Table of
Contents
Filed
Pursuant to Rule 424(b)(2)
Registration
No. 333-155742
CALCULATION
OF REGISTRATION FEE
Title of Each Class of Securities
to be Registered
|
|
Amount
to
be
Registered
(1)
|
|
Proposed
Maximum
Offering
Price
Per Unit
|
|
Proposed
Maximum
Aggregate
Offering Price
|
|
Amount
of
Registration
Fee
|
|
Common
Stock, $0.01 par value per share
|
|
50,000
|
|
$
|
30.69
|
|
$
|
1,534,500
|
|
$
|
85.63
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Pursuant
to Rule 416 of the Securities Act of 1933, as amended, the Registrant
common stock offered hereby shall be deemed to cover additional securities to
be issued to prevent dilution resulting from stock splits, stock dividends or
similar transactions.
|
(2)
|
The
filing fee of $85.63 is calculated in accordance with
Rules 457(c) and 457(r) of the Securities Act of 1933, as
amended, based on the high and low prices of the registrants common stock on
December 11, 2009.
|
Prospectus Supplement
(To
Prospectus dated November 26, 2008)
50,000 Shares
Common
Stock
This prospectus
supplement relates to the issuance of up to an aggregate of 50,000 shares (the Shares)
of our common stock, par value $.01 per share (Common Stock), that we may
issue to holders of:
(1)
common units (OP Units) of limited partnership
interest in The Macerich Partnership, L.P., our operating partnership (the Operating
Partnership), issued upon conversion of series D preferred units of limited
partnership interest in the Operating Partnership (Series D Preferred
Units), upon tender of those OP Units for redemption;
(2) common units (MACWH Units) of limited
partnership interest in MACWH, LP, a Delaware limited partnership (MACWH),
outstanding as of the date of this prospectus supplement, and those MACWH Units
that may be issued in the future upon conversion of the Class A
Convertible Preferred Units (MACWH CPUs) of limited partnership interest in
MACWH, upon tender of those MACWH Units for redemption. Walleye Retail
Investments LLC, the general partner of MACWH, is a wholly owned indirect
subsidiary of the Operating Partnership; and
(3)
MACWH CPUs, upon tender of those MACWH
CPUs for redemption.
The Shares represent additional shares of Common Stock
that may be issued as a result of adjustments made to the conversion ratio or
factor of the Series D Preferred Units, the MACWH Units and the MACWH CPUs
in connection with the dividend and distribution payable to our stockholders
and OP Unit holders of record as of November 12, 2009 (the Record Date).
The
registration of the Shares covered by this prospectus supplement does not
necessarily mean that any of the holders of OP Units, Series D Preferred
Units, MACWH Units and MACWH CPUs will exercise their conversion and/or
redemption rights, as applicable, or that upon any such redemption we will
elect, in our sole and absolute discretion, to redeem some or all of the OP
Units, MACWH Units and MACWH CPUs by issuing some or all of the Shares instead
of paying the applicable redemption price in cash.
We will receive no
cash proceeds from any issuance of the Shares covered by this prospectus
supplement, but we will acquire additional OP Units, MACWH Units and MACWH CPUs
in exchange for any such issuances. We will pay all registration expenses.
Our Common Stock
trades on the New York Stock Exchange under the symbol MAC. On December 14,
2009, the closing sale price of our Common Stock was $31.97 per share.
Investing in our Common Stock
involves risks. See the Risk Factors section of this prospectus supplement
beginning on page S-3.
Neither the U.S.
Securities and Exchange Commission (the SEC) nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this
prospectus supplement is December 18, 2009.
Table of
Contents
TABLE OF CONT
ENTS
This document consists of
two parts. The first part is this prospectus supplement, which relates to the
possible issuance of the Shares upon redemption of OP Units, MACWH Units and
MACWH CPUs and also supplements and updates information contained in the
accompanying prospectus and the documents incorporated by reference into the
prospectus. The second part is the accompanying prospectus, which gives more
general information, some of which may not apply to any potential redemption of
OP Units, MACWH Units and MACWH CPUs. To the extent there is a conflict between
the information contained in this prospectus supplement, on the one hand, and
the information contained in the accompanying prospectus or any document
incorporated by reference, on the other hand, you should rely on the
information in this prospectus supplement.
You should rely only on the information contained in or
incorporated by reference in this prospectus supplement and the accompanying
prospectus. We have not authorized anyone to provide you with information that
is different from that contained or incorporated by reference in this
prospectus supplement or the accompanying prospectus. The offering of the
Shares may be restricted by law in certain non-U.S. jurisdictions. This
prospectus supplement is not an offer to sell nor does it seek an offer to buy
any Shares in any jurisdiction where the offer or sale is not permitted.
S-i
Table of Contents
PROSPECTUS
SUPPLEMENT
SUMMARY
This summary only highlights the more detailed information appearing
elsewhere in this prospectus supplement or incorporated by reference in this
prospectus supplement. It may not contain all of the information that is
important to you. You should carefully read this entire prospectus supplement,
the accompanying prospectus and the documents incorporated by reference in this
prospectus supplement before deciding whether to invest in the Shares.
Unless the context otherwise requires, or unless otherwise specified,
all references in this prospectus supplement to the terms we, us, our and
our Company refer to The Macerich Company, which we refer to as Macerich,
together with its subsidiaries, including The Macerich Partnership, L.P., which
we refer to as our Operating Partnership.
Our
Company
We
are involved in the acquisition, ownership, development, redevelopment,
management and leasing of regional and community shopping centers located
throughout the United States. As of September 30, 2009, the Operating
Partnership owned or had an ownership interest in 72 regional shopping centers
and 19 community shopping centers totaling approximately 76 million square
feet of gross leasable area.
We
are a self-administered and self-managed real estate investment trust, or REIT,
and conduct all of our operations through the Operating Partnership and our
management companies.
We
were organized as a Maryland corporation in September 1993. Our
principal executive offices are located at 401 Wilshire Boulevard, Suite 700,
Santa Monica, California 90401. Our telephone number is (310) 394-6000.
S-1
Table of Contents
The Offering
Securities offered
Up to 50,000
shares of our Common Stock that may be issued from time to time if, and to the
extent that, the holders of (1) OP Units issued upon conversion of
Series D Preferred Units, (2) MACWH Units and/or (3) MACWH CPUs,
present such units for redemption, and we exercise our right to issue shares of
our Common Stock to them instead of paying a cash amount.
On
October 30, 2009, we announced that our Board of Directors declared a
dividend of $0.60 per share of our Common Stock (the Dividend) that is
expected to be paid on December 21, 2009 in a combination of cash and shares of
our Common Stock, at the election of the stockholder, subject to a limitation
that the aggregate amount of cash payable to holders of our Common Stock would
not exceed 10% of the aggregate amount of the dividend, or $0.06 per
share. We expect to issue approximately 1.7
million shares of our Common Stock to stockholders in connection with the
Dividend.
We
determined that, in connection with the Dividend, the Operating Partnership
would make a comparable distribution of $0.60 per OP Unit and per long term
incentive plan unit of limited partnership in the Operating Partnership (the
Distribution) to unitholders of record as of the close of business on the
Record Date. The Distribution is
expected to be made on December 21, 2009. Each unitholder will receive 10%
of the Distribution in cash and had the option to receive the remaining 90% of
the Distribution in either (1) shares of our Common Stock or (2) OP Units
(with one OP Unit being valued for this purpose the same as one share of Common
Stock). The Operating Partnership expects
to issue approximately 93,000 OP Units in connection with the Distribution and
we expect to issue approximately 122,000 shares of our Common Stock in
connection with the Distribution to those unitholders who elected to receive
Common Stock instead of additional OP Units.
In
accordance with the terms of the Amended and Restated Limited Partnership
Agreement of the Operating Partnership, as amended (the Operating Partnership
Agreement), the conversion ratio of the Series D Preferred Units shall be
adjusted, effective as of the Record Date, so that the holder of any Series D
Preferred Unit thereafter surrendered for conversion shall be entitled to
receive the number of OP Units that such holder would have owned after the
payment of the Distribution had such Series D Preferred Units been
converted into OP Units immediately prior to the Record Date.
In
accordance with the 2005 Amended and Restated Agreement of Limited Partnership
of MACWH (the MACWH Agreement), the conversion factor for MACWH Units and
MACWH CPUs shall be adjusted in accordance with the MACWH Agreement, effective
as of the Record Date, to reflect the number of shares of our Common Stock
issued in connection with the Dividend to our stockholders.
The issuance, prior to any conversion ratio or factor adjustments, of
Common Stock to holders of OP Units (issued upon conversion of Series D
Preferred Units), MACWH Units and MACWH CPUs upon tender of those units for
redemption was previously registered by us. This prospectus supplement
registers the maximum number of additional shares of our Common Stock that we
may issue as a result of adjustments made to the conversion ratio or factor of
the Series D Preferred Units, the MACWH Units and the MACWH CPUs described
above in connection with the Dividend and Distribution.
Use of proceeds
We will receive no cash proceeds from any
issuance of the Shares covered by this prospectus supplement, but we will
acquire additional OP Units, MACWH Units and MACWH CPUs, in exchange for any
such issuances. We will pay all registration expenses.
New York Stock
MAC
Exchange symbol
Risk factors
Before investing in the Shares, you should
carefully read and consider the information set forth in Risk Factors
beginning on page S-3 of this prospectus supplement and all other
information appearing elsewhere and in the documents incorporated herein by
reference.
S-2
Table of Contents
RISK
FACTORS
In
addition to other information contained in this prospectus supplement and the
accompanying prospectus, you should carefully consider the risks described in
the documents incorporated by reference in this prospectus supplement before
making an investment decision. The risks described in those documents are not
the only risks facing our Company. Additional risks not presently known to us
or that we currently deem immaterial may also impair our business operations.
Our business, financial condition or results of operations could be materially
adversely affected by the materialization of any of these risks. The trading
price of the Shares could decline due to the materialization of any of these
risks, and you may lose all or part of your investment. This prospectus
supplement, the accompanying prospectus and the documents incorporated herein
by reference also contain forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including the
risks described in the documents incorporated herein by reference, including (i) Macerichs
Annual Report on Form 10-K for the year ended December 31, 2008, (ii) Macerichs
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009,
June 30, 2009 and September 30, 2009 and (iii) documents Macerich
files with the SEC after the date of this prospectus supplement and which are
deemed incorporated by reference in this prospectus supplement.
REDEMPTION
OF OP UNITS, MACWH UNITS AND MACWH CPUS
Prior
to the Distribution, holders of Series D Preferred Units had the right to
convert all or a portion of their Series D Preferred Units into OP Units, at
a conversion rate of 1.04646 OP Units per Series D Preferred Units. As a result of the Distribution effective as
of the Record Date, the Series D Preferred Units have the right to convert
all or a portion of their Series D Preferred Units into OP Units, at a
conversion rate of 1.06520 OP Units per Series D Preferred Units.
Subject
to the limitations set forth in the Operating Partnership Agreement, holders of
OP Units will have the right to redeem their OP Units in whole or in part for
an equal number of shares of Common Stock, subject to adjustment in the event
of certain dilutive or other capital events. A holder of OP Units may generally
not exercise the redemption right for less than two thousand (2,000) OP Units
or, if such holder holds less than two thousand (2,000) OP Units, all of
the OP Units held by such holder. We have the right to pay holders of OP
Units an amount of cash equal to the value of the Common Stock otherwise
issuable to such holders upon tender of their OP Units, as determined in
accordance with the Operating Partnership Agreement, instead of issuing Common
Stock to such holders.
Subject
to the limitations set forth in the Operating Partnership Agreement, holders of
Series D Preferred Units also have the right to redeem their Series D
Preferred Units in whole or in part for an equal number of shares of
series D preferred stock in the Company (Series D Preferred Stock),
subject to adjustment in the event of certain dilutive or other capital events.
We have the right to pay holders of Series D Preferred Units $36.55 plus
accrued and unpaid dividends with respect to each Series D Preferred Unit
tendered for redemption instead of issuing Series D Preferred Stock to the
holders.
OP Unit Redemption Procedures
A
holder of OP Units may exercise the right to redeem OP Units by providing to us
an appropriate notice, as described in the Operating Partnership Agreement. A
holder of OP Units may also be required to furnish certain other certificates
and forms. The Operating Partnership Agreement establishes certain limitations
on the right to redeem OP Units.
Once
we receive a notice of redemption with respect to OP Units, we will determine
whether to redeem the tendered OP Units for cash or shares of our Common Stock.
When
a holder of OP Units redeems OP Units, the holders right to receive
distributions on the OP Units so redeemed will cease for all periods
thereafter. No redemption can occur if delivery of OP Units on the specified
date
S-3
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to
the holder seeking redemption would be prohibited under our charter, the
Operating Partnership Agreement or applicable federal or state securities laws.
Registration
Rights
We have filed this prospectus supplement under
registration statement File No. 333-155742, dated November 26, 2008,
and registration statement File No. 333-107063, dated July 15, 2003
(collectively, the Registration Statements), pursuant to our obligations in
conjunction with certain agreements entered into in connection with the
acquisition of Westcor Realty Limited Partnership and its affiliated companies.
Under these agreements, we are obligated to use our reasonable best efforts to
keep the Registration Statements continuously effective until all holders have
tendered for redemption their outstanding Series D Preferred Units and any
OP Units issued upon conversion of Series D Preferred Units. We have no
obligation under these agreements to retain any underwriter to effect the sale
of the shares covered thereby, and the Registration Statements are not
available for use for an underwritten public offering of such shares.
We have the right under these agreements to suspend
sales under the Registration Statements for a period of not more than
105 days during any one-year period ending on December 31. To
exercise this right, we must furnish to you a certificate signed by our
executive officer or any director certifying that, in our good faith judgment,
it would be detrimental to us or our stockholders to amend the Registration
Statements at that time (or to continue sales under a filed registration
statement). We also have the right to require such holders not to make any
public sale of our Common Stock during the 15-day period prior to, and during
the 90-day period beginning on, the date of pricing of any registered offering
of our securities.
Pursuant to these agreements, we agreed to pay all
expenses of effecting the registration of securities covered by this prospectus
supplement (other than underwriting discounts, selling commissions and stock
transfer taxes, if any).
Holders of MACWH Units and MACWH CPUs
Prior to the Dividend, a holder of MACWH Units could
require MACWH to redeem all or a portion of the holders MACWH Units at a cash
redemption price per MACWH Unit equal to the 10-day average trading price of a
share of our Common Stock multiplied by a conversion factor (the Conversion
Factor) equal to 1.04645 (subject to equitable adjustment for customary
charges in capitalization) plus an amount equal to certain unpaid
distributions, if any. As a result of
the Dividend, the Conversion Factor was adjusted effective as of the Record
Date to 1.06519. As an alternative to
paying the redemption price in cash, we may elect, in our sole discretion, to
purchase MACWH Units offered for redemption by issuing a number of shares of
our Common Stock equal to the number of MACWH Units offered for redemption
multiplied by the Conversion Factor.
Prior to the Dividend, holders of MACWH CPUs could
require MACWH to redeem all or a portion of such MACWH CPUs at a cash
redemption price per MACWH CPU equal to the 10-day average trading price of an
equal number of shares of our Common Stock (subject to equitable adjustment for
customary changes in capitalization) multiplied by (i) the conversion rate
of approximately 0.83333 between the MACWH CPUs and MACWH Units (the Conversion
Rate) and as then multiplied by (ii) the Conversion Factor and plus an
amount equal to certain unpaid distributions, if any, attributable to the MACWH
CPUs, and plus a pro-rated amount attributable to distributions on such MACWH
CPUs for the most recent quarter end. The Dividend did not require an
adjustment to the Conversion Rate. As a result of the Dividend, the Conversion
Factor was adjusted effective as of the Record Date to 1.06519. As an alternative to paying the redemption
price in cash, we may elect, in our sole discretion, to purchase MACWH CPUs
offered for redemption by issuing a number of shares of our Common Stock equal
to the number of MACWH CPUs offered for redemption multiplied by an approximate
0.88766 exchange rate (i.e., approximately 0.88766 share of our Common Stock
for each MACWH CPU redeemed).
If we elect to purchase the MACWH Units or MACWH CPUs offered for
redemption, we must notify the redeeming holder within a fixed time period that
MACWH will not be obligated to satisfy the redemption right of the redeeming
holder and, for tax purposes, we will treat the transaction between us and the
redeeming holder as a sale by the redeeming holder. A holder may not exercise the redemption
right for less than one thousand (1,000) MACWH Units or MACWH CPUs or, if such
holder holds less than one thousand (1,000) MACWH Units or MACWH CPUs, all of
the MACWH Units or MACWH CPUs held by such holder. The redeeming holder shall have no right,
with respect to any MACWH Units or MACWH CPUs so redeemed, to receive any
distributions paid
S-4
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on
or after the specified redemption date (unless MACWH or, if applicable,
Macerich shall have failed to redeem or purchase such MACWH Units or MACWH CPUs
as of such time). See also Description of MACWH Units and MACWH CPUsRedemption
and Conversion for other special redemption rights and limitations.
Redemption Procedures
A holder may exercise the right to redeem MACWH Units or MACWH CPUs by
providing to MACWH and us an appropriate notice, as described in the MACWH Agreement.
A holder may also be required to furnish certain other certificates and forms.
The MACWH Agreement establishes some limitations on the right to redeem MACWH
Units and MACWH CPUs. See Description of MACWH Units and MACWH CPUsRedemption
and Conversion.
Once we receive a notice of redemption with respect to MACWH Units or
MACWH CPUs, we will determine whether to redeem the tendered MACWH Units or
MACWH CPUs for cash or for shares of Common Stock or whether MACWH will redeem
the tendered MACWH Units or MACWH CPUs. Any shares of Common Stock that we
issue will be validly issued, fully paid and nonassessable.
When a holder redeems MACWH Units or MACWH CPUs, the holders right to
receive distributions on the MACWH Units or MACWH CPUs so redeemed will cease
for all periods thereafter. No redemption can occur if delivery of MACWH Units
or MACWH CPUs on the specified date to the holder seeking redemption would be
prohibited under the charter, the MACWH Agreement or applicable federal or
state securities laws.
Registration Rights
We have filed this prospectus supplement and the prospectus supplement
dated November 26, 2008 under the registration statement File No. 333-155742,
dated November 26, 2008 (the Registration Statement), pursuant to our
obligations under a registration rights agreement entered into with various
persons on April 25, 2005 in connection with our acquisition of Wilmorite
Properties, Inc. and Wilmorite Holdings, L.P. Under the registration rights agreement, we
are obligated to use our reasonable best efforts to keep the Registration
Statement continuously effective until all holders have tendered for redemption
their outstanding MACWH Units or MACWH CPUs. We have no obligation under the
Registration Rights Agreement to retain any underwriter to effect the sale of
the shares covered thereby, and the Registration Statement is not available for
use for an underwritten public offering of such shares.
We have the right under the registration rights agreement to defer the
updating of the Registration Statement of which this prospectus supplement and
accompanying prospectus is a part, or suspend sales under the Registration
Statement for a period of not more than 105 days during any one-year period
ending on December 31. To exercise this right, we must furnish to the
related holders of MACWH Units or MACWH CPUs a certificate signed by one of our
executive officers or any of our directors certifying that, in our good faith
judgment, it would be detrimental to us or our stockholders to amend the Registration
Statement at that time or to continue sales under the Registration Statement,
and, therefore, we have elected to defer the amendment of the Registration
Statement or suspend sales under the Registration Statement of which this
prospectus supplement and accompanying prospectus is a part. We also have the
right to require such holders not to make any public sale of our Common Stock
during the 15-day period prior to, and during the 90-day period beginning on,
the date of pricing of any registered offering of our securities.
Pursuant to the registration rights agreement, we agreed to pay all
expenses of effecting the registration of securities covered by this prospectus
supplement (other than underwriting discounts, selling commissions and stock transfer
taxes, if any).
DESCRIPTION OF
SERIES
D PREFERRED
UNITS
AND OP UNITS
The material terms of the Series D Preferred Units and OP Units,
including a summary of certain provisions of the Operating Partnership
Agreement, as in effect as of the date of this prospectus supplement, are set
forth below. The following description does not purport to be complete and is
subject to and qualified in its entirety by reference to applicable provisions
of Delaware law and the Operating Partnership Agreement. For a comparison
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of
the voting and other rights of holders of OP Units and our stockholders, see Comparison
of Ownership of OP Units and our Shares.
Series D Preferred Units
Rank
The Series D Preferred Units rank, with respect to the payment of
distributions and the distribution of amounts upon voluntary or involuntary
liquidation, dissolution or winding-up of the Operating Partnership, as
follows:
·
senior to all classes or series of OP Units
and to all other units of limited partnership interest in the Operating
Partnership (the Units), the terms of which provide that they will rank
junior to the Series D Preferred Units;
·
on parity with each series of preferred Units
issued by the Operating Partnership that does not expressly provide that it
ranks junior or senior in right of payment to the Series D Preferred Units
with respect to payment of distributions or amounts upon liquidation,
dissolution or winding-up; and
·
junior to any class or series of Units issued
by the Operating Partnership that ranks senior to the Series D Preferred
Units in accordance with the Operating Partnership Agreement.
Voting Rights
The Operating Partnership may not, without the affirmative consent of
the holders of at least a majority of the Series D Preferred Units
outstanding at the time:
·
authorize, create, issue or increase the
authorized or issued amount of, any class or series of partnership interests in
the Operating Partnership ranking prior to the Series D Preferred Units
with respect to the payment of distributions or the distribution of assets upon
voluntary or involuntary liquidation, dissolution or winding-up of the
Operating Partnership or reclassify any OP Units into such partnership
interests, or create, authorize or issue any obligation or security convertible
or exchangeable into or evidencing the right to purchase any such partnership
interests; or
·
amend, alter or repeal the provisions of the
Operating Partnership Agreement, whether by merger or consolidation or
otherwise, so as to materially and adversely affect any right, preference,
privilege or voting power of the Series D Preferred Units or the holders
thereof.
Certain events are described in the Operating Partnership Agreement
that are deemed not to materially and adversely affect any such right,
preference, privilege or voting power or otherwise require the vote or consent
of the holders of the Series D Preferred Units. Each Series D
Preferred Unit will have one vote for the foregoing purposes and except as
otherwise required by applicable law or in the Operating Partnership Agreement,
the Series D Preferred Units will not have any voting rights or powers and
the consent of the holders will not be required for the taking of any action.
Distributions
With respect to each distribution period and subject to the rights of
the holders of preferred Units ranking senior to or on parity with the Series D
Preferred Units, the holders of Series D Preferred Units are entitled to
receive, when, as and if declared, quarterly cumulative cash distributions in
an amount per Series D Preferred Unit equal to the greater of:
·
$0.6725, and
S-6
Table of Contents
·
the amount of the regular quarterly cash
distribution for such distribution period upon the number of OP Units (or
portion thereof) into which such Series D Preferred Unit is then
convertible.
No distribution on the Series D Preferred Units will be declared
at any time if the terms of any agreement to which the Operating Partnership is
a party, including any debt instrument, prohibits such declaration, payment or
setting apart for payment or if any of these actions would constitute a breach
or a default, or are restricted or prohibited by law. However, distributions on
the Series D Preferred Units will accumulate whether or not any of these
restrictions exist.
So long as any Series D Preferred Units are outstanding, (i) no
distributions (other than in OP Units or other Units ranking junior to the Series D
Preferred Units) will be declared or paid upon the OP Units or any other Units
ranking junior to or on a parity with the Series D Preferred Units, and (ii) no
OP Units or other Units ranking junior to or on a parity with the Series D
Preferred Units will be redeemed, purchased or otherwise acquired for any
consideration by the Operating Partnership (except as expressly permitted in
the Operating Partnership Agreement), unless, in the case of either clause (i) or
(ii), full cumulative distributions have been or contemporaneously are declared
and paid or declared and set apart for such payment on the Series D
Preferred Units for all distribution periods ending on or prior to the
applicable distribution, redemption, purchase or acquisition date.
When distributions are not paid in full (or a sum sufficient for such
full payment is not set apart for such payment) upon the Series D
Preferred Units and any other Units ranking on a parity as to payment of
distributions with the Series D Preferred Units, all distributions
declared upon the Series D Preferred Units and any other Units ranking on
a parity as to payment of distributions with the Series D Preferred Units
will be declared pro rata so that the amount of distributions declared per Series D
Preferred Unit and such other Units will in all cases bear to each other the
same ratio that accrued distributions per Series D Preferred Unit and such
other Units bear to each other (not including any accumulation in respect of
unpaid distributions for prior distribution periods if such Units do not have
cumulative distributions).
Liquidation Preference
In the event of any voluntary or involuntary liquidation, dissolution
or winding-up of the Operating Partnership, before any payment or distribution
of the assets of the Operating Partnership will be made to the holders of OP
Units or any other Units ranking junior to the Series D Preferred Units,
the holders of the Series D Preferred Units will be entitled to receive,
after payment of all debts and other liabilities of the Operating Partnership,
according to their positive capital account balances, an amount equal to
$36.55, plus an amount equal to all distributions (whether or not earned or
declared) accrued and unpaid thereon to the date of final distribution. If,
upon any such voluntary or involuntary liquidation, dissolution or winding up
of the Operating Partnership, the assets of the Operating Partnership are
insufficient to pay in full the preferential amount on the Series D
Preferred Units and liquidating payments on any other Units ranking on parity,
then such assets, or the proceeds thereof, will be distributed among the
holders of Series D Preferred Units and any such other Units ratably.
Conversion
Holders of Series D Preferred Units have the right to convert all
or a portion of their Series D Preferred Units into OP Units, at a
conversion rate of 1.06520 (as adjusted effective as of the Record Date from a
previous conversion rate of 1.04646), subject to certain further adjustments
meant to address future dilutive or other capital events of the Operating
Partnership, if any.
Redemption
Subject to the limitations set forth in the Operating Partnership
Agreement, holders of Series D Preferred Units have the right to redeem
their Series D Preferred Units in whole or in part for an equal number of
shares of our Series D Preferred Stock, subject to adjustment in the event
of certain dilutive or other capital events. We have the right to pay $36.55 in
cash plus accrued and unpaid dividends with respect to each Series D
Preferred Unit tendered for redemption instead of issuing Series D
Preferred Stock. Any shares of Series D Preferred Stock we issue will be
subject to the ownership restrictions and limitations set forth in Article Eight
of our charter, which is incorporated by
S-7
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reference
into the registration statement of which this prospectus is a part. See Description
of our Capital Stock in the accompanying prospectus.
Transfer Restrictions
The Operating Partnership Agreement provides that, without the consent
of our Company as the general partner, limited partners may not transfer,
assign, sell, encumber or otherwise dispose of their interest in the Operating
Partnership, other than to affiliates who agree to assume the obligations of
the transferor under the Operating Partnership Agreement.
Because the Series D Preferred Units were issued in a private
placement, and have not been registered under the Securities Act, they may not
be resold unless they are registered under the Securities Act and registered or
qualified under any applicable state securities law, or unless an exemption of
such registration or qualification is available.
OP Units
Rank
The OP Units rank junior to the preferred Units issued by the Operating
Partnership. Our Company, as general partner, is authorized, in its sole
discretion, to cause the Operating Partnership to issue additional OP Units or
other limited partnership interests in the Operating Partnership for any
partnership purpose at any time to the limited partners or to other persons on
terms established by our Company within the boundaries set forth in the
Operating Partnership Agreement. The Operating Partnership may also issue preferred
Units, having such rights, preferences and other privileges, variations and
designations as our Company may determine in its sole and absolute discretion,
as provided in the Operating Partnership Agreement. The Operating Partnership
Agreement requires our Company to invest, contribute or otherwise transfer the
net proceeds of any sale of securities by our Company to the Operating
Partnership in exchange for equivalent securities of the Operating Partnership.
Voting
As the general partner of the Operating Partnership, our Company has
been granted by the limited partners the right to vote and give consents and
approvals on behalf of any absolute majority of all OP Units and preferred
Units held by the limited partners as a class with respect to any matters that
may require the vote, consent or approval of the limited partners under the
Operating Partnership Agreement, with the exception of (i) a merger or
sale of substantially all of the Operating Partnerships assets, which would
require the consent of 75% of the outstanding OP Units, or (ii) as
otherwise provided by the terms of any preferred Units.
Distributions
The Operating Partnership Agreement provides that all or a portion of
the net cash flow of the Operating Partnership will be distributed from time to
time (but at least quarterly) as determined by our Company pro rata in
accordance with the partners percentage interest. Distributions to the OP
Units rank junior to all preferred Units issued by the Operating Partnership.
Liquidation Preference
The OP Units rank, with respect to the payment of distributions and the
distribution of amounts upon voluntary or involuntary liquidation, dissolution
or winding-up of the Operating Partnership, junior to all classes of preferred
Units issued by the Operating Partnership.
Redemption
Subject to the limitations set forth in the Operating Partnership
Agreement, holders of the OP Units have the right to redeem their OP Units in
whole or in part for an equal number of shares of our Common Stock, subject to
adjustment in the event of certain dilutive or other capital events. We have
the right to pay redeeming holders an
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amount
of cash equal to the value of the Common Stock otherwise issuable to them upon
tender of their OP Units, as determined in accordance with the Operating
Partnership Agreement, instead of issuing our Common Stock. Any shares of our
Common Stock we issue will be subject to the ownership restrictions and
limitations set forth in Article Eight of our charter, which is
incorporated by reference into the registration statement of which this
prospectus supplement is a part. See Description of our Capital Stock in the
accompanying prospectus.
Transfer Restrictions
The Operating Partnership Agreement provides that, without the consent
of our Company as the general partner, limited partners may not transfer,
assign, sell, encumber or otherwise dispose of their interest in the Operating
Partnership, other than to affiliates who agree to assume the obligations of
the transferor under the Operating Partnership Agreement.
Because the issuance of any OP Units to tendering holders of Series D
Preferred Units will not be registered under the Securities Act of 1933 (the Securities
Act), the OP Units may not be resold unless they are registered under the
Securities Act and registered or qualified under any applicable state
securities law, or unless an exemption from such registration or qualification
is available.
DESCRIPTION
OF MACWH UNITS AND
MACWH
CPUS
The material terms of the MACWH Units and MACWH CPUs, including a
summary of certain provisions of the MACWH Agreement, as in effect as of the
date of this prospectus supplement, are set forth below. The following
description does not purport to be complete and is subject to and qualified in
its entirety by reference to applicable provisions of Delaware law and the
MACWH Agreement. For a comparison of the voting and other rights of holders of
MACWH Units and MACWH CPUs and our stockholders, see Comparison of Ownership
of MACWH Units and MACWH CPUs and Our Shares.
Rank
As general partner, Walleye Retail Investments LLC (Walleye) is
authorized, in its sole discretion, to cause MACWH to issue additional MACWH
Units, MACWH CPUs or other limited partnership interests in MACWH for any
partnership purpose at any time to the limited partners or to other persons on
terms established by the general partner within the boundaries set forth in the
MACWH Agreement. MACWH may also issue preferred partnership units, having such
rights, preferences and other privileges, variations and designations as the
general partner may determine in its sole and absolute discretion, as provided
in the MACWH Agreement.
Distributions
Subject to certain limitations, MACWH Units will receive a quarterly
distribution that will track, in part, quarterly dividends made on our Common
Stock on an as-converted basis. MACWH CPU holders will receive a quarterly
distribution comprised of both a fixed component and a component that floats
with the regular dividend paid on shares of our Common Stock. See Comparison
of Ownership of MACWH Units and MACWH CPUs and Our SharesNature of Investment.
Redemption and Conversion
MACWH limited partners have certain rights under the MACWH Agreement to
redeem and/or convert, in certain cases, their MACWH Units and MACWH CPUs.
General Redemption Right for Units
of MACWH
Prior to the Dividend, a holder of MACWH Units could require MACWH to
redeem all or a portion of the holders MACWH Units at a cash redemption price
per MACWH Unit equal to the 10-day average trading price of a share of our
Common Stock multiplied by the Conversion Factor equal to 1.04645 (subject
to equitable adjustment for customary charges in capitalization) plus an amount
equal to certain unpaid distributions, if any.
As a result of the Dividend, the Conversion Factor was adjusted
effective as of the Record Date to 1.06519.
As an alternative to
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paying
the redemption price in cash, we may elect, in our sole discretion, to purchase
MACWH Units offered for redemption by issuing a number of shares of our Common
Stock equal to the number of MACWH Units offered for redemption multiplied by
the Conversion Factor.
Prior to the Dividend, holders of MACWH CPUs could require MACWH to
redeem all or a portion of such MACWH CPUs at a cash redemption price per MACWH
CPU equal to the 10-day average trading price of an equal number of shares of
our Common Stock (subject to equitable adjustment for customary changes in
capitalization) multiplied by (i) the Conversion Rate and
as then
multiplied by (ii) the Conversion Factor and plus an amount equal to
certain unpaid distributions, if any, attributable to the MACWH CPUs, and plus
a pro-rated amount attributable to distributions on such MACWH CPUs for the
most recent quarter end. The Dividend did not require an adjustment to the
Conversion Rate. As a result of the Dividend, the Conversion Factor was
adjusted effective as of the Record Date to
1.06519. As an
alternative to paying the redemption price in cash, we may elect, in our sole
discretion, to purchase MACWH CPUs offered for redemption by issuing a number
of shares of our Common Stock equal to the number of MACWH CPUs offered for
redemption multiplied by an approximate 0.88766 exchange rate (i.e., approximately 0.88766 share of our Common Stock for each
MACWH CPU redeemed). See Redemption of
OP Units, MACWH Units and MACWH CPUsHolders of MACWH Units or MACWH CPUs.
MACWH CPU Conversion Right
The holders of MACWH CPUs have a conversion right pursuant to which
limited partners may convert all or a portion of their MACWH CPUs into MACWH
Units at any time. In the event of such conversion, the MACWH CPUs will be
converted to MACWH Units by multiplying the number of MACWH CPUs to be
converted by the Conversion Rate (as may be adjusted for certain dividends,
subdivisions or combinations of MACWH Units).
Special Redemption Right for MACWH
CPUs
The holders of MACWH CPUs will have a special redemption right for a
30-day period commencing on April 25, 2012 to have all or a portion of
their MACWH CPUs redeemed by MACWH for cash in the amount of, or, at the
election of MACWH, MACWH Units with a value equal to $53.0315 per unit, subject
to certain adjustments. We, at our election, may assume MACWHs obligation
under this special redemption right and may elect to satisfy such obligation
either in cash or shares of our Common Stock with a value equal to $53.0315 per
unit, subject to certain adjustments. The aggregate amount of MACWH CPUs
redeemed in this manner may not exceed $75,000,000.
Forced Conversion Right of MACWH
During the same 30-day period commencing on April 25, 2012, MACWH
will have the right to require the limited partners holding MACWH CPUs to
convert all of their MACWH CPUs for that number of MACWH Units with a value
equal to $82.3548, subject to adjustment, per MACWH CPU to be redeemed. At any
time prior to the effective date listed in the forced conversion notice, the
limited partners holding such MACWH CPUs may exercise their right to convert
all or a portion of such MACWH CPUs into MACWH Units.
Forced and Voluntary Exchange for
Units of the Operating Partnership
Holders of MACWH Units may, at specified times, exchange their MACWH
Units for OP Units on a one-for-one basis (subject to equitable adjustments for
customary changes in capitalization). Between June 1, 2011 and May 30,
2012, each holder of MACWH Units may exchange all or part of the remaining
MACWH Units held by such holder for OP Units on a one-for-one basis.
MACWH CPU holders may, at specified times, exchange their MACWH CPUs
for a new class of partnership units of the Operating Partnership with
materially similar terms to the MACWH CPUs (including the special redemption
right and forced conversion right described above) on a one-for-one basis
(subject to equitable adjustments for customary changes in capitalization).
Between June 1, 2011 and May 30, 2012, each MACWH CPU holder may
exchange all or part of the remaining MACWH CPUs held by such holder for the
applicable new class of partnership units of the Operating Partnership on a
one-for-one basis.
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Between June 1, 2011 and May 30, 2012, the Operating
Partnership or MACWH will have the right to cause each limited partner (other
than us, Walleye, the Operating Partnership, or our or their respective
subsidiaries or affiliates or any transferee of Walleye) to exchange such
limited partners MACWH CPUs or MACWH Units for the applicable new classes of
partnership interests in the Operating Partnership on a one-for-one basis
(subject to equitable adjustments for customary changes in capitalization).
Transfer Restrictions
A limited partner (other than us, Walleye, Macerich Partnership or any
of our or its respective subsidiaries or affiliates) may not transfer (including
any sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage,
exchange or any other disposition by operation of law or otherwise) all or any
portion of its MACWH Units or MACWH CPUs (or any of its economic rights as a
limited partner) without the prior written consent of Walleye, which consent
may be given or withheld in Walleyes sole and absolute discretion.
Additionally, Walleye may prohibit any transfer of partnership interests by a
limited partner if such a transfer would require the filing of a registration
statement under the Securities Act or would violate federal or state securities
laws.
After giving Walleye five business days written notice and such
information about the transferee as Walleye may reasonably request in order to determine,
among other things, that the transfer is not a transaction that might
jeopardize our REIT status, a limited partner may transfer its MACWH Units or
MACWH CPUs to a person who is, at the time of the transfer, a limited partner,
a person who is a member of such limited partners family group, a person who
or which is an affiliate of such limited partner, or any lenders to such
limited partner through a pledge of such limited partners partnership interest
(provided, however, that no limited partner may pledge, encumber, hypothecate
or mortgage any of its MACWH Units or MACWH CPUs without the prior consent of
Walleye, such consent not to be unreasonably withheld or delayed).
Notwithstanding a limited partners ability to pledge its partnership interests,
Walleyes consent is required to transfer any MACWH Units or MACWH CPUs to (a) a
lender to MACWH or (b) any person who is related (within the meaning of Section 1.752-4(b) of
the Internal Revenue Code of 1986, as amended (the Code)) to any lender to
Walleye whose loan constitutes a non-recourse liability. Such consent may be
given or withheld by Walleye in its sole and absolute discretion.
In addition, a limited partner may not transfer its MACWH Units or
MACWH CPUs to any person, including a redemption or exchange under the MACWH
Agreement, if it would have certain adverse legal or regulatory effects on us,
the Operating Partnership or MACWH.
CERTAIN MATERIAL UNITED
STATES FEDERAL
INCOME
TAX CONSIDERATIONS
TO
ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY THE INTERNAL REVENUE SERVICE
(THE IRS), WE INFORM YOU THAT ANY U.S. TAX ADVICE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT (INCLUDING ANY ATTACHMENTS) IS NOT INTENDED OR WRITTEN TO
BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF (I) AVOIDING PENALTIES
UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (II) PROMOTING,
MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TRANSACTION OR MATTER ADDRESSED
HEREIN.
The following discussion summarizes certain material U.S. federal
income tax considerations that may be relevant to a U.S. Holder (as defined
below) who receives our common stock upon redemption of his, her or its OP
Units, MACWH Units or MACWH CPUs (collectively, the Units) as well as certain
material U.S. federal income tax considerations regarding our qualification and
taxation as a REIT and certain material U.S. federal income tax considerations
to U.S. Stockholders and Non-U.S. Stockholders (each as defined below) of the
purchase, ownership and disposition of our Common Stock. This summary is based
upon the Code, the regulations promulgated by the U.S. Treasury Department,
rulings and other administrative pronouncements issued by the IRS, and judicial
decisions, all as currently in effect, and all of which are subject to
differing interpretations or to change, possibly with retroactive effect. No
assurance can be given that the IRS would not assert, or that a court would not
sustain, a position contrary to any of the tax consequences described below.
The summary is also based upon the assumption that our operation and the
operation of the Company, the Operating Partnership and MACWH, and each of
their subsidiaries and other lower-tier and affiliated entities, will in each
case be in accordance with its applicable organizational documents. This summary
is for general information only and does not purport to discuss all aspects of
U.S. federal income taxation which may be important to a particular investor in
light of its specific investment or tax circumstances, or if a particular
investor is subject to special tax rules (for example, if a particular
investor is a dealer in securities, bank, thrift or other financial
institution, broker-dealer, regulated investment company, insurance company,
tax-exempt organization, partnership, grantor trust or other pass-through
entity (or person holding Units or Common Stock through a partnership, grantor
trust or other pass-through
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entity),
U.S. expatriate, a person that holds Common Stock or Units as part of a
straddle, conversion transaction, or hedge, a person deemed to sell our Common
Stock or Units under the constructive sale provisions of the Code, a person
whose functional currency is other than the U.S. dollar, a person subject to
the alternative minimum tax, a foreign government, international organization, or,
except to the extent discussed below, a Non-U.S. Holder (as defined below) of
Units or Non-U.S. Stockholder of Common Stock or if an investor received his
Units or Common Stock in connection with providing services to the Company, the
Operating Partnership or MACWH, as applicable, as determined for U.S. federal
income tax purposes). Except to the extent discussed below under Non-U.S.
Holders, this discussion only applies to unit holders that provide an
affidavit to the Operating Partnership or MACWH, as applicable, at the time
their Units are redeemed, accurately stating, under penalties of perjury, the
holders taxpayer identification number and that the holder is not a foreign
person. This summary also assumes that Units and Common Stock are held as
capital assets. No advance ruling has been or will be sought from the IRS, and
no opinion of counsel will be received, regarding the U.S. federal, state,
local or foreign tax consequences discussed herein. The U.S. federal income tax
consequences to a holder of Units that receives shares of Common Stock depends
in some instances on determinations of fact and interpretations of complex
provisions of the U.S. federal income tax law. No clear precedent or authority
may be available on some questions. This summary supersedes in its entirety the
discussion of Certain United States Federal Income Tax Considerations in the
accompanying Prospectus.
If a partnership (including any entity or arrangement treated as a
partnership for U.S. federal income tax purposes) holds Units or Common Stock,
the tax treatment of such partnership, or a partner in the partnership,
generally will depend on the status of the partner and the activities of the
partnership. Partnerships holding Units or Common Stock, and persons that are
partners in partnerships holding Units or Common Stock, should consult their
own tax advisors regarding the tax consequences of the transactions described
herein.
As used herein, a U.S. Holder is a beneficial owner of OP Units,
MACWH Units or MACWH CPUs, as applicable, that is, for U.S. federal income tax
purposes, (a) an individual citizen or resident of the United States, (b) a
corporation (or other entity treated as a corporation for U.S. federal income
tax purposes) created or organized under the laws of the United States, a state
therein or the District of Columbia, (c) an estate the income of which is
subject to U.S. federal income taxation regardless of its source, or (d) a
trust (i) if a U.S. court is able to exercise primary supervision over the
trusts administration and one or more United States persons, as defined under Section 7701(a)(30)
of the Code, have authority to control all the trusts substantial decisions or
(ii) that has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a United States person. A Non-U.S. Holder means
a beneficial owner of Units (other than an entity treated as a partnership for
U.S. federal income tax purposes), and a Non-U.S. Stockholder is a beneficial
owner of our Common Stock (other than an entity treated as a partnership for
U.S. federal income tax purposes), that, for U.S. federal income tax purposes,
is a non-resident alien individual, foreign corporation, foreign estate or
foreign trust.
The sections of the Code relating to qualification and operation as a
REIT, and the U.S. federal income tax treatment of a REIT and its stockholders,
are highly technical and complex. The following discussion sets forth
only the material aspects of those sections. This summary is qualified in
its entirety by the applicable Code provisions and the related rules and
Treasury regulations.
HOLDERS
SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES TO THEM OF
REDEEMING THEIR UNITS, INCLUDING THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSIDERATIONS OF REDEEMING UNITS IN THEIR PARTICULAR CIRCUMSTANCES AND POTENTIAL
CHANGES IN APPLICABLE LAWS AS WELL AS THE TAX CONSEQUENCES OF ACQUIRING,
HOLDING AND DISPOSING OF OUR STOCK.
TAX CONSIDERATIONS APPLICABLE TO THE
REDEMPTION OF UNITS
Tax Consequences of Redemption of OP Units
If the Operating Partnership were to redeem OP Units and if we were to
satisfy that redemption with shares of our Common Stock, the partnership
agreement for the Operating Partnership provides that we, the Operating
Partnership, and the holder will treat the redemption as a sale of OP Units to us
at the time the OP Units are redeemed. This sale will be fully taxable to the
holder. See Tax Treatment of Disposition of Units by Holders Generally
below.
If, instead, the Operating Partnership were to redeem all of a U.S.
Holders OP Units for cash, and such cash was not contributed by us to the
Operating Partnership for that purpose, the tax consequences to the U.S.
Holder would generally be as described under Tax Treatment of
Disposition of Units by Holders Generally below. If, however, the Operating
Partnership redeems less than all of a U.S. Holders OP Units for cash (and
such cash was not contributed by us to the Operating Partnership), such holder
would recognize taxable gain only to the extent that the amount the U.S. Holder
would be treated as receiving (including the cash plus the reduction, if any,
of such holders share of the Operating Partnership liabilities resulting from
the redemption) exceeded the U.S. Holders adjusted basis in all of its OP
Units immediately before the redemption, and the U.S. Holder would not be
permitted to recognize any loss in respect of the redemption.
Tax
Consequences of Redemption of MACWH Units and MACWH CPUs
If a U.S. Holder of MACWH Units or MACWH CPUs receives
our Common Stock in exchange for a Unit in connection with a redemption, the
holder generally should be treated as if the holder sold the Unit in a fully
taxable
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transaction
for U.S. federal income tax purposes. In this regard, the MACWH Agreement
provides that we, MACWH and the holder will treat the transaction between the
holder and us as a sale of MACWH Units or MACWH CPUs, as the case may be, for
U.S. federal income tax purposes. See Tax Treatment of Disposition of Units
by Holders Generally below.
If, instead, MACWH were to redeem all of a U.S. Holders
MACWH Units or MACWH CPUs, as applicable, for cash, and such cash was not
contributed by us to MACWH for that purpose, the tax consequences to the U.S.
Holder would generally be as described under Tax Treatment of Disposition of
Units by Holders Generally below. If,
however, MACWH redeems less than all of a U.S. Holders MACWH Units or MACWH
CPUs, as applicable, for cash (and such cash was not contributed by us to
MACWH), such holder would recognize taxable gain only to the extent that the
amount the U.S. Holder would be treated as receiving (including cash plus the
reduction, if any of such holders share of MACWHs liabilities resulting from
the redemption) exceed the U.S. Holders adjusted basis in all of its MACWH
Units and/or MACWH CPUs, as applicable, immediately before the redemption, and
the U.S. Holder would not be permitted to recognize any loss in respect of the
redemption.
Potential
Application of Disguised Sale Regulations to a Holders Original Contribution
of Property for
Units upon a Redemption
If
a U.S. Holder originally contributed property (including for this purpose a partnership
interest) to the Operating Partnership or MACWH, as applicable, in exchange for
OP Units, MACWH Units or MACWH CPUs, as applicable, a distribution of cash or
shares of our Common Stock to the U.S. Holder (including upon a redemption) may
result in a disguised sale of that contributed property. The Code and the
Treasury regulations under the Code generally provide that a holders
contribution of property to the Operating Partnership or MACWH, as applicable,
and a simultaneous or subsequent transfer of money or other consideration from
the Operating Partnership or MACWH, as applicable, to the holder, including the
partnerships assumption of a liability or taking the property subject to a
liability, may be treated as a sale, in whole or in part, of the property by
the holder to the partnership. Further, the Treasury regulations provide
generally that, in the absence of an applicable exception, if the Operating
Partnership or MACWH, as applicable, transfers money or other consideration
(such as shares of our Common Stock) to a holder within two years after the
holder contributed property to the partnership, the transactions will be
presumed to be a sale of the contributed property unless the facts and
circumstances clearly establish that the transfers do not constitute a sale.
The Treasury regulations also provide that if more than two years have passed
between the time when a holder contributed property to the partnership and the
time when the partnership transferred money or other consideration (such as
shares of our Common Stock) to the holder, the transactions will be presumed
not to be a sale unless the facts and circumstances clearly establish that the
transfers constitute a sale.
Accordingly, if the Operating Partnership or MACWH, as applicable,
distributes cash or shares of our Common Stock (including upon a redemption of
a U.S. Holders Units), the Internal Revenue Service (the IRS) could contend
that the distribution of cash or shares of our Common Stock should be treated
as part of a disguised sale of the original contribution property because the
U.S. Holder will receive cash or shares of our Common Stock, as applicable,
after having contributed property to the Operating Partnership or MACWH, as
applicable. If disguised sale treatment were to apply in whole or in part to
the original contribution and subsequent distribution of cash or shares of our
Common Stock, such holder would be treated for U.S. federal income tax purposes
as if, on the date of the holders contribution of property to the Operating
Partnership or MACWH, as applicable, the Operating Partnership or MACWH
transferred to the holder, in addition to any Units not treated as part of the
disguised sale, an obligation to pay the holder the amount of the later
distribution. In that case, the holder may be required to recognize gain
on the disguised sale in such earlier year and/or may have a portion of the
proceeds recharacterized as interest or be required to pay an interest charge
on any tax due.
Tax Treatment of Disposition of Units
by Holders Generally
If a U.S. Holder redeems Units in a manner that is treated as a sale of
the Units, the U.S. Holders gain or loss from the redemption will generally be
equal to the difference between:
·
the amount realized for tax purposes; and
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·
the U.S. Holders tax basis in the Units.
The
amount realized will generally be the sum of:
·
the cash and fair market value of other
property received, including any shares of our Common Stock; plus
·
the reduction of the portion of the Operating
Partnerships or MACWHs liabilities, as applicable, allocable to the Units
redeemed.
The amount of Operating Partnership or MACWH
liabilities, as applicable, allocable to the Units redeemed will include the
Operating Partnerships or MACWHs share, as applicable, of the liabilities of
certain entities in which it owns an interest. See Basis of Units below for
information about the tax basis of Units.
A U.S. Holder will generally recognize gain to the extent that the
amount realized exceeds the U.S. Holders basis in the Units redeemed. The
amount of gain recognized or the tax liability resulting from the gain could
exceed the amount of cash and the value of any other property, including shares
of our Common Stock, received upon the redemption of the Units. A U.S. Holders
adjusted tax basis in any shares of our Common Stock received in exchange for
Units will be the fair market value of those shares on the date of the
exchange. Similarly, a U.S. Holders holding period in such shares will
begin on the day following the exchange. The use of any losses recognized upon
an exchange is subject to a number of limitations set forth in the Code.
Except as described below, any gain recognized upon a redemption of
Units will be treated as gain attributable to the sale or disposition of a
capital asset. To the extent, however, that the amount realized upon the
redemption of a Unit attributable to a U.S. Holders share of unrealized
receivables of the Operating Partnership or MACWH, as applicable, as defined
in Section 751 of the Code, exceeds the basis attributable to those assets,
this excess will be treated as ordinary income. Unrealized receivables include,
to the extent not previously included in the Operating Partnerships or MACWHs
income, as applicable, any rights to payment for services rendered or to be
rendered. Unrealized receivables also include amounts that would be subject to
recapture as ordinary income if the Operating Partnership or MACWH, as
applicable, had sold its assets at their fair market value at the time of the
redemption of a Unit, MACWH Unit or MACWH CPU, as applicable.
For non-corporate U.S. Holders, the current maximum rate of U.S.
federal income tax on the net capital gain from the sale or exchange of a
capital asset held for more than one year is 15%. The current maximum rate for
net capital gains attributable to the sale of depreciable real property held
for more than one year is 25% to the extent of the prior deductions for
depreciation that are not otherwise recaptured as ordinary income under the
depreciation recapture rules described above.
Basis of Units
In general, if a U.S. Holder received Units in exchange for
contributing an interest in a partnership or for other property, the holder has
an initial tax basis in the Units equal to the holders basis in the
contributed partnership interest or other property, as applicable. The U.S.
Holders basis in Units generally is increased by:
·
the holders share of the Operating
Partnerships or MACWHs, as applicable, taxable and tax-exempt income; and
·
increases in the holders share of the
liabilities of the Operating Partnership or MACWH, as applicable, including the
Operating Partnerships or MACWHs share of the liabilities of entities in
which it owns an interest.
Generally,
a U.S. Holders basis in Units is decreased by:
·
the holders share of Operating Partnership
distributions, or MACWH distributions, as applicable;
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·
decreases in the holders share of
liabilities of the Operating Partnership or MACWH, as applicable, including the
Operating Partnerships or MACWHs share of the liabilities of entities in
which it owns an interest;
·
the holders share of losses of the Operating
Partnership or MACWH, as applicable; and
·
the holders share of nondeductible
expenditures of the Operating Partnership or MACWH, as applicable, that are not
chargeable to capital.
However,
a U.S. Holders basis in each of his, her or its Units will not decrease below
zero.
Tax Reporting and Withholding
Information concerning a redemption may be
required to be reported to the IRS. The
Operating Partnership or MACWH, as applicable, will be required to withhold any
applicable U.S. federal, state and local taxes from the distribution. If the amount required to be withheld with respect
to a unit holder exceeds the cash portion of the distribution made to such unit
holder, the U.S. Holder may be required to pay such excess amount in cash to
the Operating Partnership or MACWH, as applicable, or the Operating Partnership
or MACWH, as applicable, may withhold such excess amount from future
distributions.
Non-U.S. Holders
Gain recognized by a Non-U.S. Holder on a sale, exchange or redemption
of a Unit will be subject to U.S. federal income tax under the Foreign
Investment in Real Property Tax Act of 1980 (FIRPTA) at the same rates generally
applicable to U.S. Holders. The Company, the Operating Partnership or MACWH
will be required, under the FIRPTA provisions of the Code, to deduct and
withhold 10% of the amount realized by Non-U.S. Holders on the disposition and Non-U.S.
Holders will be required to file a U.S. federal income tax return to report any
gain and pay any additional tax due. The amount withheld would be
creditable against the Non-U.S. Holders U.S. federal income tax liability and,
if the amount withheld exceeds the actual tax liability, the Non-U.S. Holder
could claim a refund from the IRS. State and local taxes, withholding and tax
return filing obligations may also apply.
YOU SHOULD CONSULT YOUR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES
TO YOU OF REDEEMING UNITS, INCLUDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF REDEEMING UNITS IN YOUR PARTICULAR CIRCUMSTANCES AND POTENTIAL
CHANGES IN APPLICABLE LAWS.
TAX CONSIDERATIONS APPLICABLE TO THE OWNERSHIP OF COMMON
STOCK
Taxation of Our Company
We have elected to be taxed as a REIT under Sections
856 through 860 of the Code, commencing with our taxable year ending December 31,
1994. We believe that we are organized and have operated in a manner that
qualifies us for taxation as a REIT under the Code. We further believe
that our proposed future method of operation will enable us to continue to
qualify as a REIT. However, no assurances can be given that our beliefs
or expectations will be fulfilled, since qualification as a REIT depends on our
continuing to satisfy numerous asset, income and distribution tests described
below, which in turn depends, in part, on our operating results.
We generally are not subject to U.S. federal income
tax on the portion of our taxable income or capital gain that is distributed to
stockholders annually as long as we qualify as a REIT. This treatment
substantially eliminates the double taxation (at the corporate and
stockholder levels) that typically results from investment in a corporation.
Notwithstanding our qualification as a REIT, we are subject to U.S.
federal income tax as follows:
·
we are taxed at normal corporate rates on any undistributed net income
(including undistributed net capital gains);
·
if we fail to satisfy either the 75% or the 95% gross income tests
(discussed below), but nonetheless maintain our qualification as a REIT because
other requirements are met, we will be subject to a 100% tax on the greater of (1) the
amount by which we fail the 75% test and (2) the amount by which we fail
the 95% test, in either case multiplied by a fraction intended to reflect our
profitability;
·
if we should fail to satisfy the asset or other requirements applicable
to REITs, as described below, yet nonetheless maintain our qualification as a
REIT because there is reasonable cause for the failure and other applicable
requirements are met, we may be subject to an excise tax;
·
we are subject to a tax of 100% on net income from any prohibited
transaction;
·
we are subject to tax, at the highest corporate rate, on net income
from (1) the sale or other disposition of foreclosure property which is
held primarily for sale to customers in the ordinary course of business or (2) other
non-qualifying income from foreclosure property;
·
if we fail to distribute during each calendar year at least the sum of (1) 85%
of our REIT ordinary income for the year, (2) 95% of our REIT capital gain
income for the year and (3) any undistributed taxable income from prior
years, we will be subject to a 4% excise tax on the excess of the required
distribution over the sum of (a) the amounts actually distributed plus (b) the
amounts with respect to which certain taxes are imposed on us;
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·
if we acquire any asset from a C corporation (that is, a corporation
generally subject to the 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 C corporation, and we recognize gain on the
disposition of the asset during a ten-year period (seven-year period with
respect to any such gain recognized during any taxable year beginning in 2009
or 2010) beginning on the date that we acquired the asset, then the assets
built-in gain generally will be subject to tax at the highest regular
corporate rate;
·
we are subject to the corporate alternative minimum tax, as well as
additional taxes if we find ourselves in situations not presently contemplated;
and
·
a 100% tax may be imposed on certain transactions between us and our
taxable REIT subsidiaries that do not reflect arms length terms.
Our management companies that are referred to as
taxable REIT subsidiaries (within the meaning of Section 856(l)(1) of
the Code), including Macerich Management Company and Westcor Partners, LLC, are
taxed on their income at regular corporate rates. We use the calendar
year both for U.S. federal income tax purposes and for financial reporting
purposes.
Requirements for Qualification
To qualify as a REIT for U.S. federal income tax
purposes, we must elect to be treated as a REIT, and we must meet various (a) organizational
requirements, (b) gross income tests, (c) assets tests and (d) annual
distribution requirements.
Organizational
Requirements.
We must be organized as a corporation, trust or association:
(1) that is managed by one or more
trustees or directors;
(2) the beneficial ownership of which is
evidenced by transferable shares, or by transferable certificates of beneficial
interest;
(3) that would be taxable as a domestic
corporation, but for Sections 856 through 860 of the Code;
(4) that is neither a financial
institution nor an insurance company subject to specified provisions of the
Code;
(5) the beneficial ownership of which is
held by 100 or more persons;
(6) 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, or by application of certain constructive ownership
rules, by five or fewer individuals (as defined in the Code to include some
entities that would not ordinarily be considered individuals); and
(7) that meets other tests, described
below, regarding the nature of its income and assets.
The Code provides that conditions (1) through (4) must
be met during our entire taxable year, and that condition (5) 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. Our
charter provides for restrictions regarding transfer of our capital stock, in
order to assist us in continuing to satisfy the share ownership requirements
described in (5) and (6) above. These transfer restrictions are
described in Description of Our Capital StockRestrictions on Transfer and
Ownership in the accompanying Prospectus.
We are treated as having satisfied condition (6) above
if we comply with the regulatory requirements to request information from our
stockholders regarding their actual ownership of our stock, and do not know, or
in exercising
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reasonable
diligence would not have known, that we failed to satisfy this condition.
If we fail to comply with these regulatory requirements for any taxable year we
will be subject to a penalty of $25,000, or $50,000 if such failure was
intentional. However, if our failure to comply was due to reasonable
cause and not willful neglect, no penalties will be imposed.
Gross Income
Tests.
We
must satisfy the following two separate gross income tests each year:
·
75% Gross Income Test. At least 75% of our gross income
(excluding gross income from prohibited transactions, certain hedging
transactions and certain foreign currency gains recognized after July 30,
2008) must consist of income derived directly or indirectly from investments
relating to real property or mortgages on real property (generally including
rents from real property, dividends from other REITs, and, in some
circumstances, interest on mortgages), or some types of temporary investment
income.
·
95% Gross Income Test. At least 95% of our gross income
(excluding gross income from prohibited transactions, certain hedging
transactions and certain foreign currency gains recognized after July 30,
2008) must consist of items that satisfy the 75% gross income test and certain
other items, including dividends, interest and gain from the sale or
disposition of stock or securities (or from any combination of these types of
income).
Rents from Real
Property.
Rents received by us qualify as rents from real property in satisfying the
gross income tests described above if the following conditions are met.
First, the amount of rent must not be based, in whole or in part, on the income
or profits of any person. An amount received or accrued generally is not
excluded from the term rents from real property solely because the amount is
based on a fixed percentage or percentages of receipts or sales. Second,
we, or an owner of 10% or more of our equity securities, must not directly or
constructively own 10% or more of a tenant. Third, if more than 15% of
the total rent we receive under a lease is attributable to personal property
leased in connection with a lease of real property, then the portion of rent
attributable to that personal property does not qualify as rents from real
property. Finally, we generally must not operate or manage the property, or
furnish or render services to the tenants of the property, other than through
an independent contractor from whom we do not derive revenue. However, we
may directly perform services that are usually or customarily rendered in
connection with the rental of space for occupancy only or are not otherwise
considered rendered to the occupant for its convenience. A de minimis
amount of up to 1% of the gross income may be received by us from each property
from the provision of non-customary services without disqualifying all other
amounts received from that property as rents from real property. However, the
de minimis amount itself will not qualify as rents from real property for
purposes of the 75% and 95% gross income tests. In addition, we may
furnish certain services (including non-customary services) through a taxable
REIT subsidiary, which includes a corporation other than a REIT in which we hold
stock and that has made a joint election with us to be treated as a taxable
REIT subsidiary. As mentioned above, a taxable REIT subsidiary is subject
to U.S. federal income tax at regular corporate rates.
For purposes of the above, rents received from a tenant
that is a taxable REIT subsidiary, however, will not be excluded from the
definition of rents from real property if at least 90% of the space at the
property to which the rents relate is leased to third parties, and the rents
paid by our taxable REIT subsidiary are substantially comparable to rents by
our other tenants for comparable space. Whether rents paid by a taxable
REIT subsidiary are substantially comparable to rents paid by other tenants is
determined at the time the lease with the taxable REIT subsidiary is entered
into, extended, or modified, if such modification increases the rents due under
such lease. Notwithstanding the foregoing, however, if a lease with a
controlled taxable REIT subsidiary is modified and such modification results in
an increase in the rents payable by such taxable REIT subsidiary, any such
increase will not qualify as rents from real property. For purposes of this
rule, a controlled taxable REIT subsidiary is a taxable REIT subsidiary in
which we own stock representing more than 50% of the total voting power or
value of the outstanding stock of such taxable REIT subsidiary.
Certain of our affiliates, including Macerich
Property Management Company, LLC and Macerich Westcor Management, LLC, have
provided and will continue to provide services with respect to shopping centers
wholly owned by us (Centers) and any newly-acquired, wholly-owned property of
the Operating Partnership or certain of our property partnerships. We
believe that all of the services so provided were and will be of the type
usually or
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customarily
rendered in connection with the rental of space for occupancy only.
Therefore, the provision of those services will not cause the rents received
with respect to the Centers or newly-acquired centers to fail to qualify as
rents from real property for purposes of the 75% and 95% gross income tests.
In addition, we have elected taxable REIT subsidiary status with respect to
certain of our affiliates. If the Operating Partnership or a property
partnership contemplates providing services in the future that reasonably might
be expected to fail the usual or customary standard, it will arrange to have
those services provided by an independent contractor from which neither the
Operating Partnership nor any property partnership receives any income, or by
one of our taxable REIT subsidiaries.
Prohibited Transactions.
Net income from prohibited
transactions is subject to a 100% tax. The term prohibited transaction
generally includes a sale or other disposition of property (other than
foreclosure property) that is held primarily for sale to customers in the ordinary
course of a trade or business. We believe that none of the assets owned
by the Operating Partnership, the property partnerships, or us are held for
sale to customers. Further, the sale of any Center and associated
property will not be in the ordinary course of business of the Operating
Partnership, the relevant property partnership or us. We will attempt to
comply with the terms of the safe harbor provisions in the Code prescribing
when asset sales will not be characterized as prohibited transactions.
However, we may not always comply with the safe harbor and in the absence of
the safe harbor whether property is held primarily for sale to customers in
the ordinary course of a trade or business depends on the facts and
circumstances, including those related to a particular property. As such,
complete assurance cannot be given that we can comply with the safe harbor
provisions of the Code or avoid owning property that may be characterized as
property held primarily for sale to customers in the ordinary course of
business.
Effect of
Subsidiary Entities.
In the case of a REIT that is a partner in a partnership, Treasury regulations
provide that for purposes of applying the gross income and assets tests the
REIT will be deemed to own its proportionate share of the assets of the
partnership and will be deemed to be entitled to the income of the partnership
attributable to such share. In addition, the character of the assets and
gross income of the partnership will remain the same in the hands of the REIT
for U.S. federal income tax purposes. Thus, our proportionate share of
the assets, liabilities and items of income of the Operating Partnership and
our property partnerships will be treated as our assets, liabilities and items
of income for purposes of applying the gross income and assets tests described
in this prospectus supplement.
Our investment in the Centers directly or indirectly
through the Operating Partnership and property partnerships should give rise to
qualifying income in the form of rents and gains on the sales of Centers.
Substantially all income derived by us from our taxable REIT subsidiaries will
be in the form of dividends on the stock and equity interests owned by the
Operating Partnership. While these dividends only satisfy the 95% (and
not the 75%) gross income test, we anticipate that non-qualifying income on our
investments (including dividend income) will not result in our failing any of
the gross income tests.
Redetermined
Rents.
Any
redetermined rents, redetermined deductions or excess interest we generate will
be subject to a 100% penalty tax. In general, redetermined rents are
rents from real property that are overstated as a result of services furnished
to any of our tenants by one of our taxable REIT subsidiaries, and redetermined
deductions and excess interest represent amounts that are deducted by a taxable
REIT subsidiary for amounts paid to us that are in excess of the amounts that
would have been deducted based on arms length negotiations. Rents we receive
will not constitute redetermined rents if they qualify for the safe harbor
provisions contained in the Code. Safe harbor provisions generally apply
where:
·
amounts are excluded from the definition of impermissible tenant
service income as a result of satisfying the 1% de minimis exception;
·
the taxable REIT subsidiary renders a significant amount of similar
services to unrelated parties, and the charges for such services are
substantially comparable;
·
rents paid to the REIT by tenants who are not receiving services from
the taxable REIT subsidiary are substantially comparable to the rents paid by
the REITs tenants leasing comparable space who are receiving such services
from the taxable REIT subsidiary, and the charge for services is separately
stated; or
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·
the taxable REIT subsidiarys gross income from the services is not
less than 150% of the subsidiarys direct cost in furnishing or rendering the
service.
Relief Provisions
for Failing the 75% or the 95% Gross Income Tests.
If we fail to satisfy one or both of
the 75% or 95% gross income tests for any taxable year, we may nevertheless
qualify as a REIT for that year if we are entitled to relief under provisions
of the Code. Relief provisions are generally available if:
·
following our identification of the failure to meet the 75% or 95%
gross income tests for any taxable year, we file a schedule with the
Internal Revenue Service (the IRS) setting forth each item of our gross
income for purposes of the 75% or 95% gross income tests for such taxable year
in accordance with forthcoming Treasury regulations; and
·
our failure to meet these tests was due to reasonable cause and not
willful neglect.
However, it is not possible to state whether in all
circumstances we would be entitled to the benefit of these relief
provisions. As discussed above in Taxation of Our Company, even if the
relief provisions apply, a tax will be imposed with respect to some or all of
our excess nonqualifying gross income, reduced by approximated expenses.
Asset Tests.
We must satisfy the following four
tests relating to the nature of our assets at the close of each quarter of our
taxable year:
·
at least 75% of the value of our total assets must be represented by
real estate assets (including (1) our allocable share of real estate
assets held by partnerships in which we own an interest, (2) stock or debt
instruments held for not more than one year purchased with the proceeds of a
stock offering or long-term (at least five years) debt offering of our company,
cash, cash items and government securities and (3) stock in other REITs);
·
not more than 25% of our total assets may be represented by securities
other than those in the 75% asset class;
·
of the investments included in the 25% asset class, the value of any
one issuers securities owned by us may not exceed 5% of the value of our total
assets (unless the issuer is a taxable REIT subsidiary), and we may not own
more than 10% of the vote or value of any one issuers outstanding securities
(unless the issuer is a taxable REIT subsidiary or we can avail ourselves of
the rules relating to certain securities and straight debt summarized
below); and
·
not more than 20% of the value of our total assets (25% for taxable
years beginning after July 30, 2008) may be represented by securities of
one or more taxable REIT subsidiaries.
For purposes of these tests, the term securities
does not include equity or debt securities of a qualified REIT subsidiary,
mortgage loans that constitute real estate assets, other securities included in
the 75% asset class above, or equity interests in a partnership. The term
securities, however, generally includes debt securities issued by a
partnership or another REIT. However, straight debt securities and
certain other obligations, including loans to individuals or estates, certain
specified loans to partnerships, certain specified rental agreements and securities
issued by REITs are not treated as securities for purposes of the 10% value
asset test. Straight debt means a written unconditional promise to pay
on demand or on a specified date a sum certain in money if (i) the debt is
not convertible, directly or indirectly, into stock, (ii) the interest
rate and interest payment dates are not contingent on profits, the borrowers
discretion, or similar factors (subject to certain specified exceptions), and (iii) the
issuer is either not a corporation or partnership, or the only securities of
the issuer held by us, and certain of our taxable REIT subsidiaries, subject to
a de minimis exception, are straight debt and other specified assets.
Our investment in the Centers through our interest
in the Operating Partnership and property partnerships will constitute
qualified assets for purposes of the 75% asset test.
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The Operating Partnership owns 100% of the
outstanding stock of Macerich Management Company, which has elected taxable
REIT subsidiary status. In addition, the Operating Partnership owns
indirectly 100% of the interests in Westcor Partners, L.L.C., which also has
elected taxable REIT subsidiary status. Because we have a partnership
interest in the Operating Partnership, we are deemed to own our pro rata share
of the assets of the Operating Partnership, including the securities of
Macerich Management Company and the interests in Westcor Partners, L.L.C.
Macerich Property Management Company, LLC and Macerich Westcor Management, LLC
are both single member limited liability companies that are disregarded for
U.S. federal income tax purposes.
Because the management companies are either taxable
REIT subsidiaries or are disregarded entities for U.S. federal income tax
purposes, the Operating Partnership does not violate the limitation on holding
more than 10% of the voting securities of any one issuer. In addition, not
more than 20% (25% for taxable years beginning after July 30, 2008) of our
total assets consists of securities issued by the management companies that
have elected taxable REIT subsidiary status.
The above asset tests must be satisfied not only on
the date that we acquire, directly or through the Operating Partnership,
securities in the applicable issuer, but also in each quarter we acquire any
security or other property, including as a result of increasing our interest in
the Operating Partnership. After initially meeting the asset tests at the
beginning of any quarter, we will not lose our REIT status if we fail to
satisfy the asset tests at the end of a later quarter solely by reason of
changes in the relative values of our assets. If the failure to satisfy
the asset tests results from the acquisition of securities or other property
during a quarter, the failure can be cured by a disposition of sufficient
non-qualifying assets or acquisition of sufficient qualifying assets within
30 days after the close of that quarter. Although we believe we have
satisfied the asset tests and plan to take steps to ensure that we satisfy such
steps for any quarter with respect to which retesting is to occur, there can be
no assurance that such steps will always be successful, or will not require a
reduction in the Operating Partnerships overall interest in an issuer.
If we fail to cure the noncompliance with the asset tests within this 30-day
period, we could fail to qualify as a REIT.
In certain cases, we may avoid disqualification for
any taxable year if we fail to satisfy the asset tests after the 30 day
cure period. We will be deemed to have met certain of the REIT asset
tests if the value of our non-qualifying assets for such tests (i) does
not exceed the lesser of (a) 1% of the total value of our assets at the
end of the applicable quarter or (b) $10,000,000, and (ii) we dispose
of the non-qualifying assets within (a) six months after the last day of
the quarter in which the failure to satisfy the asset tests is discovered or (b) the
period of time prescribed by forthcoming Treasury regulations. For
violations due to reasonable cause rather than willful neglect that are in
excess of the de minimis exception described above, we may avoid
disqualification as a REIT, after the 30 day cure period, by taking steps
including (i) the disposition of sufficient assets to meet the asset test
within (a) six months after the last day of the quarter in which the
failure to satisfy the asset tests is discovered or (b) the period of time
prescribed by forthcoming Treasury regulations, (ii) paying a tax equal to
the greater of (a) $50,000 or (b) the highest corporate tax rate
multiplied by the net income generated by the non-qualifying assets, and (iii) disclosing
certain information to the IRS. If we fail the asset test and cannot
avail ourselves of these relief provisions, we may fail to qualify as a REIT.
Annual Distribution Requirements.
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 (1) 90% of our REIT taxable income
(computed without regard to the dividends paid deduction and our net capital
gain) and (2) 90% of the net income (after tax), if any, from foreclosure
property, minus (B) the sum of specified items of noncash income.
Dividends must be paid in the taxable year to which they relate, or in the
following taxable year if declared before we timely file our tax return for
that year and if paid on or before the first regular dividend payment after the
declaration. To the extent that we do not distribute all of our net
capital gain or distribute at least 90%, but less than 100%, of our REIT
taxable income, as adjusted, we will be subject to tax on the undistributed amount
at regular ordinary and capital gains corporate tax rates, as applicable.
We may designate all or a portion of our undistributed net capital gains as
being includable in the income of our stockholders as gain from the sale or
exchange of a capital asset. If so, the stockholders receive an increase
in the basis of their stock in the amount of the income recognized.
Stockholders are also to be treated as having paid their proportionate share of
the capital gains tax imposed on us on the undistributed amounts and receive a
corresponding decrease in the basis of their stock. Furthermore, if we
should fail to distribute during each calendar year at least the sum of (1) 85%
of our REIT ordinary income for that year, (2) 95% of our REIT capital
gain net income for that year and (3) any undistributed taxable income
from prior periods, we would be subject to a 4% excise tax on the excess of the
required distribution over the sum of (a) the amounts actually
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distributed
and (b) the amounts on which certain taxes are imposed on us. We
have made and intend to make timely distributions sufficient to satisfy all
annual distribution requirements.
From time to time, we may experience timing
differences between (1) the actual receipt of income and actual payment of
deductible expenses and (2) the inclusion of that income and deduction of
those expenses in arriving at our taxable income. Further, from time to
time, we may be allocated a share of net capital gain attributable to the sale
of depreciated property which exceeds our allocable share of cash attributable
to that sale. Additionally, we may incur cash expenditures that are not
currently deductible for tax purposes. As such, we may have less cash
available for distribution than is necessary to meet our annual 90%
distribution requirement or to avoid tax with respect to capital gain or the
excise tax imposed on specified undistributed income. To meet the 90%
distribution requirement necessary to qualify as a REIT or to avoid tax with
respect to capital gain or the excise tax imposed on specified undistributed
income, we may find it appropriate to arrange for short-term (or possibly
long-term) borrowings or to pay distributions in the form of taxable stock
dividends (discussed immediately below). We are required to arrange
through the Operating Partnership any borrowings for the purpose of making
distributions to stockholders.
The
IRS has published Revenue Procedure 2009-15, which provides temporary relief
for a publicly-traded REIT to satisfy the annual distribution requirement with
distributions consisting of its stock and at least a minimum percentage of
cash. Pursuant to this IRS guidance, a REIT may treat the entire
amount of a distribution consisting of both stock and cash as a qualifying
distribution for purposes of the annual distribution requirement if the
following requirements are met: (1) the distribution is made by the REIT
to its shareholders with respect to its stock; (2) stock of the REIT is
publicly traded on an established securities market in the United States; (3) the
distribution is declared with respect to a taxable year ending on or before December 31,
2009; (4) pursuant to such declaration, each shareholder may elect to
receive its proportionate share of the declared distribution in either money or
stock of the REIT of equivalent value, subject to a limitation on the amount of
money to be distributed in the aggregate to all shareholders (the Cash
Limitation), provided that (a) such Cash Limitation is not less than 10%
of the aggregate declared distribution, and (b) if too many shareholders
elect to receive money, each shareholder electing to receive money will receive
a pro rata amount of money corresponding to the shareholders respective
entitlement under the declaration, but in no event will any shareholder
electing to receive money receive less than 10% of the shareholders entire
entitlement under the declaration in money; (5) the calculation of the
number of shares to be received by any shareholder will be determined, as close
as practicable to the payment date, based upon a formula utilizing market
prices that is designed to equate in value the number of shares to be received
with the amount of money that could be received instead; and (6) with
respect to any shareholder participating in a dividend reinvestment plan
(DRIP), the DRIP applies only to the extent that, in the absence of the DRIP,
the shareholder would have received the distribution in money under subsection (4) above. We
have made distributions (and may make future distributions) that are intended
to meet all of the requirements described in this paragraph and count toward
our satisfaction of the annual distribution requirement.
Under circumstances relating to any IRS audit
adjustments that increase income, we may be able to rectify a failure to meet
the distribution requirement for a year by paying deficiency dividends to
stockholders in a later year, which may be included in our deduction for
dividends paid for the earlier year. Thus, we may be able to avoid being
disqualified as a REIT or taxed on amounts distributed as deficiency
dividends. However, we will be required to pay interest based upon the
amount of any deduction taken for deficiency dividends.
Record Keeping
Requirements.
To elect taxation as a REIT under applicable Treasury regulations, we must
maintain records and request information from our stockholders designed to
disclose the actual ownership of our stock. We have complied and intend
to continue to comply with these requirements.
Affiliated REITs.
The Operating Partnership owns 100% of
the outstanding common stock of Macerich PPR Corp., which in turn owns a 51%
interest in Pacific Premier Retail Trust. The Operating Partnership also
owns (i) a 50% interest in Queens Mall Limited Partnership, (ii) a
51% interest in Queens Mall Expansion Limited Partnership and (iii) a 50%
interest in Freehold Chandler Trust LLC, each of which has elected to be
treated as a corporation for U.S. federal income tax purposes and each of which
will elect to be treated as a REIT for the taxable year ending December 31,
2009. These affiliated REITs must also
meet the REIT tests discussed above. The failure of any of these
affiliated REITs to qualify as a REIT could cause us to fail to qualify as a
REIT, because we would then own (through the Operating Partnership) more than
10% of the securities of an issuer that was neither a REIT, a qualified
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REIT
subsidiary nor a taxable REIT subsidiary. We believe that the affiliated
REITs have been organized and operated in a manner that will permit them to
qualify as REITs. The affiliated REITs, however, may be personal holding
companies within the meaning of the Code, and may thereby be subject to the
personal holding company tax.
Failure to Qualify as a REIT
If we fail to qualify for taxation as a REIT for
U.S. federal income tax purposes in any taxable year and the 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 will not
be deductible by us, nor will we be required to make those distributions.
If we fail to so qualify and the relief provisions do not apply, to the extent
of current and accumulated earnings and profits, all distributions to
stockholders will be taxable at capital gain rates (through 2010), and, subject
to specified limitations of the Code, corporate distributees may be eligible
for the dividends received deduction. Unless entitled to relief under
specific statutory provisions, we will also be disqualified from taxation as a
REIT for the four taxable years following the year during which we ceased to
qualify as a REIT. It is not possible to state whether in all
circumstances we would be entitled to statutory relief.
We can invoke specified cure provisions for any
taxable year in the event we violate a provision of the Code that would
otherwise result in our failure to qualify as a REIT for U.S. federal income
tax purposes. These cure provisions would limit the instances causing our
disqualification as a REIT for violations due to reasonable cause, and would
instead require the payment of a monetary penalty.
Tax Aspects of Our Investments in Partnerships
We hold direct or indirect interests in the
Operating Partnership and the property partnerships (each individually a
Partnership and, collectively, the Partnerships). In general,
partnerships are pass-through entities which are not subject to U.S. federal
income tax. Rather, partners are allocated their proportionate shares of
the items of income, gain, loss, deduction and credit of a partnership.
Further, the partners are potentially subject to tax thereon without regard to
whether the partners receive a distribution from the partnership. We will
include our proportionate share of the items of income, gain, loss, deduction
and credit of the Partnerships for purposes of the various REIT income
tests. See above Requirements for QualificationGross Income Tests.
Any resulting increase in our REIT taxable income will increase our
distribution requirements (see above Requirements for QualificationAnnual
Distribution Requirements).
However, these increases will not be subject
to U.S. federal income tax in our hands provided that the income is distributed
by us to our stockholders. Moreover, for purposes of the REIT asset tests
(see above Requirements for QualificationAsset Tests), we will include our
proportionate share of assets held by the Partnerships.
Tax Allocations
with Respect to Contributed Properties.
Under Section 704(c) of the
Code, 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 in a manner such that the
contributing partner is charged with, or benefits from, respectively, 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 contributed
property at the time of contribution, and the adjusted tax basis of the
property at the time of contribution (a Book-Tax Difference). These
allocations are solely for U.S. federal income tax purposes and do not affect
the book capital accounts or other economic or legal arrangements among the
partners. The Operating Partnership was formed principally by way of contributions
of appreciated property. Consequently, the Partnership Agreement requires
these allocations to be made in a manner consistent with Section 704(c) of
the Code.
In general, the limited partners of the Operating
Partnership who contributed properties to it will be allocated lower amounts of
depreciation deductions for tax purposes and increased taxable income and gain
on sale by the Partnerships of the contributed assets. This will tend to
eliminate the Book-Tax Difference over the life of the Partnerships.
However, the special allocation rules of Section 704(c) of the
Code do not always rectify the Book-Tax Difference on an annual basis or with
respect to a specific taxable transaction such as a sale. Under the
applicable Treasury regulations, special allocations of income and gain and
depreciation deductions must be made on a property-by-property basis.
Depreciation deductions resulting from the carryover basis of a contributed
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property
are used to eliminate the Book-Tax Difference by allocating these deductions to
the non-contributing partners (i.e., the REIT and the other non-contributing
partners) up to the amount of their share of book depreciation. Any
remaining tax depreciation for the contributed property would be allocated to
the partners that contributed the property. The Operating Partnership
intends to elect the traditional method of rectifying the Book-Tax Difference
under the applicable Treasury regulations, under which, if depreciation
deductions are less than the non-contributing partners share of book
depreciation, then the non-contributing partners lose the benefit of these
deductions (ceiling rule). The application of the ceiling rule increases
the likelihood that we will recognize taxable income in excess of cash proceeds
in our capacity as a partner of the Operating Partnership, which might
adversely affect our ability to comply with the REIT distribution
requirements. See above Requirements for QualificationAnnual
Distribution Requirements.
Taxation of Stockholders
Taxation of
Taxable U.S. Stockholders
Distributions.
As long as we qualify as a REIT for
U.S. federal income tax purposes, distributions made to our taxable U.S.
Stockholders on our Common Stock will be taxed as follows:
·
Distributions out of current or accumulated earnings and profits (and
not designated as capital gain dividends) generally constitute ordinary
dividend income to U.S. Stockholders and will not be eligible for the dividends
received deduction for corporations.
·
Distributions in excess of current and accumulated earnings and profits
are not taxable to a U.S. Stockholder to the extent that they do not exceed the
adjusted basis of the U.S. Stockholders shares, but rather reduce the adjusted
basis of those shares. To the extent that distributions in excess of
current and accumulated earnings and profits exceed the adjusted basis of a
U.S. Stockholders shares, they are to be included in income as long-term
capital gain (or short-term capital gain if the shares have been held for one
year or less).
·
Distributions designated as capital gain dividends constitute long-term
capital gains (to the extent they do not exceed our actual net capital gain for
the taxable year) without regard to the period for which the U.S. Stockholder
has held its stock. Corporate U.S. Stockholders may be required to treat
up to 20% of some capital gain dividends as ordinary income.
·
Distributions declared by us in October, November or December of
any year payable to a U.S. Stockholder of record on a specified date in October,
November or December will be treated as both paid by us and received
by the U.S. Stockholder on December 31 of that year, provided that the
distribution is actually paid by us during January of the following
calendar year.
·
U.S. Stockholders may not include in their individual income tax
returns any of our net operating losses or capital losses.
·
In determining the extent to which a distribution constitutes a
dividend for U.S. federal income tax purposes, the Companys earnings and
profits generally will be allocated first to distributions with respect to our
preferred stock prior to allocating any remaining earnings and profits to
distributions on our Common Stock. If we have net capital gains and
designate some or all of our distributions as capital gain dividends to that
extent, although the proper tax treatment of those amounts is not entirely
clear, we intend to allocate the capital gain dividends among different classes
of stock in proportion to the allocation of earnings and profits as described
above.
Distributions Consisting of Stock
and Cash.
As discussed in Requirements for QualificationAnnual
Distribution Requirements, we have made distributions (and may make further
distributions) in cash and shares of Common Stock in accordance with Revenue
Procedure 2009-15. With respect to each
such distribution, each U.S. Stockholder must include the sum of the value of
the shares of our Common Stock and the amount of cash, if any, received
pursuant to the dividend in its gross income as a taxable dividend to the
extent that the distribution is made
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out
of our current and accumulated earnings and profits. For this purpose,
the amount of the dividend paid in Common Stock will be equal to the amount of
cash that could have been received instead of the Common Stock. A U.S. Stockholder that receives shares
of our Common Stock pursuant to the dividend would have a tax basis in such
stock equal to the amount of cash that could have been received instead of such
stock as described above, and the holding period in such stock would begin on
the day following the payment date for the dividend. Accordingly, a U.S. Stockholders tax
liability with respect to such dividend may be significantly greater than the
amount of cash it receives.
Tax Rates.
The maximum tax rate applicable to
non-corporate taxable U.S. Stockholders for long-term capital gains, including
capital gain dividends, and for certain dividends, has generally been reduced
to 15%. Short-term capital gains recognized by non-corporate taxpayers
are taxed at ordinary income rates (currently up to 35%). Gains
recognized by corporate taxpayers (other than tax-exempt taxpayers) are subject
to U.S. federal income tax at a maximum rate of 35%, whether or not classified
as long-term capital gains. The deductibility of capital losses is
subject to certain limitations.
In general, dividends paid by REITs are not eligible
for the reduced 15% tax rate on corporate dividends, except to the extent the
REITs dividends are attributable either to dividends received from taxable
corporations (such as our taxable REIT subsidiaries), to income that was
subject to tax at the corporate (REIT) level or to dividends properly
designated by us as capital gain dividends. The currently applicable
provisions of the U.S. federal income tax laws relating to the 15% tax rate are
currently scheduled to sunset or revert back to the provisions of prior law
effective for taxable years beginning after December 31, 2010, at which
time the capital gains tax rate will be increased to 20% and the rate
applicable to dividends will be increased to the tax rate then applicable to
ordinary income.
Sale, Exchange, Repurchase
or Other Disposition of the Common Stock.
Upon a sale, repurchase or other
taxable disposition of our Common Stock, a U.S. Stockholder generally will
recognize capital gain or loss equal to the difference between the amount of
cash and the fair market value of property received on the sale or other
disposition and such holders adjusted tax basis in the Common Stock.
Such capital gain or loss will be long-term capital gain or loss if a U.S.
Stockholders holding period for the Common Stock is more than one year.
In general, any loss upon a sale or exchange of shares by a U.S. Stockholder,
if such holder has held the shares for six months or less (after applying
certain holding period rules), will be treated as a long-term capital loss to
the extent of distributions from us required to be treated by such holder as
long-term capital gain. The deductibility of capital losses is subject to
a number of limitations.
Backup Withholding and Information
Reporting.
Information with respect to dividends paid on our Common Stock and proceeds
from the sale or other disposition of our Common Stock may be required to be
reported to U.S. Stockholders and to the IRS. This obligation, however,
does not apply with respect to payments to certain U.S. Stockholders, including
corporations and tax-exempt organizations.
A U.S. Stockholder may be subject to backup
withholding (currently at a rate of 28%) with respect to distributions paid on
our Common Stock, or with respect to proceeds received from a sale or other
disposition of our Common Stock. Backup withholding will not apply,
however, if the U.S. Stockholder (i) is a corporation or comes within
certain other exempt categories and, when required, demonstrates such fact or (ii) provides
a taxpayer identification number, certifies as to no loss of exemption from
backup withholding and otherwise complies with applicable backup withholding
rules. To establish status as an exempt person, a U.S. Stockholder will
generally be required to provide certification on IRS Form W-9.
U.S. Stockholders should consult their personal tax
advisor regarding their qualification for an exemption from backup withholding
and the procedures of obtaining such an exemption, if applicable. The
backup withholding tax is not an additional tax and taxpayers may use amounts
withheld as a credit against their U.S. federal income tax liability or may
claim a refund as long as they timely provide certain information to the IRS.
Treatment of Tax-Exempt Holders of our Common
Stock.
Distributions on our Common Stock by us to a tax-exempt employee pension trust,
or other domestic tax-exempt holder, generally will not constitute unrelated
business taxable income (UBTI), unless the holder has borrowed to acquire or
carry our Common Stock. However, qualified trusts that hold more than 10%
(by value) of some REITs may be required to treat a specified
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percentage
of those REITs distributions as UBTI. This requirement will apply only
if (1) the REIT would not qualify as such for U.S. federal income tax
purposes but for the application of a look-through exception to the five or fewer
requirement applicable to shares held by qualified trusts and (2) the REIT
is predominantly held by qualified trusts (as defined below). A REIT
is predominantly held if either (1) a single qualified trust holds more
than 25% by value of the REIT interests; or (2) one or more qualified
trusts, each owning more than 10% by value of the REIT interests, hold in the
aggregate more than 50% of the REIT interests. The percentage of any REIT
dividend treated as UBTI is equal to the ratio of (a) the UBTI earned by
the REIT (treating the REIT as if it were a qualified trust and therefore
subject to tax on UBTI) to (b) the total gross income (less specified
associated expenses) of the REIT. A
de
minimis
exception applies for any year in which the ratio set forth
in the preceding sentence is less than 5%. For these purposes, a
qualified trust is any trust described in Section 401(a) of the Code
and exempt from tax under Section 501(a) of the Code. Because
the provisions requiring qualified trusts to treat a portion of REIT
distributions as UBTI will not apply if the REIT is able to satisfy the five
or fewer requirement without relying upon the look-through exception, the
restrictions on ownership of our stock in our Charter generally should prevent
application of the provisions treating a portion of REIT distributions as UBTI
to tax-exempt entities purchasing our stock, absent approval by our Board of
Directors.
Taxation of
Non-U.S. Stockholders.
This section provides a brief summary of the complex rules governing
U.S. federal income taxation of Non-U.S. Stockholders. Prospective
Non-U.S. Stockholders should consult with their own tax advisors to determine
the impact of U.S. federal, state and local income tax laws with regard to an
investment in our Common Stock, including any reporting requirements.
Distributions.
Distributions that are not
attributable to gain from sales or exchanges by us of U.S. real property
interests and that may not be designated by us as capital gain dividends
generally will be treated as ordinary dividend income to the extent that they
are made out of our current or accumulated earnings and profits. These
distributions will ordinarily be subject to a withholding tax of 30% of the
gross amount of the distribution, unless an applicable tax treaty reduces or
eliminates that tax. However, if income from the investment in our Common
Stock is treated as effectively connected with a Non-U.S. Stockholders conduct
of a U.S. trade or business (through a U.S. permanent establishment, if the
Non-U.S. Stockholder is entitled to the benefits of an applicable tax treaty
and such tax treaty so requires as a condition for taxation), the Non-U.S.
Stockholder generally will be subject to a tax at graduated rates, in the same
manner that U.S. Stockholders are taxed with respect to distributions of this
kind (and may also be subject to the 30% branch profits tax in the case of a
Non-U.S. Stockholder that is a foreign corporation). We expect to
withhold U.S. income tax at the rate of 30% on the gross amount of any
distributions of this kind made to a Non-U.S. Stockholder, unless the Non-U.S.
Stockholder files (1) an accurate and complete IRS Form W-8BEN with
us certifying that a lower treaty rate applies, or (2) an accurate and
complete IRS Form W-8ECI with us claiming that the distribution is
effectively connected income.
Distributions in excess of our current and
accumulated earnings and profits will not be taxable to a Non-U.S. Stockholder
to the extent that these distributions do not exceed the adjusted basis of the
Non-U.S. Stockholders shares, but rather will reduce the adjusted basis of
those shares. To the extent that distributions in excess of current
accumulated earnings and profits exceed the adjusted basis of a Non-U.S. Stockholders
shares, these distributions will give rise to tax liability if the Non-U.S.
Stockholder would otherwise be subject to tax on any gain from the sale or
disposition of shares in us, as described below. If it cannot be
determined, at the time a distribution is made, whether or not that
distribution will be in excess of current and accumulated earnings and profits,
the distributions will be subject to withholding at the same rate as
dividends. However, amounts thus withheld are refundable by the IRS if it
is subsequently determined that the distribution was, in fact, in excess of our
current and accumulated earnings and profits and the proper forms are filed
with the IRS by the Non-U.S. Stockholder on a timely basis.
Distributions to a Non-U.S. Stockholder that are
designated by us at the time of the distribution as capital gain dividends,
other than those arising from the disposition of a U.S. real property interest,
generally should not be subject to U.S. federal income taxation unless: (1) the
investment in our Common Stock is effectively connected with the Non-U.S.
Stockholders U.S. trade or business (through a U.S. permanent
establishment, if the Non-U.S. Stockholder is entitled to the benefits of an
applicable tax treaty and such tax treaty so requires as a condition for
taxation), in which case the Non-U.S. Stockholder will be subject to the same
treatment as U.S. Stockholders with respect to any gain, except that a holder
that is a foreign corporation also may be subject to the 30% branch profits tax,
as discussed above; or (2) the Non-U.S. Stockholder is a nonresident alien
individual who is present in the United States for more than 182 days
during the taxable year and certain other requirements are met, in which case
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the
nonresident alien individual will be subject to a 30% tax on the individuals
capital gains, reduced by certain capital losses.
For any year in which we qualify as a REIT for U.S.
federal income tax purposes, 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 (FIRPTA). Under FIRPTA, distributions
attributable to gain from sales of U.S. real property interests are taxed to a
Non-U.S. Stockholder as if the gain were effectively connected with a U.S.
business. Non-U.S. Stockholders would thus be taxed at the normal capital
gain rates applicable to U.S. Stockholders (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals). Also, distributions subject to FIRPTA may be subject
to a 30% branch profits tax in the hands of a foreign corporate stockholder not
entitled to treaty exemption. We are required by applicable Treasury
regulations to withhold 35% of any distribution that could be designated by us
as a capital gains dividend. This amount is creditable against the
Non-U.S. Stockholders FIRPTA tax liability.
Notwithstanding the foregoing, distributions that
are attributable to gain from sales or exchanges of U.S. real property
interests (including capital gain distributions) with respect to any class of
stock of a REIT that is regularly traded on an established securities market
located in the United States will not be treated as gain recognized from the
sale or exchange of a U.S. real property interest if the Non-U.S. Stockholder
does not own more than 5% of such class of stock at any time during the 1-year
period ending on the date of distribution. Instead, any such distribution
will be treated as an ordinary dividend for U.S. federal income tax purposes.
Distributions Consisting of Stock
and Cash.
As discussed in Requirements for QualificationAnnual
Distribution Requirements, we have made distributions (and may make further
distributions) in cash and shares of Common Stock in accordance with Revenue
Procedure 2009-15. As described in Taxation of StockholdersTaxation of Taxable U.S. StockholdersDistributions Consisting of Stock and Cash,
such distributions will be treated as taxable dividends for U.S. federal income
tax purposes and, as such, will generally be treated in the same manner as the
cash distributions discussed above. More
specifically, we generally will withhold and remit to the IRS 30% of the amount
of the dividend (including any portion of the dividend paid in our Common Stock). If such withholding exceeds a Non-U.S.
Stockholders actual U.S. federal income tax liability, such Non-U.S.
Stockholder may be entitled to a refund or credit for such excess. To the extent that the amount we are required
to withhold with respect to a Non-U.S. Stockholder exceeds the cash portion of
the dividend payable to such Non-U.S. Stockholder, we will also withhold a
portion of the Common Stock payable to the Non-U.S. Stockholder to the extent
necessary for us to satisfy our withholding obligations. Furthermore, to the extent that any portion
of such a dividend is treated as effectively connected with a Non-U.S.
Stockholders U.S. trade or business, the Non-U.S. Stockholders tax
liability with respect to such dividend may be significantly greater than the
amount of cash it receives.
Sale, Exchange, Repurchase or
Other Disposition of the Common Stock.
Gain recognized by a Non-U.S. Stockholder upon a sale,
repurchase or other disposition of our Common Stock generally will not be
taxable to a Non-U.S. Stockholder in the United States unless (1) investment
in our Common Stock is effectively connected with the Non-U.S. Stockholders
U.S. trade or business (through a U.S. permanent establishment, if the Non-U.S.
Stockholder is entitled to the benefits of an applicable tax treaty and such
tax treaty so requires as a condition for taxation), in which case the Non-U.S.
Stockholder generally will be subject to the same treatment as U.S.
Stockholders with respect to the gain and if such Non-U.S. Stockholder is a
corporation, may also be subject to the branch profits tax described above; (2) the
Non-U.S. Stockholder is a nonresident alien individual who was present in the
United States for more than 182 days during the taxable year and other
requirements are met, in which case the nonresident alien individual will be
subject to a 30% tax on the individuals capital gains, reduced by certain
capital losses; or (3) we are not a domestically controlled REIT
(defined generally as a REIT in which at all times during a specified testing
period less than 50% in value of the stock was held directly or indirectly by
foreign persons), in which case gain recognized by a Non-U.S. Stockholder will
be taxable under FIRPTA.
We currently anticipate that we constitute a
domestically controlled REIT, although, because our Common Stock is publicly
traded, there can be no assurance that we have or will retain that
status. If we are not a domestically controlled REIT, gain recognized by
a Non-U.S. Stockholder with respect to any class of our stock that is regularly
traded on an established securities market will nevertheless be exempt under
FIRPTA if that Non-U.S.
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Stockholder
at no time during the five-year period ending on the date of disposition owned
more than 5% of such class of stock. If the gain on the sale of shares
were to be subject to taxation under FIRPTA, the Non-U.S. Stockholder would be
subject to the same treatment as U.S. Stockholders with respect to the gain
(subject to applicable alternative minimum tax and a special alternative
minimum tax in the case of nonresident alien individuals). In that case,
withholding tax at a rate of 10% of the amount payable could apply and any
withholding tax withheld pursuant to the rules applicable to dispositions
of a U.S. real property interest would be creditable against such Non-U.S.
Stockholders U.S. federal income tax liability.
Non-U.S. Stockholders are urged to consult their own
tax advisors as to whether they will be subject to tax under FIRPTA upon a
disposition of their Common Stock.
Backup Withholding and Information
Reporting.
Information may be required to be reported to Non-U.S. Stockholders and to the
IRS concerning the amount of any dividends paid on our Common Stock.
Under current U.S. federal income tax law, backup withholding tax (at the rate
of 28%) will not apply to dividend payments on our Common Stock if the required
certifications of exempt status are received, provided in each case that the
payor, including a bank or its paying agent, as the case may be, does not have
actual knowledge or reason to know that the payee is a nonexempt person.
Under the Treasury regulations, payments on the
sale, exchange or other disposition of our Common Stock effected through a
foreign office of a broker to its customer generally are not subject to
information reporting or backup withholding. However, if the broker is a
U.S. person, a controlled foreign corporation for U.S. federal income tax
purposes, a foreign person 50% or more of whose gross income is effectively
connected with a U.S. trade or business for a specified three-year period, a
foreign partnership that has significant U.S. ownership or at any time during
its taxable year is engaged in a U.S. trade or business, or a U.S. branch of a
foreign bank or insurance company, then information reporting will be required,
unless the broker has in its records documentary evidence that the beneficial
owner of the payment is not a U.S. person or is otherwise entitled to an
exemption, and the broker has no actual knowledge that the beneficial owner is
not entitled to an exemption. Backup withholding may apply if the sale is
subject to information reporting and the broker has actual knowledge that the
beneficial owner is a U.S. person.
The information reporting and backup withholding rules will
apply to payments effected at a U.S. office of any U.S. or foreign broker, unless
the broker has in its records documentary evidence that the beneficial owner of
the payment is not a U.S. person or is otherwise entitled to an exemption, and
the broker has no actual knowledge that the beneficial owner is not entitled to
an exemption.
Non-U.S. Stockholders should consult their own tax
advisors regarding the application of withholding, information reporting and
backup withholding in their particular circumstances and the availability of
and procedure for obtaining an exemption from withholding, information
reporting and backup withholding under the current Treasury regulations.
Backup withholding does not represent an additional income tax. Any
amounts withheld from a payment to a holder under the backup withholding rules will
be allowed as a credit against the Non-U.S. Stockholders U.S. federal income
tax liability and may entitle the holder to a refund, provided that the
required information or returns are timely furnished by such holder to the IRS.
Other Tax Considerations
Taxable REIT
Subsidiaries.
A portion of the cash to be used by the Operating Partnership to fund
distributions to partners, including us, may come from the taxable REIT
subsidiaries through distributions on the stock or limited liability company
interests that will be held by the Operating Partnership. The taxable
REIT subsidiaries will receive income from the Operating Partnership, the
property partnerships and unrelated third parties. Because we, the
Operating Partnership and the taxable REIT subsidiaries are related through
stock or other ownership, income of the taxable REIT subsidiaries from services
performed for us and the Operating Partnership may be subject to rules under
which additional income may be allocated to the taxable REIT
subsidiaries. The taxable REIT subsidiaries will pay federal and state
income tax at the full applicable corporate rates on their income prior to
payment of any distributions. The taxable REIT subsidiaries will attempt
to minimize the amount of these taxes, but there can be no assurance whether,
or the extent to which, measures taken to minimize taxes will be
successful. To
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the
extent that the taxable REIT subsidiaries are required to pay federal, state or
local taxes, the cash available for distribution by us to stockholders or
available to service our indebtedness will be reduced accordingly.
Possible
Legislative or Other Actions Affecting Tax Consequences.
You should recognize that the present
U.S. federal income tax treatment of an investment in us may be modified by
legislative, judicial or administrative action at any time and that any such
action may affect investments and commitments previously made. The rules dealing
with U.S. federal income taxation are constantly under review by persons
involved in the legislative process and by the IRS and the Treasury, resulting
in revisions of regulations and revised interpretations of established concepts
as well as statutory changes. Revisions in federal tax laws and
interpretations thereof could affect the tax consequences of an investment in
us.
State and Local
Taxes.
We
and our stockholders may be subject to state or local taxation in various
jurisdictions, including those in which we or they transact business or
reside. The state and local tax treatment of us and our stockholders may
not conform to the federal income tax consequences discussed above.
Consequently, you should consult your own tax advisors regarding the effect of
state and local tax laws on an investment in any securities being offered by
this prospectus or a prospectus supplement to this prospectus.
COMPARISON OF OWNERSHIP OF
OP
UNITS
AND OUR SHARES
The information below highlights a number of the significant
differences and similarities between the Operating Partnership and our Company
relating to, among other things, form of organization, investment objectives,
policies and restrictions, asset diversification, capitalization, management
structure, duties, liability, exculpation and indemnification of the general
partner and the directors and investor voting and other rights. These
comparisons are intended to assist unitholders in understanding how the unitholders
investment will be changed if the unitholder redeems OP Units and receives our
Common Stock. THE DISCUSSION BELOW IS ONLY A SUMMARY OF THESE MATTERS, AND A
UNITHOLDER SHOULD CAREFULLY REVIEW THE BALANCE OF THIS PROSPECTUS SUPPLEMENT
FOR ADDITIONAL IMPORTANT INFORMATION.
Form of
Organization and Purposes
Operating Partnership
The
Operating Partnership is a limited partnership organized under the laws of the
State of Delaware. The Operating Partnership primarily owns interests in
regional malls and community shopping centers. The Operating Partnership may
also invest in other types of assets and in any geographic areas that our
Company deems appropriate. Our Company, as general partner of the Operating
Partnership, conducts the business of the Operating Partnership in a manner
intended to permit our Company to be classified as a REIT under the Code.
Our Company
Our
Company is a Maryland corporation organized under the Maryland General
Corporation Law. We are a self-administered and self-managed REIT. Although our
Company currently intends to continue to qualify as a REIT under the Code and
to operate as a self-administered REIT, our Company is not under any
contractual obligation to continue to qualify as a REIT, and our Company may
discontinue this qualification or mode of
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operation
in the future. Although our Company has no intention of ceasing to qualify as a
REIT, some other real estate companies that previously operated as REITs have
chosen to cease to qualify as REITs. Except as otherwise permitted in the
Operating Partnership Agreement, our Company is obligated to conduct its
activities through the Operating Partnership. Our Company is the sole general
partner of the Operating Partnership.
Nature
of Investment
Operating Partnership
The
OP Units constitute equity interests entitling each limited partner in the
Operating Partnership to his or her proportionate share of cash distributions
made to the limited partners in the Operating Partnership, consistent with the
class preferences provided for in the Operating Partnership Agreement. See Description
of Series D Preferred Units and OP Units for further information about
distributions to limited partners. The OP Units entitle their holders to
participate in the growth and income of the Operating Partnership. The
Operating Partnership Agreement grants our Company broad discretion to
determine the amount of distributions by the Operating Partnership. Except in
limited circumstances, we generally expect the Operating Partnership to retain
and reinvest proceeds of any asset sales or refinancings, or to use those
proceeds to pay down debt or for general partnership purposes, rather than to
distribute the proceeds to its partners, including our Company. Thus, limited
partners in the Operating Partnership will generally not be able to realize
upon their investments through distributions of sale and refinancing proceeds.
Instead, limited partners will be able to realize upon their investments
primarily by redeeming OP Units and, if our Company issues stock upon
redemption of the units, by subsequently selling the stock.
Our Company
Our Common Stock constitutes equity interests in our
Company. For a more detailed description of our Common Stock, see Description
of Common Stock in the accompanying prospectus. We are entitled to receive our
proportionate share of distributions made by the Operating Partnership with
respect to the OP Units owned by us. The dividends payable to holders of our
stock will generally correspond to the distributions received by us from the
Operating Partnership. However, dividends payable by us are only paid if, when
and as authorized by the Board of Directors and declared by us out of assets
legally available to pay dividends. Each holder of Common Stock is entitled to
his or her proportionate share of any dividends or distributions paid with
respect to the Common Stock held, subject to the preferences on dividends and
distributions of any preferred stock issued and outstanding. To qualify as a
REIT and minimize taxes, we generally must distribute to our stockholders at
least 90% of our annual taxable income as determined for federal income tax
purposes. Corporate income tax will apply to any taxable income, including
capital gains, not distributed.
Length
of Investment
Operating Partnership
The
Operating Partnership has a stated term expiring on December 31, 2092 or
earlier upon the happening of certain events, including our election if certain
conditions described in the Operating Partnership Agreement are satisfied, any
event which causes us to cease to be the general partner of the Operating
Partnership (unless the Operating Partnership is continued in accordance with
applicable law), disposition of all of the Operating Partnerships assets, or
dissolution of the Operating Partnership by a court of competent jurisdiction.
The Operating Partnership has no specific plans for disposition of its assets.
The Operating Partnership is a vehicle for taking advantage of future
investment opportunities that may be available, primarily in the real estate
market.
Our Company
Our
Company has a perpetual term, and we intend to continue our operations for an
indefinite time period. Under our charter, the dissolution of our Company must
be approved by the affirmative vote of the holders of not less than a majority
of the shares of Common Stock entitled to vote on dissolution. We have an
indirect interest in the properties and assets owned by the Operating
Partnership and its affiliates. Holders of our Common Stock are expected to
realize liquidity of their investments by trading their Common Stock on the New
York Stock Exchange.
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Liquidity
Operating Partnership
The
OP Units have not been registered as a class under the Securities Act or any
state securities laws and therefore may not be sold, pledged, hypothecated or
otherwise transferred unless first registered under the Securities Act and any
applicable state securities laws, or unless an exemption from registration is
available. OP Units also may not be sold or otherwise transferred unless the
other transfer restrictions discussed below have been satisfied. Our Company
and the Operating Partnership do not intend to register the OP Units under the
Securities Act or any state securities laws.
The
Operating Partnership Agreement provides that, without the consent of our
Company, limited partners may not in any way dispose of their interest in the
Operating Partnership, other than to affiliates who agree to assume the
obligations of the transferor under the Operating Partnership Agreement.
Limited partners may be able to redeem their OP Units for cash or other
securities of our Company.
Our Company
Any
Common Stock issued upon redemption of any outstanding OP Units will be
registered under the Securities Act and be freely transferable, as long as the
stockholder complies with the ownership limits in our charter. Our Common Stock
is currently listed on the New York Stock Exchange under the ticker symbol MAC.
The future breadth and strength of this secondary market for our Common Stock
will depend, among other things, upon the amount of Common Stock outstanding,
our financial results and prospects, the general interest in our real estate
investments and real estate investments in general, and our dividend yield
compared to that of other debt and equity securities.
Potential Dilution of Rights
Operating Partnership
Subject to the rights of the preferred Units, our
Company, as general partner of the Operating Partnership, is authorized, in its
sole discretion and without limited partner approval, to cause the Operating
Partnership to issue additional limited partnership interests and other
ownership interests for any partnership purpose at any time to the limited
partners or other persons on terms established by our Company. Our Company can
also cause the Operating Partnership to issue additional OP Units to our
Company, subject to certain terms and conditions. The interests of the limited
partners in any cash available for distribution may be diluted if our Company
causes the Operating Partnership to issue additional OP Units or other
ownership interests.
Our Company
Our
Board of Directors may, in its discretion, authorize the issuance of additional
Common Stock and other equity securities of our Company, including one or more
classes or series of common or preferred stock, with the voting rights,
dividend rates, preferences, subordinations, conversion or redemption prices or
rights, maturity dates, distribution, exchange or liquidation rights or other
rights that the Board of Directors may specify at the time. The issuance of
additional equity securities, redemption or conversion of outstanding OP Units
and other partnership units, and the exercise of employee stock options will
result in the dilution of the interests of the stockholders. As permitted by
applicable Maryland law, our charter contains a provision permitting the Board
of Directors, without any action by our stockholders, to authorize the issuance
of additional stock within the limits established in the charter. Under our
charter, although our stockholders do not have any preemptive rights to
subscribe to any securities of our Company, the Board of Directors is
authorized to create such rights. See Description of our Capital
StockSelected Provisions of Maryland Law and of Our Charter and Bylaws in the
accompanying prospectus.
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Management
Control
Operating Partnership
The
Operating Partnership Agreement provides that a decision to merge the Operating
Partnership, sell all or substantially all of its assets or liquidate must be
approved by the holders of 75% of the outstanding OP Units. Depending on the
percentage of the outstanding OP Units owned by us at the time, the concurrence
of at least some of the other holders of OP Units may be required to approve
any merger, sale of all or substantially all of the assets, or liquidation of
the Operating Partnership. As of the date of this prospectus supplement, we own
89% of the outstanding OP Units. Other than the foregoing, all management
powers over the business and affairs of the Operating Partnership are vested in
our Company as the general partner of the Operating Partnership, and no limited
partner of the Operating Partnership has any right to participate in or
exercise control or management power over the business and affairs of the
Operating Partnership. Our Company may not be removed as general partner by the
limited partners with or without cause.
Our Company
Our
Board of Directors has exclusive control over the management of our business
and affairs, limited only by express restrictions in our charter and bylaws,
the Operating Partnership Agreement and applicable law. The Board of Directors
is currently divided into three classes of directors with each class
constituting one third of the total number of directors. Prior to our 2009
annual meeting, one class of our directors was elected at each annual meeting
of stockholders to serve a three-year term.
At our 2008 annual meeting, our stockholders approved an amendment to
our charter to declassify our Board. As a result of this charter amendment, a
declassified Board structure will be phased in as follows: (a) certain current
directors will continue to serve the remainder of their three-year terms, and (b)
starting with the 2009 annual meeting, directors were and will be elected
annually, so that by our 2011 annual meeting of stockholders, all directors
will be elected annually.
The
policies adopted by the Board of Directors may be altered or eliminated without
a vote of the stockholders. Stockholders have limited rights to make proposals
that will be considered and voted on at stockholder meetings, including the
right to nominate directors for election. Stockholder proposals must be
approved by the requisite number of stockholder votes and depending on the type
of proposal they may not binding on us. Accordingly, except for their vote in
the elections of directors and limited rights to make proposals for
consideration at stockholder meetings, stockholders have no control over our
ordinary business policies.
Because
a portion of the Board of Directors will be elected each year by the
stockholders at our annual meeting through 2010 and the stockholders have
limited rights to make proposals for consideration at stockholder meetings, the
stockholders have greater control over the management of our Company than the
limited partners have over the Operating Partnership.
Duties
of General Partner and Directors
Operating Partnership
Under
Delaware law, our Company, as the general partner of the Operating Partnership,
is accountable to the Operating Partnership as a fiduciary and, consequently,
is required to exercise good faith and integrity in all of its dealings with
respect to partnership affairs. However, under the Operating Partnership
Agreement, our Company is expressly under no obligation to consider the
separate interests of the limited partners in deciding whether to cause the
Operating Partnership to take or decline to take any actions, and our Company
is not liable for monetary damages for losses sustained, liabilities incurred
or benefits not derived by limited partners as a result of our Companys decisions,
provided that the general partner has acted in good faith and in accordance
with the Operating Partnership Agreement.
Our Company
Under
Maryland law, our directors are required to perform their duties in good faith,
in a manner that they reasonably believe to be in the best interests of the
corporation and with the care of an ordinarily prudent person in a
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like
position under similar circumstances. The Maryland General Corporation Law
presumes that a directors standard of care has been satisfied.
Management
Liability and Indemnification
Operating Partnership
As
a matter of Delaware law, the general partner has liability for the payment of
the obligations and debts of the Operating Partnership unless this liability is
limited by the terms of the obligations or debt. Under the Operating
Partnership Agreement, the Operating Partnership has agreed to indemnify our
Company and any director or officer of our Company from and against all losses,
claims, damages, liabilities, costs and expenses (including attorneys fees and
costs), judgments, fines, settlements, and other amounts arising from any and
all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, that relate to the operation of the Operating
Partnership as set forth in the Operating Partnership Agreement in which our
Company or any director or officer of our Company may be involved, unless the
act or omission was in bad faith or the result of active and deliberate
dishonesty and was material to the action; the party seeking indemnification
received an improper personal benefit; or in the case of any criminal
proceeding, the party seeking indemnification had reasonable cause to believe
the act or omission was unlawful. Our Operating Partnership Agreement and
charter each provide that these indemnification rights are non-exclusive of any
other rights to which those seeking indemnification may be entitled. The
Operating Partnership Agreement also provides for indemnification of the
limited partners on substantially similar terms.
The
Operating Partnership may advance reasonable expenses incurred by an indemnified
party before the final disposition of the proceeding, upon receipt by the
Operating Partnership of an affirmation by the indemnified person of the
indemnified persons good faith belief that it is entitled to indemnification
and an undertaking by the indemnified person to repay the amount if it is
ultimately adjudged not to have been entitled to indemnification.
Our Company
Our
charter includes provisions that limit the liability of directors and officers
to us and to our stockholders for money damages to the fullest extent permitted
under Maryland law. Our charter also requires us to indemnify our present
directors and officers to the maximum extent permitted under Maryland law.
These provisions apply to officers and directors acting in their capacity as
officers and directors of our Company or of any other entity at our request.
Our charter also requires us to make payments to our officers and directors for
expenses they incur in advance of final determination of any claim or dispute
for which they are seeking indemnification, in accordance with the procedures
and to the full extent permitted by Maryland law. In addition, we have entered
into indemnification agreements with our directors and some of our officers.
The
Maryland General Corporation Law permits a Maryland 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
the act or omission of the director or officer was material to the matter
giving rise to the proceeding and (a) was committed in bad faith or (b) was the
result of active and deliberate dishonesty; the director or officer actually
received an improper personal benefit in money, property or services; or 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 Maryland General Corporation Law, 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 Maryland General Corporation Law
permits a corporation to advance reasonable expenses to a director or officer
upon the corporations receipt of 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 the corporation, and a written undertaking by
him or on his behalf to repay the amount paid or reimbursed by the corporation
if it is ultimately determined that the standard of conduct was not met.
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Liability
of Investors
Operating Partnership
Under
the Operating Partnership Agreement and applicable state law, the liability of
the limited partners for the Operating Partnerships debts and obligations
generally is limited to the amount of their investments in the Operating
Partnership, together with their interest in the Operating Partnerships
undistributed income, if any. Also, if any limited partner has guaranteed the
Operating Partnerships indebtedness, as provided by the Operating Partnership
Agreement, the limited partner would be liable to the extent provided in its
guaranty.
Our Company
Under
the Maryland General Corporation Law, our stockholders are not liable for our
debts and obligations. Their risk of loss is limited to the amount of their
investments in us, together with their interest in our undistributed income, if
any. The Common Stock, upon issuance in accordance with this prospectus
supplement, will be fully paid and nonassessable. Thus, the limited partners in
the Operating Partnership and our stockholders have substantially the same
limited personal liability.
Voting
Rights
Operating Partnership
Under
the Operating Partnership Agreement, the limited partners have limited voting
rights. The limited partners do not have the right to vote on any proposed
sale, exchange, transfer or disposal of assets except when all or substantially
all of the assets of the Operating Partnership are being transferred, and then
only to the extent that our Company does not own at least 75% of the OP Units.
In addition, the limited partners do not have the right to propose amendments
to the Operating Partnership Agreement, and certain types of amendments can be
approved without the vote of the limited partners. However, certain amendments
that would change the limited liability of a limited partner or change
specified provisions in the Operating Partnership Agreement with respect to
distributions and allocations or the right to redeem units must be approved by
each limited partner adversely affected by the amendment.
Our Company
The business and affairs of our Company are managed
under the direction of the Board of Directors, which currently consists of nine
members. Prior to our 2009 annual
meeting, one class of our directors was elected at each annual meeting of
stockholders to serve a three-year term.
At our 2008 annual meeting, our stockholders approved an amendment to
our charter to declassify our Board. As a result of this charter amendment, a
declassified Board structure will be phased in as follows: (a) current
directors will continue to serve the remainder of their three-year terms, and (b)
starting with the 2009 annual meeting, directors will be elected annually, so
that by our 2011 annual meeting of stockholders, all directors will be elected
annually. Each share of Common Stock has
one vote.
Maryland law requires that certain major corporate
transactions, including most amendments to our charter, may be consummated only
with the approval of stockholders. Our bylaws and Maryland law permit any
action that may be taken at a meeting of stockholders to be taken without a
meeting if a written consent to the action is signed by holders of all
outstanding shares of capital stock having a right to vote on the action.
Maryland law also permits the charter of a Maryland corporation to contain a
provision permitting action to be taken by the written or electronic consent of
the holders of Common Stock entitled to cast not less than the minimum number
of votes that would be necessary to take the action at a stockholders meeting.
Our charter does not contain such a provision.
In addition to Common Stock, we have authorized shares of Series D
Preferred Stock. The holders of Series D Preferred Stock, when and if issued,
have no right to vote, except that so long as any Series D Preferred Stock is
outstanding, the affirmative vote of a majority of the Series D Preferred Stock
outstanding, voting as a separate class or voting as a single class with any
other series of preferred stock which has the right to vote with the Series D
Preferred Stock on such matter, will be necessary to materially and adversely
affect the rights and preferences of Series D Preferred Stock.
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Amendment
of the Operating Partnership Agreement or our Charter
Operating Partnership
Our
Company generally has the power, without the consent of any limited partners,
to amend the Operating Partnership Agreement as may be required to reflect any
changes that our Company deems necessary or appropriate in its sole discretion,
provided that the amendment does not adversely affect or eliminate any right
granted to a limited partner that is protected by special voting provisions.
See Voting Rights.
Our Company
Under
the Maryland General Corporation Law and our charter, most amendments to our
charter will require the affirmative vote of the holders of at least two-thirds
of the capital stock entitled to vote on the amendment. However, subject to the
rights of any class or series of preferred stock, a majority of the entire
Board of Directors may supplement the charter to designate new classes or
series of common or preferred stock without stockholder approval.
Issuance
of Additional Equity
Operating Partnership
The
Operating Partnership is generally authorized to issue OP Units and other
partnership interests, including partnership interests of different series or
classes, as determined by our Company as the general partner in its sole
discretion. The Operating Partnership may issue OP Units and other partnership
interests to our Company, as long as these interests are issued to all of the
partners in proportion to their respective interests in the Operating
Partnership. The Operating Partnership may also issue OP Units to our Company
in connection with a new issuance of securities of our Company, provided that
the proceeds of the new issuance of securities of our Company are contributed
to the Operating Partnership and the OP Units issued to our Company have terms
substantially identical to the new securities being issued by our Company.
Our Company
Subject
to the rights and restrictions of any class or series of preferred stock, the
Board of Directors may authorize the issuance, in its discretion, of additional
Common Stock and other equity securities of our Company, including one or more
classes of common or preferred stock, with such preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends and
other distributions, qualifications and terms and conditions of redemption as
the Board of Directors may establish.
Borrowing Policies
Operating Partnership
The Operating Partnership has no restrictions on
borrowings, and our Company as general partner has full power and authority to
borrow money on behalf of the Operating Partnership.
Our Company
We
are not restricted under our charter from borrowing. However, under the
Operating Partnership Agreement, we, as the general partner of the Operating
Partnership, may not borrow money, except for the purpose of advancing funds to
the Operating Partnership for any proper purpose of the Operating Partnership
and except for certain loans from the Operating Partnership to our Company.
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Permitted
Investments
Operating Partnership
The
Operating Partnerships purpose is to conduct any business that may be lawfully
conducted by a Delaware limited partnership, provided that this business is to
be conducted in a manner that permits our Company to be qualified as a REIT,
unless our Company ceases to qualify as a REIT for any reason. The Operating
Partnership is authorized to perform any and all acts for the furtherance of
the purposes and business of the Operating Partnership, including making
investments or entering into joint ventures or partnerships.
Our Company
Under
our charter, we may engage in any lawful activity permitted by the Maryland
General Corporation Law. Under the Operating Partnership Agreement, we, as the
general partner of the Operating Partnership, must conduct all of our business
activities through the Operating Partnership. However, we, as the general
partner of the Operating Partnership, are also permitted to hold, directly or
indirectly, up to a 1% interest in certain existing entities and may acquire an
interest in other additional properties but only if the Operating Partnership
is acquiring at least 99 times our proposed participation in the property.
COMPARISON
OF OWNERSHIP OF MACWH UNITS AND MACWH CPUS AND OUR SHARES
The information below highlights a number of the significant
differences and similarities between MACWH and our Company relating to, among
other things, form of organization, investment objectives, policies and
restrictions, asset diversification, capitalization, management structure,
duties, liability, exculpation and indemnification of the general partner and
the directors and investor voting and other rights. These comparisons are
intended to assist holders in understanding how the holders investment will be
changed if the holder redeems MACWH Units or MACWH CPUs and receives our Common
Stock. THE DISCUSSION BELOW IS ONLY A SUMMARY OF THESE MATTERS, AND A HOLDER
SHOULD CAREFULLY REVIEW THE BALANCE OF THIS PROSPECTUS SUPPLEMENT FOR
ADDITIONAL IMPORTANT INFORMATION.
Form of Organization and Purposes
MACWH
MACWH is a limited partnership organized under the laws of the State of
Delaware. MACWH primarily owns interests in regional malls and community
shopping centers. MACWH may also invest in other types of assets and in any
geographic areas that its general partner deems appropriate. We, as general
partner of the Operating Partnership, the indirect parent company of MACWH,
will cause MACWH to conduct the business of MACWH in a manner intended to
permit us to be classified as a REIT under the Code.
Our Company
Our Company is a Maryland corporation organized under the Maryland
General Corporation Law. We are a self-administered and self-managed REIT.
Although our Company currently intends to continue to qualify as a REIT under
the Code and to operate as a self-administered REIT, our Company is not under
any contractual obligation to continue to qualify as a REIT, and our Company
may discontinue this qualification or mode of operation in the future. Although
our Company has no intention of ceasing to qualify as a REIT, some other real
estate companies that previously operated as REITs have chosen to cease to qualify
as REITs. Except as otherwise permitted in the Operating Partnership Agreement,
our Company is obligated to conduct its activities through the Operating
Partnership. Our Company is the sole general partner of the Operating
Partnership.
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Nature of Investment
MACWH
The MACWH Units and MACWH CPUs constitute equity interests entitling
each limited partner in MACWH to a share of cash distributions made to the
limited partners in MACWH.
Subject to certain limitations, MACWH Units receive a quarterly
distribution, or common distribution amount, which will track, in part,
quarterly dividends made on our Common Stock on an as-converted basis.
MACWH CPU holders in MACWH receive a quarterly distribution, or MACWH
CPU return amount, comprised of both a fixed component and a component that
floats with the regular dividend paid on shares of our Common Stock. Holders of
MACWH CPUs are entitled to a quarterly distribution in an amount equal to
approximately $0.896856 per unit plus the amount by which our regular quarterly
dividend exceeds $0.65.
Subject to certain exceptions, the general partner generally must, at
least quarterly, distribute 100% of the available cash generated by MACWH
during the previous full calendar quarter or shorter period as follows:
·
first, to the MACWH CPU holders who are
partners on the applicable partnership record date for such distribution, pro
rata to such MACWH CPU holders in proportion to the cumulative unpaid MACWH CPU
return amount (as described in more detail above), if any, of each such MACWH
CPU holder until the cumulative unpaid MACWH CPU return amount of each MACWH
CPU holder is reduced to zero;
·
second, to the MACWH CPU holders who are
partners on the applicable partnership record date for such distribution, pro
rata to such MACWH CPU holders in proportion to the MACWH CPU return amount (as
described in more detail above) of each such MACWH CPU holder, until each such
MACWH CPU holder has received an amount equal to the MACWH CPU return amount
with respect to such distribution;
·
third, to holders of the MACWH Units (MACWH
Unitholders) (other than us, Walleye, the Operating Partnership or any of our
or their respective subsidiaries or affiliates or any transferee of Walleye)
who are partners on the applicable partnership record date for such
distribution, pro rata among them in proportion to the cumulative unpaid common
distribution amount, if any, of each such MACWH Unitholder until the cumulative
unpaid common distribution amount of each such MACWH Unitholder is reduced to
zero;
·
fourth, to the MACWH Unitholders (other than
us, Walleye, the Operating Partnership or any of our or their respective
subsidiaries or affiliates or any transferee of Walleye) who are partners on
the applicable partnership record date for such distribution, pro rata among
such MACWH Unitholders in proportion to the common distribution amount, if any,
of each such MACWH Unitholder, until each such MACWH Unitholder has received an
amount equal to the common distribution amount with respect to such distribution;
and
·
thereafter and without limitation, one
hundred percent (100%) to us, Walleye, the Operating Partnership, and our and
their respective subsidiaries and affiliates or any transferee of Walleye (and
any permitted transferee) pro rata in proportion to the MACWH Units held by us,
Walleye, the Operating Partnership and our and their respective subsidiaries
and affiliates or any transferee of Walleye (and any permitted transferee).
Notwithstanding the foregoing order of distributions, in no event may a
partner receive a distribution with respect to a MACWH Unit or MACWH CPU if and
to the extent that such MACWH Unit or MACWH CPU has been redeemed or exchanged
prior to the applicable partnership record date for such distribution, or, in
general, such MACWH CPU has been redeemed prior to the distribution date for
such distribution. For example, if a partner receives a share of our Common
Stock upon redemption of its MACWH Unit, that partner cannot receive both (a) a
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distribution
with respect to that MACWH Unit and (b) a dividend with respect to our
Common Stock for the quarter in which such MACWH Unit was redeemed.
No interest will be paid on accrued but unpaid MACWH CPU return amounts
and MACWH Unit distribution amounts. MACWH will not pay any subordinated
amounts unless and until the cumulative unpaid common distribution amounts and
the common distribution amounts of all MACWH Unitholders (other than us,
Walleye, the Operating Partnership or any of our or their respective
subsidiaries or affiliates or any transferee of Walleye) have been paid.
Subordinated amounts are amounts owed to or being paid to Walleye or any of its
respective subsidiaries or affiliates or any transferee of Walleye by MACWH,
including (a) any payment of principal or interest with respect to any
indebtedness; (b) any payments with respect to any reimbursement of
expenses incurred by us, Walleye or any of our or its respective subsidiaries
or affiliates or any transferee of Walleye; (c) any compensation paid by
MACWH to us, Walleye or any of our or their respective subsidiaries or
affiliates or any transferee of Walleye for services rendered.
MACWH, and Walleye on behalf of MACWH, will not be required to make a
distribution to any limited partner on account of its interest in MACWH if such
distribution would violate Delaware law or other applicable law. However, any
amounts not paid for such reasons will continue to accumulate as cumulative
unpaid MACWH CPU return amount or cumulative unpaid common distribution amount,
as applicable.
Our Company
Our Common Stock constitutes equity interests in our Company. For a
more detailed description of our Common Stock, see Description of Common Stock
in the accompanying prospectus. We are entitled to receive our proportionate
share of distributions made by the Operating Partnership with respect to the
MACWH Units owned by us. The dividends payable to holders of our stock will
generally correspond to the distributions received by us from the Operating
Partnership. However, dividends payable by us are only paid if, when and as
authorized by the Board of Directors and declared by us out of assets legally
available to pay dividends. Each holder of Common Stock is entitled to his or
her proportionate share of any dividends or distributions paid with respect to
the Common Stock held, subject to the preferences on dividends and
distributions of any preferred stock issued and outstanding. To qualify as a
REIT, we must distribute to our stockholders at least 90% of our taxable
income, excluding capital gains, and corporate income tax will apply to any
taxable income, including capital gains, not distributed.
Length of Investment
MACWH
MACWH has a stated term expiring on December 31, 2099 or earlier
upon the happening of certain events, including, at the election of Walleye, if
certain conditions described in the MACWH Agreement are satisfied, any event
which causes Walleye to cease to be the general partner of MACWH (unless MACWH
is continued in accordance with applicable law), disposition of all of MACWHs
assets, or dissolution of MACWH by a court of competent jurisdiction. MACWH has
no specific plans for disposition of its assets. MACWH is a vehicle for holding
a portfolio of investments in the real estate market.
Our Company
Our Company has a perpetual term, and we intend to continue our
operations for an indefinite time period. Under our charter, the dissolution of
our Company must be approved by the affirmative vote of the holders of not less
than a majority of the shares of Common Stock entitled to vote on dissolution.
We have an indirect interest in the properties and assets owned by the
Operating Partnership and its affiliates. Holders of our Common Stock are
expected to realize liquidity of their investments by trading their Common
Stock on the New York Stock Exchange.
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Liquidity
MACWH
Neither the MACWH Units nor the MACWH CPUs have been registered under
the Securities Act or any state securities laws and therefore may not be sold,
pledged, hypothecated or otherwise transferred unless first registered under
the Securities Act and any applicable state securities laws, or unless an
exemption from registration is available. MACWH Units and MACWH CPUs also may
not be sold or otherwise transferred unless the other transfer restrictions
discussed below have been satisfied. We and MACWH do not intend to register the
MACWH Units or MACWH CPUs under the Securities Act or any state securities
laws.
The MACWH Agreement provides that, without the consent of Walleye,
limited partners may not in any way dispose of their interest in MACWH, other
than to affiliates in accordance with the provisions and subject to the
limitations in the MACWH Agreement. See Description of MACWH Units and MACWH
CPUsTransfer Restrictions.
Our Company
Any Common Stock issued upon redemption of MACWH Units will be
registered under the Securities Act and be transferable, as long as the
stockholder complies with the ownership limits in our charter. Our Common Stock
is currently listed on the New York Stock Exchange under the ticker symbol MAC.
The future breadth and strength of this secondary market for our Common Stock
will depend, among other things, upon the amount of Common Stock outstanding,
our financial results and prospects, the general interest in our real estate
investments and real estate investments in general, and our dividend yield
compared to that of other debt and equity securities.
Potential Dilution of Rights
MACWH
Subject to certain limitations on the ability to issue units to us, the
Operating Partnership, or any direct or indirect subsidiary or affiliate of the
Operating Partnership, Walleye can cause MACWH to issue additional units to the
partners (including itself) or other persons for the consideration and on the
terms and conditions that the general partner deems appropriate. These
additional units may be issued in one or more classes, or one or more series of
any such classes, with such designations, preferences, rights, powers and
duties as the general partner may determine in its sole and absolute discretion
subject to Delaware law. The interests of the limited partners in any cash
available for distribution may be diluted if MACWH issues additional MACWH
Units, MACWH CPUs or other ownership units.
Our Company
Our Board of Directors may, in its discretion, authorize the issuance
of additional Common Stock and other equity securities of our Company,
including one or more classes or series of common or preferred stock, with the
voting rights, dividend rates, preferences, subordinations, conversion or
redemption prices or rights, maturity dates, distribution, exchange or
liquidation rights or other rights that the Board of Directors may specify at
the time. The issuance of additional equity securities, redemption or conversion
of outstanding partnership units and the exercise of employee stock options will
result in the dilution of the interests of the stockholders. As permitted by
applicable Maryland law, our charter contains a provision permitting the Board
of Directors, without any action by our stockholders, to authorize the issuance
of additional stock within the limits established in the charter. Under our
charter, although our stockholders do not have any preemptive rights to
subscribe to any securities of our Company, the Board of Directors is
authorized to create such rights. See Description of our Capital
StockSelected Provisions of Maryland Law and of Our Charter and Bylaws in the
accompanying prospectus.
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Management Control
MACWH
As general partner, Walleye has the power to cause MACWH to enter into
certain major transactions, including acquisitions, developments and dispositions
of properties and, generally, the incurrence of indebtedness. The MACWH
Agreement provides the general partner with broad powers to act in furtherance
of the business purposes of MACWH, including all activities pertaining to the
acquisition and operation of its properties, provided that MACWH does not take,
or refrain from taking, any action which the general partner believes will
adversely affect our ability to qualify as a REIT. Limited partners have no
power to remove the general partner and no voting rights relating to the
operation and management of MACWH, except in connection with certain amendments
to the MACWH Agreement and certain specified restrictions. The MACWH Agreement
places certain limits on the general partners authority with regard to
dissolving MACWH, transferring or assigning its general partnership interest in
MACWH, disposing of all or substantially all of MACWHs assets, and commencing
a voluntary proceeding or consenting to an involuntary proceeding seeking
liquidation, reorganization or other relief under bankruptcy or insolvency law.
Our Company
Our
Board of Directors has exclusive control over the management of our business
and affairs, limited only by express restrictions in our charter and bylaws,
the Operating Partnership Agreement and applicable law. The Board of Directors
is currently divided into three classes of directors with each class
constituting one third of the total number of directors. Prior to our 2009
annual meeting, one class of our directors was elected at each annual meeting
of stockholders to serve a three-year term.
At our 2008 annual meeting, our stockholders approved an amendment to
our charter to declassify our Board. As a result of this charter amendment, a
declassified Board structure will be phased in as follows: (a) certain
current directors will continue to serve the remainder of their three-year
terms, and (b) starting with the 2009 annual meeting, directors were and
will be elected annually, so that by our 2011 annual meeting of stockholders,
all directors will be elected annually.
The policies adopted by the Board of Directors may be altered or
eliminated without a vote of the stockholders. Stockholders have limited rights
to make proposals that will be considered and voted on at stockholder meetings,
including the right to nominate directors for election. Stockholder proposals
must be approved by the requisite number of stockholder votes and depending on
the type of proposal they may not be binding on us. Accordingly, except for
their vote in the elections of directors and limited rights to make proposals
for consideration at stockholder meetings, stockholders have no control over
our ordinary business policies.
Because a portion of the Board of Directors will be elected each year
by the stockholders at our annual meeting through 2010 and the stockholders
have limited rights to make proposals for consideration at stockholder
meetings, the stockholders have greater control over the management of our
Company than the limited partners have over MACWH.
Duties of General Partner and Directors
MACWH
Under Delaware law, Walleye, as the general partner of MACWH, is
accountable to MACWH as a fiduciary and, consequently, is required to exercise
good faith and integrity in all of its dealings with respect to partnership
affairs. However, under the MACWH Agreement, Walleye is expressly under no
obligation to consider the separate interests of the limited partners in
deciding whether to cause MACWH to take or decline to take any action, and it
is not liable for monetary damages for losses sustained, liabilities incurred
or benefits not derived by limited partners as a result of our decisions,
provided that the general partner has acted in good faith and in accordance
with the MACWH Agreement.
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Our Company
Under Maryland law, our directors are required to perform their duties
in good faith, in a manner that they reasonably believe to be in the best
interests of the corporation and with the care of an ordinarily prudent person
in a like position under similar circumstances. The Maryland General
Corporation Law presumes that a directors standard of care has been satisfied.
Management Liability and Indemnification
MACWH
As a matter of Delaware law, Walleye, as the general partner of MACWH,
has liability for the payment of the obligations and debts of MACWH unless this
liability is limited by the terms of the obligations or debt. Under the MACWH
Agreement, MACWH has agreed to indemnify Walleye, any director, officer,
manager, trustee or general partner of Walleye, or any entity that directly or
indirectly controls Walleye (including us and the Operating Partnership) from
and against all losses, claims, damages, liabilities, costs and expenses
(including attorneys fees and costs), judgments, fines, settlements, and other
amounts arising from any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative, that relate to
the operation of MACWH as set forth in the MACWH Agreement in which such
indemnified person may be involved, unless the act or omission was in bad faith
or the result of active and deliberate dishonesty and was material to the
action; the party seeking indemnification received an improper personal
benefit; or in the case of any criminal proceeding, the party seeking
indemnification had reasonable cause to believe the act or omission was
unlawful. The MACWH Agreement provides that these indemnification rights are
non-exclusive of any other rights to which those seeking indemnification may be
entitled.
MACWH may advance reasonable expenses incurred by an indemnified party
before the final disposition of the proceeding, upon receipt by MACWH of an
affirmation by the indemnified person of the indemnified persons good faith
belief that it is entitled to indemnification and an undertaking by the
indemnified person to repay the amount if it is ultimately adjudged not to have
been entitled to indemnification.
Our Company
Our charter includes provisions that limit the liability of directors
and officers to us and to our stockholders for money damages to the fullest
extent permitted under Maryland law. Our charter also requires us to indemnify
our present directors and officers to the maximum extent permitted under
Maryland law. These provisions apply to officers and directors acting in their
capacity as officers and directors of our Company or of any other entity at our
request. Our charter also requires us to make payments to our officers and
directors for expenses they incur in advance of final determination of any
claim or dispute for which they are seeking indemnification, in accordance with
the procedures and to the full extent permitted by Maryland law. In addition,
we have entered into indemnification agreements with our directors and some of
our officers.
The Maryland General Corporation Law permits a Maryland 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 the act or omission of the director or officer was material to
the matter giving rise to the proceeding and (a) was committed in bad
faith or (b) was the result of active and deliberate dishonesty; the
director or officer actually received an improper personal benefit in money,
property or services; or 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 Maryland General Corporation Law, 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 Maryland General
Corporation Law permits a corporation to advance reasonable expenses to a
director or officer upon the corporations receipt of 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 the corporation, and a written
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undertaking
by him or on his behalf to repay the amount paid or reimbursed by the
corporation if it is ultimately determined that the standard of conduct was not
met.
Liability of Investors
MACWH
Under the MACWH Agreement and applicable state law, the liability of
the limited partners for MACWHs debts and obligations generally is limited to
the amount of their investments in MACWH, together with their interest in MACWHs
undistributed income, if any. Also, if any limited partner has guaranteed MACWHs
indebtedness, as provided by the MACWH Agreement, the limited partner would be
liable to the extent provided in its guaranty.
Our Company
Under the Maryland General Corporation Law, our stockholders are not
liable for our debts and obligations. Their risk of loss is limited to the
amount of their investments in us, together with their interest in our
undistributed income, if any. The Common Stock, upon issuance in accordance
with this prospectus supplement, will be fully paid and nonassessable. Thus,
the limited partners in MACWH and our stockholders have substantially the same
limited personal liability.
Voting Rights
MACWH
Under the MACWH Agreement, the limited partners have limited voting
rights. The limited partners do not have voting rights relating to the
operation and management of MACWH. In addition, the limited partners do not
have the right to propose amendments to the MACWH Agreement, and certain types
of amendments can be approved without the vote of the limited partners.
However, certain amendments that would change the limited liability of a
limited partner or change specified provisions in the MACWH Agreement with
respect to distributions and allocations or the right to redeem units must be
approved by each limited partner adversely affected by the amendment.
Neither we, the Operating Partnership nor Walleye, as the general
partner of MACWH, may engage in an extraordinary transaction, except, in any
such case, (a) if such extraordinary transaction is a permitted extraordinary
transaction, as described in the MACWH Agreement, or (b) if limited
partners holding two-thirds-in-interest of the MACWH Units and MACWH CPUs (on
an as-converted basis), other than partnership units held by us, Walleye or any
of our or its respective subsidiaries or affiliates, consent to such
extraordinary transaction. The following events will be deemed an extraordinary
transaction with regard to us, the Operating Partnership or Walleye:
·
a merger (including a triangular merger),
consolidation or other combination with or into another person (other than in
connection with a change in our state of incorporation or organizational form
or a merger with one of our direct or indirect subsidiaries);
·
the direct or indirect sale, lease, exchange
or other transfer of all or substantially all of our or its assets in one
transaction or a series of related transactions;
·
any reclassification, recapitalization or
change of our or its outstanding equity interests (other than a change in par
value, or from par value to no par value, or as a result of a stock split,
dividend or similar subdivision); or
·
the adoption of any plan of liquidation or
dissolution whether or not in compliance with the provisions of the MACWH
Agreement.
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Our Company
The business and affairs of our Company are managed
under the direction of the Board of Directors, which currently consists of nine
members. Prior to our 2009 annual
meeting, one class of our directors was elected at each annual meeting of
stockholders to serve a three-year term.
At our 2008 annual meeting, our stockholders approved an amendment to
our charter to declassify our Board. As a result of this charter amendment, a
declassified Board structure will be phased in as follows: (a) current
directors will continue to serve the remainder of their three-year terms, and (b) starting
with the 2009 annual meeting, directors will be elected annually, so that by
our 2011 annual meeting of stockholders, all directors will be elected
annually. Each share of Common Stock has
one vote.
Maryland law requires that certain major corporate
transactions, including most amendments to our charter, may be consummated only
with the approval of stockholders. Our bylaws and Maryland law permit any
action that may be taken at a meeting of stockholders to be taken without a
meeting if a written consent to the action is signed by holders of all outstanding
shares of capital stock having a right to vote on the action. Maryland law also
permits the charter of a Maryland corporation to contain a provision permitting
action to be taken by the written or electronic consent of the holders of
Common Stock entitled to cast not less than the minimum number of votes that
would be necessary to take the action at a stockholders meeting. Our charter
does not contain such a provision.
In addition to Common Stock, we have authorized shares of Series D
Preferred Stock. The holders of Series D Preferred Stock, when and if
issued, have no right to vote, except that so long as any Series D
Preferred Stock is outstanding, the affirmative vote of a majority of the Series D
Preferred Stock outstanding, voting as a separate class or voting as a single
class with any other series of preferred stock which has the right to vote with
the Series D Preferred Stock on such matter, will be necessary to
materially and adversely affect the rights and preferences of Series D
Preferred Stock.
Amendment of the MACWH Agreement or our Charter
MACWH
As the general partner, Walleye generally has the power, without the
consent of any limited partners, to amend the MACWH Agreement as may be
required to reflect any changes that it deems necessary or appropriate in its
sole discretion, provided that the amendment does not adversely affect or
eliminate any right granted to a limited partner that is protected by special
voting provisions. See Voting Rights.
Our Company
Under the Maryland General Corporation Law and our charter, most
amendments to our charter will require the affirmative vote of the holders of
at least two-thirds of the capital stock entitled to vote on the amendment.
However, subject to the rights of any class or series of preferred stock, a
majority of the entire Board of Directors may supplement the charter to
designate new classes or series of common or preferred stock without
stockholder approval.
Issuance of Additional Equity
MACWH
MACWH is generally authorized to issue MACWH Units, MACWH CPUs and
other partnership interests, including partnership interests of different
series or classes, as determined by Walleye as the general partner in its sole
discretion. MACWH may issue MACWH Units, MACWH CPUs and other partnership
interests to us, the general partner or any direct or indirect subsidiary or
affiliate of the general partner as long as (a) we, the general partner,
or the applicable subsidiary or affiliate makes a capital contribution to MACWH
in an amount equal to the fair market value of such partnership unit or
partnership interest (as determined in good faith by the general partner), or (b) such
interests are issued to all of the partners in proportion to their respective
interests in MACWH.
Absent the consent of two-thirds-in-interest-of the limited partners
(with MACWH CPUs voting on an as-converted basis), MACWH may not issue
partnership units or partnership interests to us, the general partner or a
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subsidiary
or affiliate thereof if such partnership units or partnership interests (a) would
have distribution rights senior to the limited partners currently holding limited
partnership units or (b) would have rights to net losses that would result
in a change in the priority of allocation of net losses in a manner that
adversely affects any of the limited partners holding limited partnership units
prior to such issuance.
No limited partner has any preemptive, preferential or other similar
purchase right with respect to capital contributions or loans to MACWH or the
issuance or sale of any partnership units or partnership interests.
Our Company
Subject to the rights and restrictions of any class or series of
preferred stock, the Board of Directors may authorize the issuance, in its
discretion, of additional Common Stock and other equity securities of our
Company, including one or more classes of common or preferred stock, with such
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications and terms
and conditions of redemption as the Board of Directors may establish.
Borrowing Policies
MACWH
MACWH has no restrictions on borrowings, and the general partner has
full power and authority to borrow money on behalf of MACWH.
Our Company
We are not restricted under our charter from borrowing. However, under
the Operating Partnership Agreement, we, as the general partner of the
Operating Partnership, may not borrow money, except for the purpose of
advancing funds to the Operating Partnership for any proper purpose of the
Operating Partnership and except for certain loans from the Operating Partnership
to our Company.
Permitted Investments
MACWH
MACWHs purpose is to conduct any business that may be lawfully
conducted by a Delaware limited partnership, provided that this business is to
be conducted in a manner that permits us to be qualified as a REIT, unless we
otherwise consent or cease to qualify as a REIT. MACWH is authorized to perform
any and all acts for the furtherance of the purposes and business of MACWH,
including making investments or entering into joint ventures or partnerships.
Our Company
Under our charter, we may engage in any lawful activity permitted by
the Maryland General Corporation Law. Under the Operating Partnership
Agreement, we, as the general partner of the Operating Partnership, must
conduct all of our business activities through the Operating Partnership.
However, we, as the general partner of the Operating Partnership, are also
permitted to hold, directly or indirectly, up to a 1% interest in certain
existing entities and may acquire an interest in other additional properties
but only if the Operating Partnership is acquiring at least 99 times our
proposed participation in the property.
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USE OF
PROCEEDS
We will receive no cash proceeds from any issuance
of the Shares covered by this prospectus supplement, but we will acquire
additional OP Units, MACWH Units and MACWH CPUs in exchange for any such
issuances. We intend to hold any OP Units, MACWH Units and MACWH CPUs which we
acquire.
PLAN OF
DISTRIBUTION
This
prospectus supplement relates to the possible issuance by us of up to 50,000 Shares
issued to holders of (1) OP Units issued upon conversion of Series D
Preferred Units, (2) MACWH Units and/or (3) MACWH CPUs, and any of their
pledgees, donees, transferees or other successors in interest. We may only
offer the Shares to the holders of OP Units, MACWH Units and MACWH CPUs if the
holders present them for redemption and we exercise our right to issue Common
Stock to them instead of paying a cash amount.
We
will bear all costs, expenses and fees in connection with the registration of
the Shares.
LEGAL
MATTERS
The
validity of the securities offered hereby will be passed upon for us by Goodwin
Procter LLP.
WHERE YOU
CAN FIND MORE INFORMATION
We
are subject to the information requirements of the Exchange Act of 1934 (the Exchange
Act), and in accordance with the Exchange Act we file annual, quarterly, and
current reports, proxy statements, and other information with the SEC. You may
read and copy any document we file at the SECs Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549. You may call the SEC at
1-800-SEC-0330 for further information on the operation of the Public Reference
Room. Macerichs SEC filings are also available to the public from the SECs
website at http://www.sec.gov. In addition, you may read Macerichs SEC filings
at the offices of the New York Stock Exchange, which is located at 20 Broad
Street, New York, New York 10005.
The
information incorporated by reference herein is an important part of this
prospectus supplement. Any statement contained in a document which is
incorporated by reference in this prospectus supplement is automatically
updated and superseded if information contained in this prospectus supplement,
or information that we later file with the SEC prior to the termination of this
offering, modifies or replaces this information. Macerichs SEC file number is
001-12504. We are incorporating by reference the documents listed below, which
were previously filed by us with the SEC:
·
our
Annual Report on Form 10-K for the year ended December 31, 2008,
filed on February 27, 2009;
·
those
portions of our definitive Proxy Statement for the 2009 Annual Meeting of
Stockholders that are incorporated by reference in our Form 10-K;
·
our
Quarterly Reports on Form 10-Q for the period ended March 31, 2009,
filed on May 11, 2009; for the period ended June 30, 2009, filed on
August 7, 2009; and for the period ended September 30, 2009, filed on
November 6, 2009;
·
the
descriptions of Common Stock which are contained in registration statements
filed under the Securities Exchange Act of 1934, including any amendment or
reports filed for the purpose of updating such descriptions;
·
our
Current Reports on Form 8-K filed on January 5, 2009, February 11,
2009 (with respect to Items 1.01, 5.03 and 9.01 only), May 1, 2009, May 27,
2009, May 28, 2009, June 12, 2009, June 23, 2009, July 31,
2009, September 4, 2009, September 21, 2009, October 2, 2009, October 21, 2009
(with respect to Items 8.01 and 9.01), October 23, 2009 and October 30, 2009;
and
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·
all
documents filed by us with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus supplement and prior to the
termination of this offering, except as to any portion of any future report or
document that is not deemed filed under such provisions.
Upon
request, we will provide, without charge, to each person to whom a copy of this
prospectus supplement is delivered a copy of the documents incorporated by
reference in this offering memorandum. You may request a copy of these filings,
and any exhibits we have specifically incorporated by reference as an exhibit
in this prospectus supplement, by writing or telephoning us at the following:
The Macerich Company
401 Wilshire Boulevard, #700
Santa Monica, CA 90401-1452
Attention: Corporate Secretary
(310) 394-6000
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PROSPECTUS
COMMON STOCK
PREFERRED STOCK
DEBT SECURITIES
WARRANTS
RIGHTS
UNITS
We, or any selling securityholders
to be identified in the future, may offer from time to time, in one or more
series:
·
shares of our common stock;
·
shares of our preferred stock;
·
senior and/or subordinated debt
securities;
·
warrants to purchase common stock,
preferred stock and/or debt securities;
·
rights to purchase common stock,
preferred stock and/or debt securities; and
·
units consisting of two or more of
these classes or series of securities.
We, or any selling
securityholders to be identified in the future, may offer these securities in
amounts, at prices and on terms determined at the time of offering. The specific plan of distribution for any
securities to be offered will be provided in a prospectus supplement. If we use agents, underwriters or dealers to
sell these securities, a prospectus supplement will name them and describe
their compensation.
The specific terms of any
securities to be offered will be described in a supplement to this
prospectus. The prospectus supplement
may also add, update or change information contained in this prospectus. You should read this prospectus and any
prospectus supplement, together with additional information described under the
heading Where You Can Find More Information, before you make an investment
decision.
Our common stock is
listed on the New York Stock Exchange under the symbol MAC.
Investing
in our securities involves a high degree of risk. See the Risk Factors section contained in
the applicable prospectus supplement and in the documents we incorporate by
reference in this prospectus to read about factors you should consider before
investing in our securities.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this prospectus is November 26, 2008.
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ABOUT THIS PROSPECTUS
This prospectus is
part of an automatic shelf registration statement that we filed with the
United States Securities and Exchange Commission, or the SEC, as a well-known
seasoned issuer as defined in Rule 405 under the Securities Act of 1933,
as amended, or the Securities Act, using a shelf registration process. By using a shelf registration statement, we
may sell any combination of our common stock, preferred stock, debt securities,
warrants, rights and units from time to time and in one or more offerings. Each time we sell securities, we will provide
a supplement to this prospectus that contains specific information about the
securities being offered (if other than common stock) and the specific terms of
that offering. The supplement may also
add, update or change information contained in this prospectus. If there is any inconsistency between the
information in this prospectus and any prospectus supplement, you should rely
on the prospectus supplement. Before
purchasing any securities, you should carefully read both this prospectus and
any prospectus supplement, together with the additional information described
under the heading Where You Can Find More Information and Incorporation of
Certain Documents by Reference.
You should rely only on
the information contained or incorporated by reference in this prospectus and
in any prospectus supplement. We have
not authorized any other person to provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We will not make an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information
appearing in this prospectus and any prospectus supplement is accurate as of
the date on its respective cover, and that any information incorporated by
reference is accurate only as of the date of the document incorporated by
reference, unless we indicate otherwise.
Our business, financial condition, results of operations and prospects
may have changed since those dates.
Unless otherwise stated,
or the context otherwise requires, references in this prospectus to the Company,
we, us and our refer to The Macerich Company, those entities owned or
controlled by The Macerich Company and predecessors of The Macerich Company.
WHERE YOU CAN FIND MORE INFORMATION
We have filed our
registration statement on Form S-3 with the SEC under the Securities Act.
We also file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read
and copy any document that we file with the SEC, including the registration
statement and the exhibits to the registration statement, at the SECs public
reference facility at:
Securities and
Exchange Commission
Room 1500
100 F Street, N.E.
Washington D.C. 20549
You may call the
SEC at 1-800-SEC-0330 for further information. Our SEC filings are also
available to the public at the SECs web site at www.sec.gov. In addition, you may inspect and copy
reports, proxy statements and other information about us at the offices of the
New York Stock Exchange, Inc. at 20 Broad Street, New York, New York 10005.
This prospectus
and any prospectus supplement are part of a registration statement that we
filed with the SEC and do not contain all of the information in the
registration statement. The full
registration statement may be obtained from the SEC or us as indicated
below. Forms of the indenture and other
documents establishing the terms of the offered securities are filed as
exhibits to the registration statement or will be filed through an amendment to
our registration statement on Form S-3 or under cover of a Current Report
on Form 8-K and incorporated in this prospectus by reference. Statements in this prospectus or any
prospectus supplement about these documents are summaries and each statement is
qualified in all respects by reference to the document to which it refers. You should refer to the actual documents for
a more complete description of the relevant matters.
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INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE
The SEC allows us
to incorporate by reference in this prospectus the information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and later information filed with the SEC will
update and supersede the information included or incorporated by reference in
this prospectus. We incorporate by reference in this prospectus the following
information:
·
our Annual Report on Form 10-K for the fiscal
year ended December 31, 2007;
·
Amendment No. 1 to our Annual Report on Form 10-K/A
for the fiscal year ended December 31, 2007;
·
our Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2008;
·
our Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2008;
·
our Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2008;
·
our Current Report on Form 8-K filed on May 8,
2008 (Accession No. 000104659-08-031270);
·
our Current Report on Form 8-K filed on May 14,
2008;
·
our Current Report on Form 8-K filed on September 5,
2008;
·
our Current Report on Form 8-K filed on September 18,
2008;
·
our Current Report on Form 8-K filed on October 14,
2008; and
·
the description of our common stock, which is
contained in a registration statement filed under the Securities Exchange Act
of 1934, including any amendment or report filed for the purpose of updating
such description.
We also
incorporate by reference any future filings we may make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
prior to the termination of this offering, other than documents or information
deemed furnished and not filed in accordance with SEC rules.
You may request a
copy of these filings, at no cost, by writing or telephoning us at the
following address:
Corporate
Secretary
The Macerich Company
401 Wilshire Boulevard, No. 700
Santa Monica, California 90401
Telephone: (310) 394-6000
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FORWARD-LOOKING STATEMENTS
This prospectus contains
or incorporates by reference, and any prospectus supplement will contain or
incorporate by reference, statements that constitute 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. Any statements that do not relate to historical
or current facts or matters are forward-looking statements. You can identify
some of the forward-looking statements by the use of forward-looking words,
such as may, will, could, should, expects, anticipates, intends, projects,
predicts, plans, believes, seeks, and estimates and variations of
these words and similar expressions. Statements concerning current conditions
may also be forward-looking if they imply a continuation of current conditions.
Forward-looking statements include statements regarding, among other matters:
·
expectations regarding our growth;
·
our
beliefs regarding our acquisition, redevelopment and development activities and
opportunities;
·
our
acquisition and other strategies;
·
regulatory
matters pertaining to compliance with governmental regulations;
·
our
capital expenditure plans and expectations for obtaining capital for
expenditures; and
·
our
expectations regarding our financial condition or results of operations.
We caution you
that any such forward-looking statements are not guarantees of future
performance and involve risks, uncertainties and other factors that may cause
our actual results, performance or achievements or the industry to differ
materially from our future results, performance or achievements, or those of
the industry, expressed or implied in such forward-looking statements. We urge you to carefully review the
disclosures we make concerning risks and other factors that may affect our
business and operating results, including those made in Item 1A. Risk
Factors of our Annual Report on Form 10-K/A for the year ended December 31,
2007 and in Item 1A. Risk Factors of our Quarterly Report on Form 10-Q
for the quarter ended September 30, 2008 and as such risk factors may be
updated in subsequent SEC filings, as well as our other reports filed with the
SEC and in any prospectus supplement. We caution you not to place undue
reliance on these forward-looking statements, which speak only as of the date
of this prospectus or any prospectus supplement. We do not intend, and we
undertake no obligation, to update any forward-looking information to reflect
events or circumstances after the date of this prospectus or any prospectus
supplement or to reflect the occurrence of unanticipated events, unless
required by law to do so.
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THE MACERICH COMPANY
We are involved in
the acquisition, ownership, development, redevelopment, management, and leasing
of regional and community shopping centers located throughout the United
States. We are the sole general partner of, and own a majority of the ownership
interests in, The Macerich Partnership, L.P., a Delaware limited
partnership (the Macerich Partnership). As of September 30, 2008,
Macerich Partnership owned or had an ownership interest in 72 regional shopping
centers and 19 community shopping centers aggregating approximately
77 million square feet of gross leasable area.
We are a
self-administered and self-managed real estate investment trust, or REIT, and
conduct all of our operations through Macerich Partnership and our management
companies.
We were organized
as a Maryland corporation in September 1993. Our principal executive offices are located
at 401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401. Our telephone number is (310) 394-6000. Our website address is www.macerich.com. Information on our website does not
constitute part of this prospectus.
RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS T
O
COMBINED
FIXED CHARGES AND PREFERRED SHARE DISTRIBUTIONS
The
table below presents our consolidated ratios of earnings to fixed charges for
each of the periods indicated. We
computed these ratios by dividing earnings by fixed charges. For this purpose, earnings consist of pretax
income from continuing operations before minority interest, unconsolidated
entities, cumulative effect of change in accounting principles, gain (loss) on
sale of assets, and loss on early extinguishment of debt. We further adjusted earnings by adding cash
distributions from unconsolidated joint ventures and the management companies
instead of the equity in their income and adding fixed charges net of
capitalized interest. Fixed charges
consist of interest expense, whether capitalized or expensed, amortization of
debt issuance costs, and preferred dividend requirements of consolidated
subsidiaries, if any.
Nine Months Ended
|
|
Year Ended December 31,
|
|
September 30, 2008
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
1.29x
|
|
1.63x
|
|
1.42x
|
|
1.42x
|
|
1.53x
|
|
1.45x
|
|
The
table below presents our consolidated ratios of earnings to combined fixed
charges and preferred share distributions for each of the periods
indicated. We computed these ratios by
dividing earnings by combined fixed charges and preferred share distributions.
The terms earnings and fixed charges have the meanings assigned above. The
ratios are based solely on historical financial information and no pro forma
adjustments have been made.
Nine Months Ended
|
|
Year Ended December 31,
|
|
September 30, 2008
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
1.27x
|
|
1.59x
|
|
1.38x
|
|
1.38x
|
|
1.46x
|
|
1.35x
|
|
USE OF
PROCEEDS
When we offer
particular securities, we will describe in a prospectus supplement relating to
the securities offered how we intend to use the proceeds from their sale. We may invest funds not required immediately
for such purposes in short-term investment grade securities. We will not receive any proceeds from the
sale of securities by selling securityholders.
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DESCRIPTION OF OUR CAPITAL STOCK
The following is a
summary description of the material terms of our capital stock. Provisions of
our charter and our bylaws fix or may affect some of the terms of our capital
stock. For a complete description of the terms of all of our capital stock,
including our common stock, we refer you to the Maryland General Corporation
Law, our charter and our bylaws. Our charter and our bylaws are incorporated by
reference as exhibits to the registration statement of which this prospectus is
a part.
Capitalization
Our charter authorizes us
to issue up to 220,000,000 shares of capital stock, consisting of 145,000,000
shares of common stock, $.01 par value per share, 15,000,000 shares of
preferred stock, $.01 par value per share, and 60,000,000 shares of excess
stock, $.01 par value per share (excess stock). As of November 1, 2008,
we had
·
76,272,874 shares of common stock (including shares of unvested
restricted common stock) issued and outstanding; and
·
1,961,345 shares of Series D Preferred Stock authorized, none of
which are outstanding.
In
addition, as of November 1, 2008, 143,934 shares of our common stock were
reserved for issuance upon exercise of outstanding employee stock options,
12,881,231 shares of our common stock were reserved for issuance upon
redemption of outstanding limited partnership units of Macerich Partnership and
MACWH, L.P., and 1,257,134 shares of our common stock were reserved for
issuance upon exercise of outstanding stock appreciation rights.
Shares of Series D
Preferred Stock, if issued, could be converted into shares of our common stock
based on a formula set forth in the applicable Articles Supplementary. As of
the date of this prospectus, the conversion ratio is one-for-one. Rights of
holders of Series D Preferred Stock include dividend and liquidation
preferences over the holders of shares of our common stock and voting rights in
some circumstances.
Our charter and Maryland
law permit our board of directors, or any duly authorized committee
thereof, to classify and reclassify any
unissued shares of our capital stock by setting or changing in any one or more
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications or terms and conditions of redemption of the classified or
reclassified shares of our capital stock. The terms of any stock classified or
reclassified by our board of directors or a duly authorized committee thereof
in accordance with our charter will be set forth in articles supplementary
filed with the State Department of Assessments and Taxation of Maryland prior
to the issuance of any classified or reclassified stock.
Issuance
of Excess Stock
Our charter provides that
in the case of a prohibited event, the relevant stock will automatically be
exchanged for excess stock, to the extent necessary to ensure that the
purported transfer or other event does not result in a prohibited event. A prohibited event is a purported transfer of
stock or other event that will, if effective, result in any of the following:
·
a person owning shares of our stock in excess of the ownership limit as
determined in accordance with our charter or owning (directly or indirectly)
more than a specified percentage of our common stock as determined in
accordance with our charter (that persons percentage limitation);
·
shares of our common stock and preferred stock being owned by fewer
than 100 persons (determined without reference to any rules of
attribution);
·
our becoming closely held under Section 856(h) of the
Internal Revenue Code (the Code) (determined without regard to Code Section 856(h)(2) and
by deleting the words the last half of in the first sentence of Code Section 542(a)(2) in
applying Code Section 856(h)); or
·
our disqualification as a REIT.
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Outstanding shares of
excess stock will be held in trust. The trustee of the trust will be appointed
by us and will be independent of us, any purported record or beneficial
transferee and any beneficiary of such trust (the beneficiary). The
beneficiary will be one or more charitable organizations selected by the
trustee.
Our charter further
provides that shares of excess stock are entitled to the same dividends as the
shares of stock exchanged for excess stock (the original shares). The
trustee, as record holder of the excess stock, is entitled to receive all
dividends and distributions in respect of the excess stock as may be authorized
by the board of directors and declared by us and will hold the dividends or
distributions in trust for the benefit of the beneficiary. The trustee is also
entitled to cast all votes that holders of the excess stock are entitled to
cast. Shares of excess stock in the hands of the trustee will have the same
voting rights as original shares. Upon our liquidation, dissolution or winding
up, each share of excess stock will be entitled to receive ratably with each
other share of stock of the same class or series as the original shares, the
assets distributed to the holders of the class or series of stock. The trustee
will distribute to the purported transferee the amounts received upon our
liquidation, dissolution or winding up, but only up to the amount paid by the
purported transferee, or the market price for the original shares on the date
of the purported transfer, if no consideration was paid by the transferee, and
subject to additional limitations and offsets set forth in our charter.
If, after the purported
transfer or other event resulting in an exchange of stock for shares of excess
stock, dividends or distributions are paid with respect to the original shares,
then the dividends or distributions will be paid to the trustee for the benefit
of the beneficiary. While shares of excess stock are held in trust, excess
stock may be transferred by the trustee only to a person whose ownership of the
original shares will not result in a prohibited event. At the time of any
permitted transfer, the shares of excess stock will be automatically exchanged
for the same number of shares of the same type and class as the original
shares. Our charter contains provisions that prohibit the purported transferee
of shares of excess stock from receiving in return for the transfer an amount
that reflects any appreciation in the original shares during the period that
the shares of excess stock were outstanding. Our charter requires any amount
received by a purported transferee, in excess of the amount permitted to be
received, to be paid to the beneficiary.
Our charter further
provides that we may purchase, for a period of 90 days during the time the
shares of excess stock are held in trust, all or any portion of the excess
stock at the lesser of the price paid for the stock by the purported transferee
(or if no consideration was paid, the market price at the time of such
transaction) or the market price of the relevant shares as determined in
accordance with our charter. The 90-day period begins on the date of the
prohibited transfer if the purported transferee gives notice to the board of
directors of the transfer or, if no notice is given, the date the board of
directors determines in good faith that a prohibited transfer has been made.
These provisions
contained in our charter will not be automatically removed even if the REIT
provisions of the Code are changed so as to no longer contain any ownership
concentration limitation or if the ownership concentration limitation is
increased. Amendments to our charter require the affirmative vote of at least
two-thirds of the shares entitled to vote. In addition to preserving our status
as a REIT, the ownership limit may have the effect of precluding an acquisition
of control of us without the approval of the board of directors.
All certificates
representing shares of our common stock and our preferred stock bear or will
bear a legend referring to the restrictions described above.
All persons who own,
directly or by virtue of the attribution provisions of the Code, more than 5%
of our outstanding stock must file an affidavit with us containing the
information specified in our charter within 30 days after January 1
of each year. In addition, these and other significant stockholders are
required, upon demand, to disclose to us in writing the information with
respect to their direct, indirect and constructive ownership of shares of our
capital stock that our board of directors deems necessary to comply with the
provisions of the Code applicable to a REIT.
Restrictions
on Transfer and Ownership
For us to qualify as a
REIT under the Code, both of the following conditions relating to ownership of
shares must be satisfied:
·
not more than 50% in value of our outstanding stock
(after taking into account options to acquire stock) may be owned, directly or
indirectly, by five or fewer individuals (as defined under the
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Code to include some entities that would not ordinarily be considered individuals)
during the last half of a taxable year; and
·
shares of our capital 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.
See Certain United
States Federal Income Tax ConsiderationsTaxation of Our Company and Requirements
for Qualification.
Our
Charter Restricts the Ownership and Transfer of Shares of Our Capital Stock
Subject to exceptions
specified in our charter, no stockholder may own, or be deemed to own by virtue
of the attribution provisions of the Code, more than the ownership limit. The
attribution provisions are complex and may cause stock owned directly or
indirectly by a group of related individuals or entities to be deemed to be
owned by one individual or entity. As a result, the acquisition of less than 5%
in value or in number of shares of stock (or the acquisition of an interest in
an entity which owns stock) by an individual or entity could cause that
individual or entity (or another individual or entity) to be deemed to own in
excess of 5% in value or in number of shares of our outstanding capital stock,
and thus subject that stock to the ownership limit. The board of directors, in
its sole discretion (subject to certain limitations), may waive the ownership
limit with respect to our stockholders, but is under no obligation to do so. As
a condition of a waiver of the ownership limit, the board of directors may require
opinions of counsel satisfactory to it or other conditions as it may direct,
including an agreement from the applicant that the applicant will not act to
threaten our REIT status. Our charter excludes from the ownership limit some
persons and their respective families and affiliates, but provides that no
excluded participant may own (directly or indirectly) more than the excluded
participants percentage limitation, as described under Issuance of Excess
Stock.
Our charter provides that
any purported transfer or issuance of shares, or other event, will be null and
void if it results in a prohibited event. The intended transferee or purported
owner in a transaction that results in a prohibited event will not acquire, and
will retain no rights to, or economic interest in, those shares of stock. See Issuance
of Excess Stock.
Selected
Provisions of Maryland Law and of Our Charter and Bylaws
In addition to the
ownership limit, certain provisions of our charter and bylaws may delay, defer
or prevent a change of control or other transaction in which holders of some,
or a majority, of our common stock might receive a premium for their common
stock over the then prevailing market price or which such holders might believe
to be otherwise in their best interests. The following paragraphs summarize a
number of these provisions, as well as selected provisions of the Maryland
General Corporation Law.
Staggered
Board of Directors
Prior to our 2008 annual
meeting, our charter provided that our directors be divided into three classes,
with each director holding office for a term of three years and until their
successors are duly elected and qualify.
This classification made the replacement of the majority of our
incumbent directors more time consuming and difficult. At our 2008 annual meeting, our stockholders
approved a board proposal to amend our charter to eliminate the classified
board of directors. Our declassified
board structure will be phased in as follows:
·
current directors, including those elected to three-year terms at our
2008 annual meeting, will continue to serve the remainder of their elected
terms; and
·
starting with the 2009 annual meeting of stockholders, directors will
be elected annually so that by our 2011 annual meeting of stockholders, all
directors will be elected annually.
Advance
Notice of Director Nominations and New Business; Procedures for Special
Meetings Requested by Stockholders
Our charter and bylaws
provide that for any stockholder proposal to be presented in connection with an
annual meeting or special meeting of our stockholders, including a proposal to
nominate a director, the stockholder must have given timely written notice of
the proposal to our secretary. The bylaws provide that nominations to the board
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of directors and the
proposal of business to be considered by stockholders at an annual meeting of
stockholders may be made only:
·
pursuant to our notice of the meeting;
·
by or at the direction of the board of directors; or
·
by a stockholder who is a stockholder of record at the time such
stockholder gives the notice required by our bylaws, who is entitled to vote at
the meeting and who has complied with the advance notice procedures, including
minimum and maximum time periods, set forth in our charter and bylaws.
Our bylaws also provide
that only the business specified in our notice of meeting may be brought before
a special meeting of stockholders. Nominations of persons for election to the
board of directors at a special meeting of stockholders may be made only:
·
pursuant to our notice of the meeting;
·
by or at the direction of the board of directors; or
·
if the board of directors has determined that directors shall be
elected at such meeting, by a stockholder who is a stockholder of record at the
time such stockholder gives the notice required by our bylaws, who is entitled
to vote at the meeting and who has complied with the advance notice provisions,
including minimum and maximum time periods, set forth in our charter or bylaws.
Our bylaws also contain
special procedures applicable to a special meeting of stockholders that is
called at the request of stockholders entitled to cast not less than a majority
of all the votes entitled to be cast at the meeting.
Exemptions
for the Principals from the Maryland Business Combination Law
Under Maryland law, business
combinations between a Maryland corporation and an interested stockholder or
an affiliate of an interested stockholder are prohibited for five years after
the most recent date on which the interested stockholder becomes an interested
stockholder. These business combinations include a merger, consolidation, share
exchange, or, in circumstances specified in the statute, an asset transfer or
issuance or reclassification of equity securities. An interested stockholder is
defined as:
·
any person who beneficially owns 10% or more of the voting power of the
corporations voting stock; or
·
an affiliate or associate of the corporation who, at any time within
the two-year period prior to the date in question, was the beneficial owner of
10% or more of the voting power of the then outstanding voting stock of the
corporation.
After the five-year
prohibition, any business combination between the Maryland corporation and an
interested stockholder generally must be recommended by the board of directors
of the corporation and approved by two super-majority stockholder votes,
unless, among other conditions, the holders of the corporations common stock
receive a minimum price, as defined by Maryland law, for their shares and the
consideration is received in cash or in the same form as previously paid by the
interested stockholder for its common stock. None of these provisions of
Maryland law will apply, however, to business combinations that are approved or
exempted by the board of directors of the corporation before the time that the
interested stockholder becomes an interested stockholder. Furthermore, a person
is not an interested stockholder if the transaction by which he or she would
otherwise have become an interested stockholder is approved in advance by the
board of directors.
As permitted by Maryland
law, our charter exempts from these provisions any business combination between
us and Mace Siegel, Arthur M. Coppola, Dana K. Anderson and Edward C. Coppola
(the principals) and their respective affiliates or related persons. As a result, these persons may be able to enter
into business combinations with us that may not be in the best interest of our
stockholders without compliance with the super-majority vote requirements and
the other provisions of the statute.
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Non-Stockholder
Constituencies
Under our charter, for
the purpose of determining our and our stockholders best interests with
respect to a proposed business combination or other transaction involving a
change of control of us, our board of directors must give due consideration to
all relevant factors, including, without limitation, the interests of our
employees, the economy, community and societal interests and our and our
stockholders long-term as well as short-term interests, including the
possibility that these interests may be best served by our continued
independence.
Other
Provisions of Our Charter
Our charter authorizes
our board of directors to classify and reclassify unissued shares and issue one
or more series of common stock or preferred stock and authorizes the creation
and issuance of rights entitling holders thereof to purchase from us shares of
stock or other securities or property.
Control
Share Acquisitions
Maryland law provides
that the acquirer of certain levels of voting power in electing directors of a
Maryland corporation (one-tenth or more, but less than one-third, one-third or
more but less than a majority, and a majority or more) is not entitled to vote
the shares in excess of the applicable threshold unless voting rights for the
shares are approved at a meeting by holders of two-thirds of the disinterested
shares or unless the acquisition of the shares has been specifically or
generally approved or exempted from the statute by a provision in the
corporations charter or bylaws adopted before the acquisition of the shares.
Our charter exempts from these provisions voting rights of shares owned by the
principals and their respective affiliates and related persons. Our bylaws also
contain a provision exempting from this statute any acquisition by any person
of shares of our common stock. There can be no assurance that this bylaw will
not be amended or eliminated in the future.
Amendment
to Our Charter and Bylaws
Amendments to our charter
require the affirmative vote of holders of not less than two-thirds of all the
votes entitled to be cast on the matter. Our board of directors has the
exclusive power to adopt, alter or repeal any provision of our bylaws and to
make new bylaws.
Director
Removal
Subject to the rights of
holders of any series of preferred stock, our charter provides that a director
may be removed only for cause and only by the affirmative vote of the holders
of shares entitled to cast at least two-thirds of the votes entitled to be cast
generally in the election of directors.
Our
Dissolution
Our dissolution must be
approved by our board of directors and by the affirmative vote of not less than
a majority of all of the votes entitled to be cast on the matter.
Supermajority
Vote for Extraordinary Corporate Actions
Under Maryland law, a
Maryland corporation generally cannot dissolve, amend its charter, merge, sell
all or substantially all of its assets, or engage in a share exchange or in a
similar extraordinary corporate action unless approved by the corporations
board of directors and the affirmative vote of holders of at least two-thirds
of the votes entitled to be cast 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 corporations charter. Except for Article Ninth of our
charter, which provides that dissolution must be approved by the vote of
holders of a majority of our outstanding shares of common stock entitled to
vote on the matter, our charter does not provide for a lesser percentage in
these situations.
Limitation
of Liability of Directors
Our charter includes
provisions that limit the liability of our directors and officers to us and to
our stockholders for money damages to the fullest extent permitted under
Maryland law. Our charter also requires us to indemnify our present directors
and officers to the maximum extent permitted under Maryland law. In addition,
we have entered into indemnification agreements with our directors and some of
our officers.
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DESCRIPTION OF OUR COMMON STOCK
Subject to the provisions
of our charter regarding excess stock (as described above), the holders of our
common stock have full voting rights, one vote for each share held of record.
Subject to the provisions of our charter regarding excess stock and the rights
of any holders of preferred stock, holders of our common stock are entitled to
receive the dividends authorized by our board of directors out of funds legally
available for this purpose. Upon our liquidation, dissolution or winding up
(but subject to the provisions of our charter and the rights of holders of any
preferred stock), the assets legally available for distribution to holders of
our common stock will be distributed ratably among the holders of our common
stock. Holders of our common stock have no preemptive or other subscription or
conversion rights and no liability for further calls upon shares. See Description
of Our Capital StockSelected Provisions of Maryland Law and of Our Charter and
Bylaws. Our common stock is not subject to assessment.
The transfer agent and
registrar for our common stock is Computershare Trust Company, N.A.
Under Maryland law and
our bylaws, stockholders are entitled to receive prior notice of our annual and
special meetings of stockholders. Notice is given to a stockholder when it is
personally delivered to him or her, left at his or her residence or usual place
of business, mailed to him or her at his or her address as it appears on our
records or transmitted to him or her by electronic mail or other electronic
means.
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DESCRIPTION OF OUR PREFERRED STOCK
Under our charter, we may
issue shares of preferred stock from time to time, in one or more series as
authorized by our board of directors. Prior to issuance of shares of each
series, our board of directors is required by the Maryland General Corporation
Law to adopt resolutions and file Articles Supplementary with the State
Department of Assessments and Taxation of Maryland, fixing for each series the
designations, powers, preferences, conversion and other rights, voting powers,
qualifications, limitations as to dividends, restrictions and terms and
conditions of redemption. Our board of directors could authorize the issuance of
shares of preferred stock with terms and conditions which could have the effect
of discouraging a takeover or other transaction which holders of some, or a
majority, of shares of our common stock might believe to be in their best
interests or in which holders of some, or a majority, of shares of our common
stock might receive a premium for their shares over the then market price of
those shares. The preferred stock will, when issued, be fully paid and
nonassessable and will not have, or be subject to, any preemptive or similar
rights. The terms of any preferred stock
we offer under a prospectus supplement may differ from the terms we describe
below.
The prospectus supplement
relating to the series of preferred stock offered by that supplement will
describe the specific terms of those securities, including:
·
the title and stated value of that preferred stock;
·
the number of shares of that preferred stock offered,
the liquidation preference per share and the offering price of that preferred
stock;
·
the dividend rates, periods and/or payment dates or
methods of calculation thereof applicable to that preferred stock;
·
whether dividends will be cumulative or non-cumulative
and, if cumulative, the date from which dividends on that preferred stock will
accumulate;
·
the voting rights applicable to that preferred stock;
·
the procedures for any auction and remarketing, if
any, for that preferred stock;
·
the provisions for a sinking fund, if any, for that
preferred stock;
·
the provisions for redemption, if applicable, of that
preferred stock;
·
any listing of that preferred stock on any securities
exchange;
·
the terms and conditions, if applicable, upon which
that preferred stock will be convertible into shares of common stock, including
the conversion price (or manner of calculation of the conversion price) and
conversion period;
·
a discussion of federal income tax considerations
applicable to that preferred stock;
·
any limitations on issuance of any series of preferred
stock ranking senior to or on a parity with that series of preferred stock as
to dividend rights and rights upon our liquidation, dissolution or winding up;
·
in addition to those limitations described elsewhere
in this prospectus and any prospectus supplement, any other limitations on
actual and constructive ownership and restrictions on transfer, in each case as
may be appropriate to preserve our status as a REIT; and
·
any other specific terms, preferences, rights,
limitations or restrictions of that preferred stock.
Rank
Unless otherwise
specified in the applicable prospectus supplement, the preferred stock will,
with respect to dividend rights and rights upon our liquidation, dissolution or
winding up, rank:
·
senior to all classes or series of common stock and to
all equity securities issued by us the terms of which expressly provide that
those equity securities rank junior to the preferred stock;
·
on a parity with all equity securities issued by us
the terms of which so provide or which do not expressly provide that those equity
securities rank junior or senior to the preferred stock; and
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·
junior to all equity securities issued by us the terms
of which expressly provide that those equity securities rank senior to the
preferred stock.
The term equity
securities does not include convertible debt securities.
Dividends
Holders of shares of our
preferred stock will be entitled to receive, when, as and if authorized by our
board of directors and declared by us, out of our assets legally available for
payment, cash dividends at rates and on dates as will be set forth in the
applicable prospectus supplement. Each dividend will be payable to holders of
record as they appear on our stock transfer books on the record dates as may be
fixed by our board of directors.
Dividends on any series
or class of our preferred stock may be cumulative or noncumulative, 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 authorize a dividend payable on
a dividend payment date on any series or class of preferred stock for which
dividends are noncumulative, then the holders of that series or class of
preferred stock will have no right to receive a dividend in respect of the
dividend period ending on that dividend payment date, and we will have no obligation
to pay the dividend accrued for that period, whether or not dividends on such
series or class are declared or paid for any future period.
Except as provided in the
following paragraph, unless full cumulative dividends on the preferred stock of
that series or class have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for that payment is set apart for payment for
all past dividend periods and the then current dividend period, no dividends
(other than in the common stock or other stock of ours ranking junior to the
preferred stock of that series or class as to dividends and upon liquidation)
may be authorized or paid or set aside for payment nor may any other
distribution be authorized or made on the common stock or any other stock of
ours ranking junior to or on a parity with the preferred stock of that series
or class as to dividends or upon liquidation. In addition, common stock or any
other stock of ours ranking junior to or on a parity with the preferred stock of
that series or class as to dividends or upon liquidation may not be redeemed,
purchased or otherwise acquired for any consideration (or any amounts be paid
to or made available for a sinking fund for the redemption of any shares of any
such stock) by us (except by conversion into or exchange for other stock of
ours ranking junior to the preferred stock of that series or class as to
dividends and upon liquidation).
When dividends for all
past dividend periods are not paid in full (or a sum sufficient for the full
payment is not set apart) upon the shares of preferred stock of any series or
class and the shares of any other series or class of preferred stock ranking on
a parity as to dividends with the preferred stock of that series or class, then
all dividends authorized on shares of preferred stock of that series or class
and any other series or class of preferred stock ranking on a parity as to
dividends with that series or class of preferred stock will be authorized pro
rata, so that the amount of dividends authorized per share on the preferred
stock of that series or class and such other series or class of preferred stock
will in all cases bear to each other the same ratio that accrued dividends per
share on the shares of preferred stock of that series or class (which will not
include any accumulation in respect of unpaid dividends for prior dividend
periods if the preferred stock does not have a cumulative dividend) and that
other series or class of preferred stock bear to each other. No interest, or sum
of money in lieu of interest, will be payable in respect of any dividend
payment or payments on preferred stock of that series or class that may be in
arrears.
Any dividend payment made
on shares of a series or class of preferred stock will first be credited
against the earliest accrued but unpaid dividend due with respect to shares of
that series or class that remains payable.
In determining whether a
distribution by dividend, redemption or other acquisition of stock or otherwise
is permitted under Maryland law, amounts that would be needed, if we were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of stockholders whose preferential rights on dissolution are
superior to those receiving the distribution will not be added to our total
liabilities.
Redemption
If the applicable
prospectus supplement so states, the shares of preferred stock will be subject
to mandatory redemption or redemption at our option, in whole or in part, in
each case on the terms, at the times and at the redemption prices set forth in
that prospectus supplement.
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The prospectus supplement
relating to a series or class of preferred stock that is subject to mandatory
redemption will specify the number of shares of that preferred stock that are
to or may be redeemed by us 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 on that preferred stock
(which will not, if that preferred stock does not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date 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 or class is payable only
from the net proceeds of the issuance of our stock, the terms of that preferred
stock may provide that, if no such 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, that preferred stock will automatically
and mandatorily be converted into shares of our applicable stock pursuant to
conversion provisions specified in the applicable prospectus supplement.
Notwithstanding
the foregoing, unless full cumulative dividends on all outstanding shares of
that series or class of preferred stock have been or contemporaneously are
authorized and paid or authorized and a sum sufficient for that payment is set
apart for payment for all past dividend periods and the then current dividend
period, we may not redeem any shares of that series or class of preferred stock
unless all outstanding shares of preferred stock of that series or class are
simultaneously redeemed and may not purchase or otherwise acquire directly or indirectly
any shares of preferred stock of that series or class (except by conversion
into or exchange for our stock ranking junior to the preferred stock of that
series or class as to dividends and upon liquidation). However, this will not
prevent the purchase or acquisition of shares of preferred stock of that series
or class to preserve our REIT status or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding shares of preferred
stock of that series or class.
If fewer than all of the
outstanding shares of preferred stock of any series or class are to be
redeemed, the number of shares to be redeemed will be determined by us, and
those shares may be redeemed pro rata from the holders of record of those
shares in proportion to the number of those shares held by those holders (with
adjustments to avoid redemption of fractional shares) or any other equitable
method determined by us.
Notice of redemption will
be mailed at least 30 days but not more than 90 days before the
redemption date to each holder of record of a share of preferred stock of any
series to be redeemed at the address shown on our stock transfer books. Each
notice will state:
·
the redemption date;
·
the number of shares and series of the preferred stock
to be redeemed;
·
the redemption price;
·
the place or places where certificates for the
preferred stock are to be surrendered for payment of the redemption price;
·
that dividends on the shares to be redeemed will cease
to accrue on the redemption date; and
·
the date upon which the holders conversion rights, if
any, as to the shares will terminate.
If fewer than all the
shares of preferred stock of any series are to be redeemed, the notice mailed
to each holder will also specify the number of shares of preferred stock to be
redeemed from each holder. If notice of redemption of any shares of preferred
stock has been given, and if the funds necessary for that redemption have been
irrevocably set apart by us in trust for the benefit of the holders of any
shares of preferred stock so called for redemption, then from and after the
redemption date, dividends will cease to accrue on those shares of preferred
stock, those shares of preferred stock will no longer be deemed outstanding and
all rights of the holders of those shares will terminate, except the right to
receive the redemption price.
Liquidation
Preference
Upon our voluntary or
involuntary liquidation, dissolution or winding up, then, before we will make
any distribution or payment to the holders of common stock or any other series
or class of stock ranking junior to any series or class of the preferred stock
in the distribution of assets upon any liquidation, dissolution or winding up,
the holders of that series or class of preferred stock will be entitled to
receive, after payment or provision for payment of our debts and other
liabilities and amounts due to stockholders whose preferential rights are
senior to those of that series or class of preferred stock, out of our assets
legally available for distribution to stockholders, liquidating
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distributions in the
amount of the liquidation preference per share (set forth in the applicable
prospectus supplement), plus an amount equal to all dividends accrued and
unpaid on the preferred stock (which will 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 right or claim to any of our remaining assets.
If, upon any voluntary or
involuntary liquidation, dissolution or winding up, our legally available
assets are insufficient to pay the amount of the liquidating distributions on
all outstanding shares of any series or class of preferred stock and the
corresponding amounts payable on all shares of other classes or series of our
stock ranking on a parity with that series or class of preferred stock in the
distribution of assets upon liquidation, dissolution or winding up, then the
holders of that series or class of preferred stock and all other such classes
or series of stock will share ratably in any distribution of assets in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled.
If liquidating
distributions have been made in full to all holders of any series or class of
preferred stock, we will distribute our remaining assets among the holders of
any other classes or series of stock ranking junior to that series or class of
preferred stock upon liquidation, dissolution or winding up, according to their
respective rights and preferences and in each case according to their
respective number of shares. For these purposes, none of the following will be
deemed to constitute a liquidation, dissolution or winding up of our affairs: (i) a
consolidation, merger or other business combination of our Company with one or
more corporations, REITs or other entities, (ii) our dissolution,
liquidation, winding up, or reorganization immediately followed by
incorporation of another entity to which such assets are distributed, (iii) a
sale, lease, conveyance or other disposition of all or substantially all of our
assets, properties or business to another entity or (iv) a statutory share
exchange by us.
Voting
Rights
Holders of preferred
stock will not have any voting rights, except as set forth below or as
indicated in the applicable prospectus supplement.
Unless provided otherwise
for any series or class of preferred stock, so long as any shares of preferred
stock of a series or class remain outstanding, we will not:
·
without the affirmative vote or consent of the holders
of at least a majority of the shares outstanding at that time of that series or
class of preferred stock (voting as a single class with all other series or
classes of preferred stock upon which like voting rights have been conferred
and are exercisable), given in person or by proxy, either in writing or at a
meeting, authorize or create, or increase the authorized or issued amount of,
any class or series of stock ranking senior to that series or class of
preferred stock with respect to payment of dividends or the distribution of
assets upon liquidation, dissolution or winding up or reclassify any authorized
stock into any of those shares, or create,
authorize or issue any obligation or security convertible into or evidencing
the right to purchase any of those shares; or
·
without the affirmative vote or consent of the holders
of at least a majority of the shares outstanding at that time of that series or
class of preferred stock (voting as a single class with any other series or
classes of preferred stock upon which like voting rights have been conferred
and are exercisable), given in person or by proxy, either in writing or at a
meeting, amend, alter or repeal the provisions of our charter or articles
supplementary for such series or class of preferred stock so as to materially
and adversely alter or change the rights, preferences or privileges of that
series or class of preferred stock.
However, no such vote or
consent is required in connection with (i) any increase in the total
number of our authorized shares; (ii) the authorization or increase of any
class or series of shares of stock ranking, as to distribution rights and
liquidation preference, on a parity with or junior to that series or class of
preferred stock; (iii) any merger or consolidation in which we are the
surviving entity if, immediately after the merger or consolidation, there are
outstanding no shares of stock and no securities convertible into shares of
stock ranking as to distribution rights or liquidation preference senior to
that series or class of preferred stock other than our securities outstanding
prior to such merger or consolidation; (iv) any merger or consolidation in
which we are not the surviving entity if, as result of the merger or
consolidation, the holders of that series or class of preferred stock receive
shares of stock or other equity securities with preferences, rights and
privileges substantially identical with the preferences, rights and privileges
of that series or class of preferred stock and there are outstanding no shares
of stock or stock or other
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equity securities of the
surviving entity ranking as to distribution rights or liquidation preference
senior to that series or class of preferred stock other than our securities
outstanding prior to such merger or consolidation; or (v) the dissolution,
liquidation or winding up of our Company.
These voting provisions
will not apply if, at or prior to the time when the act with respect to which
that vote would otherwise be required will be effected, all outstanding shares
of that series or class of preferred stock have been redeemed or called for
redemption upon proper notice and (i) sufficient funds have been deposited
in trust to effect that redemption or (ii) in a case involving an issuance
of stock ranking senior to such series or class of preferred stock, the redemption
price (other than any portion thereof consisting of accrued and unpaid
dividends) is to be paid solely from the proceeds of such issuance.
Conversion
Rights
The terms and conditions,
if any, upon which shares of any series or class of preferred stock are
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
preferred stock is convertible;
·
the conversion price (or manner of calculation of the
conversion price);
·
the conversion period;
·
provisions as to whether conversion will be at our
option or the option of the holders of the preferred stock;
·
the events requiring an adjustment of the conversion
price; and
·
provisions affecting conversion in the event of the
redemption of the preferred stock.
Transfer
Agent
The transfer agent and
registrar for any series or class of preferred stock will be set forth in the
applicable prospectus supplement.
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DESCRIPTION OF DEBT SECURITIES
The following
description, together with the additional information we include in any
applicable prospectus supplements, summarizes the material terms and provisions
of the debt securities that we may offer under this prospectus. While the terms we have summarized below will
generally apply to any future debt securities we may offer under this prospectus,
we will describe the particular terms of any debt securities that we may offer
in more detail in the applicable prospectus supplement. The terms of any debt securities we offer
under a prospectus supplement may differ from the terms we describe below.
We will issue any senior notes under the senior indenture which we will
enter into with the trustee named in the senior indenture. We will issue any subordinated notes under
the subordinated indenture which we will enter into with the trustee named in the
subordinated indenture. We have filed
forms of these documents as exhibits to the registration statement of which
this prospectus is a part. We use the
term indentures to refer to both the senior indenture and the subordinated
indenture.
The indentures will be
qualified under the Trust Indenture Act of 1939. We use the term trustee to refer to either
the senior trustee or the subordinated trustee, as applicable.
The following summaries
of material provisions of the senior notes, the subordinated notes and the
indentures are subject to, and qualified in their entirety by reference to, all
the provisions of the indenture applicable to a particular series of debt
securities. We urge you to read the
applicable prospectus supplements related to the debt securities that we sell
under this prospectus, as well as the complete indentures that contain the
terms of the debt securities. Except as
we may otherwise indicate, the terms of the senior indenture and the subordinated
indenture are identical.
General
The
indentures do not limit the aggregate principal amount of debt securities that
may be issued thereunder. The debt securities may be issued from time to time
in one or more series. We will describe
in the applicable prospectus supplement the terms relating to a series of debt
securities, including:
·
the title;
·
the principal amount being offered, and, if a series,
the total amount authorized and the total amount outstanding;
·
any limit on the amount that may be issued;
·
whether or not we will issue the series of debt
securities in global form and, if so, the terms and who the depositary will be;
·
the maturity date(s);
·
the principal amount due at maturity, and whether the
debt securities will be issued with any original issue discount;
·
whether and under what circumstances, if any, we will
pay additional amounts on any debt securities held by a person who is not a
United States person for tax purposes, and whether we can redeem the debt
securities if we have to pay such additional amounts;
·
the interest rate(s), which may be fixed or variable,
or the method for determining the rate, the date interest will begin to accrue,
the dates interest will be payable and the regular record dates for interest
payment dates or the method for determining such dates;
·
whether or not the debt securities will be secured or
unsecured, and the terms of any secured debt;
·
the terms of the subordination of any series of
subordinated debt;
·
the place where payments will be payable;
·
restrictions on transfer, sale or other assignment, if
any;
·
our right, if any, to defer payment of interest and
the maximum length of any such deferral period;
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·
the date, if any, after which, the conditions upon
which, and the price at which we may, at our option, redeem the series of debt
securities pursuant to any optional or provisional redemption provisions, and
any other applicable terms of those redemption provisions;
·
provisions for a sinking fund, purchase or other
analogous fund, if any;
·
the date, if any, on which, and the price at which we
are obligated, pursuant to any mandatory sinking fund or analogous fund provisions
or otherwise, to redeem, or at the holders option to purchase, the series of
debt securities;
·
a discussion of any material or special United States
federal income tax considerations applicable to the debt securities;
·
information describing any book-entry features;
·
the procedures for any auction and remarketing, if
any;
·
the denominations in which we will issue the series of
debt securities, if other than denominations of $1,000 and any integral
multiple thereof;
·
if other than U.S. dollars, the currency in which the
series of debt securities will be denominated; and
·
any other specific terms, preferences, rights or
limitations of, or restrictions on, the debt securities, including any events
of default that are in addition to those described in this prospectus or any
covenants, including restrictive covenants, provided with respect to the debt
securities, and any terms which may be required by us or advisable under
applicable laws or regulations or advisable in connection with the marketing of
the debt securities.
One or more series
of the debt securities may be issued as discounted debt securities (bearing no
interest or interest at a rate which at the time of issuance is below market
rates) to be sold at a substantial discount below their stated principal
amount. Material United States federal income tax consequences and other
special considerations applicable to any such discounted debt securities will
be described in the prospectus supplement relating thereto.
Conversion
or Exchange Rights
We will set forth in the
prospectus supplement the terms on which a series of debt securities may be
convertible into or exchangeable for our common stock or other securities,
including the conversion or exchange rate, as applicable, or how it will be
calculated, and the applicable conversion or exchange period. We will include provisions as to whether
conversion or exchange is mandatory, at the option of the holder or at our
option. We may include provisions
pursuant to which the number of our securities that the holders of the series
of debt securities receive upon conversion or exchange would, under the
circumstances described in those provisions, be subject to adjustment, or
pursuant to which those holders would, under those circumstances, receive other
property upon conversion or exchange, for example in the event of our merger or
consolidation with another entity.
Consolidation,
Merger or Sale
The indentures in the
forms initially filed as exhibits to the registration statement of which this
prospectus is a part do not contain any covenant that restricts our ability to
merge or consolidate, or sell, convey, transfer or otherwise dispose of all or
substantially all of our assets.
However, any successor of ours or acquiror of such assets must assume
all of our obligations under the indentures and the debt securities.
If the debt securities
are convertible into our other securities, the person with whom we consolidate
or merge or to whom we sell all of our property must make provisions for the
conversion of the debt securities into securities similar to the debt
securities which the holders of the debt securities would have received if they
had converted the debt securities before the consolidation, merger or sale.
Events
of Default Under the Indentures
The following are events
of default under the indentures with respect to any series of debt securities
that we may issue:
·
if we fail to pay interest when due and payable and
our failure continues for 30 days and the time for payment has not been
extended or deferred;
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·
if we fail to pay the principal, or premium, if any,
when due and payable and the time for payment has not been extended or delayed;
·
if we fail to observe or perform any other covenant
contained in the debt securities or the indentures, other than a covenant
solely for the benefit of another series of debt securities, and our failure
continues for 90 days after we receive notice from the trustee or holders of at
least 25% in aggregate principal amount of the outstanding debt securities of
the applicable series; and
·
if specified events of bankruptcy, insolvency or
reorganization occur.
If an event of default
with respect to debt securities of any series occurs and is continuing, other
than an event of default specified in the last bullet point above, the trustee
or the holders of at least 25% in aggregate principal amount of the outstanding
debt securities of that series, by notice to us in writing, and to the trustee
if notice is given by such holders, may declare the unpaid principal or,
premium, if any, and accrued interest, if any, due and payable immediately. If an event of default specified in the last
bullet point above occurs with respect to us, the principal amount of and
accrued interest, if any, of each series of debt securities then outstanding
shall be due and payable without any notice or other action on the part of the
trustee or any holder.
The holders of a majority
in principal amount of the outstanding debt securities of an affected series
may waive any default or event of default with respect to the series and its
consequences, except defaults or events of default regarding payment of
principal, premium, if any, or interest, unless we have cured the default or
event of default in accordance with the applicable indenture.
Subject to the terms of
the indentures, if an event of default under an indenture shall occur and be
continuing, the trustee will be under no obligation to exercise any of its
rights or powers under such indenture at the request or direction of any of the
holders of the applicable series of debt securities, unless such holders have
offered the trustee reasonable indemnity.
The holders of a majority in principal amount of the outstanding debt
securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee, or
exercising any trust or power conferred on the trustee, with respect to the
debt securities of that series, provided that:
·
the direction so given by the holder is not in
conflict with any law or the applicable indenture; and
·
subject to its duties under the Trust Indenture Act of
1939, the trustee need not take any action that might involve it in personal
liability or might be unduly prejudicial to the holders not involved in the
proceeding.
A holder of the debt
securities of any series will only have the right to institute a proceeding
under the indentures or to appoint a receiver or trustee, or to seek other
remedies if:
·
the holder has given written notice to the trustee of
a continuing event of default with respect to that series;
·
the holders of at least 25% in aggregate principal
amount of the outstanding debt securities of that series have made written
request, and such holders have offered reasonable indemnity to the trustee, to
institute the proceeding as trustee; and
·
the trustee does not institute the proceeding, and
does not receive from the holders of a majority in aggregate principal amount
of the outstanding debt securities of that series other conflicting directions,
within 90 days after the notice, request and offer.
These limitations do not
apply to a suit instituted by a holder of debt securities if we default in the
payment of the principal, premium, if any, or interest on, the debt securities.
We will periodically file
statements with the trustee regarding our compliance with the covenants in the
indentures.
Modification
of Indentures; Waiver
We and the trustee may
change an indenture without the consent of any holders with respect to specific
matters, including:
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·
to fix any ambiguity, omission, defect or
inconsistency in the indenture;
·
to comply with the provisions described above under Consolidation,
Merger or Sale;
·
to comply with any requirements of the SEC in
connection with the qualification of any indenture under the Trust Indenture
Act of 1939;
·
to evidence and provide for the acceptance of
appointment by a successor trustee;
·
to provide for uncertificated debt securities;
·
to add to, delete from, or revise the conditions,
limitations and restrictions on the authorized amount, terms or purposes of
issuance, authorization and delivery of debt securities of any unissued series;
·
to add any additional events of default;
·
to provide for the issuance of and establish the form
and terms and conditions of any series of debt securities as provided in an
indenture, to establish the form of any certifications required to be furnished
pursuant to an indenture or any series
of debt securities, or to add to the rights of the holders of any series of
debt securities;
·
to add to our covenants such new covenants,
restrictions, conditions or provisions for the protection of the holders, to
make the occurrence, or the occurrence and the continuance, of a default in any
such additional covenants, restrictions, conditions or provisions an event of
default, or to surrender any of our rights or powers under the indenture; or
·
to make any other provisions with respect to matters
or questions arising under an indenture, provided that such action shall not
adversely affect the interests of holders or any related coupons in any
material respect; provided further, that any change to an indenture to conform
it to this prospectus or the applicable prospectus supplement shall be deemed
not to adversely affect the interests of holders in any material respect.
In addition, under the
indentures, the rights of holders of a series of debt securities may be changed
by us and the trustee with the written consent of the holders of at least a
majority in aggregate principal amount of the outstanding debt securities of
each series that is affected. However,
we and the trustee may make the following changes only with the consent of each
holder of any outstanding debt securities affected:
·
changing the stated fixed maturity of, or any payment
date of any installment of interest on, the debt securities;
·
reducing the principal amount, reducing the rate of
interest on, or reducing any premium payable upon the redemption of any debt
securities; or
·
reducing the percentage of debt securities, the
holders of which are required to consent to any supplemental indenture.
Defeasance
and Discharge
The indentures provide
that we may elect, with respect to the debt securities of any series to
terminate (and be deemed to have satisfied) any and all obligations in respect
of such debt securities (except for certain obligations to register the
transfer or exchange of debt securities, to replace stolen, lost or mutilated
debt securities, to maintain paying agencies and hold monies for payment in
trust and, if so specified with respect to the debt securities of a certain
series, to pay the principal of (and premium, if any) and interest, if any, on
such specified debt securities) on the 91st day after the deposit with the
trustee, in trust, of money and/or U.S. government obligations which through
the payment of interest and principal thereof in accordance with their terms
will provide money in an amount sufficient to pay any installment of principal
(and premium, if any (and interest, if any)), on and any mandatory sinking fund
payments in respect of such debt securities on the stated maturity of such
payments in accordance with the terms of the Indenture and such debt
securities.
Such a trust may be
established only if, among other things, we have delivered to the trustee an
opinion of counsel (who may be counsel to us) to the effect that, based upon
applicable U.S. federal income tax law or a ruling published by the U.S.
Internal Revenue Service (which opinion must be based on a change in applicable
U.S. federal income tax law after the date of the indenture or a ruling
published by the U.S. Internal Revenue Service after the date of the
indenture), such a defeasance and discharge will not be deemed, or result in, a
taxable event with respect
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to holders of such debt
securities. The designation of such provisions, U.S. federal income tax
consequences and other considerations applicable thereto will be described in
the prospectus supplement relating thereto. If so specified with respect to the
debt securities of a series, such a trust may be established only if
establishment of the trust would not cause the debt securities of any such
series listed on any nationally recognized securities exchange to be de-listed
as a result thereof.
Form,
Exchange and Transfer
We will issue the debt
securities of each series only in fully registered form without coupons and,
unless we otherwise specify in the applicable prospectus supplement, in
denominations of $1,000 and any integral multiple thereof. The indentures provide that we may issue debt
securities of a series in temporary or permanent global form and as book-entry
securities that will be deposited with, or on behalf of, The Depository Trust
Company or another depositary named by us and identified in a prospectus
supplement with respect to that series.
At the option of the
holder, subject to the terms of the indentures and the limitations applicable
to global securities described in the applicable prospectus supplement, the
holder of the debt securities of any series can exchange the debt securities
for other debt securities of the same series, in any authorized denomination
and of like tenor and aggregate principal amount.
Subject to the terms of
the indentures and the limitations applicable to global securities set forth in
the applicable prospectus supplement, holders of the debt securities may
present the debt securities for exchange or for registration of transfer, duly
endorsed or with the form of transfer endorsed thereon duly executed if so
required by us or the security registrar, at the office of the security
registrar or at the office of any transfer agent designated by us for this
purpose. Unless otherwise provided in
the debt securities that the holder presents for transfer or exchange, we will
make no service charge for any registration of transfer or exchange, but we may
require payment of any taxes or other governmental charges.
We will name in the
applicable prospectus supplement the security registrar, and any transfer agent
in addition to the security registrar, that we initially designate for any debt
securities. We may at any time designate
additional transfer agents or rescind the designation of any transfer agent or
approve a change in the office through which any transfer agent acts, except
that we will be required to maintain a transfer agent in each place of payment
for the debt securities of each series.
If we elect to redeem the
debt securities of any series, we will not be required to:
·
issue, register the transfer of, or
exchange any debt securities of any series being redeemed in part during a
period beginning at the opening of business 15 days before the day of mailing
of a notice of redemption of any debt securities that may be selected for
redemption and ending at the close of business on the day of the mailing; or
·
register the transfer of or exchange any debt
securities so selected for redemption, in whole or in part, except the
unredeemed portion of any debt securities we are redeeming in part.
Information
Concerning the Trustee
The trustee, other than
during the occurrence and continuance of an event of default under an
indenture, undertakes to perform only those duties as are specifically set
forth in the applicable indenture. Upon
an event of default under an indenture, the trustee must use the same degree of
care as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the
trustee is under no obligation to exercise any of the powers given it by the
indentures at the request of any holder of debt securities unless it is offered
reasonable security and indemnity against the costs, expenses and liabilities
that it might incur.
Payment
and Paying Agents
Unless we otherwise
indicate in the applicable prospectus supplement, we will make payment of the
interest on any debt securities on any interest payment date to the person in
whose name the debt securities, or one or more predecessor securities, are
registered at the close of business on the regular record date for the
interest.
We will pay principal of,
and any premium and interest on, the debt securities of a particular series at
the office of the paying agents designated by us, except that, unless we
otherwise indicate in the applicable prospectus
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supplement, we may make
payments of principal or interest by check which we will mail to the holder or
by wire transfer to certain holders.
Unless we otherwise indicate in a prospectus supplement, we will
designate an office or agency of the trustee in the City of New York as our
paying agent for payments with respect to debt securities of each series. We will name in the applicable prospectus supplement
any other paying agents that we initially designate for the debt securities of
a particular series. We will maintain a
paying agent in each place of payment for the debt securities of a particular
series.
All money we pay to a
paying agent or the trustee for the payment of the principal of or any premium
or interest on any debt securities which remains unclaimed at the end of two
years after such principal, premium or interest has become due and payable will
be repaid to us, and the holder of the debt security thereafter may look only
to us for payment thereof.
Governing
Law
The indentures and the
debt securities will be governed by and construed in accordance with the laws
of the State of New York, except to the extent that the Trust Indenture Act of
1939 is applicable.
Subordination
of Subordinated Debt Securities
The subordinated debt
securities will be subordinate and junior in priority of payment to certain of
our other indebtedness to the extent described in a prospectus supplement.
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DESCRIPTION OF WARRANTS
We may issue warrants for
the purchase of shares of our common stock, shares of our preferred stock or
debt securities. We may issue warrants independently of or together with shares
of our common stock, shares of our preferred stock or debt securities offered
by any prospectus supplement, and we may attach the warrants to, or issue them
separately from, shares of common stock, shares of preferred stock or debt
securities. Each series of warrants will be issued under a separate warrant
agreement to be entered into between us and a bank or trust company, as warrant
agent, all as set forth in the prospectus supplement relating to the particular
issue of offered warrants. The warrant agent will act solely as our agent in
connection with the warrant certificates relating to the warrants and will not
assume any obligation or relationship of agency or trust with any holders of
warrant certificates or beneficial owners of warrants. The following summaries
of certain provisions of the warrant agreements and warrants do not purport to
be complete and are subject to, and are qualified in their entirety by
reference to, all the provisions of the warrant agreement and the warrant
certificates relating to each series of warrants which we will file with the
SEC and incorporate by reference as an exhibit to the registration statement of
which this prospectus is a part at or prior to the time of the issuance of any
series of warrants.
General
The applicable prospectus
supplement will describe the terms of the warrants, including as applicable:
·
the offering price;
·
the aggregate number or amount of
underlying securities purchasable upon exercise of the warrants and the
exercise price;
·
the number of warrants being offered;
·
the date, if any, after which the
warrants and the underlying securities will be transferable separately;
·
the date on which the right to exercise
the warrants will commence, and the date on which the right will expire (the Expiration
Date);
·
the number of warrants outstanding, if
any;
·
any material United States federal income
tax consequences;
·
the terms, if any, on which we may
accelerate the date by which the warrants must be exercised; and
·
any other terms of the warrants,
including terms, procedures and limitations relating to the exchange and
exercise of the warrants.
Warrants will be offered
and exercisable for United States dollars only and will be in registered form
only.
Holders of warrants will
be able to exchange warrant certificates for new warrant certificates of
different denominations, present warrants for registration of transfer, and
exercise warrants at the corporate trust office of the warrant agent or any
other office indicated in the applicable prospectus supplement. Prior to the
exercise of any warrants, holders of the warrants to purchase shares of common
stock or preferred stock will not have any rights of holders of shares of
common stock or preferred stock, including the right to receive payments of
dividends, if any, or to exercise any applicable right to vote.
Certain
Risk Considerations
Any warrants we issue
will involve a degree of risk, including risks arising from fluctuations in the
price of the underlying shares of common stock, shares of preferred stock or
debt securities and general risks applicable to the securities market (or
markets) on which the underlying securities trade, as applicable.
Prospective purchasers of
the warrants will need to recognize that the warrants may expire worthless and,
thus, purchasers should be prepared to sustain a total loss of the purchase
price of their warrants. This risk reflects the nature of a warrant as an asset
which, other factors held constant, tends to decline in value over time and
which may, depending on the price of the underlying securities, become
worthless when it expires. The trading price of a warrant at any time is
expected to increase if the price of or, if applicable, dividend rate on, the
underlying securities increases. Conversely, the trading price of a warrant is
expected to decrease as the time remaining to expiration of
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the warrant decreases and
as the price of or, if applicable, dividend rate on, the underlying securities,
decreases. Assuming all other factors are held constant, the more a warrant is out-of-the-money
(i.e., the more the exercise price exceeds the price of the underlying
securities and the shorter its remaining term to expiration), the greater the
risk that a purchaser of the warrant will lose all or part of his or her
investment. If the price of the underlying securities does not rise before the
warrant expires to an extent sufficient to cover a purchasers cost of the
warrant, the purchaser will lose all or part of his or her investment in the
warrant upon expiration.
In addition, prospective
purchasers of the warrants should be experienced with respect to options and
option transactions, should understand the risks associated with options and
should reach an investment decision only after careful consideration, with
their financial advisers, of the suitability of the warrants in light of their
particular financial circumstances and the information discussed in this
prospectus and, if applicable, the prospectus supplement. Before purchasing,
exercising or selling any warrants, prospective purchasers and holders of warrants
should carefully consider, among other things:
·
the trading price of the warrants;
·
the price of the underlying securities at
that time;
·
the time remaining to expiration; and
·
any related transaction costs.
Some of the factors
referred to above are in turn influenced by various political, economic and
other factors that can affect the trading price of the underlying securities
and should be carefully considered prior to making any investment decisions.
Purchasers of the
warrants should further consider that the initial offering price of the
warrants may be in excess of the price that a purchaser of options might pay
for a comparable option in a private, less liquid transaction. In addition, it
is not possible to predict the price at which the warrants will trade in the
secondary market or whether any such market will be liquid. We may, but will
not be obligated to, file an application to list any warrants on a United
States national securities exchange. To the extent that any warrants are exercised,
the number of warrants outstanding will decrease, which may result in a
lessening of the liquidity of the warrants. Finally, the warrants will
constitute our direct, unconditional and unsecured obligations, and as such
will be subject to any changes in our perceived creditworthiness.
Exercise
of Warrants
Each holder of a warrant
will be entitled to purchase that number or amount of underlying securities, at
the exercise price, as will in each case be described in the prospectus
supplement relating to the offered warrants. After the close of business on the
Expiration Date (which may be extended by us), unexercised warrants will become
void.
Holders may exercise
warrants by delivering to the warrant agent payment as provided in the
applicable prospectus supplement of the amount required to purchase the
underlying securities purchasable upon exercise, together with the information
set forth on the reverse side of the warrant certificate. Warrants will be
deemed to have been exercised upon receipt of payment of the exercise price,
subject to the receipt within five business days of the warrant certificate
evidencing the exercised warrants. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the warrant agent or any other office indicated in the applicable prospectus
supplement, we will, as soon as practicable, issue and deliver the underlying
securities purchasable upon such exercise. If fewer than all of the warrants
represented by a warrant certificate are exercised, we will issue a new warrant
certificate for the remaining amount of warrants.
Amendments
and Supplements to Warrant Agreements
We may amend or
supplement the warrant agreement without the consent of the holders of the
warrants issued under the agreement to effect changes that are not inconsistent
with the provisions of the warrants and that do not adversely affect the
interests of the holders.
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DESCRIPTION OF RIGHTS
We may issue rights for
the purchase of shares of our common stock, shares of our preferred stock or
debt securities. Each series of rights will be issued under a separate rights
agreement which we will enter into with a bank or trust company, as rights
agent, all as set forth in the applicable prospectus supplement. The rights
agent will act solely as our agent in connection with the certificates relating
to the rights and will not assume any obligation or relationship of agency or
trust with any holders of rights certificates or beneficial owners of rights.
We will file the rights agreement and the rights certificates relating to each
series of rights with the SEC, and incorporate them by reference as an exhibit
to the registration statement of which this prospectus is a part on or before
the time we issue a series of rights.
The applicable prospectus
supplement will describe the terms of any rights we issue, including as
applicable:
·
the date for determining the persons
entitled to participate in the rights distribution;
·
the aggregate number or amount of
underlying securities purchasable upon exercise of the rights and the exercise
price;
·
the aggregate number of rights being
issued;
·
the date, if any, on and after which the
rights may be transferable separately;
·
the date on which the right to exercise
the rights commences and the date on which the right expires;
·
the number of rights outstanding, if any;
·
any material United States federal income
tax consequences; and
·
any other terms of the rights, including
the terms, procedures and limitations relating to the distribution, exchange
and exercise of the rights.
Rights will be
exercisable for United States dollars only and will be in registered form only.
DESCRIPTION
OF UNITS
We may issue securities in units, each consisting of two or more types
of securities. For example, we might issue units consisting of a combination of
debt securities and warrants to purchase common stock. If we issue units, the
prospectus supplement relating to the units will contain the information
described above with regard to each of the securities that is a component of
the units. In addition, the prospectus supplement relating to units will
describe the terms of any units we issue, including as applicable:
·
the date, if any, on and after which the units may be
transferable separately;
·
whether we will apply to have the units traded on a
securities exchange or securities quotation system;
·
any material United States federal income tax
consequences; and
·
how, for United States federal income tax purposes,
the purchase price paid for the units is to be allocated among the component
securities.
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CERTAIN UNITED STATES FEDERAL INCOME
TAX CONSIDERATIONS
The following discussion
summarizes the material U.S. federal income tax considerations regarding our
qualification and taxation as a REIT and the material U.S. federal income tax
considerations to U.S. Holders and Non-U.S. Holders (as defined below) of the
purchase, ownership and disposition of our securities. This discussion is based upon the provisions
of the Code, the final and temporary Treasury regulations promulgated
thereunder and administrative rulings and judicial decisions now in effect, all
of which are subject to change (possibly with retroactive effect) or different
interpretations. This summary does not
purport to deal with all aspects of U.S. federal income taxation that may be
relevant to an investors decision to purchase shares of our common stock, nor
any tax consequences arising under the laws of any state, locality or foreign
jurisdiction or under any federal tax laws other than U.S. federal income tax
laws. This summary is not intended to be
applicable to all categories of investors, such as dealers in securities, banks,
thrifts, or other financial institutions, insurance companies, regulated
investment companies, tax-exempt organizations, U.S. expatriates, persons that
hold common stock as part of a straddle, conversion transaction, or hedge,
partnerships or other pass-through entities and persons holding our common
stock through a partnership or other pass-through entity, a holder who received
our stock through the exchange of employee stock options or otherwise as
compensation, persons deemed to sell our common stock under the constructive
sale provisions of the Code, persons whose functional currency is other than
the U.S. dollar, holders subject to the alternative minimum tax, foreign
governments or international organizations, each of which may be subject to
special rules. In addition, this
discussion is limited to persons who hold our common stock as capital assets
(generally, property held for investment) within the meaning of Section 1221
of the Code.
The sections of the Code
relating to qualification and operation as a REIT, and the U.S. federal income
tax treatment of a REIT and its stockholders, are highly technical and
complex. The following discussion sets
forth only the material aspects of those sections. This summary is qualified in its entirety by
the applicable Code provisions and the related rules and Treasury
regulations.
THIS SECTION IS NOT
A SUBSTITUTE FOR CAREFUL TAX PLANNING.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC FEDERAL,
STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO YOU REGARDING THE PURCHASE,
OWNERSHIP AND SALE OF THE SECURITIES BEING OFFERED BY THIS PROSPECTUS. YOU SHOULD ALSO CONSULT WITH YOUR TAX ADVISOR
REGARDING THE IMPACT OF POTENTIAL CHANGES IN THE APPLICABLE TAX LAWS.
Taxation
of Our Company
We have elected to be
taxed as a REIT under Sections 856 through 860 of the Code, commencing with our
taxable year ending December 31, 1994.
We believe that we are organized and have operated in a manner that
qualifies us for taxation as a REIT under the Code. We further believe that our proposed future
method of operation will enable us to continue to qualify as a REIT. However, no assurances can be given that our
beliefs or expectations will be fulfilled, since qualification as a REIT
depends on our continuing to satisfy numerous asset, income and distribution
tests described below, which in turn depends, in part, on our operating
results.
We generally are not
subject to U.S. federal income tax on the portion of our taxable income or
capital gain that is distributed to stockholders annually as long as we qualify
as a REIT. This treatment substantially
eliminates the double taxation (at the corporate and stockholder levels) that
typically results from investment in a corporation.
Notwithstanding our
qualification as a REIT, we are subject to U.S. federal income tax as follows:
·
we are taxed at normal corporate rates on any
undistributed net income (including undistributed net capital gains);
·
if we fail to satisfy either the 75% or the 95% gross
income tests (discussed below), but nonetheless maintain our qualification as a
REIT because other requirements are met, we will be subject to a 100% tax on
the greater of (1) the amount by which we fail the 75% test and (2) the
excess of 95% of our gross income over the amount of gross income attributable
to sources that qualify under the 95% test, in either case, multiplied by a
fraction intended to reflect our profitability;
·
pursuant to provisions in recently enacted
legislation, if we should fail to satisfy the asset or other requirements applicable
to REITs, as described below, yet nonetheless maintain our qualification as a
REIT because there is reasonable cause for the failure and other applicable
requirements are met, we may be subject to an excise tax;
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·
we are subject to a tax of 100% on net income from any
prohibited transaction;
·
we are subject to tax, at the highest corporate rate,
on net income from (1) the sale or other disposition of foreclosure
property which is held primarily for sale to customers in the ordinary course
of business or (2) other non-qualifying income from foreclosure property;
·
if we fail to distribute during each calendar year at
least the sum of (1) 85% of our REIT ordinary income for the year, (2) 95%
of our REIT capital gain income for the year and (3) any undistributed
taxable income from prior years, we will be subject to a 4% excise tax on the
excess of the required distribution over the sum of (a) the amounts
actually distributed plus (b) the amounts with respect to which certain
taxes are imposed on us;
·
if we acquire any asset from a C corporation (that
is, a corporation generally subject to the 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 C corporation, and we
recognize gain on the disposition of the asset during a ten-year period
beginning on the date that we acquired the asset, then the assets built-in
gain generally will be subject to tax at the highest regular corporate rate;
·
we are subject to the corporate alternative minimum
tax, as well as additional taxes if we find ourselves in situations not
presently contemplated; and
·
a 100% tax may be imposed on certain transactions
between a REIT and a taxable REIT subsidiary that do not reflect arms length
terms.
Our management companies
that are referred to as taxable REIT subsidiaries (within the meaning of Section 856(l)(1) of
the Code), including Macerich Management Company and Westcor Partners, LLC, are
taxed on their income at regular corporate rates. We use the calendar year both for U.S.
federal income tax purposes and for financial reporting purposes.
Requirements
for Qualification
To qualify as a REIT for
U.S. federal income tax purposes, we must elect to be treated as a REIT, and we
must meet various (a) organizational requirements, (b) gross income
tests, (c) assets tests and (d) annual distribution requirements.
Organizational Requirements.
We must be organized as a corporation, trust or association:
(1)
that is managed by one or more trustees
or directors;
(2)
the beneficial ownership of which is
evidenced by transferable shares, or by transferable certificates of beneficial
interest;
(3)
that would be taxable as a domestic
corporation, but for Sections 856 through 860 of the Code;
(4)
that is neither a financial institution
nor an insurance company subject to specified provisions of the Code;
(5)
the beneficial ownership of which is held
by 100 or more persons;
(6)
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, or by application of certain constructive ownership rules, by
five or fewer individuals (as defined in the Code to include some entities that
would not ordinarily be considered individuals); and
(7)
that meets other tests, described below,
regarding the nature of its income and assets.
The Code provides that
conditions (1) through (4) must be met during our entire taxable
year, and that condition (5) 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. Our
charter provides for restrictions regarding transfer of our capital stock, in
order to assist us
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in continuing to satisfy
the share ownership requirements described in (5) and (6) above. These transfer restrictions are described in Description
of Our Capital StockRestrictions on Transfer and Ownership.
We are treated as having
satisfied condition (6) above if we comply with the regulatory
requirements to request information from our stockholders regarding their
actual ownership of our stock, and do not know, or in exercising reasonable
diligence would not have known, that we failed to satisfy this condition. If we fail to comply with these regulatory
requirements for any taxable year we will be subject to a penalty of $25,000,
or $50,000 if such failure was intentional.
However, if our failure to comply was due to reasonable cause and not
willful neglect, no penalties will be imposed.
Gross Income Tests.
We must
satisfy the following two separate gross income tests each year:
·
75% Gross Income Test.
At least 75% of our gross income (excluding gross income from prohibited
transactions and certain foreign currency gains recognized after July 30,
2008) must consist of income derived directly or indirectly from investments
relating to real property or mortgages on real property (generally including
rents from real property, dividends from other REITs, and, in some
circumstances, interest on mortgages), or some types of temporary investment
income.
·
95% Gross Income Test. At least 95% of our gross income (excluding
gross income from prohibited transactions, certain hedging transactions and
certain foreign currency gains recognized after July 30, 2008) must
consist of items that satisfy the 75% gross income test and certain other
items, including dividends, interest and gain from the sale or disposition of
stock or securities (or from any combination of these types of income).
Rents from Real Property.
Rents received
by us qualify as rents from real property in satisfying the gross income
tests described above if the following conditions are met. First, the amount of rent must not be based,
in whole or in part, on the income or profits of any person. An amount received or accrued generally is
not excluded from the term rents from real property solely because the amount
is based on a fixed percentage or percentages of receipts or sales. Second, we, or an owner of 10% or more of our
equity securities, must not directly or constructively own 10% or more of a
tenant. Third, if more than 15% of the
total rent we receive under a lease is attributable to personal property leased
in connection with a lease of real property, then the portion of rent
attributable to that personal property does not qualify as rents from real
property. Finally, we generally must not operate or manage the property, or
furnish or render services to the tenants of the property, other than through
an independent contractor from whom we do not derive revenue. However, we may directly perform services
that are usually or customarily rendered in connection with the rental of
space for occupancy only or are not otherwise considered rendered to the
occupant for its convenience. A de
minimis amount of up to 1% of the gross income may be received by us from each
property from the provision of non-customary services without disqualifying all
other amounts received from that property as rents from real property.
However, the de minimis amount itself will not qualify as rents from real
property for purposes of the 75% and 95% gross income tests. In addition, we may furnish certain services
(including non-customary services) through a taxable REIT subsidiary, which
includes a corporation other than a REIT in which we hold stock and that has
made a joint election with us to be treated as a taxable REIT subsidiary. As mentioned above, a taxable REIT subsidiary
is subject to U.S. federal income tax at regular corporate rates.
For purposes of the
above, rents received from a tenant that is a taxable REIT subsidiary, however,
will not be excluded from the definition of rents from real property if at
least 90% of the space at the property to which the rents relate is leased to
third parties, and the rents paid by our taxable REIT subsidiary are
substantially comparable to rents by our other tenants for comparable
space. Whether rents paid by a taxable
REIT subsidiary are substantially comparable to rents paid by other tenants is
determined at the time the lease with the taxable REIT subsidiary is entered
into, extended, or modified, if such modification increases the rents due under
such lease. Notwithstanding the
foregoing, however, if a lease with a controlled taxable REIT subsidiary is
modified and such modification results in an increase in the rents payable by
such taxable REIT subsidiary, any such increase will not qualify as rents from
real property. For purposes of this rule, a controlled taxable REIT
subsidiary is a taxable REIT subsidiary in which we own stock representing
more than 50% of the total voting power or value of the outstanding stock of
such taxable REIT subsidiary.
Certain of our affiliates,
including Macerich Property Management Company, LLC and Macerich Westcor
Management, LLC, have provided and will continue to provide services with
respect to shopping centers wholly owned by us (Centers) and any
newly-acquired, wholly-owned property of the Macerich Partnership our operating
partnership or certain of our property partnerships. We believe that all of the services so
provided were and will be of the type usually or customarily rendered in connection
with the rental of space for occupancy only.
Therefore, the
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provision of those
services will not cause the rents received with respect to the Centers or
newly-acquired centers to fail to qualify as rents from real property for
purposes of the 75% and 95% gross income tests.
In addition, we have elected taxable REIT subsidiary status with respect
to certain of our affiliates. If
Macerich Partnership or a property partnership contemplates providing services
in the future that reasonably might be expected to fail the usual or customary
standard, it will arrange to have those services provided by an independent
contractor from which neither Macerich Partnership nor any property partnership
receives any income, or by one of our taxable REIT subsidiaries.
Prohibited Transactions.
Net income
from prohibited transactions is subject to a 100% tax. The term prohibited transaction generally
includes a sale or other disposition of property (other than foreclosure
property) that is held primarily for sale to customers in the ordinary course
of a trade or business. We believe that
none of the assets owned by Macerich Partnership, the property partnerships, or
us are held for sale to customers.
Further, the sale of any Center and associated property will not be in
the ordinary course of business of Macerich Partnership, the relevant property
partnership or us. We will attempt to
comply with the terms of the safe harbor provisions in the Code prescribing
when asset sales will not be characterized as prohibited transactions. However, we may not always comply with the
safe harbor and in the absence of the safe harbor whether property is held primarily
for sale to customers in the ordinary course of a trade or business depends on
the facts and circumstances, including those related to a particular
property. As such, complete assurance
cannot be given that we can comply with the safe harbor provisions of the Code
or avoid owning property that may be characterized as property held primarily
for sale to customers in the ordinary course of business.
Effect of Subsidiary Entities.
In the case of a REIT that is a partner in a partnership, Treasury
regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the
income of the partnership attributable to such share. In addition, the character of the assets and
gross income of the partnership will remain the same in the hands of the REIT
for U.S. federal income tax purposes.
Thus, our proportionate share of the assets, liabilities and items of
income of Macerich Partnership and our property partnerships will be treated as
our assets, liabilities and items of income for purposes of applying the REIT
requirements described in this prospectus supplement.
Our investment in the
Centers directly or indirectly through Macerich Partnership and property
partnerships should give rise to qualifying income in the form of rents and
gains on the sales of Centers.
Substantially all income derived by us from our taxable REIT
subsidiaries will be in the form of dividends on the stock and equity interests
owned by Macerich Partnership. While
these dividends only satisfy the 95% (and not the 75%) gross income test, we
anticipate that non-qualifying income on our investments (including dividend
income) will not result in our failing any of the gross income tests.
Redetermined Rents.
Any redetermined
rents, redetermined deductions or excess interest we generate will be subject
to a 100% penalty tax. In general,
redetermined rents are rents from real property that are overstated as a result
of services furnished to any of our tenants by one of our taxable REIT
subsidiaries, and redetermined deductions and excess interest represent amounts
that are deducted by a taxable REIT subsidiary for amounts paid to us that are
in excess of the amounts that would have been deducted based on arms length
negotiations. Rents we receive will not
constitute redetermined rents if they qualify for the safe harbor provisions
contained in the Code. Safe harbor
provisions are provided where generally:
·
amounts are excluded from the definition of
impermissible tenant service income as a result of satisfying the 1% de minimis
exception;
·
the taxable REIT subsidiary renders a significant
amount of similar services to unrelated parties, and the charges for such
services are substantially comparable;
·
rents paid to the REIT by tenants who are not
receiving services from the taxable REIT subsidiary are substantially
comparable to the rents paid by the REITs tenants leasing comparable space who
are receiving such services from the taxable REIT subsidiary, and the charge
for services is separately stated; and
·
the taxable REIT subsidiarys gross income from the
services is not less than 150% of the subsidiarys direct cost in furnishing or
rendering the service.
Relief Provisions for Failing the 75% or the 95% Gross
Income Tests.
If we fail to satisfy one or both of the 75%
or 95% gross income tests for any taxable year, we may nevertheless qualify as
a REIT for that year if we are entitled to relief under provisions of the Code. Relief provisions are generally available if:
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·
following our identification of the failure to meet
the 75% or 95% gross income tests for any taxable year, we file a schedule
with the Internal Revenue Service (the IRS) setting forth each item of our
gross income for purposes of the 75% or 95% gross income tests for such taxable
year in accordance with forthcoming Treasury regulations; and
·
our failure to meet these tests was due to reasonable
cause and not willful neglect.
However, it is not
possible to state whether in all circumstances we would be entitled to the
benefit of these relief provisions. As
discussed above in Taxation of our Company, even if the relief provisions
apply, a tax will be imposed with respect to some or all of our excess
nonqualifying gross income, reduced by approximated expenses.
Asset Tests.
We must
satisfy the following four tests relating to the nature of our assets at the
close of each quarter of our taxable year:
·
at least 75% of the value of our total assets must be
represented by real estate assets (including (1) our allocable share of
real estate assets held by partnerships in which we own an interest, (2) stock
or debt instruments held for not more than one year purchased with the proceeds
of a stock offering or long-term (at least five years) debt offering of our
company, cash, cash items and government securities and (3) stock in other
REITs);
·
not more than 25% of our total assets may be
represented by securities other than those in the 75% asset class;
·
of the investments included in the 25% asset class,
the value of any one issuers securities owned by us may not exceed 5% of the
value of our total assets (unless the issuer is a taxable REIT subsidiary), and
we may not own more than 10% of the vote or value of any one issuers
outstanding securities (unless the issuer is a taxable REIT subsidiary or we
can avail ourselves of the rules relating to certain securities and straight
debt summarized below); and
·
not more than 20% of the value of our total assets
(25% for taxable years beginning after July 30, 2008) may be represented
by securities of one or more taxable REIT subsidiaries.
For purposes of these
tests, the term securities does not include equity or debt securities of a
qualified REIT subsidiary, mortgage loans that constitute real estate assets,
other securities included in the 75% asset class above, or equity interests in
a partnership. The term securities,
however, generally includes debt securities issued by a partnership or another
REIT. However, straight debt
securities and certain other obligations, including loans to individuals or
estates, certain specified loans to partnerships, certain specified rental
agreements and securities issued by REITs are not treated as securities for
purposes of the 10% value asset test. Straight
debt means a written unconditional promise to pay on demand or on a specified
date a sum certain in money if (i) the debt is not convertible, directly
or indirectly, into stock, (ii) the interest rate and interest payment
dates are not contingent on profits, the borrowers discretion, or similar
factors (subject to certain specified exceptions), and (iii) the issuer is
either not a corporation or partnership, or the only securities of the issuer
held by us, and certain of our taxable REIT subsidiaries, subject to a de
minimis exception, are straight debt and other specified assets.
Our investment in the
Centers through our interest in Macerich Partnership and property partnerships
will constitute qualified assets for purposes of the 75% asset test.
Macerich Partnership owns
100% of the outstanding stock of Macerich Management Company, which has elected
taxable REIT subsidiary status. In
addition, Macerich Partnership owns indirectly 100% of the interests in Westcor
Partners, LLC, which also has elected taxable REIT subsidiary status. Because we have a partnership interest in
Macerich Partnership, we are deemed to own our pro rata share of the assets of
Macerich Partnership, including the securities of Macerich Management Company
and the interests in Westcor Partners, LLC.
Macerich Property Management Company, LLC and Macerich Westcor Management,
LLC are both single member limited liability companies that are disregarded for
U.S. federal income tax purposes.
Because the management
companies are either taxable REIT subsidiaries or are disregarded entities for
U.S. federal income tax purposes, Macerich Partnership does not violate the
limitation on holding more than 10% of the voting securities of any one
issuer. In addition, not more than 20%
of our total assets consists of securities issued by the management companies
that have elected taxable REIT subsidiary status.
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The above asset tests
must be satisfied not only on the date that we acquire, directly or through
Macerich Partnership, securities in the applicable issuer, but also in each
quarter we acquire any security or other property, including as a result of
increasing our interest in Macerich Partnership. After initially meeting the asset tests at
the beginning of any quarter, we will not lose our REIT status if we fail to
satisfy the asset tests at the end of a later quarter solely by reason of
changes in the relative values of our assets.
If the failure to satisfy the asset tests results from the acquisition
of securities or other property during a quarter, the failure can be cured by a
disposition of sufficient non-qualifying assets or acquisition of sufficient
qualifying assets within 30 days after the close of that quarter. Although we believe we have satisfied the
asset tests and plan to take steps to ensure that we satisfy such steps for any
quarter with respect to which retesting is to occur, there can be no assurance
that such steps will always be successful, or will not require a reduction in
Macerich Partnerships overall interest in an issuer. If we fail to cure the noncompliance with the
asset tests within this 30-day period, we could fail to qualify as a REIT.
In certain cases, we may
avoid disqualification for any taxable year if we fail to satisfy the asset
tests after the 30 day cure period.
We will be deemed to have met certain of the REIT asset tests if the
value of our non-qualifying assets for such tests (i) does not exceed the
lesser of (a) 1% of the total value of our assets at the end of the
applicable quarter or (b) $10,000,000, and (ii) we dispose of the
non-qualifying assets within (a) six months after the last day of the
quarter in which the failure to satisfy the asset tests is discovered or (b) the
period of time prescribed by forthcoming Treasury regulations. For violations due to reasonable cause rather
than willful neglect that are in excess of the de minimis exception described
above, we may avoid disqualification as a REIT, after the 30 day cure
period, by taking steps including (i) the disposition of sufficient assets
to meet the asset test within (a) six months after the last day of the
quarter in which the failure to satisfy the asset tests is discovered or (b) the
period of time prescribed by forthcoming Treasury regulations, (ii) paying
a tax equal to the greater of (a) $50,000 or (b) the highest
corporate tax rate multiplied by the net income generated by the non-qualifying
assets, and (iii) disclosing certain information to the IRS. If we fail the asset test and cannot avail
ourselves of these relief provisions, we may fail to qualify as a REIT.
Annual Distribution Requirements.
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 (1) 90% of our REIT taxable income (computed without regard to the
dividends paid deduction and our net capital gain) and (2) 90% of the net
income (after tax), if any, from foreclosure property, minus (B) the sum
of specified items of noncash income.
Dividends must be paid in the taxable year to which they relate, or in
the following taxable year if declared before we timely file our tax return for
that year and if paid on or before the first regular dividend payment after the
declaration. To the extent that we do
not distribute all of our net capital gain or distribute at least 90%, but less
than 100%, of our REIT taxable income, as adjusted, we will be subject to tax
on the undistributed amount at regular ordinary and capital gains corporate tax
rates, as applicable. We may designate
all or a portion of our undistributed net capital gains as being includable in
the income of our stockholders as gain from the sale or exchange of a capital
asset. If so, the stockholders receive
an increase in the basis of their stock in the amount of the income
recognized. Stockholders are also to be
treated as having paid their proportionate share of the capital gains tax
imposed on us on the undistributed amounts and receive a corresponding decrease
in the basis of their stock.
Furthermore, if we should fail to distribute during each calendar year
at least the sum of (1) 85% of our REIT ordinary income for that year, (2) 95%
of our REIT capital gain net income for that year and (3) any
undistributed taxable income from prior periods, we would be subject to a 4%
excise tax on the excess of the required distribution over the sum of (a) the
amounts actually distributed and (b) the amounts on which certain taxes
are imposed on us. We have made and
intend to make timely distributions sufficient to satisfy all annual
distribution requirements.
From time to time, we may
experience timing differences between (1) the actual receipt of income and
actual payment of deductible expenses and (2) the inclusion of that income
and deduction of those expenses in arriving at our taxable income. Further, from time to time, we may be
allocated a share of net capital gain attributable to the sale of depreciated
property which exceeds our allocable share of cash attributable to that
sale. Additionally, we may incur cash
expenditures that are not currently deductible for tax purposes. As such, we may have less cash available for
distribution than is necessary to meet our annual 90% distribution requirement
or to avoid tax with respect to capital gain or the excise tax imposed on
specified undistributed income. To meet
the 90% distribution requirement necessary to qualify as a REIT or to avoid tax
with respect to capital gain or the excise tax imposed on specified
undistributed income, we may find it appropriate to arrange for short-term (or
possibly long-term) borrowings or to pay distributions in the form of taxable
stock dividends. We are required to
arrange through Macerich Partnership any borrowings for the purpose of making
distributions to stockholders.
Under circumstances
relating to any IRS audit adjustments that increase income, we may be able to
rectify a failure to meet the distribution requirement for a year by paying deficiency
dividends to stockholders in a later year, which may be included in our
deduction for dividends paid for the earlier year. Thus, we may be able to avoid being
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disqualified as a REIT or
taxed on amounts distributed as deficiency dividends. However, we will be required to pay interest
based upon the amount of any deduction taken for deficiency dividends.
Record Keeping Requirements.
To elect taxation as a REIT under applicable Treasury regulations, we
must maintain records and request information from our stockholders designed to
disclose the actual ownership of our stock.
We have complied and intend to continue to comply with these requirements.
Affiliated REITs.
Macerich
Partnership owns 100% of the outstanding common stock of Macerich PPR Corp.,
which in turn owns a 51% interest in Pacific Premier Retail Trust. These affiliated REITs must also meet the
REIT tests discussed above. The failure
of either of these affiliated REITs to qualify as a REIT could cause us to fail
to qualify as a REIT, because we would then own (through Macerich Partnership)
more than 10% of the securities of an issuer that was neither a REIT, a
qualified REIT subsidiary nor a taxable REIT subsidiary. We believe that the affiliated REITs have
been organized and operated in a manner that will permit them to qualify as
REITs. The affiliated REITs, however,
may be personal holding companies within the meaning of the Code, and may
thereby be subject to the personal holding company tax.
Failure
to Qualify as a REIT
If we fail to qualify for taxation as a REIT for U.S.
federal income tax purposes in any taxable year and the 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 will not be deductible by us, nor will we be required
to make those distributions. If we fail
to so qualify and the relief provisions do not apply, to the extent of current
and accumulated earnings and profits, all distributions to stockholders will be
taxable at capital gain rates (through 2010), and, subject to specified limitations
of the Code, corporate distributees may be eligible for the dividends received
deduction. Unless entitled to relief
under specific statutory provisions, we will also be disqualified from taxation
as a REIT for the four taxable years following the year during which we ceased
to qualify as a REIT. It is not possible
to state whether in all circumstances we would be entitled to statutory relief.
We can invoke specified
cure provisions for any taxable year in the event we violate a provision of the
Code that would otherwise result in our failure to qualify as a REIT for U.S.
federal income tax purposes. These cure
provisions would limit the instances causing our disqualification as a REIT for
violations due to reasonable cause, and would instead require the payment of a
monetary penalty.
Tax
Aspects of Our Investments in Partnerships
We hold direct or
indirect interests in Macerich Partnership and the property partnerships (each
individually a Partnership and, collectively, the Partnerships). In general, partnerships are pass-through
entities which are not subject to U.S. federal income tax. Rather, partners are allocated their
proportionate shares of the items of income, gain, loss, deduction and credit
of a partnership. Further, the partners
are potentially subject to tax thereon without regard to whether the partners
receive a distribution from the partnership.
We will include our proportionate share of the items of income, gain,
loss, deduction and credit of the Partnerships for purposes of the various REIT
income tests. See above Requirements
for QualificationGross Income Tests. Any resulting increase in our REIT
taxable income will increase our distribution requirements (see above Requirements
for QualificationAnnual Distribution Requirements).
However, these increases
will not be subject to U.S. federal income tax in our hands provided that the
income is distributed by us to our stockholders. Moreover, for purposes of the REIT asset
tests (see above Requirements for QualificationAsset Tests), we will
include our proportionate share of assets held by the Partnerships.
Tax Allocations with Respect to Contributed Properties.
Under Section 704(c) of the Code, 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 in a manner such that the contributing partner is charged
with, or benefits from, respectively, 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 contributed property at the time of contribution, and the adjusted tax
basis of the property at the time of contribution (a Book-Tax Difference). These allocations are solely for U.S. federal
income tax purposes and do not affect the book capital accounts or other
economic or legal arrangements among the partners. Macerich Partnership was formed principally
by way of contributions of appreciated property. Consequently, the Partnership Agreement
requires these allocations to be made in a manner consistent with Section 704(c) of
the Code.
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In general, the limited
partners of Macerich Partnership who contributed properties to it will be
allocated lower amounts of depreciation deductions for tax purposes and
increased taxable income and gain on sale by the Partnerships of the
contributed assets. This will tend to
eliminate the Book-Tax Difference over the life of the Partnerships. However, the special allocation rules of
Section 704(c) of the Code do not always rectify the Book-Tax
Difference on an annual basis or with respect to a specific taxable transaction
such as a sale. Under the applicable
Treasury regulations, special allocations of income and gain and depreciation
deductions must be made on a property-by-property basis. Depreciation deductions resulting from the
carryover basis of a contributed property are used to eliminate the Book-Tax
Difference by allocating these deductions to the non-contributing partners
(i.e., the REIT and the other non-contributing partners) up to the amount of
their share of book depreciation. Any
remaining tax depreciation for the contributed property would be allocated to
the partners that contributed the property.
Macerich Partnership intends to elect the traditional method of
rectifying the Book-Tax Difference under the applicable Treasury regulations,
under which, if depreciation deductions are less than the non-contributing
partners share of book depreciation, then the non-contributing partners lose
the benefit of these deductions (ceiling rule). When the property is sold, the resulting tax
gain is used to the extent possible to eliminate the Book-Tax Difference
(reduced by any previous book depreciation).
Because of the application of the ceiling rule it is anticipated
that tax depreciation will be allocated substantially in accordance with the
percentages of Macerich Partnership units held by us and the limited partners
of Macerich Partnership, notwithstanding Section 704(c) of the
Code. Thus, the carryover basis of the
contributed assets in the hands of the Partnerships will cause us to be
allocated lower depreciation and other deductions, and possibly greater amounts
of taxable income in the event of a sale of those contributed assets in excess
of the economic or book depreciation allocated to them, and possibly the
economic and book income or gain allocated to them as a result of the
sale. This may cause us to recognize
taxable income in excess of cash proceeds, which might adversely affect our
ability to comply with the REIT distribution requirements. See above Requirements for
QualificationAnnual Distribution Requirements.
Taxation
of Stockholders
Taxation of Taxable U.S. Holders
U.S.
Holder and Non-U.S. Holder.
For purposes
of this summary, a U.S. Holder is a beneficial owner of our common stock that
is:
·
a citizen or resident of the United States;
·
a corporation or entity treated as a corporation for
U.S. federal income tax purposes created or organized in or under the laws of
the United States or any political subdivision of the United States;
·
an estate, the income of which is subject to U.S.
federal income taxation regardless of its source; or
·
a trust if it (1) is subject to the primary
supervision of a court within the United States, and one or more U.S. persons
have authority to control all substantial decisions of the trust or (2) has
a valid election in effect under applicable Treasury regulations to be treated
as a U.S. person.
A beneficial owner of our
common stock that is an individual, a corporation or entity treated as a
corporation for U.S. federal income tax purposes, an estate or trust and not a
U.S. Holder is referred to herein as a Non-U.S. Holder.
If a partnership, or
entity treated as a partnership for U.S. federal income tax purposes, holds our
common stock, the tax treatment of a partner will generally depend upon the
status of the partner and upon the activities of the partnership. Persons holding our common stock through a
partnership or other entity treated as a partnership for U.S. federal income
tax purposes should consult their own tax advisors.
Distributions.
As long as we qualify as a REIT for U.S. federal income tax purposes,
distributions made to our taxable U.S. Holders on our common stock will be
taxed as follows:
·
Distributions out of current or accumulated earnings
and profits (and not designated as capital gain dividends) generally constitute
ordinary dividend income to U.S. Holders and will not be eligible for the
dividends received deduction for corporations.
·
Distributions in excess of current and accumulated
earnings and profits are not taxable to a U.S. Holder to the extent that they
do not exceed the adjusted basis of the U.S. Holders shares, but rather reduce
the adjusted basis of those shares. To
the extent that distributions in excess of current and accumulated
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earnings and profits exceed the adjusted basis of a
U.S. Holders shares, they are to be included in income as long-term capital
gain (or short-term capital gain if the shares have been held for one year or
less).
·
Distributions designated as capital gain dividends
constitute long-term capital gains (to the extent they do not exceed our actual
net capital gain for the taxable year) without regard to the period for which
the U.S. Holder has held its stock.
Corporate U.S. Holders may be required to treat up to 20% of some capital
gain dividends as ordinary income.
·
Distributions declared by us in October, November or
December of any year payable to a U.S. Holder of record on a specified
date in October, November or December will be treated as both paid by
us and received by the U.S. Holder on December 31 of that year, provided
that the distribution is actually paid by us during January of the
following calendar year.
·
U.S. Holders may not include in their individual
income tax returns any of our net operating losses or capital losses.
·
In determining the extent to which a distribution
constitutes a dividend for U.S. federal income tax purposes, the Companys
earnings and profits generally will be allocated first to distributions with
respect to our preferred stock prior to allocating any remaining earnings and
profits to distributions on our common stock.
If we have net capital gains and designate some or all of our
distributions as capital gain dividends to that extent, although the proper tax
treatment of those amounts is not entirely clear, we intend to allocate the
capital gain dividends among different classes of stock in proportion to the
allocation of earnings and profits as described above.
Tax
Rates.
The maximum tax rate applicable to
non-corporate taxable U.S. Holders for long-term capital gains, including
capital gain dividends, and for certain dividends, has generally been reduced
to 15%. Short-term capital gains
recognized by non-corporate taxpayers are taxed at ordinary income rates
(currently up to 35%). Gains recognized
by corporate taxpayers (other than tax-exempt taxpayers) are subject to U.S.
federal income tax at a maximum rate of 35%, whether or not classified as
long-term capital gains. The
deductibility of capital losses is subject to certain limitations.
In general,
dividends paid by REITs are not eligible for the reduced 15% tax rate on
corporate dividends, except to the extent the REITs dividends are attributable
either to dividends received from taxable corporations (such as our taxable
REIT subsidiaries), to income that was subject to tax at the corporate (REIT)
level or to dividends properly designated by us as capital gain dividends. The currently applicable provisions of the
U.S. federal income tax laws relating to the 15% tax rate are currently
scheduled to sunset or revert back to the provisions of prior law effective
for taxable years beginning after December 31, 2010, at which time the
capital gains tax rate will be increased to 20% and the rate applicable to
dividends will be increased to the tax rate then applicable to ordinary income.
Sale,
Exchange, Repurchase or Other
Disposition of the Common Stock.
Upon a sale,
repurchase or other taxable disposition of our common stock, a U.S. Holder
generally will recognize capital gain or loss equal to the difference between
the amount of cash and the fair market value of property received on the sale
or other disposition and such holders adjusted tax basis in the common
stock. Such capital gain or loss will be
long-term capital gain or loss if a U.S. Holders holding period for the common
stock is more than one year. In general,
any loss upon a sale or exchange of shares by a U.S. Holder, if such holder has
held the shares for six months or less (after applying certain holding period
rules), will be treated as a long-term capital loss to the extent of
distributions from us required to be treated by such holder as long-term
capital gain. The deductibility of
capital losses is subject to a number of limitations.
Backup
Withholding and Information Reporting.
Information
with respect to dividends paid on our common stock and proceeds from the sale
or other disposition of our common stock may be required to be reported to U.S.
Holders and to the IRS. This obligation,
however, does not apply with respect to payments to certain U.S. Holders,
including corporations and tax-exempt organizations.
A U.S. Holder may be
subject to backup withholding (currently at a rate of 28%) with respect to
distributions paid on our common stock, or with respect to proceeds received
from a sale or other disposition of our common stock. Backup withholding will not apply, however,
if the U.S. Holder (i) is a corporation or comes within certain other
exempt categories and, when required, demonstrates such fact or (ii) provides
a taxpayer identification number, certifies as to no loss of exemption from
backup withholding and otherwise complies with applicable backup
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withholding rules. To establish status as an exempt person, a
U.S. Holder will generally be required to provide certification on IRS Form W-9.
U.S. Holders should
consult their personal tax advisor regarding their qualification for an
exemption from backup withholding and the procedures of obtaining such an
exemption, if applicable. The backup
withholding tax is not an additional tax and taxpayers may use amounts withheld
as a credit against their U.S. federal income tax liability or may claim a
refund as long as they timely provide certain information to the IRS.
Treatment of Tax-Exempt Holders.
Distributions on our common stock by us to a tax-exempt employee pension
trust, or other domestic tax-exempt holder, generally will not constitute
unrelated business taxable income (UBTI), unless the holder has borrowed to
acquire or carry our common stock.
However, qualified trusts that hold more than 10% (by value) of some
REITs may be required to treat a specified percentage of those REITs
distributions as UBTI. This requirement
will apply only if (1) the REIT would not qualify as such for U.S. federal
income tax purposes but for the application of a look-through exception to
the five or fewer requirement applicable to shares held by qualified trusts
and (2) the REIT is predominantly held by qualified trusts (as defined
below). A REIT is predominantly held if
either (1) a single qualified trust holds more than 25% by value of the
REIT interests; or (2) one or more qualified trusts, each owning more than
10% by value of the REIT interests, hold in the aggregate more than 50% of the
REIT interests. The percentage of any
REIT dividend treated as UBTI is equal to the ratio of (a) the UBTI earned
by the REIT (treating the REIT as if it were a qualified trust and therefore
subject to tax on UBTI) to (b) the total gross income (less specified
associated expenses) of the REIT. A
de minimis
exception applies where the
ratio set forth in the preceding sentence is less than 5% for any year. For those purposes, a qualified trust is any
trust described in Section 401(a) of the Code and exempt from tax
under Section 501(a) of the Code.
Because the provisions requiring qualified trusts to treat a portion of
REIT distributions as UBTI will not apply if the REIT is able to satisfy the five
or fewer requirement without relying upon the look-through exception, the
restrictions on ownership of our stock in our Charter generally should prevent
application of the provisions treating a portion of REIT distributions as UBTI
to tax-exempt entities purchasing our stock, absent approval by our Board of
Directors.
Taxation of Non-U.S. Holders.
This section provides a brief summary of the complex rules governing
U.S. federal income taxation of Non-U.S. Holders. Prospective Non-U.S. Holders should consult
with their own tax advisors to determine the impact of federal, state and local
income tax laws with regard to an investment in our common stock, including any
reporting requirements.
Distributions.
Distributions that are not attributable to gain from sales or exchanges
by us of U.S. real property interests and that may not be designated by us as
capital gains dividends generally will be treated as dividends of ordinary
income to the extent that they are made out of our current or accumulated
earnings and profits. These
distributions will ordinarily be subject to a withholding tax of 30% of the
gross amount of the distribution, unless an applicable tax treaty reduces or
eliminates that tax. However, if income
from the investment in our common stock is treated as effectively connected
with the Non-U.S. Holders conduct of a U.S. trade or business (through a U.S.
permanent establishment, if a Non-U.S. Holder is entitled to the benefits of an
applicable tax treaty and such tax treaty so requires as a condition for
taxation), the Non-U.S. Holder generally will be subject to a tax at graduated
rates, in the same manner that U.S. Holders are taxed with respect to
distributions of this kind (and may also be subject to the 30% branch profits
tax in the case of a Non-U.S. Holder that is a foreign corporation). We expect to withhold U.S. income tax at the
rate of 30% on the gross amount of any distributions of this kind made to a
Non-U.S. Holder, unless the Non-U.S. Holder files (1) an accurate and
complete IRS Form W-8BEN with us certifying that a lower treaty rate
applies, or (2) an accurate and complete IRS Form W-8ECI with us
claiming that the distribution is effectively connected income.
Distributions in excess
of our current and accumulated earnings and profits will not be taxable to a
Non-U.S. Holder to the extent that these distributions do not exceed the
adjusted basis of a Non-U.S. Holders shares, but rather will reduce the adjusted
basis of those shares. To the extent
that distributions in excess of current accumulated earnings and profits exceed
the adjusted basis of a Non-U.S. Holders shares, these distributions will give
rise to tax liability if the Non-U.S. Holder would otherwise be subject to tax
on any gain from the sale or disposition of his or her shares in us, as
described below. If it cannot be
determined, at the time a distribution is made, whether or not that
distribution will be in excess of current and accumulated earnings and profits,
the distributions will be subject to withholding at the same rate as
dividends. However, amounts thus
withheld are refundable by the IRS if it is subsequently determined that the
distribution was, in fact, in excess of our current and accumulated earnings
and profits and the proper forms are filed with the IRS by the Non-U.S. Holder
on a timely basis.
Distributions to a
Non-U.S. Holder that are designated by us at the time of the distribution
as capital gain dividends, other than those arising from the disposition of a
U.S. real property interest, generally should not be subject to
U.S. federal income taxation unless: (1) the investment in our common
stock is effectively connected with the
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Non-U.S. Holders
U.S. trade or business (through a U.S. permanent establishment, if a
Non-U.S. Holder is entitled to the benefits of an applicable tax treaty
and such tax treaty so requires as a condition for taxation), in which case the
Non-U.S. Holder will be subject to the same treatment as U.S. Holders
with respect to any gain, except that a holder that is a foreign corporation
also may be subject to the 30% branch profits tax, as discussed above; or (2) the
Non-U.S. Holder is a nonresident alien individual who is present in the
United States for more than 182 days during the taxable year and certain
other requirements are met, in which case the nonresident alien individual will
be subject to a 30% tax on the individuals capital gains, reduced by certain
capital losses.
For any year in which we
qualify as a REIT for U.S. federal income tax purposes, 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. Holder under the provisions of the
Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). Under FIRPTA, distributions attributable to
gain from sales of U.S. real property interests are taxed to a Non-U.S. Holder
as if the gain were effectively connected with a U.S. business. Non-U.S. Holders would thus be taxed at the
normal capital gain rates applicable to U.S. Holders (subject to applicable
alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals). Also,
distributions subject to FIRPTA may be subject to a 30% branch profits tax in
the hands of a foreign corporate stockholder not entitled to treaty
exemption. We are required by applicable
Treasury regulations to withhold 35% of any distribution that could be
designated by us as a capital gains dividend.
This amount is creditable against the Non-U.S. Holders FIRPTA tax
liability.
Notwithstanding the
foregoing, distributions that are attributable to gain from sales or exchanges
of U.S. real property interests (including capital gain distributions) with
respect to any class of stock of a REIT that is regularly traded on an
established securities market located in the United States will not be treated
as gain recognized from the sale or exchange of a U.S. real property interest
if the Non-U.S. Holder does not own more than 5% of such class of stock at any
time during the 1-year period ending on the date of distribution. Instead, any such distribution will be
treated as an ordinary dividend for U.S. federal income tax purposes.
Sale,
Exchange, Repurchase or Other Disposition of the Common Stock.
Gain recognized by a Non-U.S. Holder upon a sale, repurchase or other disposition
of our common stock generally will not be taxable to a Non-U.S. Holder in the
United States unless (1) investment in our common stock is effectively
connected with the Non-U.S. Holders U.S. trade or business (through a U.S.
permanent establishment, if a Non-U.S. Holder is entitled to the benefits of an
applicable tax treaty and such tax treaty so requires as a condition for
taxation), in which case the Non-U.S. Holder generally will be subject to the
same treatment as U.S. Holders with respect to the gain and if such Non-U.S.
Holder is a corporation, may also be subject to the branch profits tax
described above; (2) the Non-U.S. Holder is a nonresident alien individual
who was present in the United States for more than 182 days during the
taxable year and other requirements are met, in which case the nonresident
alien individual will be subject to a 30% tax on the individuals capital
gains, reduced by certain capital losses; or (3) we are not a domestically
controlled REIT (defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by foreign persons), in which case gain recognized by a Non-U.S.
Holder will be taxable under FIRPTA.
We currently anticipate
that we constitute a domestically controlled REIT, although, because our common
stock is publicly traded, there can be no assurance that we have or will retain
that status. If we are not a
domestically controlled REIT, gain recognized by a Non-U.S. Holder with respect
to any class of our stock that is regularly traded on an established securities
market will nevertheless be exempt under FIRPTA if that Non-U.S. Holder at no time during the five-year period
ending on the date of disposition owned more than 5% of such class of
stock. If the gain on the sale of shares
were to be subject to taxation under FIRPTA, the Non-U.S. Holder would be
subject to the same treatment as U.S Holders with respect to the gain (subject
to applicable alternative minimum tax and a special alternative minimum tax in
the case of nonresident alien individuals).
In that case, withholding tax at a rate of 10% of the amount payable
could apply and any withholding tax withheld pursuant to the rules applicable
to dispositions of a U.S. real property interest would be creditable against
such Non-U.S. Holders U.S. federal income tax liability.
Non-U.S. Holders are
urged to consult their own tax advisors as to whether they will be subject to
tax under FIRPTA upon a disposition of their common stock.
Backup
Withholding and Information Reporting.
Information
may be required to be reported to Non-U.S.
Holders and to the IRS concerning the amount of any dividends paid on
our common stock. Under current U.S.
federal income tax law, backup withholding tax (at the rate of 28%) will not
apply to dividend payments on our common stock if the required certifications
of exempt status are received, provided in each case that the payor, including
a bank or its paying agent, as the case may be, does not have actual knowledge
or reason to know that the payee is a nonexempt person.
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Under the Treasury regulations,
payments on the sale, exchange or other disposition of our common stock
effected through a foreign office of a broker to its customer generally are not
subject to information reporting or backup withholding. However, if the broker is a U.S. person, a
controlled foreign corporation for U.S. federal income tax purposes, a foreign
person 50% or more of whose gross income is effectively connected with a U.S.
trade or business for a specified three-year period, a foreign partnership that
has significant U.S. ownership or at any time during its taxable year is
engaged in a U.S. trade or business, or a U.S. branch of a foreign bank or
insurance company, then information reporting will be required, unless the
broker has in its records documentary evidence that the beneficial owner of the
payment is not a U.S. person or is otherwise entitled to an exemption, and the
broker has no actual knowledge that the beneficial owner is not entitled to an
exemption. Backup withholding may apply
if the sale is subject to information reporting and the broker has actual
knowledge that the beneficial owner is a U.S. person.
The information reporting
and backup withholding rules will apply to payments effected at a U.S.
office of any U.S. or foreign broker, unless the broker has in its records
documentary evidence that the beneficial owner of the payment is not a U.S.
person or is otherwise entitled to an exemption, and the broker has no actual
knowledge that the beneficial owner is not entitled to an exemption.
Non-U.S. Holders should
consult their own tax advisors regarding the application of withholding,
information reporting and backup withholding in their particular circumstances
and the availability of and procedure for obtaining an exemption from
withholding, information reporting and backup withholding under the current
Treasury regulations. Backup withholding
does not represent an additional income tax.
Any amounts withheld from a payment to a holder under the backup
withholding rules will be allowed as a credit against the Non-U.S. Holders
U.S. federal income tax liability and may entitle the holder to a refund,
provided that the required information or returns are timely furnished by such
holder to the IRS.
Other
Tax Considerations
Taxable REIT Subsidiaries.
A
portion of the cash to be used by Macerich Partnership to fund distributions to
partners, including us, may come from the taxable REIT subsidiaries through
distributions on the stock or limited liability company interests that will be
held by Macerich Partnership. The
taxable REIT subsidiaries will receive income from Macerich Partnership, the
property partnerships and unrelated third parties. Because we, Macerich Partnership and the
taxable REIT subsidiaries are related through stock or other ownership, income
of the taxable REIT subsidiaries from services performed for us and Macerich
Partnership may be subject to rules under which additional income may be
allocated to the taxable REIT subsidiaries.
The taxable REIT subsidiaries will pay federal and state income tax at
the full applicable corporate rates on their income prior to payment of any
distributions. The taxable REIT
subsidiaries will attempt to minimize the amount of these taxes, but there can
be no assurance whether, or the extent to which, measures taken to minimize
taxes will be successful. To the extent
that the taxable REIT subsidiaries are required to pay federal, state or local
taxes, the cash available for distribution by us to stockholders or available
to service our indebtedness will be reduced accordingly.
Possible Legislative or Other Actions Affecting Tax
Consequences.
You should recognize that the present U.S.
federal income tax treatment of an investment in us may be modified by
legislative, judicial or administrative action at any time and that any such
action may affect investments and commitments previously made. The rules dealing with U.S. federal
income taxation are constantly under review by persons involved in the
legislative process and by the IRS and the Treasury, resulting in revisions of
regulations and revised interpretations of established concepts as well as
statutory changes. Revisions in federal
tax laws and interpretations thereof could affect the tax consequences of an
investment in us.
State and Local Taxes.
We and our
stockholders may be subject to state or local taxation in various
jurisdictions, including those in which we or they transact business or
reside. The state and local tax
treatment of us and our stockholders may not conform to the federal income tax
consequences discussed above.
Consequently, you should consult your own tax advisors regarding the
effect of state and local tax laws on an investment in any securities being
offered by this prospectus or a prospectus supplement to this prospectus.
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SELLING
SECURITYHOLDERS
Information about selling
securityholders, where applicable, will be set forth in a prospectus
supplement, in a post-effective amendment, or in filings we make with the SEC
that are incorporated into this prospectus by reference.
PLAN OF
DISTRIBUTION
We and any selling securityholders may sell the
securities under this prospectus in one or more of the following ways (or in
any combination) from time to time:
·
to or through one or more underwriters or dealers;
·
in short or long transactions;
·
directly to investors; or
·
through agents.
If underwriters or
dealers are used in the sale, the securities will be acquired by the
underwriters or dealers for their own account and may be resold from time to
time in one or more transactions, including:
·
in privately negotiated transactions;
·
in one or more transactions at a fixed price or prices,
which may be changed from time to time;
·
in at the market offerings, within the meaning of Rule 415(a)(4) of
the Securities Act, to or through a market maker or into an existing trading
market, on an exchange or otherwise;
·
at prices related to those prevailing market prices;
or
·
at negotiated prices.
As applicable, we,
any selling securityholders, and our respective underwriters, dealers or
agents, reserve the right to accept or reject all or part of any proposed
purchase of the securities. We will set forth in a prospectus supplement the
terms and offering of securities by us, including:
·
the names of any underwriters, dealers or agents;
·
any agency fees or underwriting discounts or
commissions and other items constituting agents or underwriters compensation;
·
any discounts or concessions allowed or reallowed or
paid to dealers;
·
details regarding over-allotment options under which
underwriters may purchase additional securities from us, if any;
·
the purchase price of the securities being offered and
the proceeds we will receive from the sale;
·
the public offering price; and
·
the securities exchanges on which such securities may
be listed, if any.
We and any selling
securityholders may enter into derivative transactions with third parties or
sell securities not covered by this prospectus to third parties in privately
negotiated transactions from time to time. If the applicable prospectus
supplement indicates, in connection with those derivative transactions, such
third parties (or affiliates of such third parties) may sell securities covered
by this prospectus and the applicable prospectus supplement, including in short
sale transactions. If so, such third parties (or affiliates of such third
parties) may use securities pledged by us or any selling securityholders, as
the case may be, or borrowed from us or any selling securityholders, as the
case may be, or others to settle those sales or to close out any related open
borrowings of securities, and may use securities received from us or any
selling securityholders, as the case may be, in settlement of those derivative
transactions to close out any related open borrowings of securities. The third
parties (or affiliates of such third parties) in such sale transactions by us
will be underwriters and will be identified in an applicable prospectus
supplement (or a post-effective amendment).
We may also sell securities under this prospectus upon the exercise of
rights that may be issued to our securityholders.
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We may loan or
pledge securities to a financial institution or other third party that in turn
may sell the securities using this prospectus and an applicable prospectus
supplement. Such financial institution or third party may transfer its economic
short position to investors in our securities or in connection with a
simultaneous offering of other securities offered by this prospectus.
Underwriters,
Agents and Dealers
.
If underwriters are used in the sale of
our securities, the securities will be acquired by the underwriters for their
own account and may be resold from time to time in one or more transactions
described above. The securities may be offered to the public either through
underwriting syndicates represented by managing underwriters or directly by
underwriters. Generally, the underwriters obligations to purchase the
securities will be subject to conditions precedent and the underwriters will be
obligated to purchase all of the securities if they purchase any of the
securities. We may use underwriters with which we have a material relationship
and will describe in the prospectus supplement, naming the underwriter, the
nature of any such relationship.
We and any selling
securityholders may sell the securities through agents from time to time. When
we sell securities through agents, the prospectus supplement will name any
agent involved in the offer or sale of securities and any commissions we pay to
them. Generally, any agent will be acting on a best efforts basis for the
period of its appointment.
We may authorize
underwriters, dealers or agents to solicit offers by certain purchasers to
purchase our securities from us at the public offering price set forth in the
prospectus supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified date in the future. The contracts will be
subject only to those conditions set forth in the prospectus supplement, and
the prospectus supplement will set forth any commissions we pay for
solicitation of these contracts.
Underwriters,
dealers and agents may contract for or otherwise be entitled to indemnification
by us against certain civil liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments made by the
underwriters, dealers or agents, under agreements between us and the
underwriters, dealers and agents.
We may grant
underwriters who participate in the distribution of our securities an option to
purchase additional securities to cover over-allotments, if any, in connection
with the distribution.
Underwriters,
dealers or agents may receive compensation in the form of discounts,
concessions or commissions from us or our purchasers, as their agents in
connection with the sale of our securities. These underwriters, dealers or
agents may be considered to be underwriters under the Securities Act. As a
result, discounts, commissions or profits on resale received by the
underwriters, dealers or agents may be treated as underwriting discounts and
commissions. The prospectus supplement for any securities offered by us will
identify any such underwriter, dealer or agent and describe any compensation
received by them from us. Any public offering price and any discounts or
concessions allowed or re-allowed or paid to dealers may be changed from time
to time.
Any underwriter
may engage in over-allotment transactions, stabilizing transactions,
short-covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves sales in excess of the offering
size, which create a short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed
a specified maximum. Short-covering transactions involve purchases of our
securities in the open market after the distribution is completed to cover
short positions. Penalty bids permit the underwriters to reclaim a selling
concession from a dealer when the securities originally sold by the dealer are
purchased in a transaction to cover short positions. Those activities may cause
the price of the securities to be higher than it would otherwise be. If
commenced, the underwriters may discontinue any of the activities at any time.
We make no representation or prediction as to the direction or magnitude of any
effect these transactions may have on the price of our securities. For a
description of these activities, see the information under the heading Underwriting
in the applicable prospectus supplement.
Underwriters,
broker-dealers or agents who may become involved in the sale of our securities
may engage in transactions with and perform other services for us for which
they receive compensation.
Stabilization
Activities
. In
connection with an offering through underwriters, an underwriter may, to the
extent permitted by applicable rules and
regulations, purchase and sell securities in the open market. These
transactions, to the extent permitted by applicable rules and regulations, may include short
sales, stabilizing transactions and
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purchases to cover
positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of securities than they are required to
purchase in the offering. Covered short sales are sales made in an amount not
greater than the underwriters option to purchase additional securities from us
in the offering, if any. If the underwriters have an over-allotment option to
purchase additional securities from us, the underwriters may consider, among
other things, the price of securities available for purchase in the open market
as compared to the price at which they may purchase securities through the
over-allotment option. Naked short sales, which may be prohibited or
restricted by applicable rules and regulations, are any sales in excess of
such option or where the underwriters do not have an over-allotment option. The
underwriters must close out any naked short position by purchasing securities
in the open market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of
the securities in the open market after pricing that could adversely affect
investors who purchase in the offering.
Accordingly, to
cover these short sales positions or to otherwise stabilize or maintain the
price of the securities, the underwriters may bid for or purchase securities in
the open market and may impose penalty bids. If penalty bids are imposed,
selling concessions allowed to syndicate members or other broker-dealers
participating in the offering are reclaimed if securities previously
distributed in the offering are repurchased, whether in connection with
stabilization transactions or otherwise. The effect of these transactions may
be to stabilize or maintain the market price of the securities at a level above
that which might otherwise prevail in the open market. The imposition of a
penalty bid may also affect the price of the securities to the extent that it
discourages resale of the securities. The magnitude or effect of any stabilization
or other transactions is uncertain.
Direct
Sales
. We and any
selling securityholders may also sell securities directly to one or more
purchasers without using underwriters or agents. In this case, no agents,
underwriters or dealers would be involved. We may sell securities upon the
exercise of rights that we may issue to our securityholders. We and any selling
securityholders may also sell securities 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.
Trading
Market and Listing of Securities
.
Any
common stock sold pursuant to a prospectus supplement will be listed on the New
York Stock Exchange. The securities other than common stock may or may not be
listed on a national securities exchange. It is possible that one or more
underwriters may make a market in a class or series of securities, but the
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. We cannot give any assurance as to the
liquidity of the trading market for any of the securities.
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LEGAL
MATTERS
Certain legal
matters will be passed upon for us by OMelveny & Myers LLP, Newport
Beach, California, and by Venable LLP, Baltimore, Maryland, with respect to
matters of Maryland law.
EXPERTS
The consolidated
financial statements, and the related consolidated financial statement
schedules, incorporated in this Prospectus by reference from the Companys
Amendment No. 1 to the Annual Report on Form 10-K/A, and the
effectiveness of The Macerich Companys internal control over financial
reporting have been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their reports, which are
incorporated herein by reference (which reports (1) express an unqualified
opinion on the consolidated financial statements and consolidated financial
statement schedules and include an explanatory paragraph referring to the
restatement described in Note 25 and (2) express an adverse opinion on the
effectiveness of internal control over financial reporting because of a
material weakness). Such consolidated financial statements and
consolidated financial statement schedules have been so incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The consolidated
financial statements of Pacific Premier Retail Trust as of and for the year
ended December 31, 2007 and the related consolidated financial statement
schedules, incorporated in this Prospectus by reference from Amendment No. 1
to The Macerich Companys Annual Report on Form 10-K/A have been audited
by Deloitte & Touche LLP, an independent registered public accounting
firm, as stated in their report, which is incorporated herein by
reference. Such consolidated financial statements and consolidated
financial statement schedules have been so incorporated in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The financial statements
of SDG Macerich Properties, L.P., as of December 31, 2007 and 2006 and for
each of the years in the three-year period ended December 31, 2007, have
been incorporated by reference herein and in the registration statement in
reliance upon the report of KPMG LLP, an independent registered public
accounting firm, as stated in their report appearing in Amendment No. 1 to
our Annual Report on Form 10-K/A for the year ended December 31,
2007, also incorporated by reference herein upon the authority of said firm as
experts in auditing and accounting.
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