upon conversion of preferred stock of
Reckson Associates Realty Corp. or exchange for debt securities of
Reckson Operating Partnership, L.P., as the case may be.
(3) Such indeterminate number of shares of preferred stock of Reckson
Associates Realty Corp. as may from time to time be issued in series at
indeterminate prices, upon exercise of preferred stock warrants of
Reckson Associates Realty Corp. or upon exchange for debt securities of
Reckson Operating Partnership, L.P., as the case may be.
(4) To be represented by depositary receipts of Reckson Associates Realty
Corp. representing an interest in all or a specified portion of a share
of preferred stock of Reckson Associates Realty Corp.
(5) Under registration statement no. 333-46883, an aggregate amount of
securities equal to $594,314,654 was registered thereunder and remain
available for issuance by Reckson Associates Realty Corp., and a
registration fee of approximately $175,293 was previously paid in
respect of the remaining capacity thereunder.
(6) Such indeterminate principal amount of debt securities of Reckson
Operating Partnership, L.P. as may from time to time be issued in
series at indeterminate prices or upon exchange for preferred stock of
Reckson Associates Realty Corp., as the case may be.
(7) Or, in the event of the issuance of original issue discount securities,
a higher principal amount as may be sold for an aggregate initial
offering price not to exceed $750,000,000.
(8) Debt securities not rated investment grade at the time of issuance by
at least one nationally recognized statistical rating organization will
be accompanied by guarantees to be issued by Reckson Associates Realty
Corp. None of the proceeds from the sale of these debt securities will
be received by Reckson Associates Realty Corp. for the issuance of the
guarantees. Pursuant to Rule 457(n) under the Securities Act, no
separate filing fee for the guarantees is required.
(9) Calculated pursuant to Rule 457(o) under the Securities Act.
(10) Previously paid.
Pursuant to Rule 429 under the Securities Act, the prospectus
included in this Registration Statement is a combined prospectus and relates
to registration statement no. 333-46883 previously filed by Reckson Associates
Realty Corp. on Form S-3 in respect of its common stock, common stock
warrants, preferred stock, depositary shares and preferred stock warrants and
declared effective on March 25, 1998. This registration statement, which is a
new registration statement, also constitutes post-effective amendment no. 2 to
registration statement no. 333-46883 and such post-effective amendment no. 2
shall hereafter become effective concurrently with the effectiveness of this
registration statement in accordance with Section 8(c) of the Securities Act.
EACH REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON THE DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 7, 2004
PROSPECTUS
$594,314,654
RECKSON ASSOCIATES REALTY CORP.
Common Stock, Common Stock Warrants,
Preferred Stock, Depositary Shares and Preferred Stock Warrants
$750,000,000
RECKSON OPERATING PARTNERSHIP, L.P.
Debt Securities
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Reckson Associates Realty Corp., or Reckson Associates, may offer up
to $594,314,654 of shares of its common stock, shares of its preferred stock,
depositary shares representing interests in its preferred stock, and warrants
to purchase shares of its common stock or preferred stock. Reckson Associates'
common stock is listed on the New York Stock Exchange under the symbol "RA."
Reckson Associates' Series A Convertible Cumulative Preferred Stock is listed
on the New York Stock Exchange under the symbol "RA pa."
Reckson Operating Partnership, L.P., or the Operating Partnership,
may offer up to $750,000,000 of its debt securities in one or more series. If
any of the Operating Partnership's debt securities are not rated investment
grade by at least one nationally recognized statistical rating organization at
the time of issuance, these non-investment grade debt securities will be fully
and unconditionally guaranteed by Reckson Associates as to payment of
principal, premium, if any, and interest.
We may offer the securities at prices and on terms to be set forth in
one or more supplements to this prospectus. The securities may be offered
directly, through agents on our behalf or through underwriters or dealers.
The terms of the securities may include limitations on ownership and
restrictions on transfer thereof as may be appropriate to preserve the status
of Reckson Associates as a real estate investment trust for U.S. federal
income tax purposes.
The principal executive offices of Reckson Associates and the
Operating Partnership are located at 225 Broadhollow Road, Melville, New York
11747, and the telephone number for Reckson Associates and the Operating
Partnership is (631) 694-6900.
SEE "RISK FACTORS" BEGINNING ON PAGE 2 OF THIS PROSPECTUS FOR A
DESCRIPTION OF RISKS THAT SHOULD BE CONSIDERED BY PURCHASERS OF THE
SECURITIES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is _____________ ____, 2004.
RISK FACTORS
This prospectus contains forward-looking statements which involve
risks and uncertainties. Our actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
a difference include, but are not limited to, those discussed below. An
investment in the securities involves various risks. Prospective investors
should carefully consider the following information in conjunction with the
other information contained in this prospectus and the related prospectus
supplement before purchasing the securities offered by the related prospectus
supplement.
o WE ARE DEPENDENT ON THE NEW YORK TRI-STATE AREA MARKET DUE TO LIMITED
GEOGRAPHIC DIVERSIFICATION AND OUR FINANCIAL RESULTS MAY SUFFER AS A RESULT OF
A DECLINE IN ECONOMIC CONDITIONS IN SUCH AREA
A DECLINE IN THE ECONOMIC CONDITIONS IN THE NEW YORK TRI-STATE AREA
(THE "TRI-STATE AREA") AND FOR COMMERCIAL REAL ESTATE COULD ADVERSELY AFFECT
OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS. All of our
properties, except one office property located in Orlando, Florida, are
located in the Tri-State Area, although our organizational documents do not
restrict us from owning properties outside this area. Each of our five markets
is located in New York City and the suburbs of New York City and may be
similarly affected by economic changes in this area. A significant downturn in
the financial services industry and related industries would likely have a
negative effect on these markets and on the performance of our properties.
The risk of terrorist attacks, particularly in New York City, may
adversely affect the value of our New York City properties and our ability to
generate cash flow. There may be a decrease in demand in metropolitan areas
that are considered at risk for future terrorist attacks, and this decrease
may reduce our revenues from property rentals.
o DEBT SERVICING AND REFINANCING, INCREASES IN INTEREST RATES AND FINANCIAL
AND OTHER COVENANTS COULD ADVERSELY AFFECT OUR ECONOMIC PERFORMANCE
DEPENDENCE UPON DEBT FINANCING; RISK OF INABILITY TO SERVICE OR
REFINANCE DEBT. In order to qualify as a real estate investment trust, or
REIT, for federal income tax purposes, we are required to distribute at least
90% of our taxable income. As a result, we are more reliant on debt or equity
financings than many other non-REIT companies that are able to retain more of
their income.
WE ARE SUBJECT TO THE RISKS ASSOCIATED WITH DEBT FINANCING. Our cash
flow could be insufficient to meet required payments of principal and
interest. We may not be able to refinance existing indebtedness, which in
virtually all cases requires substantial principal payments at maturity, or
the terms of such refinancing might not be as favorable as the terms of the
existing indebtedness. As of March 31, 2004, the weighted average maturity of
our existing indebtedness was approximately 5.3 years and our total existing
indebtedness was approximately $1.6 billion. We also may not be able to
refinance any indebtedness we incur in the future. Finally, we may not be able
to obtain funds by selling assets or raising equity to make required payments
on maturing indebtedness.
RISING INTEREST RATES COULD ADVERSELY AFFECT CASH FLOW. We conduct
all of our operations through, and serve as the sole general partner of, the
Operating Partnership. Increases in interest rates could increase the
Operating Partnership's interest expense, which could adversely affect its
ability to service its indebtedness or to pay dividends to our stockholders.
As of March 31, 2004, approximately 21% of our debt was variable rate debt and
our total debt was approximately $1.6 billion. Outstanding advances under the
Operating Partnership's credit facility bear interest at variable rates. In
addition, we may incur indebtedness in the future that also bears interest at
a variable rate.
COVENANTS IN OUR DEBT AGREEMENTS COULD ADVERSELY AFFECT OUR FINANCIAL
CONDITION AND OUR ABILITY TO MAKE DISTRIBUTIONS. The Operating Partnership has
an unsecured credit facility from JPMorgan Chase Bank, as Administrative
Agent, which provides for a maximum borrowing amount of up to $500 million.
The credit facility matures in December 2005, contains options for a one-year
extension subject to a fee of 25 basis points and, upon receiving additional
lender commitments, increasing the maximum revolving credit amount to $750
million. The ability of the Operating Partnership to borrow under the credit
facility is subject to certain covenants, including
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covenants relating to limitations on unsecured and secured borrowings, minimum
interest and fixed charge coverage ratios, a minimum equity value and a
maximum dividend payout ratio. The credit facility also contains a financial
covenant limiting the amount of cash distributions that we may pay to holders
of our common stock during any fiscal quarter if they exceed, when added to
all distributions paid during the three immediately preceding quarters, the
greater of:
o 90% of our funds from operations; and
o the amounts required in order for us to continue to qualify as
a REIT.
We rely on borrowings under the Operating Partnership's credit
facility to finance acquisition and development activities and for working
capital purposes. Although the Operating Partnership presently is in
compliance with the covenants under the credit facility, the Operating
Partnership's ability to borrow under such facility is subject to continued
compliance with the financial and other covenants contained therein. There is
no assurance that the Operating Partnership will continue to be in compliance.
If the Operating Partnership is unable to borrow under its credit facility, it
could adversely affect our financial condition, including our ability to
service our indebtedness or pay dividends to our stockholders.
In addition, the mortgage loans which are secured by certain of our
properties contain customary covenants, including covenants that require us to
maintain property insurance in an amount equal to the replacement cost of the
properties. In the event that we were unable to obtain such insurance, there
can be no assurance that the lenders under our mortgage loans would not take
the position that exclusions from our coverage for losses due to terrorist
acts is a breach of a covenant which, if uncured, could allow the lenders to
declare an event of default and accelerate repayment of the mortgage loans.
Other outstanding debt instruments contain standard cross default provisions
that would be triggered in the event of an acceleration of the mortgage loans.
This matter could adversely affect our financial results and our ability to
finance and/or refinance our properties or to buy or sell properties. Our
current insurance coverage provides for full replacement cost of our
properties (other than our two largest properties), including for acts of
terrorism up to $500 million on a per occurrence basis. Our two largest
properties are covered for up to $200 million on such policies and are covered
under separate policies, which include coverage for acts of terrorism, up to
the estimated replacement cost for those properties.
The facility fee and interest rate payable under the terms of our
credit facility is subject to change based upon changes in our credit ratings.
Our senior unsecured debt is currently rated "BBB-" by Fitch Ratings, "BBB-"
by Standard & Poor's and "Ba1" by Moody's Investors Service, Inc. As of March
31, 2004, based on a pricing grid of the Operating Partnership's unsecured
debt ratings, borrowings under our credit facility were priced off LIBOR plus
90 basis points and our credit facility carried a facility fee of 20 basis
points per annum. In the event of a change in the Operating Partnership's
unsecured credit ratings the interest rates and facility fee are subject to
change. At March 31, 2004, the outstanding borrowings under our credit
facility aggregated $90 million and carried a weighted average interest rate
of 1.99%.
NO LIMITATION ON DEBT. Currently, we have a policy of incurring debt
only if our Debt Ratio is 50% or less. As of March 31, 2004, our Debt Ratio
was 40%. For these purposes, "Debt Ratio" is defined as the total debt of the
Operating Partnership as a percentage of the market value of outstanding
shares of common stock, including the conversion of outstanding partnership
units in the Operating Partnership, the liquidation preference of our
preferred stock and the liquidation preference of the preferred units of the
Operating Partnership, excluding all units of general partnership owned by us,
plus total debt (including our share of consolidated joint venture debt and
net of minority partners' share of consolidated joint venture debt). Under
this policy, we could incur additional debt if our stock price increases, even
if we may not have a corresponding increase in our ability to repay the debt.
In addition, as of March 31, 2004, our debt-to-equity ratio was 1:1.5x. We
calculated our debt-to-equity ratio by comparing the total debt of the
Operating Partnership to the value of our outstanding common stock and the
common units of limited partnership interest of the Operating Partnership
(including its share of consolidated joint venture debt and net of minority
partners' share of consolidated joint venture debt), each based upon the
market value of the common stock, and the liquidation preference of our
preferred stock and the preferred units of limited partnership interest in the
Operating Partnership, excluding all units of general partnership interest
owned by us.
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As described above, our credit facility contains financial covenants
which limit the ability of the Operating Partnership to incur additional
indebtedness. However, our organizational documents do not contain any
limitation on the amount of indebtedness we may incur. Accordingly, our Board
of Directors could alter or eliminate this policy and would do so, for
example, if it were necessary in order for us to continue to qualify as a
REIT. If this policy were changed, we could become more highly leveraged,
resulting in higher interest payments that could adversely affect our ability
to pay dividends to our stockholders and could increase the risk of default on
the Operating Partnership's existing indebtedness.
o THE VALUE OF OUR INVESTMENTS IN LOANS TO FRONTLINE CAPITAL GROUP
("FRONTLINE") AND IN JOINT VENTURE INVESTMENTS WITH RECKSON STRATEGIC VENTURE
PARTNERS LLC ("RSVP") MAY BE SUBJECT TO FURTHER LOSS
In June 1998, the Operating Partnership established an unsecured
credit facility with FrontLine (the "FrontLine Facility") in the amount of
$100 million for FrontLine to use in its investment activities, operations and
other general corporate purposes. We have advanced approximately $93.4 million
under the FrontLine Facility. In addition, in June 1998, the Operating
Partnership approved the funding of investments of up to $100 million relating
to RSVP (the "RSVP Commitment"), through RSVP-controlled joint ventures (for
REIT-qualified investments) or advances made to FrontLine under an unsecured
loan facility (the "RSVP Facility") having terms similar to the FrontLine
Facility (advances made under the RSVP Facility and the FrontLine Facility are
hereafter referred to as the "FrontLine Loans"). During March 2001, we
increased the RSVP Commitment to $110 million and as of March 31, 2004,
approximately $109.1 million had been funded through the RSVP Commitment, of
which $59.8 million represents investments in RSVP-controlled (REIT-qualified)
joint ventures and $49.3 million represents advances loaned to FrontLine. As
of March 31, 2004, interest accrued (net of reserves) under the FrontLine
Facility and RSVP Facility was approximately $19.6 million. We are the largest
creditor of FrontLine. Scott Rechler, who serves as our Chief Executive
Officer and President and as one of our directors, serves as the Chief
Executive Officer and sole board member of FrontLine. Scott Rechler also
serves as a member of the management committee of RSVP.
A committee of our Board of Directors, comprised solely of
independent directors, considers any actions to be taken by us in connection
with the FrontLine Loans and its investments in joint ventures with RSVP.
During the third quarter of 2001, we noted a significant deterioration in
FrontLine's operations and financial condition and, based on our assessment of
value and recoverability and considering the findings and recommendations of
the committee and its financial advisor, we recorded a $163 million valuation
reserve charge, inclusive of anticipated costs, in our consolidated statements
of operations relating to our investments in the FrontLine Loans and joint
ventures with RSVP. We have discontinued the accrual of interest income with
respect to the FrontLine Loans. We have also reserved against our share of
GAAP equity in earnings from the RSVP controlled joint ventures funded through
the RSVP Commitment until such income is realized through cash distributions.
At December 31, 2001, pursuant to Section 166 of the Internal Revenue
Code of 1986, as amended (the "Code"), we charged off $70 million of the
aforementioned reserve directly related to the FrontLine Facility, including
accrued interest. On February 14, 2002, we charged off an additional $38
million of the reserve directly related to the FrontLine Facility, including
accrued interest, and $47 million of the reserve directly related to the RSVP
Facility, including accrued interest. The net carrying value of our
investments in the FrontLine Loans and joint venture investments with RSVP,
inclusive of our share of previously accrued GAAP equity in earnings on those
investments, was approximately $65 million as of March 31, 2004.
FrontLine is in default under the FrontLine Loans and on June 12,
2002 filed a voluntary petition for relief under Chapter 11 of the United
States Bankruptcy Code.
In September 2003, RSVP completed the restructuring of its capital
structure and management arrangements. In connection with the restructuring,
RSVP redeemed the interest of the preferred equity holders of RSVP for an
aggregate of approximately $137 million in cash and the transfer to the
preferred equity holders of the assets that comprised RSVP's parking
investment valued at approximately $28.5 million. RSVP also restructured its
management arrangements whereby a management company formed by its former
managing directors has been retained to manage RSVP pursuant to a management
agreement and the employment contracts of the managing directors with RSVP
have been terminated. The management agreement provides for an annual base
management fee and disposition fees equal to 2% of the net proceeds received
by RSVP on asset sales. (The base management
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fee and disposition fees are subject to a maximum over the term of the
agreement of $7.5 million.) In addition, the managing directors retained a
one-third residual interest in RSVP's assets, which is subordinated to the
distribution of an aggregate amount of $75 million to RSVP and/or our company
in respect of our joint ventures with RSVP. The management agreement has a
three-year term, subject to early termination in the event of the disposition
of all of the assets of RSVP.
In connection with the restructuring, RSVP and certain of its
affiliates obtained a $60 million secured loan. In connection with this loan,
the Operating Partnership agreed to indemnify the lender in respect of any
environmental liabilities incurred with regard to RSVP's remaining assets in
which the Operating Partnership has a joint venture interest (primarily
certain student housing assets) and guaranteed the obligation of an affiliate
of RSVP to the lender in an amount up to $6 million plus collection costs for
any losses incurred by the lender as a result of certain acts of malfeasance
on the part of RSVP and/or its affiliates. The loan is scheduled to mature in
2006 and is expected to be repaid from proceeds of asset sales by RSVP.
o OUR ACQUISITION, DEVELOPMENT AND CONSTRUCTION ACTIVITIES COULD RESULT IN
LOSSES
WE INTEND TO ACQUIRE EXISTING OFFICE PROPERTIES TO THE EXTENT THAT
SUITABLE ACQUISITIONS CAN BE MADE ON ADVANTAGEOUS TERMS. Acquisitions of
commercial properties entail risks, such as the risks that we may not be in a
position or have the opportunity in the future to make suitable property
acquisitions on advantageous terms and that our investments will fail to
perform as expected. Some of the properties that we acquire may require
significant additional investment and upgrades and are subject to the risk
that estimates of the cost of improvements to bring such properties up to
standards established for the intended market position may prove inaccurate.
WE ALSO INTEND TO CONTINUE THE SELECTIVE DEVELOPMENT AND CONSTRUCTION
OF OFFICE PROPERTIES IN ACCORDANCE WITH OUR DEVELOPMENT AND UNDERWRITING
POLICIES AS OPPORTUNITIES ARISE. Our development and construction activities
include the risks that:
o we may abandon development opportunities after expending
resources to pursue development;
o construction costs of a project may exceed our original
estimates;
o occupancy rates and rents at a newly completed property may not
be sufficient to make the property profitable;
o financing may not be available to us on favorable terms for
development of a property; and
o we may not complete construction and lease-up on schedule,
resulting in increased carrying costs to complete construction,
construction costs and, in some instances, penalties owed to
tenants with executed leases.
OUR DEVELOPMENT ACTIVITIES ARE ALSO SUBJECT TO RISKS RELATING TO THE
INABILITY TO OBTAIN, OR DELAYS IN OBTAINING, ALL NECESSARY ZONING, LAND-USE,
BUILDING, OCCUPANCY AND OTHER REQUIRED GOVERNMENTAL PERMITS AND
AUTHORIZATIONS. If any of the above events occur, our ability to pay dividends
to our stockholders and service the Operating Partnership's indebtedness could
be adversely affected. In addition, new development activities, regardless of
whether or not they are ultimately successful, typically require a substantial
portion of management's time and attention.
o ADVERSE REAL ESTATE MARKET CONDITIONS, INCREASES IN OPERATING EXPENSES OR
CAPITAL EXPENDITURES, TENANT DEFAULTS AND UNINSURED LOSSES COULD ADVERSELY
AFFECT OUR FINANCIAL RESULTS
Our properties' revenues and value may be adversely affected by a
number of factors, including:
o the national, state and local economic climate and real estate
conditions, such as oversupply of or reduced demand for space
and changes in market rental rates;
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o the need to periodically renovate, repair and relet our space;
o increasing operating costs, including real estate taxes and
utilities, which may not be passed through to tenants;
o defaults by our tenants or their failure to pay rent on a
timely basis; and
o uninsured losses.
A significant portion of our real estate investment expenses, such as
mortgage payments, real estate taxes, insurance and maintenance costs, are
generally not reduced when circumstances cause a decrease in income from our
properties. In addition, our real estate values and income from properties are
also affected by our compliance with laws, including tax laws, interest rate
levels and the availability of financing.
WE MAY SUFFER LOSSES AS A RESULT OF TENANT BANKRUPTCIES. If any of
our tenants files for protection from creditors under federal bankruptcy laws,
such tenant generally has the right, subject to certain conditions, to reject
its leases with us. In the event this occurs, we may not be able to readily
lease the space or to lease it on equal or better terms.
BECAUSE REAL ESTATE INVESTMENTS ARE ILLIQUID, WE MAY NOT BE ABLE TO
SELL PROPERTIES WHEN APPROPRIATE. Real estate investments generally cannot be
sold quickly. We may not be able to vary our portfolio promptly in response to
economic or other conditions. In addition, provisions of the Code limit a
REIT's ability to sell properties in some situations when it may be
economically advantageous to do so, thereby adversely affecting returns to our
stockholders.
COMPETITION IN OUR MARKETS IS SIGNIFICANT. The competition for
tenants in the office and industrial markets in the Tri-State Area is
significant and includes properties owned by other REITs, local privately-held
companies, institutional investors and other owners. There is also significant
competition for acquisitions in our markets from the same types of
competitors. In addition, many users of industrial space in our markets own
the buildings that they occupy.
INCREASING OPERATING COSTS COULD ADVERSELY AFFECT CASH FLOW. Our
properties are subject to operating risks common to commercial real estate,
any and all of which may adversely affect occupancy or rental rates. Our
properties are subject to increases in our operating expenses such as
cleaning, electricity, heating, ventilation and air conditioning; elevator
repair and maintenance; insurance and administrative costs; and other costs
associated with security, landscaping, repairs and maintenance of our
properties. As a result of the events of September 11, 2001, we are
experiencing higher operating expenses due to significantly increased
insurance costs and security measures. While our tenants generally are
currently obligated to pay a portion of these costs, there is no assurance
that tenants will agree to pay these costs upon renewal or that new tenants
will agree to pay these costs initially. If operating expenses increase, the
local rental market may limit the extent to which rents may be increased to
meet increased expenses without at the same time decreasing occupancy rates.
While we have cost saving measures at each of our properties, if any of the
above occurs, our ability to pay dividends to our stockholders and service our
indebtedness could be adversely affected.
SOME POTENTIAL LOSSES ARE NOT COVERED BY INSURANCE; LOSSES COULD
RESULT FROM TERRORIST ACTS. We carry comprehensive liability, fire, extended
coverage and rental loss insurance on all of our properties. Six of our
properties are located in New York City. As a result of the events of
September 11, 2001, insurance companies are limiting coverage for acts of
terrorism in all-risk policies. In November 2002, the Terrorism Risk Insurance
Act of 2002 was signed into law which, among other things, requires insurance
companies to offer coverage for losses resulting from defined "acts of
terrorism" through 2004. Our current insurance coverage provides for full
replacement cost of our properties (other than our two largest properties),
including for acts of terrorism up to $500 million on a per occurrence basis.
Our two largest properties are covered for up to $200 million on such policies
and are covered under separate policies, which include coverage for acts of
terrorism, up to the estimated replacement cost for these properties.
6
Furthermore, losses arising from acts of war or relating to pollution
are not generally insured because they are either uninsurable or not
economically insurable. If an uninsured loss or a loss in excess of insured
limits should occur, we could lose our capital invested in a property, as well
as any future revenue from the property. We would remain obligated on any
mortgage indebtedness or other obligations related to the property. Any such
loss could materially and adversely affect our business and financial
condition and results of operations.
INVESTMENTS IN MORTGAGE DEBT COULD LEAD TO LOSSES. We may invest in
mortgages secured by office or industrial properties. We may acquire the
mortgaged properties through foreclosure proceedings or negotiated
settlements. In addition to the risks associated with investments in
commercial properties, investments in mortgage indebtedness present additional
risks, including the risk that the fee owners of such properties may not make
payments of interest on a current basis and we may not realize our anticipated
return or sustain losses relating to the investments. Although we currently
have no intention to originate mortgage loans as a significant part of our
business, we may make loans to a seller in connection with our purchase of
real estate. The underwriting criteria we would use for these loans would be
based upon the credit and value of the underlying real estate.
o PROPERTY OWNERSHIP THROUGH PARTNERSHIPS AND JOINT VENTURES CREATES
ADDITIONAL INVESTMENT RISKS
Partnership or joint venture investments may involve risks not
otherwise present for investments made solely by us, including the possibility
that our partners or co-venturer might become bankrupt, that our partners or
co-venturer might at any time have different interests or goals than we do,
and that our partners or co-venturer may take action contrary to our
instructions, requests, policies or objectives, including our policy with
respect to maintaining our qualification as a REIT. Other risks of joint
venture investments include impasse on decisions, such as a sale, because
neither we nor our partner or co-venturer would have full control over the
partnership or joint venture. There is no limitation under our organizational
documents as to the amount of funds that may be invested in partnerships or
joint ventures.
The following is a description of the significant joint ventures in
which we are involved:
OUR JOINT VENTURE IN 919 THIRD AVENUE, NEW YORK, NEW YORK, INCLUDES
THE RISKS THAT WE CANNOT ENTER INTO LARGE LEASES OR REFINANCE OR DISPOSE OF
THE PROPERTY IN OUR DISCRETION. On December 21, 2001, we formed a joint
venture (the "919JV") with the New York State Teachers' Retirement Systems
("NYSTRS") whereby NYSTRS acquired a 49% indirect interest in the property
located at 919 Third Avenue, New York, New York for $220.5 million, which
included $122.1 million of its proportionate share of secured mortgage debt
and approximately $98.4 million of cash which was then distributed to us. We
are responsible for managing the day-to-day operations and business affairs of
the 919JV and have substantial rights in making decisions affecting the
property such as developing a budget, leasing and marketing. We must obtain
the consent of NYSTRS in order to make certain decisions, including a sale of
the property, purchasing any additional property or entering into significant
leases. NYSTRS has certain rights primarily intended to protect its
investment. For purposes of our financial statements we consolidate the 919JV.
OUR JOINT VENTURE IN A PORTFOLIO OF SEVEN OFFICE PROPERTIES INCLUDES
THE RISKS THAT WE CANNOT ENTER INTO LARGE LEASES OR REFINANCE THE PROPERTIES
IN OUR DISCRETION. In September 2000, we formed a joint venture (the
"Tri-State JV") with Teachers Insurance and Annuity Association ("TIAA") and
contributed nine Class A suburban office properties aggregating approximately
1.5 million square feet to the Tri-State JV for a 51% majority ownership
interest. TIAA contributed approximately $136 million for a 49% interest in
the Tri-State JV which was then distributed to us. In August 2003, we acquired
TIAA's 49% interest in the property located at 275 Broadhollow Road, Melville,
New York, for approximately $12.4 million. In addition, the Tri-State JV sold
a 175,000 square foot office building located on Long Island for approximately
$30 million during April 2004. Net proceeds from this sale were distributed to
the members of the Tri-State JV. As a result of these transactions, the
Tri-State JV owns seven Class A suburban office properties aggregating
approximately 1.2 million square feet. We are responsible for managing the
day-to-day operations and business affairs of the Tri-State JV and have
substantial rights in making decisions affecting the properties such as
leasing, marketing and financing. TIAA has certain rights primarily intended
to protect its investment. For purposes of our financial statements we
consolidate the Tri-State JV.
OUR INVESTMENT IN THE OMNI INCLUDES THE RISKS THAT WE CANNOT
REFINANCE OR DISPOSE OF THE PROPERTY IN OUR SOLE DISCRETION AND WE COULD HAVE
OUR GENERAL PARTNERSHIP INTEREST CONVERTED INTO A LIMITED PARTNERSHIP
INTEREST.
7
The Operating Partnership owns a 60% general partner interest in Omni
Partners, L.P. (the "Omni Partnership"), the partnership that owns the Omni, a
579,000 square foot office building located in our Nassau West Corporate
Center office park. Odyssey Partners, L.P. ("Odyssey") and an affiliate of
Odyssey own the remaining 40% interest. Through our partnership interest, we
act as managing partner and have the sole authority to conduct the business
and affairs of the Omni Partnership subject to the limitations set forth in
the amended and restated agreement of limited partnership of the Omni
Partnership (the "Omni Partnership Agreement"). These limitations include
Odyssey's right to negotiate under certain circumstances a refinancing of the
mortgage debt encumbering the Omni and the right to approve any sale of the
Omni made on or before March 13, 2007 (the "Acquisition Date"). The Operating
Partnership will continue to act as the sole managing partner of the Omni
Partnership unless certain conditions specified in the Omni Partnership
Agreement shall occur. Upon the occurrence of any of these conditions, the
Operating Partnership's general partnership interest shall convert to a
limited partnership interest and an affiliate of Odyssey shall be the sole
managing partner, or, at the option of Odyssey, the Operating Partnership
shall be a co-managing partner with an affiliate of Odyssey. In addition, on
the Acquisition Date, the Operating Partnership will have the right to
purchase Odyssey's interest in the Omni Partnership at a price (the "Option
Price") based on 90% of its fair market value. If the Operating Partnership
fails to exercise this option, Odyssey has the right to require the Operating
Partnership to purchase Odyssey's interest in the Omni Partnership on the
Acquisition Date at the Option Price. The Operating Partnership has the right
to extend the Acquisition Date until March 13, 2012. The Option Price shall
apply to the payment of all sums due under a loan made by the Operating
Partnership in March 1997 to Odyssey in the amount of approximately $17
million. The Odyssey loan matures on the Acquisition Date, subject to the
Operating Partnership's right to extend the Acquisition Date as set forth
above, and is secured by a pledge of Odyssey's interest in the Omni
Partnership.
OUR JOINT VENTURE IN AN OFFICE BUILDING IN TARRYTOWN, NEW YORK
INCLUDES THE RISKS THAT WE CANNOT ENTER INTO LARGE LEASES OR REFINANCE OR
DISPOSE OF THE BUILDING IN OUR DISCRETION. We own a 60% non-controlling
interest in a 172,000 square foot office building located at 520 White Plains
Road in White Plains, New York (the "520JV"), which we manage. As of March 31,
2004, the 520JV had total assets of $20 million, a mortgage note payable of
$11.8 million and other liabilities of $549,000. Our allocable share of the
520JV mortgage note payable is approximately $7.8 million. This mortgage note
payable bears interest at 8.85% per annum and matures on September 1, 2005.
The operating agreement of the 520JV requires joint decisions from all members
on all significant operating and capital decisions including sale of the
property, refinancing of the property's mortgage debt, development and
approval of leasing strategy and leasing of rentable space. As a result of the
decision-making participation relative to the operations of the property, we
account for the 520JV under the equity method of accounting.
o ENVIRONMENTAL PROBLEMS ARE POSSIBLE
Federal, state and local laws and regulations relating to the
protection of the environment may require a current or previous owner or
operator of real estate to investigate and clean up hazardous or toxic
substances or petroleum product releases at a property. An owner of real
estate is liable for the costs of removal or remediation of certain hazardous
or toxic substances on or in the property. These laws often impose such
liability without regard to whether the owner knew of, or caused, the presence
of the contaminants. Clean-up costs and the owner's liability generally are
not limited under the enactments and could exceed the value of the property
and/or the aggregate assets of the owner. The presence of, or the failure to
properly remediate, the substances may adversely affect the owner's ability to
sell or rent the property or to borrow using the property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances may also be liable for the clean-up costs of the substances at a
disposal or treatment facility, whether or not such facility is owned or
operated by the person. Even if more than one person was responsible for the
contamination, each person covered by the environmental laws may be held
responsible for the clean-up costs incurred. In addition, third parties may
sue the owner or operator of a site for damages and costs resulting from
environmental contamination emanating from that site.
Environmental laws also govern the presence, maintenance and removal
of asbestos-containing materials ("ACMs"). These laws impose liability for
release of ACMs into the air and third parties may seek recovery from owners
or operators of real properties for personal injury associated with ACMs. In
connection with the ownership (direct or indirect), operation, management and
development of real properties, we may be considered an owner or operator of
properties containing ACMs. Having arranged for the disposal or treatment of
contaminants we may be
8
potentially liable for removal, remediation and other costs, including
governmental fines and injuries to persons and property.
All of our office properties and all of our industrial properties
have been subjected to a Phase I or similar environmental site assessment
after April 1, 1994 that were completed by independent environmental
consultant companies, except for the property located at 35 Pinelawn Road
which was originally developed by us and subjected to a Phase I in April 1992.
These Phase I or similar environmental site assessments involved general
inspections without soil sampling, ground water analysis or radon testing and,
for our properties constructed in 1978 or earlier, survey inspections to
ascertain the existence of ACMs. These environmental site assessments have not
revealed any environmental liability that we believe would have a material
adverse effect on our business.
Soil, sediment and groundwater contamination, consisting of volatile
organic compounds and metals, has been identified at the property at 32
Windsor Place, Central Islip, New York. The contamination is associated with
industrial activities conducted by a tenant at the property over a number of
years. The contamination, which was identified through an environmental
investigation conducted on our behalf, has been reported to the New York State
Department of Environmental Conservation. We have notified the tenant of the
findings and have demanded that the tenant take appropriate actions to fully
investigate and remediate the contamination. Under applicable environmental
laws, both the tenant and ourselves are liable for the cost of investigation
and remediation. We do not believe that the cost of investigation and
remediation will be material and we have recourse against the tenant.
Management believes that the cost to address these environmental issues will
not have a material adverse effect on our business, although there can be no
assurance in this regard.
o FAILURE TO QUALIFY AS A REIT WOULD BE COSTLY
We have operated (and intend to operate) so as to qualify as a REIT
under the Code beginning with our taxable year ended December 31, 1995.
Although our management believes that we are organized and operated in a
manner to so qualify, no assurance can be given that we will qualify or remain
qualified as a REIT.
If we fail to qualify as a REIT in any taxable year, we will be
subject to federal income tax (including any applicable alternative minimum
tax) on our taxable income at regular corporate rates. Moreover, unless
entitled to relief under certain statutory provisions, we also will be
disqualified from treatment as a REIT for the four taxable years following the
year during which qualification was lost. This treatment would significantly
reduce net earnings available to service indebtedness, make investments or pay
dividends to stockholders because of the additional tax liability to us for
the years involved. Also, we would not then be required to pay dividends to
our stockholders.
o TAX CONSEQUENCES UPON A SALE OR REFINANCING OF PROPERTIES MAY RESULT IN
CONFLICTS OF INTEREST FOR OUR DIRECTORS AND OFFICERS
Holders of units of limited partnership interest of the Operating
Partnership or co-owners of properties not owned entirely by us may suffer
different and more adverse tax consequences than we will upon the sale or
refinancing of our properties. We may have different objectives from these
co-owners and holders of limited partnership units regarding the appropriate
pricing and timing of any sale or refinancing of these properties. While we,
as the sole general partner of the Operating Partnership, have the exclusive
authority over whether and on what terms to sell or refinance each property
owned solely by the Operating Partnership, our directors and officers who hold
limited partnership units may seek to influence us not to sell or refinance
the properties, even though such a sale might otherwise be financially
advantageous to us, or may seek to influence us to refinance a property with a
higher level of debt.
o NEW TAX LEGISLATION REDUCES TAX RATES FOR DIVIDENDS PAID BY NON-REIT
CORPORATIONS
Under legislation recently enacted, the maximum tax rate on dividends
to individuals has generally been reduced from 38.6% to 15% (from January 1,
2003 through December 31, 2008). The reduction in rates on dividends is
generally not applicable to dividends paid by a REIT except in limited
circumstances. Although this legislation will not adversely affect the
taxation of REITs or dividends paid by REITs, the favorable treatment of
regular corporate dividends could cause investors who are individuals to
consider stock of non-REIT corporations
9
that pay dividends as relatively more attractive than stocks of REITs. It is
not possible to predict whether such a change in perceived relative value will
occur or what effect, if any, this legislation will have on the market price
of our stock.
o LIMITS ON OWNERSHIP AND CHANGES IN CONTROL MAY DETER CHANGES IN
MANAGEMENT AND THIRD PARTY ACQUISITION PROPOSALS
OWNERSHIP LIMIT. To maintain our qualification as a REIT, five or
fewer individuals (as defined in the Code, to include certain entities) may
not own, directly or indirectly, more than 50% in value of our outstanding
capital stock at any time during the last half of a taxable year (other than
the first year). In order to protect against the risk of losing REIT status,
our charter limits ownership of our issued and outstanding common stock by any
single stockholder to 9.0% of the lesser of the number or value of the
outstanding shares of common stock. It also limits ownership of our issued and
outstanding 7-5/8% Series A Convertible Cumulative Preferred Stock to 9.0% in
value of the outstanding shares of all of our capital stock. In addition, a
stockholder may not acquire shares of our Series A preferred stock that would
result in the stockholder's owning in excess of 20% of the lesser of the
number or value of outstanding shares of the Series A preferred stock. See
"Restrictions on Ownership of Capital Stock," "Description of Common
Stock--Restrictions on Ownership" and "Description of Preferred
Stock--Restrictions on Ownership." These provisions may delay, defer or
prevent a change in control in our company or other transaction by a third
party without the consent of the Board of Directors even if a change in
control were in the best interests of our stockholders.
SUPERMAJORITY VOTE FOR REMOVAL OF DIRECTORS. In our charter, we have
opted into a provision of the Maryland General Corporation Law (the "MGCL")
requiring a vote of two-thirds of the common stock to remove one or more
directors.
MAJORITY OF VOTES REQUIRED TO CALL SPECIAL MEETINGS OF STOCKHOLDERS.
Our bylaws provide that a special meeting of stockholders need only be called
if requested by holders of the majority of votes eligible to be cast at such
meeting.
FUTURE ISSUANCES OF COMMON STOCK. Our charter authorizes the Board of
Directors to issue additional shares of common stock without stockholder
approval. We also may issue shares of common stock in exchange for limited
partnership units pursuant to the Operating Partnership's partnership
agreement.
OUR CHARTER PERMITS THE ISSUANCE OF PREFERRED STOCK WHICH COULD
DELAY, DEFER OR PREVENT A CHANGE IN CONTROL. Our charter authorizes the Board
of Directors to issue up to 25 million shares of preferred stock, of which
8,693,900 shares of Series A preferred stock are issued and outstanding, to
reclassify unissued shares of capital stock, and to establish the preferences,
conversion and other rights, voting powers, restrictions, limitations and
restrictions on ownership, limitations as to dividends or other distributions,
qualifications, and terms and conditions of redemption for each class or
series of any capital stock issued.
In October 2000, the Board of Directors adopted a Stockholder Rights
Plan (the "Rights Plan") designed to protect our stockholders from various
abusive takeover tactics, including attempts to acquire control at an
inadequate price, depriving stockholders of the full value of their
investment. The Rights Plan is designed to allow the Board of Directors to
secure the best available transaction for all of our stockholders. The Rights
Plan was not adopted in response to any known effort to acquire control of our
company.
Under the Rights Plan, each of our stockholders received a dividend
of one Right for each share of our outstanding common stock owned. The Rights
are exercisable only if a person or group acquires, or announces their intent
to acquire, 15% or more of our common stock, or announces a tender offer the
consummation of which would result in beneficial ownership by a person or
group of 15% or more of the common stock. Each Right entitles the holder to
purchase one one-thousandth of a share of a new series of junior participating
preferred stock of our company at an initial exercise price of $84.44.
If any person acquires beneficial ownership of 15% or more of the
outstanding shares of our common stock, then all Rights holders except the
acquiring person are entitled to purchase our common stock at a price
10
discounted from the then market price. If we are acquired in a merger after
such an acquisition, all Rights holders except the acquiring person are also
entitled to purchase stock in the buyer at a discount in accordance with the
Rights Plan.
LIMITATIONS ON ACQUISITION OF AND CHANGES IN CONTROL PURSUANT TO
MARYLAND LAW. The MGCL contains provisions, referred to as the "control share
acquisition statute," which eliminate the voting rights of shares acquired in
a Maryland corporation in quantities so as to constitute "control shares," as
defined under the MGCL. The MGCL also contains provisions, referred to as the
"business combination statute," which generally limit business combinations
between a Maryland corporation and any 10% owners of the corporation's stock
or any affiliate thereof. These provisions may have the effect of inhibiting a
third party from making an acquisition proposal for our company or of
delaying, deferring or preventing a change in control of our company under
circumstances that otherwise could provide the holders of shares of common
stock with the opportunity to realize a premium over the then-prevailing
market price. As permitted by the MGCL, our bylaws contain a provision
exempting any and all acquisitions by any person of shares of our capital
stock from the control share acquisition statute. In addition, the Board of
Directors has approved our opting out of the "business combination statute."
o THE MARKET VALUE OF SECURITIES COULD DECREASE IN THE EVENT WE DO NOT
MAINTAIN OUR CURRENT DIVIDEND RATE AND ALSO AS A RESULT OF OUR PERFORMANCE AND
MARKET PERCEPTION
EFFECT OF EARNINGS AND CASH DIVIDENDS. The market value of the equity
securities of a REIT may be based primarily upon the market's perception of
the REIT's growth potential and its current and future cash dividends, and may
be secondarily based upon the real estate market value of the underlying
assets. During 2003, we operated our business within a weakened market for
office leasing resulting from the economic recession. We have experienced
weakened rental rates and higher vacancy rates for our properties, which has
resulted in lower operating income. In addition, during this period we have
incurred significant leasing costs as a result of increased market demands
from tenants and high levels of leasing transactions that result from the
re-tenanting of scheduled expirations or early terminations of leases. We have
recently experienced high tenanting costs including tenant improvement costs,
leasing commissions and free rent in all of our markets. For the quarter ended
March 31, 2004, we paid $10.1 million for tenanting costs including tenant
improvement costs and leasing commissions. For the year ended December 31,
2003, we paid $50.3 million for such tenanting costs. As a result of these and
the operating factors mentioned above, our cash flow from operating activities
has not been sufficient to cover 100% of the quarterly dividends payable on
our common stock. To meet the short-term funding requirements relating to
these shortfalls, we have used proceeds of property sales or borrowings under
our credit facility. Based on our anticipated leasing for 2004, we may incur
similar shortfalls. Our ability to increase operating cash flow and eliminate
these shortfalls is dependent upon improved market conditions, including
higher occupancy rates, increased rental rates and lower tenant costs. We
periodically review our dividend policy to determine the appropriateness of
our dividend rate relative to our expected cash flows. We adjust our dividend
rate based on forecasted increases and decreases in our cash flow as well as
required distributions of taxable income to maintain REIT status. There can be
no assurance that we will maintain the current quarterly distribution level on
our common stock or on the common units of limited partnership interest in the
Operating Partnership.
ADVERSE IMPACT OF RISING INTEREST RATES. One factor which influences
the price of securities is the dividend or interest rate on the securities
relative to market interest rates. Rising interest rates may lead potential
buyers of our equity securities to expect a higher dividend rate, which would
adversely affect the market price of the securities. In addition, rising
interest rates would result in increased expense, thereby adversely affecting
cash flow and the ability of the Operating Partnership to service its
indebtedness.
o WE MAY BE ADVERSELY AFFECTED BY LITIGATION RELATING TO THE DISPOSITION OF
OUR LONG ISLAND INDUSTRIAL BUILDING PORTFOLIO
In November 2003, we disposed of all but three of our 95 property,
5.9 million square foot, Long Island industrial building portfolio to members
of the Rechler family (the "Disposition") for approximately $315.5 million,
comprised of $225.1 million in cash and debt assumption and 3,932,111 Class A
common units of limited partnership interest of the Operating Partnership
valued at approximately $90.4 million. Approximately $204 million of cash
sales proceeds from the Disposition were used to repay borrowings under our
credit facility. In addition, in April 2004, we completed the sale of two of
the remaining three properties from the Disposition for
11
approximately $5.8 million. Proceeds from the sale were used to establish an
escrow account with a qualified intermediary for a future exchange of real
property pursuant to Section 1031 of the Code. There can be no assurances that
we will meet the requirements of Section 1031 by identifying and acquiring
qualified replacement properties in the required time frame, in which case we
would incur the tax liability of approximately $1.5 million on the capital
gain realized. The disposition of the other property, which is subject to
certain environmental issues (see "Risk Factors--Environmental problems are
possible" above), is conditioned upon the approval of the buyer's lender,
which has not been obtained. As a result, we may not dispose of this property
as part of the Disposition. We believe that if we were to continue to hold
this property, the cost to address the environmental issues would not have a
material adverse effect on us, but there can be no assurance in this regard.
In addition, four of the five remaining options granted to us at the time of
our initial public offering ("IPO") to purchase interests in properties owned
by Rechler family members (including three properties in which the Rechler
family members hold non-controlling interests and one industrial property)
were terminated along with our management contracts relating to three of such
properties.
In connection with the closing, the employment of Donald Rechler,
Roger Rechler, Gregg Rechler and Mitchell Rechler as officers of Reckson
Associates terminated and Roger Rechler, Gregg Rechler and Mitchell Rechler
resigned as members of our Board of Directors. In connection with the
Disposition and the terminations of employment, we incurred the following
restructuring charges: (i) approximately $7.5 million related to outstanding
stock loans under our historical long term incentive program ("LTIP") were
transferred to the entity that acquired the Long Island industrial building
portfolio and approximately $642,000 of loans related to life insurance
contracts were extinguished, (ii) approximately $2.9 million was paid to the
departing Rechler family members in exchange for 127,689 of rights to receive
shares of common stock that were granted in 2002 and their rights that were
granted in 2003 were forfeited in their entirety and (iii) with respect to two
of the departing Rechler family members participating in our March 2003 LTIP,
each received 8,681 shares of our common stock related to the service
component of their core award which was valued at $293,000 in the aggregate.
In addition, since we attained our annual performance measure under the March
2003 LTIP in March 2004, these individuals also each received 26,041 shares of
common stock representing the balance of the annual core award as if they had
remained in continuous employment with us. The remainder of their core awards
was forfeited as was the entire amount of the special outperformance component
of the March 2003 LTIP. We also incurred additional restructure charges of
approximately $1.2 million related primarily to the release and severance of
approximately 25 employees. Total restructure charges of approximately $12.5
million were mitigated by a $972,000 fee from the departing Rechler family
members, related to the termination of our option to acquire certain
properties which were either owned by certain Rechler family members or in
which the Rechler family members owned a non-controlling minority interest.
A number of stockholder derivative actions have been commenced
purportedly on behalf of Reckson Associates against the Board of Directors
relating to the Disposition. The complaints allege, among other things, that
the process by which the directors agreed to the transaction was not
sufficiently independent of the Rechler family and did not involve a "market
check" or third-party auction process and, as a result, was not for adequate
consideration. The plaintiffs seek similar relief, including a declaration
that the directors violated their fiduciary duties and damages. Such actions
could lead to settlements, rescission of the transaction, civil damages or
other litigation costs that could adversely affect our business.
o TRANSACTIONS BY THE OPERATING PARTNERSHIP OR RECKSON ASSOCIATES COULD
ADVERSELY AFFECT DEBT HOLDERS
Except with respect to a covenant limiting the incurrence of
indebtedness, a covenant requiring the Operating Partnership to maintain a
certain percentage of unencumbered assets and a covenant requiring any
successor in a business combination with the Operating Partnership to assume
all of the obligations of the Operating Partnership under the indenture
pursuant to which the debt securities will be issued, the indenture does not
contain any provisions that would protect holders of debt securities in the
event of (i) a highly leveraged or similar transaction involving the Operating
Partnership, the management of the Operating Partnership or Reckson
Associates, or any affiliate of any these parties, (ii) a change in control,
or (iii) certain reorganizations, restructuring, mergers or similar
transactions involving the Operating Partnership or Reckson Associates.
12
o WE MAY NOT BE ABLE TO PAY ON GUARANTEES
A guarantee of the Operating Partnership's debt securities by Reckson
Associates effectively provides no benefit to investors and should not be
viewed by investors as enhancing the credit of the debt securities or as
providing any additional value to the debt securities. The Operating
Partnership conducts all of Reckson Associates' operations, and the only asset
of Reckson Associates is its interest in the Operating Partnership. As a
result, if the Operating Partnership is unable to meet its obligations on the
debt securities, Reckson Associates will not have any assets from which to pay
on its guarantee of such debt securities.
CAUTIONARY STATEMENTS CONCERNING
FORWARD-LOOKING INFORMATION
Certain information both included and incorporated by reference in
this prospectus may contain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and as such may involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of our company to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. Forward-looking statements, which are based on
certain assumptions and describe our future plans, strategies and expectations
are generally identifiable by use of the words "may," "will," "should,"
"expect," "anticipate," "estimate," "believe," "intend" or "project" or the
negative thereof or other variations thereon or comparable terminology.
Factors which could have a material adverse effect on the operations and
future prospects of our company are described above under "Risk Factors."
These risks and uncertainties should be considered in evaluating any
forward-looking statements contained or incorporated by reference herein. Our
actual results may differ significantly from the results discussed in the
forward-looking statements.
AVAILABLE INFORMATION
Reckson Associates and the Operating Partnership are each subject to
the informational requirements of the Exchange Act, and in accordance
therewith both Reckson Associates and the Operating Partnership file annual,
quarterly and current reports and other information with the Commission. These
reports and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission maintains a website that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. You may access the Commission's
website at http://www.sec.gov. These materials can also be inspected at the
office of the New York Stock Exchange, 20 Broad Street, New York, New York
10005, the exchange on which Reckson Associates' common stock and Series A
preferred stock are listed.
We have filed with the Commission a registration statement on Form
S-3 under the Securities Act, with respect to the securities. This prospectus
does not contain all of the information set forth in the registration
statement, certain parts of which have been omitted in accordance with the
rules and regulations of the Commission. For further information regarding us
and the securities, reference is made to the registration statement, including
the exhibits filed as a part thereof, and the documents incorporated by
reference in this prospectus. Statements made in this prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete; with respect to each contract, agreement or other
document filed as an exhibit to the registration statement or to an Exchange
Act report, reference is made to the exhibit for a more complete description
of the matter involved, and each statement shall be deemed qualified in its
entirety by reference thereto. Copies of the registration statement and the
exhibits may be inspected, without charge, at the offices of the Commission,
or obtained at prescribed rates from the Public Reference Section of the
Commission at the address set forth above.
13
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate by reference" the
information we file with it, which means that we can disclose important
information to you by referring you to another document filed separately with
the Commission. The information incorporated by reference is considered to be
part of this prospectus, and information we file later with the Commission
will automatically update and supersede this information. We incorporate by
reference the documents listed below (other than information in such documents
that is deemed not to be filed), which we have previously filed with the
Commission and are considered a part of this prospectus, and any future
filings made with the Commission prior to the termination of this offering
under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act. These filings
contain important information about Reckson Associates and the Operating
Partnership.
RECKSON ASSOCIATES PERIOD
COMMISSION FILINGS (FILE NO. 1-13762)
---------------------------------------------------------- -------------------------------------------------------
Annual Report on Form 10-K Year ended December 31, 2003
Quarterly Report on Form 10-Q Quarter ended March 31, 2004
Current Reports on Form 8-K Filed January 16, 2004, January 21, 2004 and March 12,
2004
Registration Statement on Form 8-A Filed May 9, 1995 (as amended)
Registration Statement on Form 8-A Filed April 9, 1998
Definitive Proxy Statement on Schedule 14A Filed April 13, 2004
RECKSON OPERATING PARTNERSHIP PERIOD
COMMISSION FILINGS (FILE NO. 1-13762)
---------------------------------------------------------- -------------------------------------------------------
Annual Report on Form 10-K Year ended December 31, 2003
Quarterly Report on Form 10-Q Quarter ended March 31, 2004
Current Reports on Form 8-K Filed January 16, 2004, January 21, 2004 and March 12,
2004
Reckson Associates and the Operating Partnership will provide a copy
of any or all of these documents (exclusive of exhibits unless the exhibits
are specifically incorporated by reference therein), without charge, to each
person to whom this prospectus is delivered, upon written or oral request to
Reckson Associates Realty Corp., 225 Broadhollow Road, Melville, New York
11747, Attn: Susan McGuire, Investor Relations, telephone number (631)
694-6900. You may also obtain copies of these documents, at no cost, by
accessing our website at http://www.reckson.com; however, the information on
our website is not considered part of this prospectus or any accompanying
prospectus supplement.
RECKSON ASSOCIATES AND THE OPERATING PARTNERSHIP
Reckson Associates is a self-administered and self-managed REIT
engaged in the business of owning, developing, re-positioning, acquiring,
constructing, managing and leasing of primarily Class A office properties in
the Tri-State Area. We own all of our interests in our real properties,
directly or indirectly, through the Operating Partnership. Reckson Associates
is the sole general partner of the Operating Partnership and, as of March 31,
2004, owned approximately 94.6% of the Operating Partnership's outstanding
common units of limited partnership interests.
Based on industry surveys, we believe that we are one of the largest
owners and managers of Class A office properties in the Tri-State Area. When
we refer to Class A office buildings in this prospectus, we mean well
maintained, high quality buildings that achieve rental rates that are at the
higher end of the range of rental rates for office properties in the
particular market.
As of March 31, 2004, we owned and controlled, directly or
indirectly, 89 properties encompassing approximately 15.7 million rentable
square feet, all of which we manage. Our properties consist of 77 Class A
office properties encompassing approximately 14.6 million rentable square
feet, 11 industrial/R&D properties encompassing approximately 1.1 million
rentable square feet and one retail property encompassing approximately
14
9,000 rentable square feet. We also own a 355,000 square foot office building
in Orlando, Florida. As of March 31, 2004, we also owned approximately 313
acres of land in 12 separate parcels on which we can develop approximately 3.0
million square feet of office space.
Unless the context otherwise requires, all references to "we," "us,"
or "our company" refer to Reckson Associates and its consolidated
subsidiaries, including the Operating Partnership.
Our executive offices are located at 225 Broadhollow Road, Melville,
New York 11747 and our telephone number at that location is (631) 694-6900. At
March 31, 2004, we had approximately 275 employees.
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement,
the net proceeds to Reckson Associates or the Operating Partnership, as the
case may be, from the sale of the securities offered by the applicable
prospectus supplement will be used for the repayment of existing indebtedness,
the development or acquisition of additional properties as suitable
opportunities arise and the renovation, expansion and improvement of our
existing properties, in each case, as described in detail in the applicable
prospectus supplement depending on the circumstances at the time of the
related offering, and for other general corporate purposes.
RATIOS OF EARNINGS TO FIXED CHARGES
AND FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the consolidated ratios of earnings to
fixed charges and the consolidated ratios of earnings to fixed charges and
preferred stock dividends of Reckson Associates and the Operating Partnership
for the periods shown:
THREE YEAR ENDED DECEMBER 31,
MONTHS ENDED
MARCH 31, -------------------------------------------------------------
2004 2003 2002 2001 2000 1999
-------------- --------- --------- -------- ------- ------
RECKSON ASSOCIATES:
Ratio of Earnings to Fixed Charges 1.65x 1.48x 1.74x 2.23x 2.24x 2.20x
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends 1.43x 1.20x 1.41x 1.75x 1.65x 1.55x
OPERATING PARTNERSHIP:
Ratio of Earnings to Fixed Charges 1.65x 1.48x 1.74x 2.27x 2.26x 2.22x
Ratio of Earnings to Fixed Charges and
Preferred Distributions 1.43x 1.20x 1.41x 1.79x 1.66x 1.56x
The ratios of earnings to fixed charges were computed by dividing
earnings by fixed charges. The ratio of earnings to fixed charges and
preferred stock dividends were computed by dividing earnings by the aggregate
of fixed charges and preferred stock dividends. For this purpose, earnings
consist of income from continuing operations before minority interest, fixed
charges and, for the ratio of earnings to fixed charges and preferred stock
dividends, preferred stock dividends. Fixed charges consist of interest
expense (including interest costs capitalized), ground rent expense and the
amortization of debt issuance costs.
The above ratios were calculated in accordance with Item 503 of
Regulation S-K. As a result, all years prior to 2003 have been restated to
exclude income from discontinued operations and include certain costs
associated with losses from extinguishment of debt in accordance with
Financial Accounting Standards Board Statement No. 145, which was adopted by
us on January 1, 2003. These costs were previously reported as extraordinary
losses and excluded from prior reported ratios.
15
DESCRIPTION OF DEBT SECURITIES
The debt securities of the Operating Partnership covered by this
prospectus (the "Debt Securities") will be issued under an Indenture (the
"Indenture") among the Operating Partnership, Reckson Associates and The Bank
of New York (the "Trustee"). The Indenture has been filed as an exhibit to the
Registration Statement of which this prospectus is a part and is available for
inspection at the corporate trust office of the Trustee at One Wall Street,
New York, New York 10286. The Indenture is subject to, and governed by, the
Trust Indenture Act of 1939, as amended (the "TIA"). The statements made
hereunder relating to the Indenture and the Debt Securities to be issued
thereunder are summaries of the material provisions thereof and do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all provisions of the Indenture and the Debt Securities. All
Section references appearing herein are to sections of the Indenture, and
capitalized terms used but not defined herein shall have the respective
meanings set forth in the Indenture.
GENERAL
The Debt Securities will be direct, unsecured obligations of the
Operating Partnership and will rank equally with all other unsecured and
unsubordinated indebtedness of the Operating Partnership. The Debt Securities
may be issued without limit as to aggregate principal amount, in one or more
series, in each case as established from time to time in or pursuant to
authority granted by a resolution of the Board of Directors of Reckson
Associates as sole general partner of the Operating Partnership, or as
established in one or more indentures supplemental to the Indenture. All Debt
Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the
holders of the Debt Securities of the series, for issuances of additional Debt
Securities of the same series.
The Indenture provides that there may be more than one Trustee
thereunder, each with respect to one or more series of Debt Securities. Any
Trustee under the Indenture may resign or be removed with respect to one or
more series of Debt Securities, and a successor Trustee may be appointed to
act with respect to the series. In the event that two or more persons are
acting as Trustee with respect to different series of Debt Securities, each
Trustee shall be a trustee of a trust under the Indenture separate and apart
from the trust administered by any other Trustee, and, except as otherwise
indicated herein, any action described herein to be taken by a Trustee may be
taken by each Trustee with respect to, and only with respect to, the one or
more series of Debt Securities for which it is Trustee under the Indenture.
Reference is made to the prospectus supplement relating to the series
of Debt Securities being offered for the specific terms thereof, including:
(1) the title of the Debt Securities;
(2) the aggregate principal amount of the Debt Securities and any
limit on the aggregate principal amount;
(3) the percentage of the principal amount at which the Debt
Securities will be issued and, if other than the principal
amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity
thereof;
(4) the date or dates, or the method for determining the date or
dates, on which the principal of such Debt Securities will be
payable;
(5) the rate or rates (which may be fixed or variable), or the
method by which the rate or rates shall be determined, at which
the Debt Securities will bear interest, if any;
(6) the date or dates, or the method for determining the date or
dates, from which any interest will accrue, the dates on which
any interest will be payable, the record dates for such
interest payment dates, or the method by which any date shall
be determined, the person to whom the interest shall
16
be payable, and the basis upon which interest shall be
calculated if other than that of a 360-day year of twelve
30-day months;
(7) the place or places where the principal of (and premium, if
any) and interest, if any, on the Debt Securities will be
payable, the Debt Securities may be surrendered for
registration of transfer or exchange and notices or demands to
or upon the Operating Partnership in respect of the Debt
Securities and the Indenture may be served;
(8) the date or dates on which or the period or periods within
which, the price or prices at which and the terms and
conditions upon which the Debt Securities may be redeemed, as a
whole or in part, at the option of the Operating Partnership,
if the Operating Partnership is to have an option;
(9) the obligation, if any, of the Operating Partnership to redeem,
repay or purchase the Debt Securities pursuant to any sinking
fund or analogous provision or at the option of a holder
thereof, and the date or dates on which or the period or
periods within which, the price or prices at which and the
terms and conditions upon which the Debt Securities will be
redeemed, repaid or purchased, as a whole or in part, pursuant
to its obligation;
(10) if other than U.S. dollars, the currency or currencies in which
the Debt Securities are denominated and payable, which may be a
foreign currency or units of two or more foreign currencies or
a composite currency or currencies, and the terms and
conditions relating thereto;
(11) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on the Debt Securities may be
determined with reference to an index, formula or other method
(which index, formula or method may, but need not be, based on
a currency, currencies, currency unit or units or composite
currency or currencies) and the manner in which the amounts
shall be determined;
(12) any additional events of default or covenants of the Debt
Securities;
(13) whether the Debt Securities will be issued in certificated
and/or book-entry form;
(14) whether the Debt Securities will be in registered or bearer
form and, if in registered form, the denominations thereof if
other than $1,000 and any integral multiple thereof and, if in
bearer form, the denominations thereof if other than $5,000 and
terms and conditions relating thereto;
(15) whether the Debt Securities will be fully and unconditionally
guaranteed by Reckson Associates pursuant to the Guarantees
(the "Guaranteed Securities");
(16) if the defeasance and covenant defeasance provisions described
herein are to be inapplicable or any modification of these
provisions;
(17) if the Debt Securities are to be issued upon the exercise of
debt warrants, the time, manner and place for the Debt
Securities to be authenticated and delivered;
(18) whether and under what circumstances the Operating Partnership
will pay additional amounts on the Debt Securities in respect
of any tax, assessment or governmental charge and, if so,
whether the Operating Partnership will have the option to
redeem such Debt Securities in lieu of making a payment;
(19) if other than the Trustee, the identity of each security
registrar and/or paying agent; and
(20) any other material terms of the Debt Securities.
17
The Debt Securities may provide for less than the entire principal
amount thereof to be payable upon declaration of acceleration of the maturity
thereof ("Original Issue Discount Securities"). If material or applicable,
special U.S. federal income tax, accounting and other considerations
applicable to Original Issue Discount Securities will be described in the
applicable prospectus supplement.
Except with respect to a covenant limiting the incurrence of
indebtedness, a covenant requiring a certain percentage of unencumbered assets
and a covenant requiring any successor in a business combination with the
Operating Partnership to assume all of the obligations of the Operating
Partnership under the Indenture, the Indenture does not contain any other
provisions that would limit the ability of the Operating Partnership or
Reckson Associates to incur indebtedness or that would afford Holders of the
Debt Securities protection in the case of any of the following events:
o a highly leveraged or similar transaction involving the
Operating Partnership, the management of the Operating
Partnership or Reckson Associates, or any affiliate of any
these parties;
o a change in control; or
o a reorganization, restructuring, merger or similar transaction
involving the Operating Partnership or Reckson Associates that
may adversely affect the Holders of the Debt Securities.
In addition, subject to the covenants referred to above, the
Operating Partnership or Reckson Associates may, in the future, enter into
certain transactions, such as the sale of all or substantially all of its
assets or the merger or consolidation of the Operating Partnership or Reckson
Associates, that would increase the amount of the Operating Partnership's
indebtedness or substantially reduce or eliminate the Operating Partnership's
assets, which may have an adverse effect on the Operating Partnership's
ability to service its indebtedness, including the Debt Securities. In
addition, restrictions on ownership and transfers of Reckson Associates'
common stock and preferred stock which are designed to preserve its status as
a REIT may act to prevent or hinder a change in control. See "Description of
Common Stock--Restrictions on Ownership" and "Description of Preferred
Stock--Restrictions on Ownership."
GUARANTEES
Reckson Associates will fully and unconditionally guarantee the due
and punctual payment of principal of, premium, if any, and interest on any
Debt Securities not rated investment grade by at least one nationally
recognized statistical rating organization at the time of issuance by the
Operating Partnership, whether at a maturity date, by declaration of
acceleration, call for redemption or otherwise.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable prospectus supplement,
the Debt Securities of any series which are registered securities, other than
registered securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $1,000 and any integral
multiple thereof and the Debt Securities which are bearer securities, other
than bearer securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $5,000.
Unless otherwise specified in the applicable prospectus supplement,
the principal of (and premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee
provided that, at the option of the Operating Partnership, payment of interest
may be made by check mailed to the address of the Person entitled thereto as
it appears in the applicable Security Register or by wire transfer of funds to
the Person at an account maintained within the United States.
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the Person in whose name the Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of the Defaulted Interest to be fixed by the
Trustee,
18
notice whereof shall be given to the Holder of the Debt Security not less than
10 days prior to the Special Record Date, or may be paid at any time in any
other lawful manner, all as more completely described in the Indenture.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of the
Debt Securities at the corporate trust office of the Trustee referred to
above. In addition, subject to certain limitations imposed upon Debt
Securities issued in book-entry form, the Debt Securities of any series may be
surrendered for registration of transfer thereof at the corporate trust office
of the Trustee referred to above. Every Debt Security surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by
a written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Trustee
or the Operating Partnership may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith. If the
applicable prospectus supplement refers to any transfer agent (in addition to
the Trustee) initially designated by the Operating Partnership with respect to
any series of Debt Securities, the Operating Partnership may at any time
rescind the designation of any transfer agent or approve a change in the
location through which any transfer agent acts, except that the Operating
Partnership will be required to maintain a transfer agent in each place of
payment for the series. The Operating Partnership may at any time designate
additional transfer agents with respect to any series of Debt Securities.
Neither the Operating Partnership nor the Trustee shall be required
to:
o issue, register the transfer of or exchange any Debt Security
if the Debt Security may be among those selected for redemption
during a period beginning at the opening of business 15 days
before selection of the Debt Securities to be redeemed and
ending at the close of business on the day of selection;
o register the transfer of or exchange any Registered Security so
selected for redemption in whole or in part, except, in the
case of any Registered Security to be redeemed in part, the
portion thereof not to be redeemed;
o exchange any Bearer Security so selected for redemption except
that the Bearer Security may be exchanged for a Registered
Security of that series and like tenor, provided that the
Registered Security shall be simultaneously surrendered for
redemption; or
o issue, register the transfer of or exchange any Security which
has been surrendered for repayment at the option of the Holder,
except the portion, if any, of the Debt Security not to be so
repaid.
MERGER, CONSOLIDATION OR SALE
The Operating Partnership or, with respect to the Guaranteed
Securities, Reckson Associates may consolidate with, or sell, lease or convey
all or substantially all of its assets to, or merge with or into, any other
entity, provided that the following conditions are met:
o the Operating Partnership or Reckson Associates, as the case
may be, shall be the continuing entity, or the successor entity
(if other than the Operating Partnership or Reckson Associates,
as the case may be) formed by or resulting from any
consolidation or merger or which shall have received the
transfer of assets shall expressly assume payment of the
principal of (and premium, if any) and interest on all the Debt
Securities and the due and punctual performance and observance
of all of the covenants and conditions contained in the
Indenture and, if applicable, the Guarantees;
o immediately after giving effect to the transaction, no Event of
Default under the Indenture, and no event which, after notice
or the lapse of time, or both, would become an Event of
Default, shall have occurred and be continuing; and
19
o an officer's certificate and legal opinion covering these
conditions shall be delivered to the Trustee.
CERTAIN COVENANTS
Limitations on Incurrence of Debt. The Operating Partnership will
not, and will not permit any Subsidiary (as defined below) to, incur any
Indebtedness (as defined below), other than Permitted Debt (as defined below),
if, immediately after giving effect to the incurrence of additional
Indebtedness, the aggregate principal amount of all outstanding Indebtedness
of the Operating Partnership, and of its Subsidiaries determined at the
applicable proportionate interest of the Operating Partnership in each
Subsidiary, determined in accordance with GAAP (as defined below), is greater
than 60% of the sum of:
(1) the Total Assets (as defined below) as of the end of the calendar
quarter covered in the Operating Partnership's Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, most recently filed with
the Commission prior to the incurrence of such additional Indebtedness or, if
the Operating Partnership is not then subject to the reporting requirements of
the Exchange Act, as of its most recent calendar quarter; and
(2) any increase in the Total Assets since the end of the quarter,
including, without limitation, any increase in Total Assets resulting from the
incurrence of additional Indebtedness (the Total Assets adjusted by this
increase are referred to as the "Adjusted Total Assets").
The Operating Partnership will not, and will not permit any
Subsidiary to, incur any Indebtedness, other than Permitted Debt, if, for the
period consisting of the four consecutive fiscal quarters most recently ended
prior to the date on which additional Indebtedness is to be incurred, the
ratio of Consolidated Income Available for Debt Service (as defined below) to
the Annual Service Charge (as defined below) shall have been less than 1.5 to
1, on a pro forma basis after giving effect to the incurrence of Indebtedness
and to the application of the proceeds therefrom, and calculated on the
assumption that:
o the Indebtedness and any other Indebtedness incurred by the
Operating Partnership or its Subsidiaries since the first day
of the four-quarter period and the application of the proceeds
therefrom, including to refinance other Indebtedness, had
occurred at the beginning of the period,
o the repayment or retirement of any other Indebtedness by the
Operating Partnership or its Subsidiaries since the first day
of the four-quarter period had been incurred, repaid or
retained at the beginning of the period (except that, in making
the computation, the amount of Indebtedness under any revolving
credit facility shall be computed based upon the average daily
balance of borrowings under the credit facility during the
period),
o any income earned as a result of any increase in Adjusted Total
Assets since the end of the four-quarter period had been
earned, on an annualized basis, for the period, and
o in the case of an acquisition or disposition by the Operating
Partnership or any of its Subsidiaries of any asset or group of
assets since the first day of the four-quarter period,
including, without limitation, by merger, stock purchase or
sale, or asset purchase or sale, the acquisition or disposition
or any related repayment of Indebtedness had occurred as of the
first day of the period with the appropriate adjustments with
respect to the acquisition or disposition being included in the
pro forma calculation of Consolidated Income Available for Debt
Service to the Annual Service Charge.
The Operating Partnership will not, and will not permit any
Subsidiary to, incur any Indebtedness secured by any Lien (as defined below)
of any kind upon any of the property of the Operating Partnership or any of
its Subsidiaries (the "Secured Debt") if, immediately after giving effect to
the incurrence of the additional Secured Debt, the aggregate principal amount
of all outstanding Secured Debt of the Operating Partnership, and of its
Subsidiaries determined at the applicable proportionate interest of the
Operating Partnership in each Subsidiary, is greater than 40% of the Adjusted
Total Assets.
20
MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. The Operating Partnership
will maintain Total Unencumbered Assets (as defined below) of not less than
150% of the aggregate principal amount of all outstanding Unsecured Debt.
EXISTENCE. Except as permitted under "Merger, Consolidation or Sale,"
the Operating Partnership is required to do or cause to be done all things
necessary to preserve and keep in full force and effect its existence and that
of each Subsidiary and their respective rights and franchises; provided,
however, that the Operating Partnership shall not be required to preserve any
right or franchise if it determines that the preservation thereof is no longer
desirable in the conduct of its business and that the loss thereof is not
disadvantageous in any material respect to the Holders of the Debt Securities.
MAINTENANCE OF PROPERTIES. The Operating Partnership is required to
cause all of its material properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and to cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Operating
Partnership may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that the Operating Partnership and its Subsidiaries shall not be
prevented from selling or otherwise disposing for value their respective
properties in the ordinary course of business.
INSURANCE. The Operating Partnership is required to, and is required
to cause each of its Subsidiaries to, keep all of its insurable properties
insured against loss or damage at least equal to their then full insurable
value with financially sound and reputable insurance companies.
PAYMENT OF TAXES AND OTHER CLAIMS. The Operating Partnership is
required to pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (1) all taxes, assessments and governmental
charges levied or imposed upon them or any Subsidiary or upon their income,
profits or property or that of any Subsidiary, and (2) all lawful claims for
labor, materials and supplies which, if unpaid, might by law become a lien
upon the property of the Operating Partnership or any Subsidiary; provided,
however, that the Operating Partnership shall not be required to pay or
discharge or cause to be paid or discharged any tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings.
PROVISION OF FINANCIAL INFORMATION. The Holders of Debt Securities
will be provided with copies of the annual reports and quarterly reports of
the Operating Partnership. Whether or not the Operating Partnership is subject
to Section 13 or 15(d) of the Exchange Act and for so long as any Debt
Securities are outstanding, the Operating Partnership will, to the extent
permitted under the Exchange Act, be required to file with the Commission the
annual reports, quarterly reports and other documents which the Operating
Partnership would have been required to file with the Commission pursuant to
such Section 13 or 15(d) (the "Financial Statements") if the Operating
Partnership were so subject, the documents to be filed with the Commission on
or prior to the respective dates (the "Required Filing Dates") by which the
Operating Partnership would have been required so to file the documents if the
Operating Partnership were so subject. If the Operating Partnership is no
longer required to file with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act, the Operating Partnership will also in any event:
o within 15 days of each Required Filing Date (1) transmit by
mail to all Holders of Debt Securities, as their names and
addresses appear in the Security Register, without cost to the
Holders, copies of the annual reports and quarterly reports
which the Operating Partnership would have been required to
file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act if the Operating Partnership were subject to these
Sections and (2) file with the Trustee copies of the annual
reports, quarterly reports and other documents which the
Operating Partnership would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act
if the Operating Partnership were subject to these Sections;
and
o if filing these documents by the Operating Partnership with the
Commission is not permitted under the Exchange Act, promptly
upon written request and payment of the reasonable cost of
duplication and delivery, supply copies of the documents to any
prospective Holder.
21
As used herein and in the applicable prospectus supplement:
"ANNUAL SERVICE CHARGE" as of any date means the amount which is
expensed in any 12-month period for interest on Indebtedness.
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means
Consolidated Net Income of the Operating Partnership and its Subsidiaries (1)
plus amounts which have been deducted for (a) interest on Indebtedness of the
Operating Partnership and its Subsidiaries, (b) provision for taxes of the
Operating Partnership and its Subsidiaries based on income, (c) amortization
of debt discount, (d) depreciation and amortization, (e) the effect of any
noncash charge resulting from a change in accounting principles in determining
Consolidated Net Income for the period, (f) amortization of deferred charges,
and (g) provisions for or realized losses on properties and (2) less amounts
which have been included for gains on properties.
"GAAP" means accounting principles as are generally accepted in the
United States of America as of the date or time of any required computation.
"INDEBTEDNESS" means any indebtedness, whether or not contingent, in
respect of (1) borrowed money evidenced by bonds, notes, debentures or similar
instruments, (2) indebtedness secured by any mortgage, pledge, lien, charge,
encumbrance or any security interest existing on property, (3) the
reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued or amounts representing the balance deferred
and unpaid of the purchase price of any property except any balance that
constitutes an accrued expense or trade payable or (4) any lease of property
as lessee which would be reflected on a balance sheet as a capitalized lease
in accordance with GAAP, in the case of items of indebtedness under (1)
through (3) above to the extent that any items (other than letters of credit)
would appear as a liability on a balance sheet in accordance with GAAP, and
also includes, to the extent not otherwise included, any obligation to be
liable for, or to pay, as obligor, guarantor or otherwise (other than for
purposes of collection in the ordinary course of business), indebtedness of
another Person.
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of
any vendor, lessor, lender or other secured party to or of the Person under
any conditional sale or other title retention agreement or Capital Lease, upon
or with respect to any property or asset of the Person. A Capital Lease is a
lease to which the lessee is required concurrently to recognize the
acquisition of an asset and the incurrence of a liability in accordance with
GAAP.
"PERMITTED DEBT" means Indebtedness of the Operating Partnership or
any Subsidiary owing to any Subsidiary or the Operating Partnership; provided
that any Indebtedness is made pursuant to an intercompany note and is
subordinated in right of payment to the Securities; provided further that any
disposition, pledge or transfer of any Indebtedness to a Person (other than
the Operating Partnership or another Subsidiary) shall be deemed to be an
incurrence of Indebtedness by the Operating Partnership or a Subsidiary, as
the case may be, and not Permitted Debt.
"SIGNIFICANT SUBSIDIARY" means each significant subsidiary (as
defined in Regulation S-X promulgated under the Securities Act) of the
Operating Partnership or Reckson Associates.
"SUBSIDIARY" means any entity of which the Operating Partnership or
one or more other Subsidiaries owns or controls, directly or indirectly, more
than 50% of the shares of Voting Stock.
"TOTAL ASSETS" as of any date means the sum of (1) the Undepreciated
Real Estate Assets, (2) all other assets of the Operating Partnership, and of
its Subsidiaries determined at the applicable proportionate interest of the
Operating Partnership in each Subsidiary, determined in accordance with GAAP
(but excluding intangibles and accounts receivable) and (3) the cost of any
property of the Operating Partnership, or any Subsidiary thereof, in which the
Operating Partnership, or Subsidiary, as the case may be, has a firm,
non-contingent purchase obligation.
"TOTAL UNENCUMBERED ASSETS" means the sum of (1) those Undepreciated
Real Estate Assets not subject to a Lien on a consolidated basis, (2) all
other assets of the Operating Partnership, and of its Subsidiaries determined
at the applicable proportionate interest of the Operating Partnership in each
such Subsidiary, which are not subject to a
22
Lien determined in accordance with GAAP (but excluding intangibles and
accounts receivable) and (3) the cost of any property of the Operating
Partnership, or any Subsidiary thereof, in which the Operating Partnership, or
Subsidiary, as the case may be, has a firm, non-contingent purchase obligation
and which is not subject to a Lien.
"UNDEPRECIATED REAL ESTATE ASSETS" means as of any date the cost
(original cost plus capital improvements) of real estate assets of the Issuer
and its Subsidiaries on the date, before depreciation and amortization,
determined on a consolidated basis in accordance with GAAP.
"UNSECURED DEBT" means Indebtedness of the Operating Partnership or
any Subsidiary which is not secured by any mortgage, lien, charge, pledge or
security interest of any kind upon any of the properties owned by the
Operating Partnership or any of its Subsidiaries.
"VOTING STOCK" means stock having general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees, provided that stock that carries only the right to vote
conditionally on the happening of an event shall not be considered Voting
Stock.
ADDITIONAL COVENANTS. Any additional or different covenants of the
Operating Partnership or Reckson Associates with respect to any series of Debt
Securities will be set forth in the prospectus supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of
Default" with respect to any series of Debt Securities issued thereunder:
a. default for 30 days in the payment of any installment of
interest on any Debt Security of the series;
b. default in the payment of the principal of (or premium, if any,
on) any Debt Security of the series at its maturity;
c. default in making any sinking fund payment as required for any
Debt Security of the series;
d. default in the performance of any other covenant of the
Operating Partnership or Reckson Associates (if the Debt
Securities of the series are Guaranteed Securities) contained
in the Indenture (other than a covenant added to the Indenture
solely for the benefit of a series of Debt Securities issued
thereunder other than the series), the default having continued
for 60 days after written notice as provided in the Indenture;
e. the Operating Partnership, Reckson Associates (if the Debt
Securities of the series are Guaranteed Securities), any
Subsidiary in which the Operating Partnership has invested at
least $20,000,000 in capital or any entity in which the
Operating Partnership is the general partner shall fail to pay
any principal of, premium or interest on or any other amount
payable in respect of, any recourse Indebtedness that is
outstanding in a principal or notional amount of at least
$20,000,000 (or the equivalent thereof in one or more other
currencies), either individually or in the aggregate (but
excluding Indebtedness outstanding hereunder), of the Operating
Partnership and its consolidated Subsidiaries, taken as a
whole, when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand
or otherwise), and the failure shall continue after the
applicable grace period, if any, specified in any agreement or
instrument relating to Indebtedness, or any other event shall
occur or condition shall exist under any agreement or
instrument evidencing, securing or otherwise relating to any
the Indebtedness and shall continue after the applicable grace
period, if any, specified in the agreement or instrument, if
the effect of the event or condition is to accelerate, or to
permit the acceleration of, the maturity of the Indebtedness or
otherwise to cause, or to permit the holder or holders thereof
(or a trustee or agent on behalf of the holders) to cause the
Indebtedness to mature prior to its stated maturity;
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f. one or more final, non-appealable judgments or orders for the
payment of money aggregating $20,000,000 (or the equivalent
thereof in one or more other currencies) or more are rendered
against one or more of the Operating Partnership, Reckson
Associates (if the Debt Securities of the series are Guaranteed
Securities), any Subsidiary in which the Operating Partnership
has invested at least $20,000,000 in capital and remain
unsatisfied and either (1) enforcement proceedings shall have
been commenced by any creditor upon any judgment or order or
(2) there shall be a period of at least 60 days after entry
thereof during which a stay of enforcement of any judgment or
order, by reason of a pending appeal or otherwise, shall not be
in effect; provided, however, that any judgment or order shall
not give rise to an Event of Default under this clause if and
for so long as (A) the amount of the judgment or order is
covered by a valid and binding policy of insurance between the
defendant and the insurer covering full payment thereof and (B)
the insurer has been notified, and has not disputed the claim
made for payment, of the amount of the judgment or order;
g. certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the
Operating Partnership, Reckson Associates (if the Debt
Securities of the series are Guaranteed Securities) or any
Significant Subsidiary or any substantial part of their
respective property; or
h. any other Event of Default provided with respect to a
particular series of Debt Securities.
If an Event of Default under the Indenture with respect to Debt
Securities of any series at the time Outstanding occurs and is continuing
(other than an Event of Default specified in subsection (g) above, which shall
result in an automatic acceleration), then in every case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Debt
Securities of that series may declare the principal amount (or, if the Debt
Securities of that series are Original Issue Discount Securities or Indexed
Securities, the portion of the principal amount as may be specified in the
terms thereof) of all of the Debt Securities of that series, or such lesser
amount as may be provided for in the Debt Securities of that series, to be due
and payable immediately by written notice thereof to the Operating Partnership
and Reckson Associates (and to the Trustee if given by the Holders). However,
at any time after the declaration of acceleration with respect to Debt
Securities of the series has been made, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the Holders of not
less than a majority in principal amount of Outstanding Debt Securities of the
series may rescind and annul the declaration and its consequences if
(a) the Operating Partnership or Reckson Associates shall have
deposited with the Trustee all required payments of the principal of (and
premium, if any) and interest on the Debt Securities of the series, plus
certain fees, expenses, disbursements and advances of the Trustee, and
(b) all Events of Default, other than the non-payment of accelerated
principal of (or specified portion thereof), or premium (if any) or interest
on the Debt Securities of the series have been cured or waived as provided in
the Indenture.
The Indenture also provides that the Holders of not less than a
majority in principal amount of the Outstanding Debt Securities of any series
may waive any past default with respect to the series and its consequences,
except a default
o in the payment of the principal of (or premium, if any) or
interest on any Debt Security of the series, or
o in respect of a covenant or provision contained in the
Indenture that cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security of the
series affected thereby.
The Trustee will be required to give notice to the Holders of Debt
Securities within 90 days of a default under the Indenture unless the default
has been cured or waived; provided, however, that the Trustee may withhold
24
notice to the Holders of any series of Debt Securities of any default with
respect to the series (except a default in the payment of the principal of (or
premium, if any) or interest on any Debt Security of the series or in the
payment of any sinking fund installment in respect of any Debt Security of the
series) if specified Responsible Officers of the Trustee consider the
withholding to be in the interest of the Holders.
The Indenture provides that no Holders of Debt Securities of any
series may institute any proceedings, judicial or otherwise, with respect to
the Indenture or for any remedy thereunder, except in the case of failure of
the Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the Holders of
not less than 25% in principal amount of the Outstanding Debt Securities of
the series, as well as an offer of reasonable indemnity. This provision will
not prevent, however, any holder of Debt Securities from instituting suit for
the enforcement of payment of the principal of (and premium, if any) and
interest on the Debt Securities at the respective due dates thereof.
Subject to provisions in the Indenture relating to its duties in case
of default, the Trustee is under no obligation to exercise any of its rights
or powers under the Indenture at the request or direction of any Holders of
any series of Debt Securities then Outstanding under the Indenture, unless the
Holders shall have offered to the Trustee thereunder reasonable security or
indemnity. The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series (or of all Debt Securities then
Outstanding under the Indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or of exercising any trust or power conferred upon
the Trustee. However, the Trustee may refuse to follow any direction which is
in conflict with any law or the Indenture, or which may be unduly prejudicial
to the Holders of Debt Securities of the series not joining therein.
Within 120 days after the close of each fiscal year, the Operating
Partnership and Reckson Associates must deliver a certificate of an officer
certifying to the Trustee whether or not the officer has knowledge of any
default under the Indenture and, if so, specifying each default and the nature
and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture will be permitted to be
made only with the consent of the Holders of not less than a majority in
principal amount of all Outstanding Debt Securities of each series which are
affected by the modification or amendment; provided, however, that no
modification or amendment may, without the consent of the Holder of each Debt
Security affected thereby:
o change the Stated Maturity of the principal of, or premium (if
any) or any installment of interest on, any Debt Security,
reduce the principal amount of, or the rate or amount of
interest on, or any premium payable on redemption of, any Debt
Security, or reduce the amount of principal of an Original
Issue Discount Security that would be due and payable upon
declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of
repayment of the holder of any Debt Security, change the place
of payment, or the coin or currency, for payment of principal
of, premium, if any, or interest on any Debt Security or impair
the right to institute suit for the enforcement of any payment
on or with respect to any Debt Security;
o reduce the above-stated percentage of outstanding Debt
Securities of any series necessary to modify or amend the
Indenture, to waive compliance with certain provisions thereof
or certain defaults and consequences thereunder or to reduce
the quorum or voting requirements set forth in the Indenture;
o modify or affect in any manner adverse to the Holders the terms
and conditions of the obligations of Reckson Associates in
respect of the payment of principal (and premium, if any) and
interest on any Guaranteed Securities; or
o modify any of the foregoing provisions or any of the provisions
relating to the waiver of certain past defaults or certain
covenants, except to increase the required percentage to effect
the action or
25
to provide that certain other provisions may not be modified or
waived without the consent of the Holder of the Debt Security.
In addition to the Operating Partnership's obligation to pay the
principal of, and premium (if any) and interest on, the Debt Securities, the
Indenture contains several other affirmative and negative covenants as
described under "--Certain Covenants." None of the Operating Partnership,
Reckson Associates and the Trustee may waive compliance with the other
covenants unless the Holders of not less than a majority in principal amount
of a series of Outstanding Debt Securities consent to the waiver.
Modifications and amendments of the Indenture will be permitted to be
made by the Operating Partnership, Reckson Associates and the Trustee without
the consent of any Holder of Debt Securities for any of the following
purposes:
1. to evidence the succession of another Person to the Operating
Partnership as obligor or Reckson Associates as guarantor under
the Indenture;
2. to add to the covenants of the Operating Partnership or Reckson
Associates for the benefit of the Holders of all or any series
of Debt Securities or to surrender any right or power conferred
upon the Operating Partnership or Reckson Associates in the
Indenture;
3. to add Events of Default for the benefit of the Holders of all
or any series of Debt Securities;
4. to add or change any provisions of the Indenture to facilitate
the issuance of, or to liberalize certain terms of, Debt
Securities in bearer form, or to permit or facilitate the
issuance of Debt Securities in uncertificated form, provided
that this action shall not adversely affect the interests of
the Holders of the Debt Securities of any series in any
material respect;
5. to amend or supplement any provisions of the Indenture,
provided that no amendment or supplement shall materially
adversely affect the interests of the Holders of any Debt
Securities then Outstanding;
6. to secure the Debt Securities;
7. to establish the form or terms of Debt Securities of any
series;
8. to provide for the acceptance of appointment by a successor
Trustee or facilitate the administration of the trusts under
the Indenture by more than one Trustee;
9. to cure any ambiguity, defect or inconsistency in the
Indenture, provided that this action shall not adversely affect
the interests of Holders of Debt Securities of any series in
any material respect; or
10. to supplement any of the provisions of the Indenture to the
extent necessary to permit or facilitate defeasance and
discharge of any series of the Debt Securities, provided that
the action shall not adversely affect the interests of the
Holders of the Debt Securities of any series in any material
respect.
In addition, with respect to Guaranteed Securities, without the
consent of any Holder of Debt Securities, Reckson Associates, or a subsidiary
thereof, may directly assume the due and punctual payment of the principal of,
any premium and interest on all the Guaranteed Securities and the performance
of every covenant of the Indenture on the part of the Operating Partnership to
be performed or observed. Upon any assumption, Reckson Associates or the
subsidiary shall succeed to, and be substituted for and may exercise every
right and power of, the Operating Partnership under the Indenture with the
same effect as if Reckson Associates or the subsidiary had been the issuer of
the Guaranteed Securities and the Operating Partnership shall be released from
all obligations and covenants with respect to the Guaranteed Securities. No
assumption shall be permitted unless Reckson Associates has delivered to the
Trustee (1) an officers' certificate and an opinion of counsel, stating, among
other things, that the Guarantee and
26
all other covenants of Reckson Associates in the Indenture remain in full
force and effect and (2) an opinion of independent counsel that the Holders of
Guaranteed Securities shall have no materially adverse U.S. federal tax
consequences as a result of the assumption, and that, if any Debt Securities
are then listed on the New York Stock Exchange, that the Debt Securities shall
not be delisted as a result of the assumption.
In determining whether the Holders of the requisite principal amount
of Outstanding Debt Securities of a series have given any request, demand,
authorization, direction, notice, consent or waiver thereunder or whether a
quorum is present at a meeting of Holders of Debt Securities, the Indenture
provides that:
1. the principal amount of an Original Issue Discount Security
that shall be deemed to be Outstanding shall be the amount of
the principal thereof that would be due and payable as of the
date of the determination upon declaration of acceleration of
the maturity thereof;
2. the principal amount of a Debt Security denominated in a
foreign currency that shall be deemed Outstanding shall be the
U.S. dollar equivalent, determined on the issue date for the
Debt Security, of the principal amount (or, in the case of an
Original Issue Discount Security, the U.S. dollar equivalent on
the issue date of the Debt Security of the amount determined as
provided in (1) above);
3. the principal amount of an Indexed Security that shall be
deemed Outstanding shall be the principal face amount of the
Indexed Security at original issuance, unless otherwise
provided with respect to the Indexed Security pursuant to the
Indenture; and
4. Debt Securities owned by the Operating Partnership or any other
obligor upon the Debt Securities or any affiliate of the
Operating Partnership or of the other obligor shall be
disregarded.
The Indenture contains provisions for convening meetings of the
Holders of Debt Securities of a series. A meeting will be permitted to be
called at any time by the Trustee, and also, upon request, by the Operating
Partnership, Reckson Associates (in respect of a series of Guaranteed
Securities) or the Holders of at least 10% in principal amount of the
Outstanding Debt Securities of the series, in any case upon notice given as
provided in the Indenture. Except for any consent that must be given by the
Holder of each Debt Security affected by certain modifications and amendments
of the Indenture, any resolution presented at a meeting or adjourned meeting
duly reconvened at which a quorum is present will be permitted to be adopted
by the affirmative vote of the Holders of a majority in principal amount of
the Outstanding Debt Securities of that series; provided, however, that,
except as referred to above, any resolution with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
may be made, given or taken by the Holders of a specified percentage, which is
less than a majority, in principal amount of the Outstanding Debt Securities
of a series may be adopted at a meeting or adjourned meeting duly reconvened
at which a quorum is present by the affirmative vote of the Holders of the
specified percentage in principal amount of the Outstanding Debt Securities of
that series. Any resolution passed or decision taken at any meeting of Holders
of Debt Securities of any series duly held in accordance with the Indenture
will be binding on all Holders of Debt Securities of that series. The quorum
at any meeting called to adopt a resolution, and at any reconvened meeting,
will be Persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at the meeting with respect to a consent or waiver which may be
given by the Holders of not less than a specified percentage in principal
amount of the Outstanding Debt Securities of a series, the Persons holding or
representing the specified percentage in principal amount of the Outstanding
Debt Securities of the series will constitute a quorum.
Notwithstanding the foregoing provisions, any action to be taken at a
meeting of Holders of Debt Securities of any series with respect to any action
that the Indenture expressly provides may be taken by the Holders of a
specified percentage which is less than a majority in principal amount of the
Outstanding Debt Securities of a series may be taken at a meeting at which a
quorum is present by the affirmative vote of Holders of the specified
percentage in principal amount of the Outstanding Debt Securities of the
series.
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DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Operating Partnership may discharge certain obligations to
Holders of any series of Debt Securities that have not already been delivered
to the Trustee for cancellation and that either have become due and payable or
will become due and payable within one year (or scheduled for redemption
within one year) by irrevocably depositing with the Trustee, in trust, funds
in the currency or currencies, currency unit or units or composite currency or
currencies in which the Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on the Debt Securities in respect of principal
(and premium, if any) and interest to the date of the deposit (if the Debt
Securities have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be.
The Indenture provides that, unless these provisions are made
inapplicable to the Debt Securities of or within any series pursuant to the
Indenture, the Operating Partnership may elect either (a) to defease and
discharge itself and Reckson Associates (if the Debt Securities are Guaranteed
Securities) from any and all obligations with respect to the Debt Securities
(except for the obligation to pay additional amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on the Debt Securities and the obligations to register the
transfer or exchange of Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of the Debt Securities and to hold moneys for payment in trust)
("defeasance") or (b) to release itself and Reckson Associates (if the Debt
Securities are Guaranteed Securities) from their obligations with respect to
the Debt Securities under certain sections of the Indenture (including the
restrictions described under "--Certain Covenants") and, if provided pursuant
to the Indenture, their obligations with respect to any other covenant, and
any omission to comply with the obligations shall not constitute a default or
an Event of Default with respect to the Debt Securities ("covenant
defeasance"), in either case upon the irrevocable deposit by the Operating
Partnership or Reckson Associates with the Trustee, in trust, of an amount, in
the currency or currencies, currency unit or units or composite currency or
currencies in which the Debt Securities are payable at Stated Maturity, or
Government Obligations (as defined below), or both, applicable to the Debt
Securities which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest on the Debt Securities,
and any mandatory sinking fund or analogous payments thereon, on the scheduled
due dates therefor.
A trust will only be permitted to be established if, among other
things, the Operating Partnership or Reckson Associates has delivered to the
Trustee an Opinion of Counsel (as specified in the Indenture) to the effect
that the Holders of the Debt Securities will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of the defeasance or
covenant defeasance and will be subject to U.S. federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if the defeasance or covenant defeasance had not occurred, and the Opinion of
Counsel, in the case of defeasance, must refer to and be based upon a ruling
of the Internal Revenue Service (the "IRS") or a change in applicable U.S.
federal income tax law.
"Government Obligations" means securities which are (1) direct
obligations of the United States of America or the government which issued the
foreign currency in which the Debt Securities of a particular series are
payable, for the payment of which its full faith and credit is pledged or (2)
obligations of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or the government which issued
the foreign currency in which the Debt Securities of the series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or other government, which, in
either case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any Government Obligation or a specific
payment of interest on or principal of any Government Obligation held by the
custodian for the account of the holder of a depository receipt, provided that
(except as required by law) the custodian is not authorized to make any
deduction from the amount payable to the holder of the depository receipt from
any amount received by the custodian in respect of the Government Obligation
or the specific payment of interest on or principal of the Government
Obligation evidenced by the depository receipt.
28
Unless otherwise provided in the applicable prospectus supplement, if
after the Operating Partnership or Reckson Associates has deposited funds
and/or Government Obligations to effect defeasance or covenant defeasance with
respect to Debt Securities of any series:
(a) the Holder of a Debt Security of the series is entitled to, and
does, elect pursuant to the Indenture or the terms of the Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which the deposit has been made in respect of the Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the
currency, currency unit or composite currency in which the deposit has been
made, the indebtedness represented by the Debt Security shall be deemed to
have been, and will be, fully discharged and satisfied through the payment of
the principal of (and premium, if any) and interest on the Debt Security as
they become due out of the proceeds yielded by converting the amount so
deposited in respect of the Debt Security into the currency, currency unit or
composite currency in which the Debt Security becomes payable as a result of
the election or the Conversion Event based on the applicable market exchange
rate.
"Conversion Event" means the cessation of use of:
o a currency, currency unit or composite currency both by the
government of the country which issued the currency and for the
settlement of transactions by a central bank or other public
institutions of or within the international banking community;
or
o the euro both within the European Monetary System and for the
settlement of transactions by public institutions of or within
the European Community.
Unless otherwise provided in the applicable prospectus supplement,
all payments of principal of (and premium, if any) and interest on any Debt
Security that is payable in a foreign currency that ceases to be used by its
government of issuance shall be made in U.S. dollars.
In the event the Operating Partnership effects covenant defeasance
with respect to any Debt Securities and the Debt Securities are declared due
and payable because of the occurrence of any Event of Default other than the
Event of Default described in clause (d) under "--Events of Default, Notice
and Waiver" with respect to sections no longer applicable to the Debt
Securities or described in clause (h) under "--Events of Default, Notice and
Waiver" with respect to any other covenant as to which there has been covenant
defeasance, the amount in the currency, currency unit or composite currency in
which the Debt Securities are payable, and Government Obligations on deposit
with the Trustee, will be sufficient to pay amounts due on the Debt Securities
at the time of their Stated Maturity but may not be sufficient to pay amounts
due on the Debt Securities at the time of the acceleration resulting from the
Event of Default. However, the Operating Partnership and Reckson Associates
(if the Debt Securities are Guaranteed Securities) would remain liable to make
payment of the amounts due at the time of acceleration.
GOVERNING LAW
The Indenture and the Debt Securities shall be governed by the laws
of the State of New York.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any Debt Securities are
convertible into debt securities of the Operating Partnership or exchangeable
for equity securities of Reckson Associates will be set forth in the
applicable prospectus supplement. The terms will include the number or
principal amount of securities into which the debt securities are convertible
or for which the debt securities are exchangeable, the conversion or exchange
price (or manner of calculation thereof), the conversion or exchange period,
provisions as to whether conversion or exchange will be at the option of the
holders of the debt securities, Reckson Associates or the Operating
Partnership, the events requiring an adjustment of the conversion or exchange
price (or the manner of calculation thereof) and any provisions affecting
conversion or exchange in the event of the redemption of the debt securities.
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GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in
the form of one or more global securities (the "Global Securities") that will
be deposited with, or on behalf of, a depositary (the "Depositary") identified
in the applicable prospectus supplement relating to the series. Global
Securities may be issued in either registered or bearer form and in either
temporary or permanent form. The specific terms of the depositary arrangement
with respect to a series of Debt Securities will be described in the
applicable prospectus supplement relating to the series.
DESCRIPTION OF COMMON STOCK
GENERAL
Our charter provides that Reckson Associates may issue up to 100
million shares of common stock, $.01 par value per share. In addition, common
units of limited partnership interest in the Operating Partnership may be
redeemed for cash or, at the option of Reckson Associates, exchanged for
common stock of Reckson Associates on a one-for-one basis. As of July 1, 2004
there were 67,267,300 shares of common stock and 3,550,553 common units of
limited partnership interest (including 465,845 Class C common units which
are substantially identical to the common units except in respect of
distributions) outstanding.
All shares of common stock have been duly authorized and will be
fully paid and nonassessable. Subject to the preferential rights of any other
shares or series of stock and to the provisions of our charter regarding
Excess Stock (as defined under "Restrictions on Ownership of Capital Stock"),
holders of shares of common stock offered hereby will be entitled to receive
distributions on the stock if, as and when authorized and declared by the
Board of Directors of Reckson Associates out of assets legally available
therefor and to share ratably in the assets of Reckson Associates legally
available for distribution to its common stockholders in the event of
liquidation, dissolution or winding up after payment of or adequate provision
for all known debts and liabilities of Reckson Associates.
Subject to the provisions of our charter regarding Excess Stock, each
outstanding share of Reckson Associates' common stock entitles the holder to
one vote on all matters submitted to a vote of stockholders, including the
election of directors, and, except as provided with respect to any other class
or series of stock, the holders of these shares will possess the exclusive
voting power. There is no cumulative voting in the election of directors,
which means that the holders of a majority of the outstanding shares of
Reckson Associates' common stock can elect all of the directors then standing
for election and the holders of the remaining shares will not be able to elect
any directors.
Holders of shares of common stock have no preference, conversion,
exchange, sinking fund, redemption or appraisal rights and have no preemptive
rights to subscribe for any other securities. Subject to the provisions of our
charter regarding Excess Stock, shares of common stock will have equal
dividend, liquidation and other rights.
CERTAIN PROVISIONS OF OUR CHARTER
Under the MGCL, a Maryland corporation generally cannot dissolve,
amend its charter, merge, sell all or substantially all of its assets, engage
in a share exchange or engage in similar transactions outside the ordinary
course of business unless approved by the affirmative vote of stockholders
holding at least two-thirds of the shares entitled to vote on the matter
unless a lesser percentage (but not less than a majority of all of the votes
entitled to be cast on the matter) is set forth in the corporation's charter.
Our charter does not provide for a lesser percentage in these situations.
Our charter authorizes the Board of Directors to reclassify any
unissued shares of common stock into other classes or series of classes of
capital stock and to establish the number of shares in each class or series
and to set the preferences, conversion and other rights, voting powers,
restrictions, limitations and restrictions on ownership, limitations as to
dividends or other distributions, qualifications and terms or conditions of
redemption for each class or series.
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Prospective investors should review the section captioned "Risk
Factors--Limits on ownership and changes in control may deter changes in
management and third party acquisition proposals."
RESTRICTIONS ON OWNERSHIP
In order to qualify as a REIT under the Code, not more than 50% in
value of the outstanding capital stock of Reckson Associates may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code)
at any time during the last half of a taxable year and the stock must be
beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months (or during a proportionate part of a shorter taxable
year). To satisfy the above ownership requirements and certain other
requirements for qualification as a REIT, the Board of Directors has adopted,
and the stockholders prior to the IPO approved, a provision in our charter
restricting the ownership or acquisition of shares of Reckson Associates'
common stock and preferred stock. See "Restrictions on Ownership of Capital
Stock."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American
Stock Transfer & Trust Company.
DESCRIPTION OF PREFERRED STOCK
GENERAL
Our charter provides that Reckson Associates may issue up to 25
million shares of preferred stock, $.01 par value per share. As of July 1,
2004, there were 8,693,900 shares of 7-5/8% Series A Convertible Cumulative
Preferred Stock outstanding. Dividends on the Series A preferred stock are
payable quarterly in arrears at an annual rate of 7-5/8% of the liquidation
preference of $25 per share. The Series A preferred stock is convertible at
any time at the option of the holder at a conversion price of $28.51 per share
of common stock, subject to adjustment in certain circumstances. On or after
April 13, 2003, the shares of Series A preferred stock became redeemable, in
whole or in part, at the option of Reckson Associates into shares of common
stock.
On January 5, 2004, we redeemed the 2 million outstanding shares or
100% of our Series B Convertible Cumulative Preferred Stock through the
issuance of approximately 1.96 million shares of common stock.
During 1998, in connection with the acquisition of certain real
property, the Amended and Restated Agreement of Limited Partnership of the
Operating Partnership was supplemented (the "Supplements") to establish a
series of 25,000 preferred units of limited partnership interest of the
Operating Partnership designated as Series B preferred units, a series of
11,518 preferred units designated as Series C preferred units and a series of
6,000 preferred units designated as Series D preferred units. Each of the
Series B, C and D preferred units have a liquidation preference of $1,000 per
unit. Distributions on each Series B, C and D preferred unit are payable in
arrears quarterly in an amount equal to the greater of: (1) $17.50 or (2) the
quarterly distribution attributable to each Series B, C and D preferred unit
if the unit was converted into common stock, subject to a maximum increase of
5% of the distributions on the Series B, C or D preferred units over the
immediately preceding year. The distribution amount due on all Series B, C or
D preferred units is reduced during any period in which certain indebtedness
remains on certain of the acquired properties subject to a prepayment premium
or prepayment penalty. The distribution amount on the Series B, C or D
preferred units may be adjusted to reflect increases or decreases in the
dividends on the common stock of Reckson Associates.
The holders of Series B, C or D preferred units have the right to
convert their preferred units into common units of limited partnership
interest of the Operating Partnership at a price per unit of $32.51, $29.39 or
$29.12, respectively. Each Series B, C or D preferred unit is exchangeable, at
the option of its holder, for shares of preferred stock of Reckson Associates
with a liquidation preference equal to the liquidation preference of the
Series B, C or D preferred units and otherwise with the same terms as the
Series B, C or D preferred units other than the conversion and exchange rights
referred to above. The Operating Partnership, with regard to any notice of an
exchange, may
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elect to redeem all of the Series B, C or D preferred units that are the
subject of the exchange for cash in an amount equal to the stated value of
Series B, C or D preferred units plus any accrued distributions thereon.
As of March 31, 2004, the Operating Partnership had issued and
outstanding approximately 19,662 preferred units of limited partnership
interest with a liquidation preference value of $1,000 per unit and a current
annualized distribution rate of $55.60 per unit. On April 12, 2004, the holder
of these units gave notice to the Operating Partnership to convert
approximately 3,081 Series B preferred units. The Operating Partnership has
elected to redeem these units for approximately $3.1 million, including
accrued and unpaid dividends, which will be applied to amounts owed from the
unit holder under certain notes receivable of the Operating Partnership that
are secured in part by the minority partner's preferred unit interest in the
Operating Partnership, an interest in real property and a personal guarantee.
On June 30, 2004, the holder of these units gave notice to the Operating
Partnership to convert approximately 10,581 or 100% of the Series C
preferred units into common units of limited partnership interest of the
Operating Partnership. As of July 1, 2004, there were 0, 10,581, and 6,000
Series B, C and D preferred units outstanding, respectively.
The statements made hereunder relating to the preferred stock are
summaries of the material terms thereof and do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, the
applicable provisions of our charter and bylaws and any applicable articles
supplementary to the charter designating terms of a series of preferred stock
(a "Designating Amendment").
The issuance of preferred stock could adversely affect the voting
power, dividend rights and other rights of holders of common stock. Although
the Board of Directors has no intention at the present time, it could
establish a series of preferred stock that could, depending on the terms of
the series, delay, defer or prevent a transaction or a change in control of
Reckson Associates that might involve a premium price for the common stock or
otherwise be in the best interest of the holders thereof. Management believes
that the availability of preferred stock will provide us with increased
flexibility in structuring possible future financing and acquisitions and in
meeting other needs that might arise.
TERMS
Subject to the limitations prescribed by our charter, the Board of
Directors is authorized to fix the number of shares constituting each series
of preferred stock and the designations and powers, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions thereof, including the provisions as may be
desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and other subjects or matters
as may be fixed by resolution of the Board of Directors. The preferred stock
will, when issued, be fully paid and nonassessable and will have no preemptive
rights.
Reference is made to the applicable prospectus supplement relating to
the series of preferred stock offered thereby for the specific terms thereof,
including:
o The title and stated value of the preferred stock;
o The number of shares of the preferred stock, the liquidation
preference per share of the preferred stock and the offering
price of the preferred stock;
o The dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to the preferred
stock;
o The date from which dividends on the preferred stock shall
accumulate, if applicable;
o The procedures for any auction and remarketing, if any, for the
preferred stock;
o The provision for a sinking fund, if any, for the preferred
stock;
o The provisions for redemption, if applicable, of the preferred
stock;
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o Any listing of the preferred stock on any securities exchange;
o The terms and conditions, if applicable, upon which the
preferred stock may or will be convertible into our common
stock, including the conversion price or manner of calculation
thereof;
o The relative ranking and preferences of the preferred stock as
to dividend rights and rights upon liquidation, dissolution or
winding up of the affairs of Reckson Associates;
o Any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to
preserve the status of Reckson Associates as a REIT;
o A discussion of material federal income tax considerations
applicable to the preferred stock; and
o Any other specific terms, preferences, rights, limitations or
restrictions of the preferred stock.
RANK
Unless otherwise specified in the applicable prospectus supplement,
the preferred stock will, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of Reckson Associates, rank:
i. senior to the common stock and to all classes or series of
equity securities issued by Reckson Associates the terms of
which provide that the equity securities shall rank junior to
the preferred stock;
ii. on a parity with all classes or series of equity securities
issued by Reckson Associates, including the Series A preferred
stock, other than those referred to in clauses (i) and (iii);
and
iii. junior to all classes or series of equity securities issued by
Reckson Associates which the terms of the preferred stock
provide will rank senior to it. The term "equity securities"
does not include convertible debt securities.
DIVIDENDS
Unless otherwise specified in the applicable prospectus supplement,
the preferred stock will have the rights with respect to payment of dividends
set forth below.
Holders of the preferred stock of each series will be entitled to
receive, when, as and if declared by our Board of Directors, out of assets of
Reckson Associates legally available for payment, cash dividends in the
amounts and on the dates as will be set forth in, or pursuant to, the
applicable prospectus supplement. Each dividend shall be payable to holders of
record as they appear on the stock transfer books of Reckson Associates on the
record dates as shall be fixed by our Board of Directors.
Dividends on any series of preferred stock may be cumulative or
non-cumulative, as provided in the applicable prospectus supplement.
Dividends, if cumulative, will be cumulative from and after the date set forth
in the applicable prospectus supplement. If our Board of Directors fails to
declare a dividend payable on a dividend payment date on any series of
preferred stock for which dividends are non-cumulative, then the holders of
the series of preferred stock will have no right to receive a dividend in
respect of the related dividend period and Reckson Associates will have no
obligation to pay the dividend accrued for the period, whether or not
dividends on the series of preferred stock are declared payable on any future
dividend payment date.
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If preferred stock of any series is outstanding, no full dividends
will be declared or paid or set apart for payment on any of the capital stock
of Reckson Associates of any other series ranking, as to dividends, on a
parity with or junior to the preferred stock of the series for any period
unless:
o if the series of preferred stock has a cumulative dividend,
full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the
payment thereof set apart for the payment for all past dividend
periods and the then current dividend period; or
o if the series of preferred stock does not have a cumulative
dividend, full dividends for the then current dividend period
have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart
for the payment on the preferred stock of the series.
When dividends are not paid in full (or a sum sufficient for the full
payment is not so set apart) upon preferred stock of any series and the shares
of any other series of preferred stock ranking on a parity as to dividends
with the preferred stock of the series, all dividends declared upon preferred
stock of the series and any other series of preferred stock ranking on a
parity as to dividends with the preferred stock shall be declared pro rata so
that the amount of dividends declared per share of preferred stock of the
series and the other series of preferred stock shall in all cases bear to each
other the same ratio that accrued dividends per share on the preferred stock
of the series and the other series of preferred stock (which shall not include
any accumulation in respect of unpaid dividends for prior dividend periods if
the preferred stock does not have a cumulative dividend) bear to each other.
No interest, or sum of money in lieu of interest, shall be payable in respect
of any dividend payment or payments on preferred stock of the series which may
be in arrears.
Except as provided in the immediately preceding paragraph, unless (1)
if the series of preferred stock has a cumulative dividend, full cumulative
dividends on the preferred stock of the series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past dividend periods and the then current
dividend period, and (2) if the series of preferred stock does not have a
cumulative dividend, full dividends on the preferred stock of the series have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, no dividends (other than in shares of common stock or other
capital stock ranking junior to the preferred stock of the series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment or other distribution shall be declared or made upon the common stock,
or any other of the capital stock of Reckson Associates ranking junior to or
on a parity with the preferred stock of the series as to dividends or upon
liquidation, nor shall any shares of common stock, or any other capital stock
of Reckson Associates ranking junior to or on a parity with the preferred
stock of the series as to dividends or upon liquidation, be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be paid
to or made available for a sinking fund for the redemption of any shares) by
Reckson Associates except:
(1) by conversion into or exchange for other capital stock of Reckson
Associates ranking junior to the preferred stock of the series as to dividends
and upon liquidation; or
(2) redemptions for the purpose of preserving the status of Reckson
Associates as a REIT.
REDEMPTION
If so provided in the applicable prospectus supplement, the preferred
stock will be subject to mandatory redemption or redemption at the option of
Reckson Associates, as a whole or in part, in each case upon the terms, at the
times and at the redemption prices set forth in the prospectus supplement.
The prospectus supplement relating to a series of preferred stock
that is subject to mandatory redemption will specify the number of shares of
the preferred stock that Reckson Associates will redeem in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to all accumulated and unpaid
dividends thereon (which shall not, if the preferred stock does not have a
cumulative dividend, include any accumulation in respect of unpaid dividends
for prior dividend periods) to the date
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of redemption. The redemption price may be payable in cash or other property,
as specified in the applicable prospectus supplement. If the redemption price
for preferred stock of any series is payable only from the net proceeds of the
issuance of capital stock of Reckson Associates, the terms of the preferred
stock may provide that, if no capital stock shall have been issued or to the
extent the net proceeds from any issuance are insufficient to pay in full the
aggregate redemption price then due, the preferred stock shall automatically
and mandatorily be converted into the applicable capital stock of Reckson
Associates pursuant to conversion provisions specified in the applicable
prospectus supplement.
Notwithstanding the foregoing, unless (1) if the series of preferred
stock has a cumulative dividend, full cumulative dividends on all shares of
any series of preferred stock shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past dividend periods and the then current dividend
period, and (2) if the series of preferred stock does not have a cumulative
dividend, full dividends on the preferred stock of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend
period, no shares of any series of preferred stock shall be redeemed unless
all outstanding preferred stock of the series is simultaneously redeemed;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of preferred stock of the series to preserve the status of Reckson
Associates as a REIT or pursuant to a purchase or exchange offer made on the
same terms to holders of all outstanding preferred stock of the series. In
addition, unless (1) if the series of preferred stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of any series of
preferred stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period, and (2) if
the series of preferred stock does not have a cumulative dividend, full
dividends on the preferred stock of any series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period, Reckson Associates
shall not purchase or otherwise acquire, directly or indirectly, any shares of
preferred stock of the series (except by conversion into or exchange for
capital stock of Reckson Associates ranking junior to the preferred stock of
the series as to dividends and upon liquidation); provided, however, that the
foregoing shall not prevent the purchase or acquisition of preferred stock of
the series to preserve the status of Reckson Associates as a REIT or pursuant
to a purchase or exchange offer made on the same terms to holders of all
outstanding preferred stock of the series.
If fewer than all of the outstanding shares of preferred stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by Reckson Associates and the shares may be redeemed pro rata from
the holders of record of the shares in proportion to the number of the shares
held or for which redemption is requested by the holder (with adjustments to
avoid redemption of fractional shares) or by lot or in any other reasonable
manner.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of record of preferred
stock of any series to be redeemed at the address shown on the stock transfer
books. Each notice shall state:
o the redemption date;
o the number of shares and series of the preferred stock to be
redeemed;
o the redemption price;
o the place or places where certificates for the preferred stock
are to be surrendered for payment of the redemption price;
o that dividends on the shares to be redeemed will cease to
accumulate on the redemption date; and
o the date upon which the holder's conversion rights, if any, as
to the shares shall terminate.
If fewer than all the shares of preferred stock of any series are to
be redeemed, the notice mailed to each holder thereof shall also specify the
number of shares of preferred stock to be redeemed from each holder. If notice
35
of redemption of any preferred stock has been given and if the funds necessary
for redemption have been set aside by Reckson Associates in trust for the
benefit of the holders of any preferred stock so called for redemption, then
from and after the redemption date dividends will cease to accumulate on the
preferred stock, and all rights of the holders of the preferred stock will
terminate, except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of Reckson Associates (referred to herein as a
"liquidation"), then, before any distribution or payment shall be made to the
holders of any common stock or any other class or series of capital stock of
Reckson Associates ranking junior to the preferred stock of the series in the
distribution of assets upon any liquidation, dissolution or winding up of
Reckson Associates, the holders of the preferred stock shall be entitled to
receive out of assets of Reckson Associates legally available for distribution
to stockholders liquidating distributions in the amount of the liquidation
preference per share (set forth in the applicable prospectus supplement), plus
an amount equal to all dividends accumulated and unpaid thereon (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if the preferred stock does not have a cumulative dividend). After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of preferred stock will have no rights or claim to any
remaining assets. In the event that, upon any voluntary or involuntary
liquidation, dissolution or winding up, the available assets of Reckson
Associates are insufficient to pay the amount of the liquidating distributions
on all outstanding preferred stock of the series and the corresponding amounts
payable on all shares of other classes or series of capital stock of Reckson
Associates ranking on a parity with the preferred stock in the distribution of
assets, then the holders of the preferred stock and all other classes or
series of capital stock shall share ratably in any distribution of assets in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled.
The consolidation or merger of Reckson Associates with or into any
other entity, or the merger of another entity with or into Reckson Associates,
or a statutory share exchange by Reckson Associates, or the sale, lease or
conveyance of all or substantially all of the property or business of Reckson
Associates, shall not be deemed to constitute a liquidation, dissolution or
winding up of Reckson Associates.
VOTING RIGHTS
Holders of the preferred stock will not have any voting rights,
except as set forth below or as otherwise from time to time required by law or
as indicated in the applicable prospectus supplement.
Whenever dividends on any series of preferred stock shall be in
arrears for six or more quarterly periods, the holders of the preferred stock
(voting separately as a class with all other series of preferred stock upon
which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of two additional directors of Reckson
Associates at a special meeting called by the holders of record of at least
ten percent (10%) of any series of preferred stock so in arrears, unless the
request is received less than 90 days before the date fixed for the next
annual or special meeting of the stockholders, or at the next annual meeting
of stockholders, and at each subsequent annual meeting until (i) if the series
of preferred stock has a cumulative dividend, all dividends accumulated on the
shares of preferred stock for the past dividend periods and the then current
dividend period shall have been fully paid or declared and a sum sufficient
for the payment thereof set aside for payment or (ii) if the series of
preferred stock does not have a cumulative dividend, four quarterly dividends
shall have been fully paid or declared and a sum sufficient for the payment
thereof set aside for payment. In these cases, the entire Board of Directors
will be increased by two directors.
Unless provided otherwise for any series of preferred stock, so long
as any shares of the preferred stock remain outstanding, Reckson Associates
will not, without the affirmative vote or consent of the holders of at least
two-thirds of the shares of the series of preferred stock outstanding at the
time, given in person or by proxy, either in writing or at a meeting (the
series voting separately as a class):
(1) authorize or create, or increase the authorized or issued amount
of, any class or series of capital stock ranking senior to the preferred stock
with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up of Reckson Associates, or reclassify
any authorized capital stock of Reckson
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Associates into preferred stock, or create, authorize or issue any obligation
or security convertible into or evidencing the right to purchase any stock; or
(2) amend, alter or repeal the provisions of our charter or the
Designating Amendment for the series of preferred stock, whether by merger,
consolidation or otherwise (an "Event"), so as to materially and adversely
affect any right, preference, privilege or voting power of the series of
preferred stock or the holders thereof;
provided, however, with respect to the occurrence of any of the Events set
forth in (2) above, so long as the series of preferred stock remains
outstanding with the terms thereof materially unchanged, taking into account
that upon the occurrence of an Event Reckson Associates may not be the
surviving entity, the occurrence of any Event shall not be deemed to
materially and adversely affect the rights, preferences, privileges or voting
powers of holders of the series of preferred stock; and provided, further,
that (x) any increase in the amount of the authorized preferred stock or the
creation or issuance of any other series of preferred stock, or (y) any
increase in the amount of authorized shares of the series of preferred stock
or any other series of preferred stock, in each case ranking on a parity with
or junior to the preferred stock of the series with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or
winding up of Reckson Associates, shall not be deemed to materially and
adversely affect the rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which the vote or consent would otherwise be
required shall be effected, all outstanding shares of the series of preferred
stock shall have been converted, redeemed or called for redemption and
sufficient funds shall have been deposited in trust to effect the redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of preferred
stock is convertible into shares of common stock will be set forth in the
applicable prospectus supplement. The terms will include the number of shares
of common stock into which the shares of preferred stock are convertible, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of
the preferred stock of Reckson Associates, the events requiring an adjustment
of the conversion price and provisions affecting conversion in the event of
the redemption of the preferred stock.
STOCKHOLDER LIABILITY
As discussed above under "Description of Common Stock--General,"
applicable Maryland law provides that no stockholder, including holders of
preferred stock, shall be personally liable for the acts and obligations of
Reckson Associates and that the funds and property of Reckson Associates shall
be the only recourse for these acts or obligations.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Restrictions on Ownership of Capital
Stock," for Reckson Associates to qualify as a REIT under the Code, not more
than 50% in value of the outstanding capital stock of Reckson Associates may
be owned, directly or indirectly, by five or fewer individuals (as defined in
the Code to include certain entities) during the last half of a taxable year.
Therefore, the Designating Amendment for each series of preferred stock may
contain provisions restricting the ownership and transfer of the preferred
stock. The applicable prospectus supplement will specify any additional
ownership limitation relating to a series of preferred stock. Our charter
limits ownership of our issued and outstanding 7-5/8% Series A Convertible
Cumulative Preferred Stock to 9.0% in value of the outstanding shares of all
of our capital stock. In addition, a stockholder may not acquire shares of our
Series A preferred stock that would result in the stockholder's owning in
excess of 20% of the lesser of the number or value of outstanding shares of
the Series A preferred stock.
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REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable prospectus supplement,
the Registrar and Transfer Agent for the preferred stock will be American
Stock Transfer & Trust Company.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
Reckson Associates may issue receipts ("Depositary Receipts") for
Depositary Shares, each of which will represent a fractional interest or a
share of a particular series of a class of preferred stock, as specified in
the applicable prospectus supplement. Preferred stock of each series of each
class represented by Depositary Shares will be deposited under a separate
Deposit Agreement (each, a "Deposit Agreement") among Reckson Associates, the
depositary named therein (the depositary or its successor, the "Preferred
Stock Depositary") and the holders from time to time of the Depositary
Receipts. Subject to the terms of the Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest
of a share of the particular series of a class of preferred stock represented
by the Depositary Shares evidenced by the Depositary Receipt, to all the
rights and preferences of the preferred stock represented by the Depositary
Shares, including dividend, voting, conversion, redemption and liquidation
rights.
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the
issuance and delivery of the preferred stock by Reckson Associates to the
Preferred Stock Depositary, Reckson Associates will cause the Preferred Stock
Depositary to issue, on our behalf, the Depositary Receipts. Copies of the
applicable form of Deposit Agreement and Depositary Receipt may be obtained
from Reckson Associates upon request.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depositary will distribute all cash dividends or
other cash distributions received in respect of the preferred stock to the
record holders of the Depositary Receipts evidencing the related Depositary
Shares in proportion to the number of the Depositary Receipts owned by the
holder, subject to certain obligations of holders to file proofs, certificates
and other information and to pay certain charges and expenses to the Preferred
Stock Depositary.
In the event of a distribution other than in cash, the Preferred
Stock Depositary will distribute property received by it to the record holders
of Depositary Receipts entitled thereto, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to the Preferred Stock Depositary, unless the Preferred
Stock Depositary determines that it is not feasible to make the distribution,
in which case the Preferred Stock Depositary may, with the approval of Reckson
Associates, sell the property and distribute the net proceeds from the sale to
holders.
WITHDRAWAL OF SHARES
Upon surrender of the Depositary Receipts at the corporate trust
office of the Preferred Stock Depositary (unless the related Depositary Shares
have previously been called for redemption), the holders thereof will be
entitled to delivery at the office, to or upon the holder's order, of the
number of whole or fractional shares of preferred stock and any money or other
property represented by the Depositary Shares evidenced by the Depositary
Receipts. Holders of Depositary Receipts will be entitled to receive whole or
fractional shares of the related preferred stock on the basis of the
proportion of preferred stock represented by each Depositary Share as
specified in the applicable prospectus supplement, but holders of the
preferred stock will not thereafter be entitled to receive Depositary Shares
therefor. If the Depositary Receipts delivered by the holder evidence a number
of Depositary Shares in excess of the number of Depositary Shares representing
the number of shares of preferred stock to be withdrawn, the Preferred Stock
Depositary will deliver to the holder at the same time a new Depositary
Receipt evidencing the excess number of Depositary Shares.
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REDEMPTION OF DEPOSITARY SHARES
Whenever Reckson Associates redeems preferred stock held by the
Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of
the same redemption date the number of Depositary Shares representing the
preferred stock so redeemed, provided Reckson Associates shall have paid in
full to the Preferred Stock Depositary the redemption price of the preferred
stock to be redeemed plus an amount equal to any accrued and unpaid dividends
thereon to the date fixed for redemption. The redemption price per Depositary
Share will be equal to the redemption price and any other amounts per share
payable with respect to the preferred stock. If less than all the Depositary
Shares are to be redeemed, the Depositary Shares to be redeemed will be
selected by the Preferred Stock Depositary by lot.
After the date fixed for redemption, the Depositary Shares so called
for redemption will no longer be deemed to be outstanding and all rights of
the holders of the Depositary Receipts evidencing the Depositary Shares so
called for redemption will cease, except the right to receive any moneys
payable upon redemption and any money or other property to which the holders
of the Depositary Receipts were entitled upon redemption upon surrender
thereof to the Preferred Stock Depositary.
VOTING OF THE UNDERLYING PREFERRED SHARES
Upon receipt of notice of any meeting at which the holders of the
preferred stock are entitled to vote, the Preferred Stock Depositary will mail
the information contained in the notice of meeting to the record holders of
the Depositary Receipts evidencing the Depositary Shares which represent the
preferred stock. Each record holder of Depositary Receipts evidencing
Depositary Shares on the record date (which will be the same date as the
record date for the preferred stock) will be entitled to instruct the
Preferred Stock Depositary as to the exercise of the voting rights pertaining
to the amount of preferred stock represented by the holder's Depositary
Shares. The Preferred Stock Depositary will vote the amount of preferred stock
represented by the Depositary Shares in accordance with the instructions, and
we will agree to take all reasonable action which may be deemed necessary by
the Preferred Stock Depositary in order to enable the Preferred Stock
Depositary to do so. The Preferred Stock Depositary will abstain from voting
the amount of preferred stock represented by the Depositary Shares to the
extent it does not receive specific instructions from the holders of
Depositary Receipts evidencing the Depositary Shares.
LIQUIDATION PREFERENCE
In the event of liquidation, dissolution or winding up of Reckson
Associates, whether voluntary or involuntary, each holder of a Depositary
Receipt will be entitled to the fraction of the liquidation preference
accorded each share of preferred stock represented by the Depositary Share
evidenced by the Depositary Receipt, as set forth in the applicable prospectus
supplement.
CONVERSION OF PREFERRED SHARES
The Depositary Shares, as such, are not convertible into common stock
or any other securities or property of Reckson Associates. Nevertheless, if so
specified in the applicable prospectus supplement relating to an offering of
Depositary Shares, the Depositary Receipts may be surrendered by holders
thereof to the Preferred Stock Depositary with written instructions to the
Preferred Stock Depositary to instruct Reckson Associates to cause conversion
of the preferred stock represented by the Depositary Shares evidenced by
Depositary Receipts into whole shares of common stock, other preferred stock
of Reckson Associates or other shares of capital stock of Reckson Associates,
and Reckson Associates has agreed that upon receipt of instructions and any
amounts payable in respect thereof, it will cause the conversion thereof
utilizing the same procedures as those provided for delivery of preferred
stock to effect the conversion. If the Depositary Shares evidenced by a
Depositary Receipt are to be converted in part only, one or more new
Depositary Receipts will be issued for any Depositary Shares not to be
converted. No fractional shares of common stock will be issued upon
conversion, and if the conversion will result in a fractional share being
issued, an amount will be paid in cash by Reckson Associates equal to the
value of the fractional interest based upon the closing price of the common
stock on the last business day prior to the conversion.
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AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares which
represent the preferred stock and any provision of the Deposit Agreement may
at any time be amended by agreement between Reckson Associates and the
Preferred Stock Depositary. However, any amendment that materially and
adversely alters the rights of the holders of Depositary Receipts will not be
effective unless the amendment has been approved by the existing holders of at
least a majority of the Depositary Shares evidenced by the Depositary Receipts
then outstanding.
The Deposit Agreement may be terminated by Reckson Associates upon
not less than 30 days' prior written notice to the Preferred Stock Depositary
if (1) the termination is to preserve the status of Reckson Associates as a
REIT or (2) a majority of each class of preferred stock affected by the
termination consents to the termination, whereupon the Preferred Stock
Depositary shall deliver or make available to each holder of Depositary
Receipts, upon surrender of the Depositary Receipts held by the holder, the
number of whole or fractional shares of preferred stock as are represented by
the Depositary Shares evidenced by Depositary Receipts. In addition, the
Deposit Agreement will automatically terminate if (1) all outstanding
Depositary Shares shall have been redeemed, (2) there shall have been a final
distribution in respect of the related preferred stock in connection with any
liquidation, dissolution or winding up of Reckson Associates and the
distribution shall have been distributed to the holders of Depositary Receipts
evidencing the Depositary Shares representing the preferred stock or (iii)
each related share of preferred stock shall have been converted into capital
stock of Reckson Associates not so represented by Depositary Shares.
CHARGES OF PREFERRED STOCK DEPOSITARY
Reckson Associates will pay all transfer and other taxes and
governmental charges arising solely from the existence of the Deposit
Agreement. In addition, Reckson Associates will pay the fees and expenses of
the Preferred Stock Depositary in connection with the performance of its
duties under the Deposit Agreement. However, holders of Depositary Receipts
will pay the fees and expenses of the Preferred Stock Depositary for any
duties requested by the holders to be performed which are outside those
expressly provided for in the Deposit Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Preferred Stock Depositary may resign at any time by delivering
to Reckson Associates notice of its election to do so, and Reckson Associates
may at any time remove the Preferred Stock Depositary, any resignation or
removal to take effect upon the appointment of a successor Preferred Stock
Depositary. A successor Preferred Stock Depositary must be appointed within 60
days after delivery of the notice of resignation or removal and must be a bank
or trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
MISCELLANEOUS
The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from Reckson Associates which are
received by the Preferred Stock Depositary with respect to the related
preferred stock.
Neither Reckson Associates nor the Preferred Stock Depositary will be
liable if the Preferred Stock Depositary is prevented from or delayed in, by
law or any circumstances beyond its control, performing its obligations under
the Deposit Agreement. The obligations of Reckson Associates and the Preferred
Stock Depositary under the Deposit Agreement will be limited to performing
specified duties thereunder in good faith and without negligence, gross
negligence or willful misconduct, and Reckson Associates and the Preferred
Stock Depositary will not be obligated to prosecute or defend any legal
proceeding in respect of any Depositary Receipts, Depositary Shares or
preferred stock represented thereby unless satisfactory indemnity is
furnished. Reckson Associates and the Preferred Stock Depositary may rely on
written advice of counsel or accountants, or information provided by persons
presenting the preferred stock represented thereby for deposit, holders of
Depositary Receipts
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or other persons believed to be competent to give information, and on
documents believed to be genuine and signed by a proper party.
If the Preferred Stock Depositary shall receive conflicting claims,
requests or instructions from any holders of Depositary Receipts, on the one
hand, and from Reckson Associates, on the other hand, the Preferred Stock
Depositary shall be entitled to act on claims, requests or instructions
received from Reckson Associates.
RESTRICTIONS ON OWNERSHIP OF CAPITAL STOCK
EXCESS STOCK
Our charter provides that Reckson Associates may issue up to 75
million shares of excess stock, par value $.01 per share ("Excess Stock"). For
a description of Excess Stock, see "--Restrictions on Ownership" below.
RESTRICTIONS ON OWNERSHIP
In order for Reckson Associates to qualify as a REIT under the Code,
among other things, not more than 50% in value of the outstanding capital
stock of Reckson Associates may be owned, directly or indirectly, by five or
fewer individuals (defined in the Code to include certain entities) at any
time during the last half of a taxable year (other than the first year) (the
"Five or Fewer Requirement"), and the shares of capital stock must be
beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months (other than the first year) or during a
proportionate part of a shorter taxable year. Pursuant to the Code, stock held
by certain types of entities, pension trusts qualifying under Section 401(a)
of the Code, United States investment companies registered under the
Investment Company Act of 1940, partnerships, trusts and corporations, will be
attributed to the beneficial owners of the entities for purposes of the Five
or Fewer Requirement (i.e., the beneficial owners of the entities will be
counted as stockholders of Reckson Associates).
In order to protect Reckson Associates against the risk of losing its
status as a REIT due to a concentration of ownership among stockholders, our
charter, subject to certain exceptions, provides that no stockholder may own,
or be deemed to own by virtue of the attribution provisions of the Code, more
than 9.0% (the "Ownership Limit") of the aggregate number or value of the
outstanding shares of common stock. Reckson Associates may also impose
limitations on the ownership of preferred stock. See "Description of Preferred
Stock--Restrictions on Ownership." Any transfer of shares of stock that would
result in a violation of the Ownership Limit or that would result in
disqualification as a REIT, including any transfer that results in shares of
capital stock being owned by fewer than 100 persons or results in Reckson
Associates being "closely held" within the meaning of Section 856(h) of the
Code, shall be null and void, and the intended transferee will acquire no
rights to the shares of capital stock. The foregoing restrictions on
transferability and ownership will not apply if the Board of Directors
determines that it is no longer in the best interests of Reckson Associates to
attempt to qualify, or to continue to qualify, as a REIT. The Board of
Directors may, in its sole discretion, waive the Ownership Limit if evidence
satisfactory to the Board of Directors and tax counsel is presented that the
changes in ownership will not then or in the future jeopardize REIT status and
the Board of Directors otherwise decides that waiving the Ownership Limit is
in the best interests of Reckson Associates. In addition, in the case of
requests for waivers of the Ownership Limit by Persons (as defined in our
charter) that are not individuals or treated as individuals under the Code,
the Board of Directors is required to waive the Ownership Limit if evidence
satisfactory to the Board and its tax counsel is presented that, as a result
of the requested waiver, no individual through its ownership interest in the
Person will own in excess of the Ownership Limit.
Shares of capital stock owned, or deemed to be owned, or transferred
to a stockholder in excess of the Ownership Limit will automatically be
converted into shares of Excess Stock that will be transferred, by operation
of law, to the trustee of a trust for the exclusive benefit of one or more
charitable organizations described in Section 170(b)(1)(A) and 170(c) of the
Code (the "Charitable Beneficiary"). The trustee of the trust will be deemed
to own the Excess Stock for the benefit of the Charitable Beneficiary on the
date of the violative transfer to the original transferee-stockholder. Any
dividend or distribution paid to the original transferee-stockholder of Excess
Stock prior to our discovery that capital stock has been transferred in
violation of the provisions of our charter shall
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be repaid to the trustee upon demand. Any dividend or distribution authorized
and declared but unpaid shall be rescinded as void ab initio with respect to
the original transferee-stockholder and shall instead be paid to the trustee
of the trust for the benefit of the Charitable Beneficiary. Any vote cast by
an original transferee-stockholder of shares of capital stock constituting
Excess Stock prior to the discovery by us that shares of capital stock have
been transferred in violation of the provisions of our charter shall be
rescinded as void ab initio. While the Excess Stock is held in trust, the
original transferee-stockholder will be deemed to have given an irrevocable
proxy to the trustee to vote the capital stock for the benefit of the
Charitable Beneficiary. The trustee of the trust may transfer the interest in
the trust representing the Excess Stock to any person whose ownership of the
shares of capital stock converted into Excess Stock would be permitted under
the Ownership Limit. If the transfer is made, the interest of the Charitable
Beneficiary shall terminate and the proceeds of the sale shall be payable to
the original transferee-stockholder and to the Charitable Beneficiary as
described herein. The original transferee-stockholder shall receive the lesser
of (1) the price paid by the original transferee-stockholder for the shares of
capital stock that were converted into Excess Stock or, if the original
transferee-stockholder did not give value for the shares (e.g., the stock was
received through a gift, devise or other transaction), the average closing
price for the class of shares from which the shares of capital stock were
converted for the ten trading days immediately preceding the sale or gift, and
(2) the price received by the trustee from the sale or other disposition of
the Excess Stock held in trust. The trustee may reduce the amount payable to
the original transferee-stockholder by the amount of dividends and
distributions relating to the shares of Excess Stock which have been paid to
the original transferee-stockholder and are owed by the original
transferee-stockholder to the trustee. Any proceeds in excess of the amount
payable to the original transferee-stockholder shall be paid by the trustee to
the Charitable Beneficiary. Any liquidation distributions relating to Excess
Stock shall be distributed in the same manner as proceeds of a sale of Excess
Stock. If the foregoing transfer restrictions are determined to be void or
invalid by virtue of any legal decision, statute, rule or regulations, then
the original transferee-stockholder of any shares of Excess Stock may be
deemed, at the option of Reckson Associates, to have acted as an agent for
Reckson Associates in acquiring the shares of Excess Stock and to hold the
shares of Excess Stock for Reckson Associates.
In addition, Reckson Associates will have the right, for a period of
90 days during the time any shares of Excess Stock are held in trust, to
purchase all or any portion of the shares of Excess Stock at the lesser of (i)
the price initially paid for the shares by the original
transferee-stockholder, or if the original transferee-stockholder did not give
value for the shares (e.g., the shares were received through a gift, devise or
other transaction), the average closing price for the class of stock from
which the shares of Excess Stock were converted for the ten trading days
immediately preceding the sale or gift, and (ii) the average closing price for
the class of stock from which the shares of Excess Stock were converted for
the ten trading days immediately preceding the date Reckson Associates elects
to purchase the shares. Reckson Associates may reduce the amount payable to
the original transferee-stockholder by the amount of dividends and
distributions relating to the shares of Excess Stock which have been paid to
the original transferee-stockholder and are owed by the original
transferee-stockholder to the trustee. Reckson Associates may pay the amount
of the reductions to the trustee for the benefit of the Charitable
Beneficiary. The 90-day period begins on the later date of which notice is
received of the violative transfer if the original transferee-stockholder
gives notice to Reckson Associates of the transfer or, if no notice is given,
the date the Board of Directors determines that a violative transfer has been
made.
These restrictions will not preclude settlement of transactions
through the New York Stock Exchange.
All certificates representing shares of stock will bear a legend
referring to the restrictions described above.
Each stockholder shall upon demand be required to disclose to Reckson
Associates in writing any information with respect to the direct, indirect and
constructive ownership of the capital stock of Reckson Associates as the Board
of Directors deems necessary to comply with the provisions of the Code
applicable to REITs, to comply with the requirements of any taxing authority
or governmental agency or to determine any compliance.
The Ownership Limit may have the effect of delaying, deferring or
preventing a change in control of Reckson Associates unless the Board of
Directors determines that maintenance of REIT status is no longer in the best
interests of Reckson Associates.
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DESCRIPTION OF WARRANTS
Reckson Associates may issue warrants for the purchase of common
stock or preferred stock. Warrants may be issued independently or together
with any securities and may be attached to or separate from the securities.
Each series of Warrants will be issued under a separate warrant agreement
(each, a "Warrant Agreement") to be entered into between Reckson Associates
and a warrant agent specified therein ("Warrant Agent"). The Warrant Agent
will act solely for Reckson Associates in connection with the Warrants of the
series and will not assume any obligation or relationship of agency or trust
for or with any holders or beneficial owners of warrants.
The applicable prospectus supplement will describe the following
terms, where applicable, of the warrants in respect of which this prospectus
is being delivered:
o the title of the warrants;
o the aggregate number of the warrants;
o the price or prices at which the warrants will be issued;
o the currencies in which the price or prices of the warrants may
be payable;
o the designation, amount and terms of the securities purchasable
upon exercise of the warrants;
o the designation and terms of the other securities, if any, with
which the warrants are issued and the number of the warrants
issued with each security;
o if applicable, the date on and after which the warrants and the
securities purchasable upon exercise of the warrants will be
separately transferable;
o the price or prices at which and currency or currencies in
which the securities purchasable upon exercise of the warrants
may be purchased;
o the date on which the right to exercise the warrants shall
commence and the date on which the right shall expire;
o the minimum or maximum amount of the warrants which may be
exercised at any one time;
o information with respect to book-entry procedures, if any;
o a discussion of material federal income tax considerations; and
o any other material terms of the warrants, including terms,
procedures and limitations relating to the exchange and
exercise of the warrants.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences that are generally applicable to prospective holders of the
offered securities. The specific tax consequences of owning the offered
securities will vary depending on the circumstances of a particular
stockholder. The discussion contained herein does not address all aspects of
federal income taxation that may be relevant to particular holders. Therefore,
we strongly recommend that stockholders review the following discussion and
then consult with a tax advisor to determine the anticipated tax consequences
of owning the offered securities.
The information in this section and the opinions of Solomon and
Weinberg LLP are based on the Code, current and proposed Treasury regulations
thereunder, current administrative interpretations and court decisions. We
43
cannot assume that future legislation, Treasury regulations, administrative
interpretations and court decisions will not significantly change current law
or affect existing interpretations of current law in a manner which is adverse
to stockholders. Any such change could apply retroactively to transactions
preceding the date of change. We cannot assume that the opinions and
statements set forth herein, which do not bind the IRS or the courts, will not
be challenged by the IRS or will be sustained by a court if so challenged.
This summary does not discuss state, local or foreign tax
considerations. Except where indicated, the discussion below describes general
federal income tax considerations applicable to individuals who are U.S.
persons for federal income tax purposes (as described below) and who hold the
offered securities as "capital assets" within the meaning of Section 1221 of
the Code. Accordingly, the following discussion has limited application to
domestic corporations and persons subject to specialized federal income tax
treatment, such as foreign persons, trusts, estates, tax-exempt entities,
regulated investment companies and insurance companies.
Under applicable Treasury regulations a provider of advice on
specific issues of law is not considered an income tax return preparer unless
the advice is (i) given with respect to events that have occurred at the time
the advice is rendered and is not given with respect to the consequences of
contemplated actions, and (ii) is directly relevant to the determination of an
entry on a tax return. Accordingly, prospective stockholders should consult
their respective tax advisors and tax return preparers regarding the
preparation of any item on a tax return, even where the anticipated tax
treatment has been discussed herein. In addition, prospective stockholders are
urged to consult with their tax advisors with regard to the application of the
federal income tax laws to such stockholders' respective personal tax
situations, as well as any tax consequences arising under the laws of any
state, local or foreign taxing jurisdiction.
TAXATION OF RECKSON ASSOCIATES
We elected to be taxed as a REIT under Sections 856 through 860 of
the Code effective for our taxable year ended December 31, 1995. We believe
that we have been organized and have operated, and we intend to continue to
operate, in a manner to qualify as a REIT. In the opinion of Solomon and
Weinberg LLP, commencing with our taxable year ended December 31, 2000, we
have been organized and operated in conformity with the requirements for
qualification and taxation as a REIT under the Code and our proposed method of
operation will enable us to continue to meet the requirements for
qualification and taxation as a REIT. This opinion is based on factual
representations relating to the organization and operation of Reckson
Associates, the Operating Partnership, their respective subsidiaries, and
factual representations relating to our continued efforts to comply with the
various REIT tests. Qualification and taxation as a REIT depends upon our
ability to meet on a continuing basis, through actual annual operating
results, the various qualification tests imposed under the Code. Solomon and
Weinberg LLP will not review compliance with these tests on a continuing
basis. See "--Failure to Qualify" below.
The following is a general summary of the material Code provisions
that govern the federal income tax treatment of a REIT and its stockholders.
These provisions of the Code are highly technical and complex.
If we qualify for taxation as a REIT, we generally will not be
subject to federal corporate income taxes on net income that we distribute
currently to stockholders. This treatment substantially eliminates the double
taxation (taxation at both the corporate and stockholder levels) that
generally results from investment in a corporation. However, we will be
subject to federal income and excise tax in specific circumstances, including
the following:
o we will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net
capital gains, other than retained capital gains as discussed
below.
o we may be subject to the alternative minimum tax on our items
of tax preference.
o if we have (a) net income from the sale or other disposition of
foreclosure property (which is, in general, property acquired
by foreclosure or otherwise on default of a loan secured by the
property) held primarily for sale to customers in the ordinary
course of business or (b) other nonqualifying income from
foreclosure property, we will be subject to tax at the highest
corporate rate on such income.
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o if we have net income from prohibited transactions, which are,
in general, sales or other dispositions of property held
primarily for sale to customers in the ordinary course of
business, such income will be subject to a 100% tax.
o if we fail to satisfy either the 75% gross income test or the
95% gross income test, but nonetheless maintain our
qualification as a REIT because other requirements have been
met, we will be subject to a 100% tax on (i) the greater of (a)
the amount by which we fail the 75% test and (b) the amount by
which 90% of our gross income (other than income from
prohibited transactions) exceeds our gross income qualifying
under the 95% test, multiplied by (ii) a fraction intended to
reflect our profitability.
o if we fail to distribute during each calendar year at least the
sum of (a) 85% of our REIT ordinary income for such year, (b)
95% of our REIT capital gain net income for such year and (c)
any undistributed taxable income from prior years, we will be
subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed.
o if we acquire any asset from a corporation generally subject to
full corporate level tax in a transaction in which the basis of
the asset in our hands is determined by reference to the basis
of the asset in the hands of the corporation and we recognize
gain on the disposition of such asset during the ten-year
period beginning on the date on which such asset was acquired
by us, then we will be subject to the built-in gain rule.
Built-in gain is the excess of the fair market value of such
property at the time of acquisition by us over the adjusted
basis in such property at such time. Under the built-in gain
rule, such gain will be subject to tax at the highest regular
corporate rate applicable.
o if it is determined that amounts of certain income and expense
were not allocated between us and a taxable REIT subsidiary (as
defined herein) on the basis of arm's-length dealing, or to the
extent we charge a taxable REIT subsidiary interest in excess
of a commercially reasonable rate, we will be subject to a tax
equal to 100% of those amounts.
REQUIREMENTS FOR QUALIFICATION
The Code defines a REIT as a corporation, trust, or association:
(a) that is managed by one or more trustees or directors;
(b) the beneficial ownership of which is evidenced by transferable
shares or by transferable certificates of beneficial interest;
(c) that would be taxable as a domestic corporation, but for
Sections 856 through 859 of the Code;
(d) that is neither a financial institution nor an insurance company
subject to specific provisions of the Code;
(e) the beneficial ownership of which is held by 100 or more
persons;
(f) during the last half of each taxable year not more than 50% in
value of the outstanding stock of which is owned, directly or indirectly, by
five or fewer individuals; and
(g) that meets other tests, described below, regarding the nature of
its income and assets.
The Code provides that conditions (a) through (d), inclusive, must be
met during the entire taxable year and that condition (e) must be met during
at least 335 days of a taxable year of 12 months, or during a proportionate
part of a taxable year of less than 12 months. Conditions (e) and (f),
however, will not apply until after the first taxable year for which an
election is made to be taxed as a REIT. We believe we have issued and have
outstanding sufficient shares of stock with sufficient diversity of ownership
to allow us to satisfy conditions (e) and (f). In addition, we intend to
comply with Treasury regulations requiring us to ascertain the actual
ownership of our outstanding shares.
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Our charter includes restrictions regarding the transfer of shares of capital
stock that are intended to assist us in continuing to satisfy the share
ownership requirements described in (e) and (f) above. See "Restrictions on
Ownership of Capital Stock" above.
Finally, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. Our taxable year is the calendar year.
EFFECT OF SUBSIDIARY ENTITIES
PARTNERSHIP INTERESTS. In the case of a REIT that is a partner in a
partnership, Treasury regulations provide that the REIT is deemed to own its
proportionate share of the partnership's assets, and to earn its proportionate
share of the partnership's income, for purposes of the asset and gross income
tests applicable to REITs as described below. In addition, the assets and
gross income of the partnership are deemed to retain the same character in the
hands of the REIT. Thus, our proportionate share, based upon our percentage
capital interest, of the assets and items of income of partnerships in which
we own an equity interest (including the Operating Partnership) are treated as
our assets and items of income for purposes of applying the REIT requirements
described below. Consequently, to the extent that we directly or indirectly
hold an interest in a partnership, the partnership's assets and operations may
affect our ability to qualify as a REIT, even though we may have no control,
or only limited influence, over the partnership. A summary of certain rules
governing the federal income taxation of partnerships and their partners is
provided below in "-- Tax Aspects of Investments in Partnerships." The
partnership agreement of the Operating Partnership requires that the Operating
Partnership be operated in a manner that will enable us to satisfy the
requirements for classification as a REIT. In this regard, we control the
operation of the Operating Partnership through our rights as its sole general
partner.
DISREGARDED SUBSIDIARIES. If a REIT owns a corporate subsidiary that
is a "qualified REIT subsidiary," that subsidiary is disregarded for federal
income tax purposes and all assets, liabilities and items of income, deduction
and credit of the subsidiary are treated as assets, liabilities and items of
income, deduction and credit of the REIT itself, including for purposes of the
gross income and asset tests applicable to REITs as summarized below. A
qualified REIT subsidiary is any corporation, other than a "taxable REIT
subsidiary" as described below, that is wholly owned by a REIT, or by other
disregarded subsidiaries, or by a combination of the two. Other entities that
are wholly owned by a REIT, including single member limited liability
companies, are also generally disregarded as separate entities for federal
income tax purposes, including for purposes of the REIT income and asset
tests.
TAXABLE SUBSIDIARIES. A REIT, in general, may jointly elect with a
subsidiary corporation, whether or not wholly owned, to treat the subsidiary
corporation as a taxable REIT subsidiary (a "TRS"). The separate existence of
a TRS or other taxable corporation, unlike a disregarded subsidiary as
discussed above, is not ignored for federal income tax purposes. Accordingly,
such an entity would generally be subject to corporate income tax on its
taxable income. A REIT is not treated as holding the assets of a TRS or as
receiving any income that the TRS earns. Rather, the stock issued by the TRS
is an asset in the hands of the REIT, and the REIT recognizes as income the
dividends, if any, that it receives from the TRS. This treatment can affect
the income and asset test calculations that apply to the REIT, as described
below. Because a REIT does not include the assets and income of its TRSs in
determining compliance with the REIT requirements, such entities may be used
by a REIT to undertake indirectly activities that the REIT rules might
otherwise preclude it from doing directly or through disregarded subsidiaries
or partnerships. To the extent that we utilize TRSs, the corporate income tax
incurred by the TRSs may reduce the cash flow generated by us and our
subsidiaries in the aggregate and, therefore, our ability to make
distributions to our stockholders.
Certain restrictions are imposed on TRSs to ensure that such entities
will be subject to appropriate levels of federal income taxation. First, a TRS
may not deduct net interest payments made in any year to an affiliated REIT to
the extent that such payments exceed, generally, 50% of the TRS's adjusted
taxable income for that year (although the TRS may carry forward to, and
deduct in, a succeeding year the disallowed interest amount if the 50% test is
satisfied in that year). Additionally, if a TRS pays rent or certain other
amounts to an affiliated REIT that exceeds the amount that would be paid to an
unrelated party in an arm's-length transaction, an excise tax equal to 100% of
such excess will be imposed. The 100% tax is also imposed to the extent that a
REIT charges its TRS interest in excess of a commercially reasonable rate.
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INCOME TESTS. In order to maintain qualification as a REIT, we must
annually satisfy two gross income tests. First, at least 75% of our gross
income, excluding gross income from prohibited transactions, for each taxable
year must be derived directly or indirectly from investments relating to real
property or mortgages on real property, including rents from real property
and, in specific circumstances, from certain types of temporary investments.
Second, at least 95% of our gross income, excluding gross income from
prohibited transactions, for each taxable year must be derived from such real
property investments described above and from dividends, interest and gain
from the sale or disposition of stock or securities, or from any combination
of the foregoing. If we fail to satisfy one or both of the 75% or the 95%
gross income tests for any taxable year, we nevertheless may qualify as a REIT
for such year if we are entitled to relief under specific provisions of the
Code. These relief provisions generally are available if our failure to meet
any such tests was due to reasonable cause and not due to willful neglect, we
attach a schedule of the sources of our income to our federal corporate income
tax return and any incorrect information on the schedule was not due to fraud
with intent to evade tax. It is not possible, however, to state whether in all
circumstances we would be entitled to the benefit of these relief provisions.
As discussed above, even if these relief provisions were to apply, a tax would
be imposed with respect to the non-qualifying net income.
For purposes of the income tests, rents received by a REIT will
qualify as rents from real property only if the following conditions are met:
o the amount of rent must not be based in whole or in part on the
income or profits of any person. However, an amount received or
accrued generally will not be excluded from rents from real
property solely by reason of being based on a fixed percentage
or percentages of receipts or sales.
o rents received from a tenant generally will not qualify as
rents from real property in satisfying the gross income tests
if the REIT, or a direct or indirect owner of 10% or more of
the REIT, directly or constructively, owns 10% or more of such
tenant.
o if rent attributable to personal property, leased in connection
with a lease of real property, is greater than 15% of the total
rent received under the lease, then the portion of rent
attributable to such personal property will not qualify as
rents from real property.
o the REIT generally must not operate or manage the property or
furnish or render services to tenants, except through a TRS (as
defined herein) or through an independent contractor who is
adequately compensated and from whom the REIT derives no
income.
The independent contractor requirement, however, does not apply to
the extent the services provided by the REIT are usually or customarily
rendered in connection with the rental of space for occupancy only and are not
otherwise considered rendered to the occupant. Additionally, under the de
minimis rule for noncustomary services, if the value of the noncustomary
service income with respect to a property, valued at no less than 150% of the
REIT's direct costs of performing such services, is 1% or less of the total
income derived from the property, then the noncustomary service income will
not cause other income from the property to fail to qualify as rents from real
property (but the noncustomary service income itself will not qualify as rents
from real property).
ASSET TESTS. In order to maintain qualification as a REIT, we must
also satisfy, at the close of each quarter of our taxable year, the following
tests relating to the nature of our assets:
o at least 75% of the value of our total assets must be
represented by real estate assets, including (a) our allocable
share of real estate assets held by the Operating Partnership
or any partnerships in which the Operating Partnership owns an
interest and (b) stock or debt instruments held for not more
than one year purchased with the proceeds of a stock offering
or long-term (i.e., at least five-year) or public debt
offering, cash, cash items and government securities;
o no more than 20% of the value of our total assets may be
securities of one or more TRSs; and
o except for securities in the 75% asset class and securities of
a TRS or a qualified REIT subsidiary: (a) the value of any one
issuer's securities owned by us may not exceed 5% of the value
of our total assets; (b) we
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may not own more than 10% of the total voting power of any
one issuer's outstanding securities; and (c) we may not own
more than 10% of the total value of any one issuer's
outstanding securities (other than certain "straight debt"
securities).
After initially meeting an asset test at the close of any quarter, we
will not lose our status as a REIT for failure to satisfy that asset test at
the end of a later quarter solely by reason of changes in asset values. If the
failure to satisfy the asset test results from an acquisition of securities or
other property during a quarter, the failure can be cured by disposition of
sufficient nonqualifying assets within 30 days after the close of that
quarter.
ANNUAL DISTRIBUTION REQUIREMENTS. In order to qualify as a REIT, we
are required to distribute dividends, other than capital gain dividends, to
our stockholders in an amount at least equal to (a) the sum of (A) 90% of our
REIT taxable income (computed without regard to the dividends paid deduction
and our net capital gain) and (B) 90% of the net income, after tax, if any,
from foreclosure property, minus (b) the sum of specific items of non-cash
income. We must pay the distribution during the taxable year to which the
distributions relate, or during the following taxable year, if declared before
we timely file our tax return for the preceding year and paid on or before the
first regular dividend payment after the declaration. In addition, a dividend
declared and payable to a stockholder of record in October, November or
December of any year may be treated as paid and received on December 31 of
such year even if paid in January of the following year. To the extent that we
do not distribute all of our net capital gain or distribute at least 90%, but
less than 100%, of our REIT ordinary taxable income, we will be subject to tax
on the undistributed amount at regular corporate capital gain and ordinary
income rates, respectively. Furthermore, if we fail to distribute during each
calendar year at least the sum of (a) 85% of our REIT ordinary income for such
year, (b) 95% of our REIT capital gain income for such year and (c) any
undistributed taxable income from prior periods, we will be subject to a 4%
excise tax on the excess of such amounts over the amounts actually
distributed.
We intend to make timely distributions sufficient to satisfy the
annual distribution requirements. In this regard, it is expected that our REIT
taxable income will be less than our cash flow due to the allowance of
depreciation and other non-cash charges in computing REIT taxable income.
Moreover, the partnership agreement of the Operating Partnership authorizes
us, as general partner, to take such steps as may be necessary to cause the
Operating Partnership to make distributions to its partners in amounts
sufficient to permit us to meet these distribution requirements. It is
possible, however, that we may not have sufficient cash or other liquid assets
to meet the 90% distribution requirement. In the event that such circumstances
do occur, then in order to meet the 90% distribution requirement, we may cause
the Operating Partnership to arrange for short-term, or possibly long-term,
borrowings to permit the payment of required distributions.
Under specific circumstances, we may rectify a failure to meet the
distribution requirement for a year by paying deficiency dividends to
stockholders in a later year that may be included in our deduction for
dividends paid for the earlier year. Thus, we may be able to avoid being taxed
on amounts distributed as deficiency dividends. However, we would be required
to pay to the IRS interest based upon the amount of any deduction taken for
deficiency dividends.
TAX ASPECTS OF INVESTMENTS IN PARTNERSHIPS
GENERAL. We may hold investments through entities that are classified
as partnerships for federal income tax purposes. In general, partnerships are
"pass-through" entities that are not subject to federal income tax. Rather,
partners are allocated their proportionate shares of the items of income,
gain, loss, deduction and credit of a partnership based on the partnership
agreement and are subject to tax on these items without regard to whether the
partners receive a distribution from the partnership. We will include in
income our proportionate share of these partnership items for purposes of the
various REIT income tests and in the computation of REIT taxable income.
Consequently, to the extent that we hold an interest in a partnership, the
partnership's assets and operations may affect our ability to qualify as a
REIT even though we may have no control, or only limited influence, over the
partnership.
ENTITY CLASSIFICATION. Our investment in partnerships (including the
Operating Partnership) involves special tax considerations, including the
possibility of a challenge by the IRS of the status of any of any subsidiary
partnership as a partnership, as opposed to a business entity taxable as a
corporation, for federal income tax purposes. If any of these entities were
treated as a corporation for federal income tax purposes, it could be subject
to
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an entity-level tax on its income. In such a situation, the character of our
assets and gross income would change and could preclude us from satisfying the
REIT asset tests (particularly the tests generally preventing a REIT from
owning more than 10% of the voting securities, or more than 10% of the
securities by value, of a corporation) or the gross income tests and in turn
could prevent us from qualifying as a REIT. See "-- Failure to Qualify" below,
for a discussion of the effect of our failure to meet these tests for a
taxable year. In addition, any change in the status of any of our subsidiary
partnerships for tax purposes might be treated as a taxable event, in which
case we could have taxable income that is subject to the REIT distribution
requirements without receiving any cash.
TAX ALLOCATIONS WITH RESPECT TO PARTNERSHIP PROPERTIES. Under the
Code and the Treasury regulations, income, gain, loss and deduction
attributable to appreciated or depreciated property that is contributed to a
partnership in exchange for an interest in the partnership must be allocated
for tax purposes in a manner such that the contributing partner is charged
with, or benefits from, the unrealized gain or unrealized loss associated with
the property at the time of the contribution. The amount of the unrealized
gain or unrealized loss is generally equal to the difference between the fair
market value of the contributed property at the time of contribution, and the
adjusted tax basis of such property at the time of contribution (a "book-tax
difference"). Such allocations are solely for federal income tax purposes and
do not affect the book capital accounts or other economic or legal
arrangements among the partners.
To the extent that any subsidiary partnership acquires appreciated
(or depreciated) properties by way of capital contributions from its partners,
allocations would need to be made in a manner consistent with these
requirements. Where a partner contributes cash to a partnership at a time that
the partnership holds appreciated (or depreciated) property, the Treasury
regulations provide for a similar allocation of these items to the other
(i.e., noncontributing) partners. These rules may apply to our contribution to
any subsidiary partnerships of the cash proceeds received in offerings of its
stock. As a result, we could be allocated greater or lesser amounts of
depreciation and taxable income in respect of a partnership's properties than
would be the case if all of the partnership's assets (including any
contributed assets) had a tax basis equal to their fair market values at the
time of any contributions to that partnership. This could cause us to
recognize, over a period of time, taxable income in excess of cash flow from
the partnership, which might adversely affect our ability to comply with the
REIT distribution requirements discussed above.
FAILURE TO QUALIFY
If we fail to qualify for taxation as a REIT in any taxable year and
certain relief provisions do not apply, we will be subject to tax, including
any applicable alternative minimum tax, on our taxable income at regular
corporate rates. Distributions to stockholders in any year in which we fail to
qualify as a REIT will not be deductible by us, nor will we be required to
make distributions. Unless entitled to relief under specific statutory
provisions, we also will be disqualified from taxation as a REIT for the four
taxable years following the year during which qualification was lost. It is
not possible to state whether in all circumstances we would be entitled to
such statutory relief.
TAXATION OF STOCKHOLDERS
This discussion does not address all of the tax consequences that may
be relevant to particular stockholders in light of their particular
circumstances. Stockholders should consult their tax advisors for a complete
description of the tax consequences of investing in the offered stock.
U.S. STOCKHOLDERS
As used herein, the term U.S. Stockholder means a stockholder who is
a U.S. Person. A U.S. Person is defined as a citizen or resident of the United
States, a corporation or partnership (including an entity treated as a
corporation or partnership for U.S. federal income tax purposes) created or
organized in or under the laws of the United States, any State of the United
States or the District of Columbia (other than a partnership that is not
treated as a U.S. Person under any applicable Treasury regulations), an estate
whose income is subject to U.S. federal income tax regardless of its source,
or a trust if 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.
Notwithstanding the preceding sentence, to the extent provided in Treasury
49
regulations, specific trusts in existence on August 20, 1996, and treated as
U.S. Persons prior to such date, that elect to continue to be treated as U.S.
Persons, also will be U.S. Persons.
DISTRIBUTIONS. As long as we qualify as a REIT, distributions made to
our taxable U.S. Stockholders out of current or accumulated earnings and
profits and not designated as capital gain dividends will be taken into
account by them as ordinary income. Corporate stockholders will not be
eligible for the dividends received deduction as to such amounts. Earnings and
profits are allocated to distributions with respect to preferred stock before
they are allocated to distributions with respect to common stock.
Distributions that are designated as capital gain dividends will be taxed as
capital gains to the extent they do not exceed our actual net capital gain for
the taxable year without regard to the period for which the stockholder has
held our stock. U.S. Stockholders that are corporations, however, may be
required to treat up to 20% of certain capital gain dividends as ordinary
income. If we elect to retain and pay income tax on any net capital gain, U.S.
Stockholders would include in their income as capital gain their proportionate
share of such net capital gain. A U.S. Stockholder would also receive the
right to claim a refundable tax credit for such stockholder's proportionate
share of the tax paid by us on such retained capital gains and an increase in
its basis in our stock. This increase in basis will be in an amount equal to
the excess of the undistributed capital gains over the amount of tax paid
thereon by us. Distributions in excess of current and accumulated earnings and
profits will not be taxable to a U.S. Stockholder to the extent that they do
not exceed the adjusted basis of the stock, but rather will reduce the
adjusted basis of the stock. To the extent that such distributions exceed a
U.S. Stockholder's adjusted basis in the stock, such distribution will be
included in income as capital gain, assuming the stock is a capital asset in
the hands of the stockholder.
Any dividend declared by us in October, November or December of any
year payable to a stockholder of record on a specific date in any such month
shall be treated as both paid by us and received by the stockholder on
December 31 of such year, provided the dividend is actually paid by us during
January of the following calendar year.
SALE OR EXCHANGE. In general, a U.S. Stockholder realizes capital
gain or loss on the sale or exchange of the stock equal to the difference
between (a) the amount of cash and the fair market value of any property
received on such disposition, and (b) the stockholder's adjusted basis in the
stock. To the extent a U.S. Stockholder who is an individual, a trust or an
estate holds the stock for more than one year, any gain realized would be
subject to tax rates applicable to long-term capital gains. However, any loss
recognized by a U.S. Stockholder from selling or otherwise disposing of stock
held for six months or less (after applying certain holding period rules) will
be treated as long-term capital loss to the extent of dividends received by
the stockholder that were required to be treated as long-term capital gains.
RECENT TAX LEGISLATION. Under legislation recently enacted, the
maximum tax rate on long-term capital gains to individuals has generally been
reduced from 20% to 15% (from May 6, 2003 through December 31, 2008) and the
maximum tax rate on dividends to individuals has generally been reduced from
38.6% to 15% (from January 1, 2003 through December 31, 2008). The reduction
in long-term capital gain rates will generally be applicable to sales of stock
of a REIT and capital gain dividends received from a REIT (except to the
extent representing real estate depreciation recapture, which continues to be
taxed at a 25% rate). The reduction in rates on dividends is generally not
applicable to dividends paid by a REIT except in limited circumstances that we
do not contemplate.
BACKUP WITHHOLDING. We will report to our U.S. Stockholders and the
IRS the amount of dividends paid during each calendar year and the amount of
tax withheld, if any, with respect thereto. Under the backup withholding
rules, a stockholder may be subject to backup withholding at a rate of 28%
with respect to dividends paid unless the holder (a) is a corporation or comes
within other exempt categories and, when required, demonstrates this fact, or
(b) provides a taxpayer identification number and certifies as to no loss of
exemption, and otherwise complies with the applicable requirements of the
backup withholding rules. In addition, we may be required to withhold a
portion of capital gain distributions made to any stockholders who fail to
certify their non-foreign status to us.
An individual who is a U.S. Stockholder may satisfy the requirements
for avoiding backup withholding by providing us with an appropriately prepared
IRS Form W-9. If a U.S. Stockholder does not provide us with its correct
taxpayer identification number, then the U.S. Stockholder may also be subject
to penalties imposed by the IRS. Backup withholding tax is not an additional
tax. Any amounts withheld under the backup withholding tax rules
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will be refunded or credited against the U.S. Stockholder's federal income tax
liability, provided the U.S. Stockholder furnishes the required information to
the IRS.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
The IRS has ruled that amounts distributed as dividends by a
qualified REIT generally do not constitute unrelated business taxable income
("UBTI") when received by a tax-exempt entity. Based on that ruling, the
dividend income from our stock will not be UBTI to a tax-exempt stockholder,
provided that the tax-exempt stockholder has not held stock as debt-financed
property within the meaning of the Code and such stock is not otherwise used
in a trade or business unrelated to the tax-exempt stockholder's exempt
purpose. Similarly, income from the sale of the stock will not constitute UBTI
unless such tax-exempt stockholder has held such stock as debt-financed
property within the meaning of the Code or has used the shares in a trade or
business.
Notwithstanding the above paragraph, if we are a pension-held REIT,
then any qualified pension trust that holds more than 10% of our stock will
have to treat dividends as UBTI in the same proportion that our gross income
would be UBTI. A qualified pension trust is any trust described in Section
401(a) of the Code that is exempt from tax under Section 501(a). In general,
we will be treated as a pension-held REIT if both (a) we are predominantly
owned by qualified pension trusts (i.e., if one such trust holds more than 25%
of the value of our stock or one or more such trusts, each holding more than
10% of the value of our stock, collectively hold more than 50% of the value of
our stock) and (b) we would not be a REIT if we had to treat our stock held by
a qualified pension trust as owned by the qualified pension trust (instead of
treating such stock as owned by the qualified pension trust's multiple
beneficiaries). Although we do not anticipate being classified as a
pension-held REIT, we cannot assume that this will always be the case.
In addition, if you are a tax-exempt stockholder described in Section
512(a)(3) of the Code, then distributions received from us may also constitute
UBTI. You are described in Section 512(a)(3) if you qualify for exemption
under Sections 501(c)(7), (9), (17), or (20).
TAXATION OF NON-U.S. STOCKHOLDERS
The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships and other foreign
stockholders, which are referred to collectively as Non-U.S. Stockholders are
complex and no attempt will be made herein to provide more than a limited
summary of such rules. Non-U.S. Stockholders should consult with their tax
advisors to determine the impact of U.S. federal, state and local income tax
laws with regard to an investment in the stock, including any reporting
requirements.
ORDINARY DIVIDENDS. Distributions, other than distributions that are
treated as attributable to gain from sales or exchanges by us of U.S. real
property interests and other than distributions designated by us as capital
gain dividends, will be treated as ordinary income to the extent that they are
made out of our current or accumulated earnings and profits. Such
distributions to Non-U.S. Stockholders will ordinarily be subject to a
withholding tax equal to 30% of the gross amount of the distribution, unless
an applicable income tax treaty reduces that tax rate. However, if income from
the investment in the shares of the stock is treated as effectively connected
with the Non-U.S. Stockholder's conduct of a U.S. trade or business, the
Non-U.S. Stockholder generally will be subject to a tax at graduated rates in
the same manner as U.S. Stockholders are taxed with respect to such dividends
and may also be subject to the 30% branch profits tax if the stockholder is a
foreign corporation.
Dividends paid to an address in a country outside the United States
are not presumed to be paid to a resident of such country for purposes of
determining the applicability of withholding discussed above and the
applicability of a tax treaty rate. A Non-U.S. Stockholder who wishes to claim
the benefit of an applicable treaty rate may need to satisfy certification and
other requirements, such as providing an IRS Form W-8BEN. A Non-U.S.
Stockholder who wishes to claim that distributions are effectively connected
with a United States trade or business may need to satisfy certification and
other requirements in order to avoid withholding, such as providing IRS Form
W-8ECI. Other requirements may apply to Non-U.S. Stockholders that hold their
shares through a financial intermediary or foreign partnership.
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RETURN OF CAPITAL. Distributions in excess of our current and
accumulated earnings and profits, which are not treated as attributable to the
gain from the disposition by us of a U.S. real property interest, will not be
taxable to a Non-U.S. Stockholder to the extent that they do not exceed the
adjusted basis of the stock, but rather will reduce the adjusted basis of such
stock. To the extent that such distributions exceed the adjusted basis of the
stock, they will give rise to tax liability if the Non-U.S. Stockholder
otherwise would be subject to tax on any gain from the sale or disposition of
its stock, as described below. If it cannot be determined at the time a
distribution is made whether such distribution will be in excess of current
and accumulated earnings and profits, the distribution will be subject to
withholding at the rate applicable to dividends. However, the Non-U.S.
Stockholder may seek a refund of such amounts from the IRS to the extent it is
subsequently determined that such distribution was, in fact, in excess of our
current and accumulated earnings and profits.
CAPITAL GAIN DIVIDENDS. For any year in which we qualify as a REIT,
distributions that are attributable to gain from sales or exchanges by us of
U.S. real property interests will be taxed to a Non-U.S. Stockholder under the
provisions of the Foreign Investment in Real Property Tax Act of 1980, as
amended ("FIRPTA"). Under FIRPTA, these distributions are taxed to a Non-U.S.
Stockholder as if such gain were effectively connected with a U.S. business.
Thus, Non-U.S. Stockholders will be taxed on such distributions at the same
capital gain rates applicable to U.S. Stockholders, subject to any applicable
alternative minimum tax and special alternative minimum tax (in the case of
nonresident alien individuals), without regard to whether such distributions
are designated by us as capital gain dividends. Also, distributions subject to
FIRPTA may be subject to a 30% branch profits tax in the hands of a corporate
Non-U.S. Stockholder not entitled to treaty relief or exemption. We are
required by applicable Treasury Regulations under FIRPTA to withhold 35% of
any distribution that could be designated by us as a capital gain dividend.
SALE OR EXCHANGE OF STOCK. Gain recognized by a Non-U.S. Stockholder
upon a sale or exchange of stock, including a redemption that is treated as a
sale, generally will not be taxed under FIRPTA if we are a domestically
controlled REIT. A REIT is a "domestically controlled REIT" if at all times
during a specified testing period less than 50% in value of its stock is held
directly or indirectly by non-U.S. persons. However, gain not subject to
FIRPTA will be taxable to a Non-U.S. Stockholder if (a) investment in the
stock is treated as effectively connected with the Non-U.S. Stockholder's U.S.
trade or business, in which case the Non-U.S. Stockholder will be subject to
the same treatment as U.S. Stockholders with respect to such gain, or (b) the
Non-U.S. Stockholder is a nonresident alien individual who was present in the
United States for 183 days or more during the taxable year, in which case the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gains. A similar rule will apply to capital gain dividends not subject
to FIRPTA.
Although we anticipate that we will qualify as a domestically
controlled REIT, we cannot assume that we will continue to so qualify. If we
were not a domestically controlled REIT, whether or not a Non-U.S.
Stockholder's sale of stock would be subject to tax under FIRPTA would depend
on whether or not the stock was regularly traded on an established securities
market and on the size of the selling Non-U.S. Stockholder's interest in us.
If the gain on the sale of the stock were to be subject to tax under FIRPTA,
the Non-U.S. Stockholder would be subject to the same treatment as U.S.
Stockholders with respect to such gain, subject to any applicable alternative
minimum tax and a special alternative minimum tax (in the case of nonresident
alien individuals) and the purchaser of such stock may be required to withhold
10% of the gross purchase price.
OTHER TAX CONSIDERATIONS
SUNSET OF REDUCED TAX RATE PROVISIONS. Several of the tax
considerations described herein are subject to a sunset provision. The sunset
provisions generally provide that for taxable years beginning after December
31, 2008, certain provisions that are currently in the Code will revert back
to a prior version of those provisions. These include provisions related to
the reduced maximum income tax rate for capital gains of 15% (rather than 20%)
for taxpayers taxed at individual rates, the application of the 15% capital
gains rate to qualified dividend income, and certain other tax rate provisions
described herein. The impact of this reversion is not discussed herein.
Consequently, prospective stockholders should consult their own tax advisors
regarding the effect of sunset provisions on an investment in our stock.
TAX SHELTER REPORTING. Under recently promulgated Treasury
regulations, if a stockholder recognizes a loss with respect to the shares in
a single taxable year of $2 million or more for an individual stockholder or
$10
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million or more for a corporate stockholder, the stockholder may be required
to file a disclosure statement with the IRS on Form 8886. Direct stockholders
of portfolio securities are in many cases exempt from this reporting
requirement, but stockholders of a REIT currently are not excepted. The fact
that a loss is reportable under these regulations does not affect the legal
determination of whether the taxpayer's treatment of the loss is proper.
Stockholders should consult their tax advisors to determine the applicability
of these regulations in light of their individual circumstances.
FEDERAL ESTATE TAXES. In general, if an individual who is not a
citizen or resident (as defined in the Code) of the United States owns (or is
treated as owning) our stock at the date of death, such stock will be included
in the individual's estate for U.S. federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise.
STATE AND LOCAL TAX. We and our stockholders may be subject to state
and local tax in states and localities in which it does business or owns
property. Our tax treatment and the tax treatment of the stockholders in such
jurisdictions may differ from the federal income tax treatment described
above.
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PLAN OF DISTRIBUTION
Reckson Associates and the Operating Partnership may sell the
securities to one or more underwriters for public offering and sale by them or
may sell the securities to investors directly or through agents. Any
underwriter or agent involved in the offer and sale of the securities will be
named in the applicable prospectus supplement.
Underwriters may offer and sell the securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market
prices at the time of sale or at negotiated prices. Reckson Associates and the
Operating Partnership also may, from time to time, authorize underwriters
acting as their agents to offer and sell the securities upon the terms and
conditions as are set forth in the applicable prospectus supplement. In
connection with the sale of securities, underwriters may be deemed to have
received compensation from Reckson Associates or the Operating Partnership in
the form of underwriting discounts or commissions and may also receive
commissions from purchasers of securities for whom they may act as agent.
Underwriters may sell securities to or through dealers, and dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act
as agent.
Any underwriting compensation paid by Reckson Associates or the
Operating Partnership to underwriters or agents in connection with the
offering of securities, and any discounts, concessions for commissions allowed
by underwriters to participating dealers, will be set forth in the applicable
prospectus supplement. Underwriters, dealers and agents participating in the
distribution of the securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the securities may be deemed to be underwriting discounts and
commissions, under the Securities Act. Underwriters, dealers and agents may be
entitled, under agreements entered into with Reckson Associates and the
Operating Partnership, to indemnification against and contribution toward
certain civil liabilities, including liabilities under the Securities Act.
Certain of the underwriters, dealers and agents and their affiliates
may be customers of, engage in transactions with, and perform services for,
Reckson Associates and the Operating Partnership and their subsidiaries in the
ordinary course of business.
Reckson Associates or the Operating Partnership may sell the
securities directly. If the securities are sold directly to institutional
investors or others who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any sale of those securities, we will
describe the terms of any such sales in the applicable prospectus supplement.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will be
passed upon for Reckson Associates and the Operating Partnership by Sidley
Austin Brown & Wood LLP, New York, New York. Certain legal matters described
under "Material Federal Income Tax Consequences" will be passed upon by
Solomon and Weinberg LLP.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the
consolidated financial statements and schedule of each of Reckson Associates
and the Operating Partnership included in their respective Annual Reports on
Form 10-K for the year ended December 31, 2003, as set forth in their reports,
which are incorporated by reference in this prospectus and elsewhere in the
registration statement. These financial statements and schedule are
incorporated by reference in reliance on Ernst & Young LLP's reports, given on
their authority as experts in accounting and auditing.
54
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the estimated expenses in connection with
the issuance and distribution of the Registrants' securities being registered
hereby, other than underwriting discounts and commissions, all of which will
be borne by the Registrants:
Securities and Exchange Commission registration fee.......... $95,025
Printing and engraving expenses.............................. 200,000
Legal fees and expenses...................................... 150,000
Accounting fees and expenses................................. 60,000
Blue Sky fees and expenses................................... 20,000
Trustee's fees............................................... 10,000
Miscellaneous................................................ 64,975
--------
Total $600,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Maryland General Corporation Law, as amended from time to time
(the "MGCL"), permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The charter of
Reckson Associates contains such a provision which eliminates such liability
to the maximum extent permitted by Maryland law.
The charter of Reckson Associates authorizes Reckson Associates, to
the maximum extent permitted by Maryland law, to obligate itself to indemnify
and to pay or reimburse reasonable expenses in advance of final disposition of
a proceeding to (a) any present or former director or officer or (b) any
individual who, while a director of Reckson Associates and at the request of
Reckson Associates, serves or has served another corporation, real estate
investment trust, partnership, joint venture, trust, employee benefit plan or
any other enterprise as a director, officer, partner or trustee of such
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or other enterprise and who is made a party to the
proceeding by reason of his or her service in that capacity. The bylaws of
Reckson Associates obligate it, to the maximum extent permitted by Maryland
law, to indemnify and to pay or reimburse reasonable expenses in advance of
final disposition of a proceeding to (a) any present or former director or
officer who is made a party to the proceeding by reason of his service in that
capacity or (b) any individual who, while a director of Reckson Associates and
at the request of Reckson Associates, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner
or trustee of such corporation, real estate investment trust, partnership,
joint venture, trust, employee benefit plan or other enterprise and who is
made a party to the proceeding by reason of his service in that capacity. The
charter and bylaws also permit Reckson Associates to indemnify and advance
expenses to any person who served a predecessor of Reckson Associates in any
of the capacities described above and to any employee or agent of Reckson
Associates or a predecessor of Reckson Associates.
The MGCL requires a corporation (unless its charter provides
otherwise, which Reckson Associates' charter does not) to indemnify a director
or officer who has been successful, on the merits or otherwise, in the defense
of any proceeding to which he is made a party by reason of his service in that
capacity. The MGCL permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection
with any proceeding to which they may be made a party by reason of their
service in those or other capacities unless it is established that (a) the act
or omission of the director or officer was material to the matter giving rise
to the proceeding and (i) was committed
in bad faith or (ii) was the result of active and deliberate dishonesty, (b)
the director or officer actually received an improper personal benefit in
money, property or services or (c) in the case of any criminal proceeding, the
director or officer had reasonable cause to believe that the act or omission
was unlawful. However, under the MGCL, a Maryland corporation may not
indemnify for an adverse judgment in a suit by or in the right of the
corporation or for a judgment of liability on the basis that personal benefit
was improperly received, unless in either case a court orders indemnification
and then only for expenses. In addition, the MGCL permits a corporation to
advance reasonable expenses, upon the corporation's receipt of (a) a written
affirmation by the director or officer of his good faith belief that he has
met the standard of conduct necessary for indemnification by Reckson
Associates and (b) a written statement by or on his behalf to repay the amount
paid or reimbursed by Reckson Associates if it shall ultimately be determined
that the standard of conduct was not met.
Reckson Associates has entered into indemnification agreements with
each of its executive officers and directors. The indemnification agreements
require, among other matters, that Reckson Associates indemnify its executive
officers and directors to the fullest extent permitted by law and advance to
the executive officers and directors all related expenses, subject to
reimbursement if it is subsequently determined that indemnification is not
permitted. Under these agreements, Reckson Associates must also indemnify and
advance all expenses incurred by executive officers and directors seeking to
enforce their rights under the indemnification agreements and may cover
executive officers and directors under Reckson Associates' directors' and
officers' liability insurance. Although indemnification agreements offer
substantially the same scope of coverage afforded the bylaws, they provide
greater assurance to directors and executive officers that indemnification
will be available, because, as contracts, they cannot be modified unilaterally
in the future by the Board of Directors or the stockholders to eliminate the
rights they provide.
The partnership agreement of the Operating Partnership contains
provisions indemnifying its partners and their officers and directors to the
fullest extent permitted by the Delaware Revised Uniform Limited Partnership
Act.
ITEM 16. EXHIBITS.
1 -- Form of underwriting agreement.(1)
4.1 -- Form of common stock certificate.(2)
4.2 -- Form of designating amendment for preferred stock.(1)
4.3 -- Form of preferred stock certificate.(1)
4.4 -- Form of warrant agreement.(1)
4.5 -- Form of warrant.(1)
4.6 -- Indenture, dated March 26, 1999, among the Operating
Partnership, the Registrant, and The Bank of New York,
as trustee.(3)
5 -- Opinion of Sidley Austin Brown & Wood LLP as to the
legality of the securities.(4)(6)
8 -- Opinion of Solomon
and Weinberg LLP as to tax matters.(6)
12.1 -- Calculation of Reckson Associates Realty Corp. Ratios of
Earnings to Fixed Charges and Ratios of Earnings to Fixed
Charges and Preferred Stock Dividends.(6)
12.2 -- Calculation of Reckson Operating Partnership, L.P. Ratios
of Earnings to Fixed Charges and Ratios of Earnings to
Fixed Charges and Preferred Distributions.(6)
23.1 -- Consent of Sidley Austin Brown & Wood LLP (included in
Exhibit 5).
23.2 -- Consent of Solomon and Weinberg LLP (included in
Exhibit 8).
23.3 -- Consent of Ernst & Young LLP.
24 -- Power of attorney.(6)
25 -- Statement of eligibility of trustee on Form T-1.(5)
--------------
(1) To be filed by amendment or incorporated by reference in connection with
the offering of securities.
(2) Previously filed as an exhibit to Registration Statement on Form S-11
(No. 33-84324) and incorporated herein by reference.
(3) Previously filed as an exhibit to the Registrant's Form 8-K filed with
the Commission on March 26, 1999 and incorporated herein by reference.
(4) A revised opinion will be filed by amendment or incorporated by reference
in connection with the offering of securities.
(5) Previously filed as an exhibit to Amendment No. 4 to Registration
Statement on Form S-3 (333-67129) and incorporated herein by reference.
(6) Previously filed as an exhibit to this Registration Statement.
ITEM 17. UNDERTAKINGS.
(a) Each Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to the Registration Statement;
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum offering price set
forth in the "Calculation of Registration Fee" table in the effective
Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the Registrant pursuant to
Section 13 or 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; and
(3) (a) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) Each Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of such
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, partners and
controlling persons of a Registrant pursuant to the foregoing provisions, or
otherwise, the Registrants have been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a
Registrant of expenses incurred or paid by a director, officer, partner or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, partner or
controlling person in connection with the securities being registered, the
applicable Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(d) Each Registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Township of Huntington, State of New York,
on July 7, 2004.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott H. Rechler
-----------------------------------------------
Scott H. Rechler
Chief Executive Officer, President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Donald J. Rechler* Chairman of the Board
------------------------
Donald J. Rechler
/s/ Scott H. Rechler Chief Executive Officer, President and July 7, 2004
------------------------ Director
Scott H. Rechler
Michael Maturo* Executive Vice President, Treasurer and
------------------------ Chief Financial Officer (Principal
Michael Maturo Financial Officer and Principal
Accounting Officer)
Ronald Menaker* Director
------------------------
Ronald Menaker
Peter Quick* Director
------------------------
Peter Quick
Lewis S. Ranieri* Director
------------------------
Lewis S. Ranieri
Douglas Crocker III* Director
------------------------
Douglas Crocker III
Stanley Steinberg* Director
------------------------
Stanley Steinberg
Elizabeth McCaul* Director
------------------------
Elizabeth McCaul
John Ruffle* Director
------------------------
John Ruffle
*By: /s/ Scott H. Rechler July 7, 2004
------------------------
Scott H. Rechler
Attorney-in-Fact
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Township of Huntington, State of New York,
on July 7, 2004.
RECKSON OPERATING PARTNERSHIP, L.P.
By: Reckson Associates Realty Corp.
By: /s/ Scott H. Rechler
-----------------------------------------------
Scott H. Rechler
Chief Executive Officer, President and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Donald J. Rechler* Chairman of the Board
------------------------
Donald J. Rechler
/s/ Scott H. Rechler Chief Executive Officer, President and July 7, 2004
------------------------ Director
Scott H. Rechler
Michael Maturo* Executive Vice President, Treasurer and
------------------------ Chief Financial Officer (Principal
Michael Maturo Financial Officer and Principal
Accounting Officer)
Ronald Menaker* Director
------------------------
Ronald Menaker
Peter Quick* Director
------------------------
Peter Quick
Lewis S. Ranieri* Director
------------------------
Lewis S. Ranieri
Douglas Crocker III* Director
------------------------
Douglas Crocker III
Stanley Steinberg* Director
------------------------
Stanley Steinberg
Elizabeth McCaul* Director
------------------------
Elizabeth McCaul
John Ruffle* Director
------------------------
John Ruffle
*By: /s/ Scott H. Rechler July 7, 2004
------------------------
Scott H. Rechler
Attorney-in-Fact
EXHIBIT INDEX
EXHIBITS DESCRIPTION
-------- -----------
1 -- Form of underwriting agreement.(1)
4.1 -- Form of common stock certificate.(2)
4.2 -- Form of designating amendment for preferred stock.(1)
4.3 -- Form of preferred stock certificate.(1)
4.4 -- Form of warrant agreement.(1)
4.5 -- Form of warrant.(1)
4.6 -- Indenture, dated March 26, 1999, among the Operating
Partnership, the Registrant, and The Bank of New York,
as trustee.(3)
5 -- Opinion of Sidley Austin Brown & Wood LLP as to the
legality of the securities.(4)(6)
8 -- Opinion of Solomon
and Weinberg LLP as to tax matters.(6)
12.1 -- Calculation of Reckson Associates Realty Corp. Ratios of
Earnings to Fixed Charges and Ratios of Earnings to Fixed
Charges and Preferred Stock Dividends.(6)
12.2 -- Calculation of Reckson Operating Partnership, L.P. Ratios
of Earnings to Fixed Charges and Ratios of Earnings to
Fixed Charges and Preferred Distributions.(6)
23.1 -- Consent of Sidley Austin Brown & Wood LLP (included in
Exhibit 5).
23.2 -- Consent of Solomon and Weinberg LLP (included in Exhibit
8).
23.3 -- Consent of Ernst & Young LLP.
24 -- Power of attorney.(6)
25 -- Statement of eligibility of trustee on Form T-1.(5)
--------------
(1) To be filed by amendment or incorporated by reference in connection with
the offering of securities.
(2) Previously filed as an exhibit to Registration Statement on Form S-11
(No. 33-84324) and incorporated herein by reference.
(3) Previously filed as an exhibit to the Registrant's Form 8-K filed with
the Commission on March 26, 1999 and incorporated herein by reference.
(4) A revised opinion will be filed by amendment or incorporated by reference
in connection with the offering of securities.
(5) Previously filed as an exhibit to Amendment No. 4 to Registration
Statement on Form S-3 (333-67129) and incorporated herein by reference.
(6) Previously filed as an exhibit to this Registration Statement.