CALCULATION OF REGISTRATION FEE
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Title of Each Class of
Securities Offered
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Maximum
Amount to
be Registered
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Maximum
Offering Price
per Unit
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Maximum
Aggregate
Offering Price
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Amount of
Registration Fee
(1)
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Common Shares of Beneficial Interest
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15,525,000
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$21.75
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$337,668,750
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$43,491.74
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-
(1)
-
Calculated
in accordance with Rule 457(r) of the Securities Act of 1933, as amended, and reflects the potential additional issuance of common shares
of beneficial interest pursuant to an option granted to the underwriters.
Table of Contents
PROSPECTUS SUPPLEMENT
(To Prospectus dated June 29, 2012)
13,500,000 Shares
Common Shares of Beneficial Interest
We are offering 13,500,000 of our common shares of beneficial interest.
Our
common shares are listed on the New York Stock Exchange under the symbol "SNH." The last reported sale price of our common shares on April 16, 2014, was $22.78 per share.
Investing in our common shares involves risks that are described in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31,
2013, or Annual Report.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying
prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
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PER SHARE
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TOTAL
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Public offering price
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$
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21.75
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$
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293,625,000
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Underwriting discounts and commissions
(1)
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$
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0.92438
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$
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12,479,130
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Proceeds, before expenses, to us
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$
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20.82562
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$
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281,145,870
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-
(1)
The
underwriters will also be reimbursed for certain expenses incurred in this offering. See "Underwriting" for details.
The underwriters may also purchase from us up to an additional 2,025,000 of our common shares at the public offering price, less underwriting discounts and
commissions, within 30 days from the date of this prospectus supplement. If the underwriters exercise the option in full, the total discounts and commissions will be $14,350,999.50, and the
total proceeds, before expenses, to us will be $323,317,750.50.
The
underwriters are offering our common shares as described in "Underwriting." The shares will be ready for delivery on or about April 23, 2014.
Joint Book-Running Managers
Jefferies BofA Merrill Lynch Citigroup Morgan Stanley RBC Capital Markets
Co-Managers
BB&T Capital Markets Janney Montgomery Scott JMP
Securities MLV & Co. Oppenheimer & Co.
The date of this prospectus supplement is April 17, 2014.
Table of Contents
Table of Contents
References in this prospectus supplement to "we," "us," "our" and "SNH" mean Senior Housing Properties Trust and its consolidated subsidiaries, unless the context otherwise
requires. References in this prospectus supplement to "shares" mean our common shares of beneficial interest, $.01 par value per share.
Unless otherwise stated, we have assumed throughout this prospectus supplement that the underwriters' option to purchase additional shares is not
exercised.
This
prospectus supplement contains the terms of this offering. A description of our shares is set forth in the accompanying prospectus under the heading "Description of shares of beneficial
interest." This prospectus supplement, or the information incorporated by reference herein, may add, update or change information in the accompanying prospectus (or the information incorporated by
reference therein). If information in this prospectus supplement, or the information incorporated by reference herein, is inconsistent with the accompanying prospectus (or the information incorporated
by reference therein), this prospectus supplement (or the information incorporated by reference herein) will apply and will supersede that information in the accompanying prospectus (or the
information incorporated by reference therein).
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Table of Contents
It
is important for you to read and consider all information contained in this prospectus supplement, the accompanying prospectus and the information incorporated by reference herein and therein in
making your investment decision. You should also read and consider the information in the documents to which we have referred you in "Where you can find more information" in this prospectus supplement
and the accompanying prospectus.
You
should rely only on the information contained or incorporated by reference in this prospectus supplement or the accompanying prospectus. We have not, and the underwriters 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 are not, and the underwriters are not, making
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 supplement and the accompanying
prospectus, as well as information we previously filed with the Securities and Exchange Commission, or the SEC, and incorporated by reference, is accurate only as of their respective dates. Our
business, financial condition, results of operations and prospects may have changed since those dates.
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Table of Contents
Incorporation of certain information by reference
The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by
referring you to documents previously filed with the SEC. The information incorporated by reference is considered to be part of this prospectus supplement and the accompanying prospectus, and
information that we subsequently file with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below which were filed with the SEC under
the Securities Act of 1934, as amended, or the Exchange Act:
-
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Our Annual Report on Form 10-K for the fiscal year ended
December 31, 2013;
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The information required by Items 10, 11, 12, 13 and 14 of
Part III of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and included in our preliminary Proxy Statement for our 2014 Annual Meeting of Shareholders
filed with the SEC on April 10, 2014; and
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Our Current Reports on Form 8-K filed with the SEC on
January 6, 2014, February 14, 2014 (Item 1.01 and Exhibit 2.1 only) and April 10, 2014.
We
also incorporate by reference each of the following documents that we will file with the SEC after the date of this prospectus supplement but before the termination of the offering of the
shares:
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Reports filed under Sections 13(a) and (c) of the Exchange
Act;
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-
Definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent shareholders' meeting; and
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Any reports filed under Section 15(d) of the Exchange Act.
You
may request a copy of any of these filings (excluding exhibits other than those which we specifically incorporate by reference in this prospectus supplement or the accompanying prospectus), at no
cost, by writing, emailing or telephoning us at the following address:
Investor
Relations
Senior Housing Properties Trust
Two Newton Place
255 Washington Street, Suite 300
Newton, Massachusetts 02458-1634
(617) 796-8234
info@snhreit.com
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Table of Contents
Prospectus supplement summary
This summary may not contain all of the information that is important to you. You should carefully read this entire prospectus
supplement and the accompanying prospectus. You should also read the documents referred to in "Incorporation of certain information by reference."
Our Company
We are a real estate investment trust, or REIT, which invests in senior living properties, including apartment buildings for aged residents,
independent living properties, assisted living facilities, nursing homes, wellness centers and properties leased to medical providers, medical related businesses, clinics and biotech laboratory
tenants, or MOBs. As of April 15, 2014, we owned 375 properties (401 buildings) located in 40 states and Washington, D.C., including 13 properties (16 buildings) classified as held for sale. On
that date, the undepreciated carrying value of our properties, net of impairment losses, was $5.3 billion, excluding properties classified as held for sale. As of December 31, 2013, 95%
of our net operating income, or NOI, came from properties where a majority of the charges are paid from private resources.
On
April 15, 2014, our board of trustees approved an increase in our authorized common shares and, in connection with the previously announced expiration of our shareholders' rights plan, the
reclassification of our 300,000 authorized and unissued junior participating preferred shares as common shares, together resulting in an increase of our authorized common shares from 199,700,000 to
220,000,000. We expect to file the related articles of amendment and articles supplementary to our declaration of trust before completion of this offering.
Distributions
Our current cash distribution rate to common shareholders is $0.39 per share per quarter, or $1.56 per share per year. However, the timing and amount
of future distributions is determined at the discretion of our board of trustees and factors that our board of trustees consider in making distribution determinations include our results of
operations, our financial condition, debt and equity capital available to us, our expectations of our future capital requirements and operating performance, including our funds from operations, or
FFO, our normalized FFO, restrictive covenants in our financial or other contractual arrangements (including those in our revolving credit facility agreement), tax law requirements to maintain our
status as a REIT, restrictions under Maryland law and our expected needs and availability of cash to pay our obligations.
We
paid a quarterly distribution of $0.39 per common share for the quarter ended December 31, 2013 on or about February 21, 2014 to our shareholders of record as of the close of business
on January 13, 2014. On April 2, 2014, we declared a quarterly distribution of $0.39 per common share for the quarter ended March 31, 2014 to our common shareholders of record on
April 14, 2014. We expect to pay this distribution on or about May 21, 2014. Purchasers of common shares in this offering will not receive this distribution. We expect our next quarterly
distribution for the quarter ending June 30, 2014 to be declared in July 2014 and paid in August 2014. Purchasers of common shares in this offering who continue to hold the shares on the record
date will receive any distribution that our board of trustees declares for the quarter ending June 30, 2014.
Recent Developments
Pending acquisition of one MOB (two buildings).
In February 2014, we agreed to acquire one MOB (two buildings) located in Boston, Massachusetts with 1,651,037
square feet for a total purchase price of approximately $1.125 billion, excluding closing costs. We expect to fund this acquisition using cash on hand (which may include a portion of the net
proceeds of this offering), borrowings under our revolving credit facility, a new term loan borrowing and new mortgage debt. We anticipate that, when we purchase
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Table of Contents
this
property, we will lease an aggregate of approximately 1.1 million square feet of laboratory and office space to Vertex Pharmaceuticals Incorporated through 2028 for an initial annualized rental
income (including straight line rent adjustment and reimbursable expenses) of $75.2 million. We expect this acquisition to close in May 2014; however the closing of this acquisition is contingent upon
closing conditions. Accordingly, we can provide no assurance that we will purchase this property.
Acquisition of one MOB (one building).
In April 2014, we acquired one MOB (one building) for approximately $32.7 million including the assumption of
approximately $15.6 million of mortgage debt, excluding closing costs. The MOB is located in San Antonio, Texas and includes 125,240 square feet.
Organization and Principal Place of Business
We are organized as a Maryland real estate investment trust. Our principal place of business is Two Newton Place, 255 Washington Street,
Suite 300, Newton, Massachusetts 02458-1634 and our telephone number is (617) 796-8350.
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Table of Contents
The offering
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Shares being offered by us
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13,500,000 shares
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Shares to be outstanding after the offering
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201,697,921 shares
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Use of proceeds
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We estimate that our net proceeds from this offering will be $280.7 million after deducting the underwriting discount and other estimated offering expenses. If the underwriters exercise their
option in full to purchase additional shares, we estimate that our net proceeds will be approximately $322.9 million after deducting the underwriting discount and other estimated offering expenses. We intend to apply our net proceeds from this
offering to repay amounts outstanding under our revolving credit facility and for general business purposes, including funding in part the pending acquisition described above in "Recent Developments" or other possible future acquisitions of
properties. As of April 15, 2014, we had $145.0 million outstanding and $605.0 million available under our revolving credit facility.
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New York Stock Exchange symbol
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SNH
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The
number of our shares to be outstanding after this offering is based on the number of shares outstanding on April 15, 2014. If the underwriters exercise their option to purchase additional
shares, we will sell up to an additional 2,025,000 shares.
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Table of Contents
Warning concerning forward looking statements
THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS, AND THE DOCUMENTS INCORPORATED HEREIN OR THEREIN BY REFERENCE CONTAIN STATEMENTS WHICH
CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO, WHENEVER WE USE WORDS SUCH AS "BELIEVE,"
"EXPECT," "ANTICIPATE," "INTEND," "PLAN," "ESTIMATE" OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR
EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. FORWARD LOOKING STATEMENTS RELATE TO VARIOUS ASPECTS OF OUR BUSINESS,
INCLUDING:
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OUR ACQUISITIONS AND SALES OF PROPERTIES,
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OUR ABILITY TO COMPETE FOR ACQUISITIONS AND TENANCIES EFFECTIVELY,
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OUR ABILITY TO RAISE EQUITY OR DEBT CAPITAL,
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OUR ABILITY TO PAY DISTRIBUTIONS TO OUR SHAREHOLDERS AND THE AMOUNT OF SUCH
DISTRIBUTIONS,
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OUR ABILITY TO RETAIN OUR EXISTING TENANTS, ATTRACT NEW TENANTS AND MAINTAIN
OR INCREASE CURRENT RENTAL RATES,
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THE CREDIT QUALITIES OF OUR TENANTS,
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OUR POLICIES AND PLANS REGARDING INVESTMENTS AND FINANCINGS,
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THE FUTURE AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY,
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OUR ABILITY TO PAY INTEREST ON AND PRINCIPAL OF OUR DEBT,
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OUR TAX STATUS AS A REIT,
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OUR BELIEF THAT FIVE STAR QUALITY CARE, INC., OR FIVE STAR, OUR
FORMER SUBSIDIARY, WHICH IS OUR LARGEST TENANT AND WHICH MANAGES SEVERAL OF OUR SENIOR LIVING COMMUNITIES FOR OUR ACCOUNT, HAS ADEQUATE FINANCIAL RESOURCES AND LIQUIDITY TO MEET ITS OBLIGATIONS TO US
AND TO MANAGE OUR SENIOR LIVING COMMUNITIES SUCCESSFULLY,
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OUR EXPECTATION THAT WE WILL BENEFIT FINANCIALLY BY PARTICIPATING IN
AFFILIATES INSURANCE COMPANY, OR AIC, WITH REIT MANAGEMENT & RESEARCH LLC, OR RMR, AND COMPANIES TO WHICH RMR PROVIDES MANAGEMENT SERVICES, AND
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OTHER MATTERS.
OUR
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. FACTORS THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
FORWARD LOOKING STATEMENTS AND UPON OUR BUSINESS, RESULTS OF OPERATIONS, FINANCIAL CONDITION, FFO, NORMALIZED FFO, NOI, CASH FLOWS, LIQUIDITY AND PROSPECTS INCLUDE, BUT ARE NOT LIMITED
TO:
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THE IMPACT OF CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS ON US AND OUR
TENANTS,
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THE IMPACT OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT, AS AMENDED BY
THE HEALTHCARE AND EDUCATION RECONCILIATION ACT, OR COLLECTIVELY, THE ACA, AND OTHER RECENTLY ENACTED, ADOPTED OR PROPOSED LEGISLATION OR REGULATIONS ON US AND ON OUR TENANTS AND MANAGERS AND THEIR
ABILITY TO PAY OUR RENTS AND RETURNS,
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ACTUAL AND POTENTIAL CONFLICTS OF INTEREST WITH OUR MANAGING TRUSTEES, FIVE
STAR, RMR, AIC, D&R YONKERS LLC AND THEIR RELATED PERSONS AND ENTITIES,
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COMPLIANCE WITH, AND CHANGES TO, FEDERAL, STATE AND LOCAL LAWS AND
REGULATIONS, ACCOUNTING RULES, TAX LAWS AND SIMILAR MATTERS,
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Table of Contents
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LIMITATIONS IMPOSED ON OUR BUSINESS AND OUR ABILITY TO SATISFY COMPLEX RULES
IN ORDER FOR US TO QUALIFY AS A REIT FOR U.S. FEDERAL INCOME TAX PURPOSES,
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COMPETITION WITHIN THE HEALTHCARE AND REAL ESTATE INDUSTRIES, AND
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ACTS OF TERRORISM, OUTBREAKS OF SO CALLED PANDEMICS OR OTHER MANMADE OR
NATURAL DISASTERS BEYOND OUR CONTROL.
FOR
EXAMPLE:
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FIVE STAR IS OUR LARGEST TENANT AND MANAGES SEVERAL OF OUR SENIOR LIVING
COMMUNITIES FOR OUR ACCOUNT AND FIVE STAR MAY EXPERIENCE FINANCIAL DIFFICULTIES AS A RESULT OF A NUMBER OF FACTORS, INCLUDING, BUT NOT LIMITED TO:
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CHANGES IN MEDICARE AND MEDICAID PAYMENTS, INCLUDING THOSE THAT MAY RESULT
FROM THE ACA AND OTHER RECENTLY ENACTED OR PROPOSED LEGISLATION OR REGULATIONS, WHICH COULD RESULT IN REDUCED RATES OR A FAILURE OF SUCH RATES TO COVER FIVE STAR'S COSTS,
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CHANGES IN REGULATIONS AFFECTING FIVE STAR'S OPERATIONS,
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CHANGES IN THE ECONOMY GENERALLY OR GOVERNMENTAL POLICIES WHICH REDUCE THE
DEMAND FOR THE SERVICES FIVE STAR OFFERS,
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INCREASES IN INSURANCE AND TORT LIABILITY AND OTHER COSTS, AND
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INEFFECTIVE INTEGRATION OF NEW ACQUISITIONS,
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IF FIVE STAR'S OPERATIONS BECOME UNPROFITABLE, FIVE STAR MAY BECOME UNABLE
TO PAY OUR RENTS AND WE MAY NOT RECEIVE OUR EXPECTED RETURN ON OUR INVESTED CAPITAL OR ADDITIONAL AMOUNTS FROM OUR SENIOR LIVING COMMUNITIES THAT ARE MANAGED BY FIVE STAR,
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OUR OTHER TENANTS MAY EXPERIENCE LOSSES AND BECOME UNABLE TO PAY OUR RENTS,
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CONTINUED AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY IS
SUBJECT TO OUR SATISFYING CERTAIN FINANCIAL COVENANTS AND MEETING OTHER CUSTOMARY CREDIT FACILITY CONDITIONS,
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ACTUAL COSTS UNDER OUR REVOLVING CREDIT FACILITY WILL BE HIGHER THAN LIBOR
PLUS A PREMIUM BECAUSE OF OTHER FEES AND EXPENSES ASSOCIATED WITH OUR REVOLVING CREDIT FACILITY,
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INCREASING THE MAXIMUM BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY IS
SUBJECT TO OBTAINING ADDITIONAL COMMITMENTS FROM LENDERS, WHICH MAY NOT OCCUR,
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CONTINGENCIES IN OUR ACQUISITION AND SALES AGREEMENTS MAY CAUSE OUR FUTURE
ACQUISITIONS AND ANY RELATED MANAGEMENT AGREEMENTS AND OUR FUTURE SALES NOT TO OCCUR OR TO BE DELAYED OR THE TERMS TO BE CHANGED,
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OUR ANNUAL REPORT DESCRIBES CERTAIN EXPECTED TERMS OF AN $800 MILLION TERM
LOAN WHICH WE MAY INCUR IN CONNECTION WITH THE PENDING ACQUISITION OF THE MOB DESCRIBED UNDER "RECENT DEVELOPMENTS." THE COMMITMENTS WHICH WE RECEIVED FOR THE TERM LOAN ARE SUBJECT TO VARIOUS
CONDITIONS, INCLUDING MUTUALLY SATISFACTORY DOCUMENTATION. THERE CAN BE NO ASSURANCE THAT ALL THE CONDITIONS WILL BE SATISFIED, THAT THE TERMS OF THE TERM LOAN WILL NOT CHANGE, OR THAT THE TERM LOAN
WILL BE AVAILABLE TO US TIMELY OR AT ALL. WE ARE NOT COMMITTED TO INCUR THE ENTIRE TERM LOAN OR ANY PORTION THEREOF, AND MAY UTILIZE OTHER DEBT OR EQUITY FINANCING FOR ALL OR A PORTION OF THE
ACQUISITION,
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OUR ANNUAL REPORT STATES THAT THE INTEREST RATE UNDER THE TERM LOAN WILL BE
LIBOR PLUS 140 BASIS POINTS. THIS INTEREST RATE IS BASED ON OUR CURRENT DEBT RATINGS AND THE INTEREST RATE MAY BE HIGHER OR LOWER THAN LIBOR PLUS 140 BASIS POINTS IN THE FUTURE DEPENDING ON OUR FUTURE
DEBT RATINGS. THIS INTEREST RATE IS
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OUR ANNUAL REPORT STATES THAT WE BELIEVE THAT OUR CONTINUING RELATIONSHIPS
WITH FIVE STAR, COMMONWEALTH REIT, OR CWH, RMR, AIC, D&R YONKERS LLC AND THEIR AFFILIATED AND RELATED PERSONS AND ENTITIES MAY BENEFIT US AND PROVIDE US WITH COMPETITIVE ADVANTAGES IN OPERATING
AND GROWING OUR BUSINESS, BUT THE ADVANTAGES WE BELIEVE WE MAY REALIZE FROM THESE RELATIONSHIPS MAY NOT BE REALIZED.
THESE
RESULTS COULD OCCUR DUE TO MANY DIFFERENT CIRCUMSTANCES, SOME OF WHICH ARE BEYOND OUR CONTROL, SUCH AS CHANGED MEDICARE AND MEDICAID RATES, NEW LEGISLATION OR REGULATIONS AFFECTING OUR BUSINESS
OR THE BUSINESSES OF OUR TENANTS OR MANAGERS, CHANGES IN OUR TENANTS' OR MANAGERS' REVENUES OR COSTS, CHANGES IN OUR TENANTS' OR MANAGERS' FINANCIAL CONDITIONS, CHANGES IN CAPITAL MARKETS OR THE
ECONOMY GENERALLY OR NATURAL DISASTERS.
THE
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND IN OUR FILINGS WITH THE SEC, INCLUDING UNDER THE CAPTION "RISK FACTORS", OR INCORPORATED HEREIN OR THEREIN, IDENTIFIES OTHER
IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM OUR FORWARD LOOKING STATEMENTS. OUR FILINGS WITH THE SEC ARE AVAILABLE ON THE SEC'S WEBSITE AT WWW.SEC.GOV.
YOU
SHOULD NOT PLACE UNDUE RELIANCE UPON OUR FORWARD LOOKING STATEMENTS.
EXCEPT
AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
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Table of Contents
Use of proceeds
We estimate that our net proceeds from this offering, after deducting the underwriting discount and other estimated offering expenses, will be
$280.7 million. If the underwriters exercise their option to purchase additional shares in full, we estimate that our net proceeds will be approximately $322.9 million after deducting
the underwriting discount and other estimated offering expenses. We intend to apply our net proceeds from this offering to repay amounts outstanding on our revolving credit facility and for general
business purposes, including funding in part the pending acquisition described above in "Recent Developments" or other possible future acquisitions of properties.
Affiliates
of some of the underwriters, including Jefferies LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Morgan
Stanley & Co. LLC and RBC Capital Markets, LLC, are lenders under our revolving credit facility and will receive a portion of the net proceeds from this offering used to
repay amounts outstanding thereunder. Our revolving credit facility matures in January 2018, and outstanding borrowings under the facility bear interest at LIBOR plus 130 basis points. At
April 15, 2014, the weighted average interest payable on our revolving credit facility was 1.42% per year. Amounts repaid under the facility may be re-borrowed in the future.
At
April 15, 2014, we had $145.0 million outstanding under our revolving credit facility. The proceeds of those borrowings were used to fund acquisitions and for general business
purposes.
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Table of Contents
Federal income tax and ERISA considerations
The following supplements and updates the summary of U.S. federal income tax considerations and Employee Retirement Income Security Act of 1974, as
amended, or ERISA, considerations relating to the acquisition, ownership and disposition of our shares in our Annual Report which is incorporated in this prospectus supplement by reference.
Sullivan & Worcester LLP, Boston, Massachusetts, has rendered a legal opinion that the discussions in this section and in the sections of our Annual Report captioned "Federal Income Tax
Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement Accounts" in all material respects are the material U.S. federal income tax consequences and the material ERISA consequences
relevant to owners of our shares, and the opinions of counsel referred to in those sections represent Sullivan & Worcester LLP's opinions on those subjects. Specifically, subject to
qualifications and assumptions contained in its opinion and in our Annual Report, Sullivan & Worcester LLP has given opinions to the effect (1) that we have been organized and
have qualified as a REIT under the Internal Revenue Code of 1986, as amended, or the Tax Code, for our 1999 through 2013 taxable years, and that our current investments and plan of operation will
enable us to continue to meet the requirements for qualification and taxation as a REIT under the Tax Code, it being understood that our actual qualification as a REIT, however, will depend on our
continued ability to meet, and our meeting, through actual annual operating results and distributions, the various qualification tests under the Tax Code, and (2) that under the "plan assets"
regulations promulgated by the U.S. Department of Labor under ERISA, our shares are
"publicly offered securities" and our assets will not be deemed to be "plan assets" in respect of any benefit plan investor who acquires our shares in this offering.
Subject
to the detailed discussion contained in our Annual Report, we believe that we have qualified, and we intend to remain qualified, as a REIT under the Tax Code. As a REIT, we generally will not
be subject to federal income tax on our net income distributed as dividends to our shareholders. Our distributions to you generally are includable in your income as dividends to the extent these
distributions do not exceed allocable current or accumulated earnings and profits; distributions in excess of allocable current or accumulated earnings and profits generally are treated for tax
purposes as a return of capital to the extent of your basis in our shares, and reduce your basis. Subject to the detailed discussion contained in our Annual Report, we intend to conduct our affairs so
that our assets are not deemed to be "plan assets" of any individual retirement account, tax-favored account (such as an Archer MSA, Coverdell education savings account or health savings account),
employee benefit plan subject to Title 1 of ERISA, or other qualified retirement plan subject to Section 4975 of the Tax Code that acquires our shares in this offering.
Information
reporting, backup withholding and foreign account withholding may apply to payments you receive on our shares, as described in our Annual Report. Backup withholding is not an additional
tax. Any amounts withheld under backup withholding may be allowed as a credit against your U.S. federal income tax liability and, if backup withholding results in an overpayment of taxes, a refund may
be obtained from the Internal Revenue Service, or the IRS, provided that you furnish the required information to the IRS. The backup withholding rate is currently 28%.
We
encourage you to consult your tax advisor regarding the specific federal, state, local, foreign and other tax and ERISA consequences to you of the acquisition, ownership and disposition of our
shares.
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Table of Contents
Underwriting
We are offering the shares described in this prospectus supplement through the underwriters named below. Jefferies LLC, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC and RBC Capital Markets, LLC are the representatives of the underwriters,
and are the joint book-running managers for this offering. We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, each
of the underwriters has severally agreed to purchase the number of shares listed next to its name in the following table:
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Underwriters
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Number of shares
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Jefferies LLC
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2,500,875
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated
|
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2,500,875
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Citigroup Global Markets Inc.
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2,500,875
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Morgan Stanley & Co. LLC
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2,500,875
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RBC Capital Markets, LLC
|
|
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2,500,875
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BB&T Capital Markets, a division of BB&T Securities, LLC
|
|
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131,625
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Janney Montgomery Scott LLC
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|
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131,625
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JMP Securities LLC
|
|
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131,625
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MLV & Co. LLC
|
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131,625
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Oppenheimer & Co. Inc.
|
|
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131,625
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Capital One Securities, Inc.
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33,750
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Comerica Securities, Inc.
|
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33,750
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Mitsubishi UFJ Securities (USA), Inc.
|
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33,750
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PNC Capital Markets LLC
|
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33,750
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Santander Investment Securities Inc.
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33,750
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SMBC Nikko Securities America, Inc.
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33,750
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TD Securities (USA) LLC
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33,750
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BBVA Securities Inc.
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|
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33,750
|
|
Mizuho Securities USA Inc.
|
|
|
33,750
|
|
The Huntington Investment Company
|
|
|
33,750
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
13,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subject
to the terms and conditions set forth in the underwriting agreement, the underwriters must buy all of the shares listed above if they buy any of them. The underwriters are not required to take
or pay for the shares covered by the underwriters' option described below.
Our
shares are offered subject to a number of conditions, including:
-
-
receipt and acceptance of the shares by the underwriters; and
-
-
the underwriters' right to reject orders in whole or in part.
In
connection with this offering, certain of the underwriters and securities dealers may distribute prospectuses electronically.
We
have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. If we are unable to provide this indemnification, we will
contribute to payments the underwriters may be required to make in respect of those liabilities.
S-10
Table of Contents
Option to Purchase Additional Shares
We have granted the underwriters an option to buy up to 2,025,000 additional shares at the public offering price set forth on the cover page of this
prospectus supplement. The underwriters have 30 days from the date of this prospectus supplement to exercise this option. If the underwriters exercise this option, they will each purchase
additional shares approximately in proportion to the amounts specified in the table above.
Commissions and Discounts
Shares sold by the underwriters to the public will initially be offered at the initial offering price set forth on the cover of this prospectus
supplement. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the other selling terms.
Sales
of shares made outside of the United States may be made by affiliates of the underwriters.
Upon
execution of the underwriting agreement, the underwriters will be obligated to purchase the shares at the prices and upon the terms stated therein, and, as a result, will thereafter bear any risk
associated with changing the offering price to the public or other selling terms.
The
following table shows the per share and total underwriting discounts and commissions we will pay to the underwriters assuming both no exercise and full exercise of the underwriters' option to
purchase up to an additional 2,025,000 shares from us:
|
|
|
|
|
|
|
|
|
|
No exercise
|
|
Full exercise
|
|
Per share
|
|
$
|
0.92438
|
|
$
|
0.92438
|
|
Total
|
|
$
|
12,479,130.00
|
|
$
|
14,350,999.50
|
|
We
estimate that the total expenses of the offering payable by us, not including underwriting discounts and commissions, will be approximately $400,000. We also have agreed to reimburse the
underwriters for up to approximately $2,500 for their FINRA counsel fee. In accordance with FINRA Rule 5110, this reimbursed fee is deemed underwriting compensation for this offering.
No Sales of Similar Securities
We and our Managing Trustees and our executive officers have entered into lock-up agreements with the underwriters. Under these agreements, we and
each of these persons may not, without the prior written approval of Jefferies LLC, subject to certain permitted exceptions, offer, sell, contract to sell or otherwise dispose of or hedge our
shares or securities convertible into or exercisable or exchangeable for our shares. The permitted exceptions include issuances of shares under our equity compensation plan, the issuance of incentive
compensation shares to RMR, and issuances of shares as partial or full payment for properties directly or indirectly acquired or to be acquired by us or our subsidiaries, provided such shares are
subject to restrictions on transfer for the remainder of the lock-up period. These restrictions will be in effect for a period of 60 days after the date of this prospectus supplement. At any
time and without public notice, Jefferies LLC may release all or some of the securities from these lock-up agreements.
The
60-day lock-up period may be extended for up to 37 additional days under certain circumstances where we announce or pre-announce earnings or material news or a material event within approximately
18 days prior to, or approximately 16 days after, the termination of the 60-day period.
New York Stock Exchange Listing
Our shares are listed on the New York Stock Exchange under the symbol "SNH."
S-11
Table of Contents
Price Stabilization, Short Positions
In connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our shares
including:
-
-
stabilizing transactions;
-
-
short sales;
-
-
purchases to cover positions created by short sales;
-
-
imposition of penalty bids; and
-
-
syndicate covering transactions.
Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our shares while this offering is in progress. These transactions
may also include making short sales of our shares, which involves the sale by the underwriters of a greater number of shares than they are required to purchase in this offering, and purchasing shares
on the open market to cover positions created by short sales. Short sales may be "covered" shorts, which are short positions in an amount not greater than the underwriters' option to purchase
additional shares referred to above, or may be "naked" shorts, which are short positions in excess of that amount.
The
underwriters may close out any covered short position by either exercising their option to purchase additional shares, in whole or in part, or by purchasing shares in the open market. In making
this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through
the option.
Naked
short sales are sales in excess of the underwriters' option to purchase additional shares. The underwriters must close out any naked short position by purchasing shares in the open market. A
naked short position is more likely to be created if the underwriters are concerned there may be downward pressure on the price of shares in the open market after pricing that could adversely affect
investors who purchase in this offering.
The
underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives
have repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions.
As
a result of these activities, the price of our shares may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. The underwriters may carry out these transactions on the New York Stock Exchange, in the over-the-counter market or otherwise.
Other Relationships
As described in "Use of proceeds," some of the net proceeds of this offering will be used to repay borrowings under our unsecured revolving credit
facility. Because affiliates of one or more of the underwriters, including Jefferies LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global
Markets Inc., Morgan Stanley & Co. LLC and RBC Capital Markets, LLC, are lenders under our unsecured revolving credit facility, it is possible that more than 5% of
the proceeds of this offering (not including underwriting discounts and commissions) may be received by the underwriters or their affiliates.
Nonetheless,
as a "real estate investment trust" as defined in Section 856 of the Tax Code we, the issuer of the securities in this offering, are exempt from compliance with Financial Industry
Regulatory Authority Rule 5121 regarding Public Offerings of Securities with Conflicts of Interest. In addition, from time to time, some of the underwriters and/or their affiliates have engaged
in, and may in the future engage in, commercial and/or investment banking transactions with us and our affiliates.
S-12
Table of Contents
Some
of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our
affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions.
In
addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or
related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve
securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect
of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
S-13
Table of Contents
Notice to Investors
Australia
This prospectus supplement and the accompanying prospectus is not a disclosure document for the purposes of Australia's Corporations Act 2001 (Cth) of
Australia, or Corporations Act, has not been lodged with the Australian Securities & Investments Commission and is only directed to the categories of exempt persons set out below. Accordingly,
if you receive this prospectus supplement and the accompanying prospectus in Australia:
-
A.
-
You
confirm and warrant that you are either:
-
-
a "sophisticated investor" under section 708(8)(a) or (b) of
the Corporations Act;
-
-
a "sophisticated investor" under section 708(8)(c) or (d) of
the Corporations Act and that you have provided an accountant's certificate to the company which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act
and related regulations before the offer has been made;
-
-
"professional investor" within the meaning of section 708(11)(a) or
(b) of the Corporations Act.
To
the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor or professional investor under the Corporations Act any offer made to you under this prospectus is
void and incapable of acceptance.
-
B.
-
You
warrant and agree that you will not offer any of the shares issued to you pursuant to this prospectus for resale in Australia within 12 months of
those shares being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations Act.
Dubai International Financial Centre
This prospectus supplement and the accompanying prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai
Financial Services Authority, or DFSA. This prospectus supplement and the accompanying prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of
the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not
approved this prospectus supplement and the accompanying prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus supplement and the
accompanying prospectus. The securities to which this prospectus supplement and the accompanying prospectus
relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not
understand the contents of this prospectus supplement and the accompanying prospectus you should consult an authorized financial advisor.
European Economic Area
In relation to each member state of the European Economic Area which has implemented the Prospectus Directive, each, a Relevant Member State, with
effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, or the Relevant Implementation Date, no offer of any securities which are the subject
of the offering contemplated by this prospectus supplement and the accompanying prospectus have been or will be made to the public in that Relevant Member State other than any offer where a prospectus
has been or will be published in relation to such securities that has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member
State and notified to the relevant competent authority in that Relevant Member
S-14
Table of Contents
State
in accordance with the Prospectus Directive, except that with effect from and including the Relevant Implementation Date, an offer of such securities may be made to the public in that Relevant
Member State:
-
(a)
-
to
any legal entity which is a "qualified investor" as defined in the Prospectus Directive;
-
(b)
-
to
fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons
(other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives of the underwriters
for any such offer; or
-
(c)
-
in
any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided
that no such offer of securities shall require the Company or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a
prospectus pursuant to Article 16 of the Prospectus Directive.
For
the purposes of this provision, the expression an "offer to the public" in relation to any securities in any Relevant Member State means the communication in any form and by any means of
sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe the securities, as the same may be varied in that
Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto,
including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression "2010
PD Amending Directive" means Directive 2010/73/EU.
Hong Kong
No securities have been offered or sold, and no securities may be offered or sold, in Hong Kong, by means of any document, other than to persons whose
ordinary business is to buy or sell shares or debentures, whether as principal or agent; or to "professional investors" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong
Kong and any rules made under that Ordinance; or in other circumstances which do not result in the document being a "prospectus" as defined in the Companies Ordinance (Cap. 32) of Hong Kong or
which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong. No document, invitation or advertisement relating to the securities has been
issued or may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely
to be accessed or read by, the public of Hong Kong (except if permitted under the securities laws of Hong Kong) other than with respect to securities which are or are intended to be disposed of only
to persons outside Hong Kong or only to "professional investors" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance.
This
prospectus supplement and the accompanying prospectus have not been registered with the Registrar of Companies in Hong Kong. Accordingly, this prospectus supplement and the accompanying
prospectus may not be issued, circulated or distributed in Hong Kong, and the securities may not be offered for subscription to members of the public in Hong Kong. Each person acquiring the securities
will be required, and is deemed by the acquisition of the securities, to confirm that he is aware of the restriction on offers of the securities described in this prospectus supplement and the
accompanying prospectus and the relevant offering documents and that he is not acquiring, and has not been offered any securities in circumstances that contravene any such restrictions.
S-15
Table of Contents
Switzerland
The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or
regulated trading facility in Switzerland. This prospectus supplement and the accompanying prospectus have been prepared without regard to the disclosure standards for issuance prospectuses under art.
652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or
regulated trading facility in Switzerland. Neither this prospectus supplement and the accompanying prospectus nor any other offering or marketing material relating to the securities or the offering
may be publicly distributed or otherwise made publicly available in Switzerland.
Neither
this prospectus supplement and the accompanying prospectus nor any other offering or marketing material relating to the offering, the Company or the securities have been or will be filed with
or approved by any Swiss regulatory authority. In particular, this prospectus supplement and the accompanying prospectus will not be filed with, and the offer of securities will not be supervised by,
the Swiss Financial Market Supervisory Authority FINMA, or FINMA, and the offer of securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or
CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of securities.
United Kingdom
This prospectus supplement and the accompanying prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that
are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive that are also (i) investment professionals falling within Article 19(5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or the Order, and/or (ii) high net worth entities falling within Article 49(2)(a) to (d) of the Order
and other persons to whom it may lawfully be communicated, each such person being referred to as a relevant person.
This
prospectus supplement and the accompanying prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to
any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.
S-16
Table of Contents
Legal matters
Venable LLP, Baltimore, Maryland, our Maryland counsel, will issue an opinion about the legality of the shares. Sullivan &
Worcester LLP, Boston, Massachusetts, our lawyers, and Covington & Burling LLP, New York, New York, counsel to the underwriters in connection with this offering, will each also
issue an opinion to the underwriters as to certain matters. Sullivan & Worcester LLP and Covington & Burling LLP will rely, as to certain matters of Maryland law, upon an
opinion of Venable LLP. Sullivan & Worcester LLP also has passed upon our qualification and taxation as a REIT in an opinion filed with the registration statement of which the
accompanying prospectus is a part. Sullivan & Worcester LLP and Venable LLP represent Five Star, CWH and certain of their affiliates on various matters. Sullivan &
Worcester LLP also represents RMR and certain of its affiliates on various matters.
Experts
Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated financial statements and schedule
included in our Annual Report on Form 10-K for the year ended December 31, 2013, and the effectiveness of our internal control over financial reporting as of December 31, 2013, as
set forth in their reports, which are incorporated by reference in this prospectus supplement and elsewhere in the registration statement. Our financial statements and schedule are incorporated by
reference in reliance on Ernst & Young LLP's reports, given on their authority as experts in accounting and auditing.
Where you can find more information
You may read and copy any material that we file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.
You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also access our SEC filings over the internet at the SEC's website at
http://www.sec.gov.
THE
AMENDED AND RESTATED DECLARATION OF TRUST ESTABLISHING SENIOR HOUSING PROPERTIES TRUST, DATED SEPTEMBER 20, 1999, AS AMENDED AND SUPPLEMENTED, AS FILED WITH THE STATE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF MARYLAND, PROVIDES THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SENIOR HOUSING PROPERTIES TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, SENIOR HOUSING PROPERTIES TRUST. ALL PERSONS DEALING WITH SENIOR HOUSING PROPERTIES TRUST IN ANY WAY SHALL LOOK ONLY TO THE ASSETS OF SENIOR HOUSING PROPERTIES TRUST
FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
S-17
PROSPECTUS
SENIOR HOUSING PROPERTIES TRUST
Debt Securities, Common Shares of Beneficial Interest,
Preferred Shares of Beneficial Interest, Depositary Shares and Warrants
We
or our selling security holders may offer and sell, from time to time, in one or more offerings:
-
-
debt securities;
-
-
common shares;
-
-
preferred shares;
-
-
depositary shares; and
-
-
warrants.
The
securities described in this prospectus may be offered and sold separately or in any combination. We will provide the specific terms of any securities actually offered, the manner in
which the securities will be offered and the identity of any selling security holders in supplements to this prospectus. The applicable prospectus supplement may also contain information, where
applicable, about material U.S. federal income tax considerations relating to, and any securities exchange listing of, securities covered by such prospectus supplement. You should carefully read this
prospectus and the applicable prospectus supplements before you decide to invest in any of these securities.
We
or our selling security holders may offer and sell these securities to or through one or more underwriters, dealers and agents, or directly to purchasers, on a continuous or delayed
basis. The applicable prospectus supplement will describe the terms of the plan of distribution and set forth the names of any underwriters, dealers or agents involved in the sale of the securities.
Our
common shares are listed on the New York Stock Exchange, or the NYSE, under the symbol "SNH." On June 28, 2012, the last reported sale price of our common shares on the NYSE
was $21.86 per share.
Investment in our securities involves risk. See "Risk Factors" on page 1 of this prospectus and any risk factors described in any accompanying prospectus
supplement.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this
prospectus is truthful and complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is June 29, 2012.
TABLE OF CONTENTS
|
|
|
|
|
Page
|
About This Prospectus
|
|
i
|
Prospectus Summary
|
|
1
|
Risk Factors
|
|
1
|
Warning Concerning Forward Looking Statements
|
|
2
|
Ratio of Earnings to Fixed Charges
|
|
6
|
Use of Proceeds
|
|
6
|
Description of Debt Securities
|
|
7
|
Description of Shares of Beneficial Interest
|
|
18
|
Description of Depositary Shares
|
|
24
|
Description of Warrants
|
|
28
|
Description of Certain Provisions of Maryland Law and of our Declaration of Trust and Bylaws
|
|
29
|
Selling Security Holders
|
|
43
|
Plan of Distribution
|
|
43
|
Legal Matters
|
|
44
|
Experts
|
|
44
|
Where You Can Find More Information
|
|
45
|
Information Incorporated By Reference
|
|
45
|
ABOUT THIS PROSPECTUS
References in this prospectus to "we," "us," "our" or "SNH" mean Senior Housing Properties Trust and its
consolidated subsidiaries unless the context otherwise requires.
This
prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or the SEC, using a "shelf" registration process. Under this shelf
registration process, we or our selling security holders may, from time to time, sell any of the securities or any combination of the securities described in this prospectus, in one or more offerings.
This
prospectus provides you only with a general description of the securities that may be offered. Each time we or our selling security holders sell securities, we will provide a
prospectus supplement that contains specific information about the terms of that offering. The prospectus supplement may also add to, update or change information contained in this prospectus. You
should read both this prospectus and any prospectus supplement together with additional information described under the headings "Where You Can Find More Information" and "Information Incorporated By
Reference." If there is
any inconsistency between the information in this prospectus and any applicable prospectus supplement, you should rely on the information in the applicable prospectus supplement.
You
should rely only on the information provided or incorporated by reference in this prospectus or any relevant prospectus supplement. Neither we nor our selling security holders have
authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. Neither we nor our selling security holders
will make an offer of the securities in any jurisdiction where it is unlawful. You should assume that the information in this prospectus and any relevant prospectus supplement, as well as the
information in any document incorporated or deemed to be incorporated into this prospectus and any relevant prospectus supplement is accurate only as of the date of the documents containing the
information.
(i)
PROSPECTUS SUMMARY
We are a real estate investment trust, or REIT, formed under the laws of the State of Maryland, which invests in senior living
properties, including apartment buildings for aged residents, independent living properties, assisted living facilities, nursing homes, wellness centers, and office properties leased to medical
providers, medical related businesses, clinics and biotech laboratory tenants, or MOBs. As of June 28, 2012, we owned 375 properties located in 39 states and Washington, D.C. with a book value
of $4.9 billion before depreciation.
Our
principal executive offices are located at Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634, and our telephone number is
(617) 796-8350.
RISK FACTORS
Investing in our securities involves risks. You should carefully review the risk factors contained under the heading "Risk Factors" in
our Annual Report on Form 10-K for the year ended December 31, 2011, or our Annual Report, which risk factors are incorporated by reference in this prospectus, the information contained
under the heading "Warning Concerning Forward Looking Statements" in this prospectus or under any similar heading in any applicable prospectus supplement or in any document incorporated herein or
therein by reference, any specific risk factors discussed under the caption "Risk Factors" in any applicable prospectus supplement or in any
document incorporated herein or therein by reference and the other information contained in, or incorporated by reference in, this prospectus or any applicable prospectus supplement before making an
investment decision. If any such risks occur, our business, financial condition or results of operations could be materially harmed, the market price of our securities could decline and you could lose
all or part of your investment.
1
WARNING CONCERNING FORWARD LOOKING STATEMENTS
THIS PROSPECTUS, INCLUDING THE DOCUMENTS THAT ARE INCORPORATED BY REFERENCE, CONTAINS STATEMENTS WHICH
CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO, WHENEVER WE USE WORDS SUCH AS "BELIEVE,"
"EXPECT," "ANTICIPATE," "INTEND," "PLAN," "ESTIMATE" OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR
EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. FORWARD LOOKING STATEMENTS RELATE TO VARIOUS ASPECTS OF OUR BUSINESS,
INCLUDING:
-
-
OUR ACQUISITIONS AND SALES OF PROPERTIES,
-
-
OUR ABILITY TO RAISE EQUITY OR DEBT CAPITAL,
-
-
OUR ABILITY TO PAY INTEREST ON AND PRINCIPAL OF OUR
DEBT,
-
-
OUR ABILITY TO PAY DISTRIBUTIONS AND THE AMOUNT OF SUCH
DISTRIBUTIONS,
-
-
OUR ABILITY TO RETAIN OUR EXISTING TENANTS, ATTRACT NEW TENANTS AND MAINTAIN OR INCREASE CURRENT
RENTAL RATES,
-
-
OUR POLICIES AND PLANS REGARDING INVESTMENTS AND
FINANCINGS,
-
-
THE FUTURE AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT
FACILITY,
-
-
OUR TAX STATUS AS A REIT,
-
-
OUR BELIEF THAT FIVE STAR QUALITY CARE, INC., OR FIVE STAR, OUR FORMER SUBSIDIARY, WHICH,
AS OF MARCH 31, 2012, IS RESPONSIBLE FOR 44.7% OF OUR CURRENT ANNUALIZED RENTS, HAS ADEQUATE FINANCIAL RESOURCES AND LIQUIDITY TO MEET ITS OBLIGATIONS TO
US,
-
-
OUR EXPECTATION THAT WE WILL BENEFIT FINANCIALLY BY PARTICIPATING IN AFFILIATES INSURANCE COMPANY,
OR AIC, WITH REIT MANAGEMENT & RESEARCH LLC, OR RMR, AND COMPANIES TO WHICH RMR PROVIDES MANAGEMENT SERVICES,
AND
-
-
OTHER MATTERS.
OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. FACTORS THAT COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR FORWARD LOOKING STATEMENTS AND UPON OUR BUSINESS, RESULTS OF OPERATIONS, FINANCIAL CONDITION, FUNDS FROM OPERATIONS, NORMALIZED FUNDS FROM OPERATIONS, NET
OPERATING INCOME, CASH AVAILABLE FOR
2
DISTRIBUTION, CASH FLOWS, LIQUIDITY AND PROSPECTS INCLUDE, BUT ARE NOT LIMITED TO:
-
-
THE IMPACT OF CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS ON US AND OUR
TENANTS,
-
-
THE IMPACT OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT, OR PPACA, AND OTHER RECENTLY
ENACTED, ADOPTED OR PROPOSED LEGISLATION OR REGULATIONS ON US AND ON OUR TENANTS AND THEIR ABILITY TO PAY OUR RENTS,
-
-
ACTUAL AND POTENTIAL CONFLICTS OF INTEREST WITH OUR MANAGING TRUSTEES, FIVE STAR, COMMONWEALTH
REIT, OR CWH, AND RMR AND THEIR RELATED PERSONS AND ENTITIES,
-
-
COMPLIANCE WITH, AND CHANGES TO, FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS, ACCOUNTING RULES,
TAX RATES AND SIMILAR MATTERS,
-
-
LIMITATIONS IMPOSED ON OUR BUSINESS AND OUR ABILITY TO SATISFY COMPLEX RULES IN ORDER FOR US TO
QUALIFY AS A REIT FOR U.S. FEDERAL INCOME TAX PURPOSES,
-
-
COMPETITION WITHIN THE HEALTHCARE AND REAL ESTATE INDUSTRIES,
AND
-
-
ACTS OF TERRORISM, OUTBREAKS OF SO CALLED PANDEMICS OR OTHER MANMADE OR NATURAL DISASTERS BEYOND
OUR CONTROL.
FOR EXAMPLE:
-
-
FIVE STAR IS OUR LARGEST TENANT AND MANAGES SEVERAL OF OUR SENIOR LIVING COMMUNITIES FOR OUR
ACCOUNT AND FIVE STAR MAY EXPERIENCE FINANCIAL DIFFICULTIES AS A RESULT OF A NUMBER OF FACTORS, INCLUDING, BUT NOT LIMITED TO:
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CHANGES IN MEDICARE AND MEDICAID PAYMENTS, INCLUDING THOSE THAT MAY RESULT FROM PPACA AND OTHER
RECENTLY ENACTED, ADOPTED OR PROPOSED LEGISLATION OR REGULATIONS, WHICH COULD RESULT IN REDUCED RATES OR A FAILURE OF SUCH RATES TO MATCH FIVE STAR'S
COSTS,
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CHANGES IN REGULATIONS AFFECTING FIVE STAR'S
OPERATIONS,
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CHANGES IN THE ECONOMY GENERALLY OR GOVERNMENTAL POLICIES WHICH REDUCE THE DEMAND FOR THE SERVICES
FIVE STAR OFFERS,
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INCREASES IN INSURANCE AND TORT LIABILITY COSTS,
AND
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INEFFECTIVE INTEGRATION OF NEW ACQUISITIONS,
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IF FIVE STAR'S OPERATIONS BECOME UNPROFITABLE, FIVE STAR MAY BECOME UNABLE TO PAY OUR RENTS AND WE
MAY NOT RECEIVE OUR CONTRACTED RETURN ON OUR INVESTED CAPITAL OR ADDITIONAL AMOUNTS FROM OUR SENIOR LIVING COMMUNITIES THAT ARE MANAGED BY FIVE STAR,
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OUR OTHER TENANTS MAY EXPERIENCE LOSSES AND BECOME UNABLE TO PAY OUR
RENTS,
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CONTINUED AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY IS SUBJECT TO OUR
SATISFYING CERTAIN FINANCIAL COVENANTS AND MEETING OTHER CUSTOMARY CONDITIONS,
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ACTUAL ANNUAL COSTS UNDER OUR REVOLVING CREDIT FACILITY WILL BE HIGHER THAN LIBOR PLUS A PREMIUM
BECAUSE OF OTHER FEES AND EXPENSES ASSOCIATED WITH OUR REVOLVING CREDIT FACILITY,
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INCREASING THE MAXIMUM BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY IS SUBJECT TO OBTAINING
ADDITIONAL COMMITMENTS FROM LENDERS, WHICH MAY NOT OCCUR,
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OUR PENDING ACQUISITIONS AND SALES OF SENIOR LIVING COMMUNITIES AND MOBS, AND CERTAIN RELATED
MANAGEMENT ARRANGEMENTS, ARE CONTINGENT UPON VARIOUS CONDITIONS, INCLUDING IN SOME CASES, COMPLETION OF DILIGENCE AND/OR REGULATORY, LENDER OR OTHER THIRD PARTY APPROVALS. ACCORDINGLY, SOME OR ALL OF
THESE PURCHASES AND SALES, AND ANY RELATED MANAGEMENT ARRANGEMENTS, MAY BE DELAYED OR MAY NOT OCCUR,
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WE MAY BE UNABLE TO REPAY OUR DEBT OBLIGATIONS WHEN THEY BECOME
DUE,
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OUR ABILITY TO MAKE FUTURE DISTRIBUTIONS DEPENDS UPON A NUMBER OF FACTORS, INCLUDING OUR FUTURE
EARNINGS. WE MAY BE UNABLE TO MAINTAIN OUR CURRENT RATE OF DISTRIBUTIONS ON OUR COMMON SHARES AND FUTURE DISTRIBUTIONS MAY BE SUSPENDED OR PAID AT A LESSER RATE THAN THE DISTRIBUTIONS WE NOW
PAY,
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OUR ABILITY TO GROW OUR BUSINESS AND INCREASE OUR DISTRIBUTIONS DEPENDS IN LARGE PART UPON OUR
ABILITY TO BUY PROPERTIES AND ARRANGE FOR THEIR PROFITABLE OPERATION OR LEASE THEM FOR RENTS THAT EXCEED OUR CAPITAL COSTS. WE MAY BE UNABLE TO IDENTIFY PROPERTIES THAT WE WANT TO ACQUIRE OR TO
NEGOTIATE ACCEPTABLE PURCHASE PRICES, ACQUISITION FINANCING, MANAGEMENT CONTRACTS OR LEASE TERMS FOR NEW PROPERTIES,
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SOME OF OUR TENANTS MAY NOT RENEW EXPIRING LEASES, AND WE MAY BE UNABLE TO LOCATE NEW TENANTS TO
MAINTAIN THE HISTORICAL OCCUPANCY RATES OF, OR RENTS FROM, OUR PROPERTIES,
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RENTS THAT WE CAN CHARGE AT OUR PROPERTIES MAY DECLINE, AND
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THE ADVANTAGES IN OPERATING AND GROWING OUR BUSINESS THAT WE BELIEVE THAT WE MAY REALIZE FROM OUR
CONTINUING RELATIONSHIPS WITH FIVE STAR, RMR, CWH AND AIC AND THEIR AFFILIATED AND RELATED PERSONS AND ENTITIES MAY NOT MATERIALIZE.
THESE RESULTS COULD OCCUR DUE TO MANY DIFFERENT CIRCUMSTANCES, SOME OF WHICH ARE BEYOND OUR CONTROL, SUCH AS CHANGED MEDICARE AND MEDICAID RATES, NEW LEGISLATION
AFFECTING OUR BUSINESS OR THE BUSINESSES OF OUR TENANTS, NATURAL DISASTERS OR CHANGES IN OUR TENANTS' REVENUES OR COSTS, OR CHANGES IN CAPITAL MARKETS OR THE ECONOMY GENERALLY.
THE INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS, AND IN OUR FILINGS WITH THE SEC, INCLUDING UNDER THE CAPTION "RISK FACTORS" IN OUR ANNUAL REPORT OR
INCORPORATED HEREIN OR THEREIN, IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM OUR FORWARD LOOKING STATEMENTS. OUR FILINGS WITH THE SEC ARE AVAILABLE AT THE SEC'S WEBSITE AT
WWW.SEC.GOV.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON OUR FORWARD LOOKING STATEMENTS.
EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR
OTHERWISE.
5
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for each of the periods shown.
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Year Ended December 31,
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Three Months
Ended
March 31, 2012
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2011
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2010
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2009
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2008
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2007
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Ratio of earnings to fixed charges
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2.1x
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2.5x
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2.5x
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2.9x
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3.7x
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3.3x
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For
purposes of calculating the ratios above, earnings have been calculated by subtracting equity in earnings (losses) of equity investees from, and adding fixed charges to, income
before income tax expense. Fixed charges consist of interest expense (including net amortization of debt discounts, premiums and deferred financing fees). We did not have any preferred securities
outstanding during any of the periods presented above, and therefore our ratio of earnings to combined fixed charges and preferred distributions is the same as the ratio of earnings to fixed charges
for each of the periods presented above.
USE OF PROCEEDS
Unless otherwise described in a prospectus supplement, we intend to use the net proceeds from the sale of any securities covered by
this prospectus for general business purposes, which may include acquiring and investing in additional properties and the repayment of borrowings under our revolving credit facility or other debt.
Until we apply the proceeds from a sale of securities covered by this prospectus to their stated purposes, we may invest those proceeds in short term investments, including repurchase agreements, some
or all of which may not be investment grade.
We
will not receive any of the proceeds of the sale by any selling security holders of the securities covered by this prospectus.
6
DESCRIPTION OF DEBT SECURITIES
The following is a summary of the material terms of our debt securities. Because it is a summary, it does not contain all of the
information that may be important to you. If you want more information, you should read the forms of indentures which we have filed as exhibits to the registration statement of which this prospectus
is a part. If we issue debt securities, we will file any final indentures and supplemental indentures as exhibits to such registration statement. See "Where You Can Find More Information." You may
also review the Indenture, dated as of December 20, 2001, between us and U.S. Bank National Association (as successor trustee), as it may be amended, supplemented, or otherwise modified from
time to time, at the corporate trust offices of U.S. Bank National Association, One Federal Street, 3rd Floor, Boston, Massachusetts 02110. This summary is also subject to and qualified by
reference to the descriptions of the particular terms of our debt securities described in the applicable prospectus supplement. If indicated in a prospectus supplement, the terms of such debt
securities may differ from those described below.
The
debt securities sold under this prospectus will be our direct obligations, which may be secured or unsecured, and which may be senior or subordinated indebtedness. Our senior
unsecured debt securities will be issued under our December 20, 2001 Indenture or under one or more other indentures between us and U.S. Bank National Association, as trustee, or another
trustee. Our other debt securities will be issued under one or more indentures between us and a trustee. Any indenture will be subject to and governed by the Trust Indenture Act of 1939, as amended.
The statements made in this prospectus relating to any indentures and the debt securities to be issued under the indentures are summaries of certain anticipated provisions of the indentures and are
not complete.
General
We may issue debt securities that rank "senior," "senior subordinated" or "junior subordinated." The debt securities that we refer to
as "senior" will be our direct obligations and will rank equally and ratably in right of payment with our other indebtedness that is not subordinated. We may issue debt securities that will be
subordinated in right of payment to the prior payment in full of senior debt, as defined in the applicable prospectus supplement, and may rank equally and ratably with the other senior subordinated
indebtedness. We refer to these as "senior subordinated" securities. We may also issue debt securities that may be subordinated in right of payment to the senior subordinated securities. These would
be "junior subordinated" securities. We have filed with the registration statement, of which this prospectus is a part, three separate forms of indenture, one for the senior securities, one for the
senior subordinated securities and one for the junior subordinated securities.
We
may issue debt securities without limit as to aggregate principal amount, in one or more series, in each case as we establish in one or more supplemental indentures. We need not issue
all debt securities of one series at the same time. Unless we otherwise provide, we may reopen a series, without the consent of the holders of the series, for issuances of additional securities of
that series.
We
anticipate that any indenture will provide that we may, but need not, designate more than one trustee under an indenture, each with respect to one or more series of debt securities.
Any trustee under any indenture may resign or be removed with respect to one or more series of debt securities, and we may appoint a successor trustee to act with respect to any such series.
The
applicable prospectus supplement will describe the specific terms relating to the series of debt securities we will offer, including, where applicable, the following:
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the title and series designation and whether they are senior securities, senior subordinated securities or junior
subordinated securities;
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the aggregate principal amount of the debt securities;
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the percentage of the principal amount at which we will issue the debt securities and, if other than the principal amount
of the debt securities, the portion of the principal amount of the debt securities payable upon maturity of the debt securities;
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if convertible, the initial conversion price, the conversion period and any other terms governing such conversion;
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the stated maturity date;
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any fixed or variable interest rate or rates per annum;
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the place where principal, premium, if any, and interest will be payable and where the debt securities can be surrendered
for transfer, exchange or conversion;
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the date from which interest may accrue and any interest payment dates;
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any sinking fund requirements;
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any provisions for redemption, including the redemption price and any remarketing arrangements;
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whether the debt securities are denominated or payable in U.S. dollars, foreign currency or units of two or more
currencies;
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whether the amount of payments of principal of or premium, if any, or interest on the debt securities may be determined
with reference to an index, formula or other method and the manner in which such amounts shall be determined;
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the events of default and covenants of the debt securities, to the extent different from or in addition to those described
in this prospectus;
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whether we will issue the debt securities in certificated or book-entry form;
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whether the debt securities will be in registered or bearer form and, if in registered form, the denominations, if other
than in even multiples of $1,000, and, if in bearer form, the denominations and terms and conditions relating thereto;
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whether we will issue any of the debt securities in permanent global form and, if so, the terms and conditions, if any,
upon which interests in the global security may be exchanged, in whole or in part, for the individual debt securities represented by the global security;
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the applicability, if any, of the defeasance and covenant defeasance provisions described in this prospectus or any
prospectus supplement;
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whether we will pay additional amounts on the debt securities in respect of any tax, assessment or governmental charge
and, if so, whether we will have the option to redeem the debt securities instead of making this payment;
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the subordination provisions, if any, relating to the debt securities; and
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if the debt securities are to be issued upon the exercise of warrants, the time, manner and place for such debt securities
to be authenticated and delivered.
We
may issue debt securities at less than the principal amount payable at maturity. We refer to these securities as "original issue discount" securities. If material or applicable, we
will describe in the applicable prospectus supplement special U.S. federal income tax, accounting and other considerations applicable to original issue discount securities.
Except
as may be described in any prospectus supplement, an indenture will not contain any other provisions that would limit our ability to incur indebtedness or that would afford
holders of the debt securities protection in the event of a highly leveraged or similar transaction involving us or in the event of a change in control. You should review carefully the applicable
prospectus supplement for information with respect to events of default and covenants applicable to the debt securities being offered.
Denominations, Interest, Registration and Transfer
Unless otherwise described in the applicable prospectus supplement, we will issue debt securities of any series that are registered
securities in denominations that are even multiples of $1,000, other than global securities, which may be of any denomination.
Unless
otherwise specified in the applicable prospectus supplement, we will pay the interest, principal and any premium at the corporate trust office of the trustee or, at our option, we
may make payment of interest by check mailed to the address of the person entitled to the payment as it appears in the applicable register or by wire transfer of funds to that person at an account
maintained within the United States.
If
we do not punctually pay or otherwise provide for interest on any interest payment date, the defaulted interest will be paid either:
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to the person in whose name the debt security is registered at the close of business on a special record date the trustee
will fix; or
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in any other lawful manner, all as the applicable indenture describes.
You
may have your debt securities divided into more debt securities of smaller denominations or combined into fewer debt securities of larger denominations, as long as the total
principal amount is not changed. We call this an "exchange."
You
may exchange or transfer debt securities at the office of the applicable trustee. The trustee acts as our agent for registering debt securities in the names of holders and
transferring debt securities. We may change this appointment to another entity or perform it ourselves. The entity performing the role of maintaining the list of registered holders is called the
"registrar." The registrar will also perform transfers.
You
will not be required to pay a service charge to transfer or exchange debt securities, but you may be required to pay for any tax or other governmental charge associated with the
exchange or transfer. The registrar will make the transfer or exchange only if it is satisfied with your proof of ownership.
9
Merger, Consolidation or Sale of Assets
Under any indenture, we are generally permitted to consolidate or merge with another company. We are also permitted to sell
substantially all of our assets to another company or to buy substantially all of the assets of another company. However, we may not take any of these actions unless the following conditions are
met:
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if we merge out of existence or sell all our assets, the other company must be an entity organized under the laws of a
State or the District of Columbia or under federal law and must agree to be legally responsible for our debt securities; and
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immediately after the merger, sale of assets or other transaction, we may not be in default on our debt securities. A
default for this purpose would include any event that would be an event of default if the requirements for giving us default notice or our default having to exist for a specific period of time were
disregarded.
Certain Covenants
Existence.
Except as permitted as described above under "Merger, Consolidation or Sale of Assets," we will agree to do all things
necessary to preserve and keep our trust existence, rights and franchises provided that it is in our best interests for the conduct of business.
Provisions of Financial Information.
Whether or not we remain required to do so under the Exchange Act, to the extent permitted by law,
we will agree
to file all annual, quarterly and other reports and financial statements with the SEC and an indenture trustee on or before the applicable SEC filing dates as if we were required to do so.
Additional Covenants.
Any additional or different covenants or modifications to the foregoing covenants with respect to any series of
debt securities
will be described in the applicable prospectus supplement.
Events of Default and Related Matters
Events of Default.
The term "event of default" for any series of debt securities means any of the
following:
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we do not pay the principal of or any premium on a debt security of that series within 30 days after its maturity
date;
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we do not pay interest on a debt security of that series within 30 days after its due date;
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we do not deposit any sinking fund payment for that series within 30 days after its due date;
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we remain in breach of any other term of the applicable indenture (other than a term added to the indenture solely for the
benefit of other series) for 60 days after we receive a notice of default stating we are in breach. Either the trustee or holders of at least a majority in principal amount of outstanding debt
securities of the affected series may send the notice;
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we default under any of our other indebtedness in an aggregate principal amount exceeding the dollar amount specified in
the applicable prospectus supplement after the expiration of any applicable grace period, which default results in the acceleration of the maturity of such
10
indebtedness.
Such default is not an event of default if the other indebtedness is discharged, or the acceleration is rescinded or annulled, within a period of 10 days after we receive notice
specifying the default and requiring that we discharge the other indebtedness or cause the acceleration to be rescinded or annulled. Either the trustee or the holders of at least a majority in
principal amount of outstanding debt securities of the affected series may send the notice;
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we or one of our "significant subsidiaries," if any, files for bankruptcy or certain other events in bankruptcy,
insolvency or reorganization occur; or
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any other event of default described in the applicable prospectus supplement occurs.
The
term "significant subsidiary" means each of our significant subsidiaries, if any, as defined in Regulation S-X under the Securities Act of 1933, as amended, or the Securities
Act.
Remedies if an Event of Default Occurs.
If an event of default has occurred and has not been cured, the trustee or the holders of at
least a majority
in principal amount of the debt securities of the affected series may declare the entire principal amount of all the debt securities of that series to be due and immediately payable. If an event of
default occurs because of certain events in bankruptcy, insolvency or reorganization, the principal amount of all the debt securities of that series will be automatically accelerated, without any
action by the trustee or any holder. At any time after the trustee or the holders have accelerated any series of debt securities, but before a judgment or decree for payment of the money due has been
obtained, the holders of at least a majority in principal amount of the debt securities of the affected series may, under certain circumstances, rescind and annul such acceleration.
The
trustee will be required to give notice to the holders of debt securities within 90 days after a default under the applicable indenture unless the default has been cured or
waived. The trustee may withhold notice to the holders of any series of debt securities of any default with respect to that series, except a default in the payment of the principal of or interest on
any debt security of that series, if specified responsible officers of the trustee in good faith determine that withholding the notice is in the interest of the holders.
Except
in cases of default where the trustee has some special duties, the trustee is not required to take any action under the applicable indenture at the request of any holders unless
the holders offer the trustee reasonable protection from expenses and liability. We refer to this as an "indemnity." If reasonable indemnity is provided, the holders of a majority in principal amount
of the outstanding securities of the relevant series may direct the time, method and place of conducting any lawsuit or other formal legal action seeking any remedy available to the trustee. These
majority holders may also direct the trustee in performing any other action under the applicable indenture, subject to certain limitations.
Before
you bypass the trustee and bring your own lawsuit or other formal legal action or take other steps to enforce your rights or protect your interests relating to the debt
securities, the following must occur:
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you must give the trustee written notice that an event of default has occurred and remains uncured;
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the holders of at least a majority in principal amount of all outstanding securities of the relevant series must make a
written request that the trustee take action because of the default and must offer reasonable indemnity to the trustee against the cost and other liabilities of taking that action; and
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the trustee must have not taken action for 60 days after receipt of the notice and offer of indemnity.
However,
you are entitled at any time to bring a lawsuit for the payment of money due on your debt security after its due date.
Every
year we will furnish to the trustee a written statement by certain of our officers certifying that, to their knowledge, we are in compliance with the applicable indenture and the
debt securities, or else specifying any default.
Modification of an Indenture
There are three types of changes we can make to the indentures and our debt securities:
Changes Requiring Your Approval.
First, we cannot make certain changes to the indentures and our debt securities without the approval
of each holder
of debt securities affected by the change. The following is a list of those types of changes:
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change the stated maturity of the principal of, or premium, if any, or interest on a debt security;
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reduce the principal of, or the rate of interest on, a debt security;
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reduce the amount of any premium due upon redemption;
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reduce the amount of principal of an original issue discount security payable upon acceleration of its maturity;
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change the currency or place of payment on a debt security;
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impair a holder's right to sue for payment on or after the due date of a debt security;
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in the case of a subordinated debt security, modify the subordination provisions of such debt security in a manner that is
adverse to the holders;
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reduce the percentage of holders of debt securities whose consent is needed to modify or amend an indenture;
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reduce the percentage of holders of debt securities whose consent is needed to waive compliance with certain provisions of
an indenture or certain defaults and their consequences;
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waive past defaults in the payment of principal of or premium, if any, or interest on the debt securities or in respect of
any covenant or provision that cannot be modified or amended without the approval of each holder of the debt securities; or
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modify any of the foregoing provisions.
Changes Requiring a Majority Vote.
Second, certain changes require a favorable vote by holders of debt securities owning a majority of
the principal
amount of the particular series affected. Most changes fall into this category, except for clarifying changes and certain other changes that would not materially adversely affect the holders of the
debt securities. We require the same majority vote to obtain a waiver of a past default. However, we cannot obtain a waiver of a payment default or any other aspect
12
of
an indenture or the debt securities listed in the first category described above under "Changes Requiring Your Approval" without the consent of each holder of debt securities affected
by the waiver.
Changes Not Requiring Approval.
Third, certain changes do not require any vote by holders of debt securities. These changes are limited
to
clarifications and certain other changes that would not materially adversely affect holders of the debt securities.
Further Details Concerning Voting.
Debt securities are not considered outstanding, and therefore the holders thereof are not eligible
to vote, if we
have deposited or set aside in trust for you money for their payment or redemption or if we or one of our affiliates own them. The holders of debt securities are also not eligible to vote if they have
been fully defeased, as described below under "Discharge, Defeasance and Covenant DefeasanceFull Defeasance." For original issue discount securities, we will use the
principal amount that would be due and payable on the voting date if the maturity of the debt securities were accelerated to that date because of a default.
Discharge, Defeasance and Covenant Defeasance
Discharge.
We may discharge some of our obligations to holders of any series of debt securities that have become due and payable or
will become due
and payable within one year, or are scheduled for redemption within one year, by irrevocably depositing with the trustee, in trust, funds in the applicable currency in an amount sufficient to pay the
debt securities, including any premium and interest.
Full Defeasance.
We can, under particular circumstances, effect a full defeasance of any series of debt securities. By this we mean we
can legally
release ourselves from any payment or other obligations on the debt securities if, among other things, we put in place the arrangements described below to repay those debt securities and deliver
certain certificates and opinions to the trustee:
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we must deposit in trust for your benefit and the benefit of all other direct holders of the debt securities a combination
of money or U.S. government agency notes or bonds (or, in some circumstances, depositary receipts representing these notes or bonds) that will generate enough cash to satisfy all interest, principal
and any other payment obligations on the debt securities on their various due dates;
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the current U.S. federal income tax law must be changed or an Internal Revenue Service, or IRS, ruling must be issued
permitting us to make the deposit described above, without causing you to be taxed on the debt securities any differently than if we did not make the deposit and instead repaid the debt securities
ourselves. Under current U.S. federal income tax law, the deposit and our legal release from the debt securities would be treated as though we took back your debt securities and gave you your share of
the cash and notes or bonds deposited in trust. Under such circumstances, you could recognize gain or loss on the debt securities you were deemed to have returned to us; and
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we must deliver to the trustee a legal opinion confirming the U.S. federal income tax law change or IRS ruling described
above.
If
we did accomplish full defeasance, you would have to rely solely on the trust deposit for repayment on the debt securities. You could not look to us for repayment in the unlikely
event of any shortfall. Conversely, the trust deposit would most likely be protected from any claims of our lenders and other creditors if we ever became bankrupt or insolvent. You would also be
released from any subordination provisions.
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Notwithstanding
the foregoing, the following rights and obligations will survive full defeasance:
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your right to receive payments from the trust when payments are due;
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our obligations relating to registration and transfer of debt securities and lost or mutilated certificates; and
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our obligations to maintain a payment office and to hold moneys for payment in trust.
Covenant Defeasance.
Under current U.S. federal income tax law, we can make the same type of deposit described above and be released
from some of the
restrictive covenants in the debt securities. This is called "covenant defeasance." In that event, you would lose the protection of such restrictive covenants but would gain the protection of having
money and securities set aside in trust to repay the debt securities and you would be released from any subordination provisions.
If
we accomplish covenant defeasance, the following provisions of an indenture and the debt securities would no longer apply:
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any covenants applicable to the series of debt securities and described in the applicable prospectus supplement;
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any subordination provisions; and
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certain events of default relating to breach of covenants and acceleration of the maturity of other debt set forth in any
prospectus supplement.
If
we accomplish covenant defeasance, you may still look to us for repayment of the debt securities if a shortfall in the trust deposit occurred. A shortfall may occur if one of the
remaining events of default occurs, such as our bankruptcy, causing the debt securities to become immediately due and payable. Depending on the event causing the default, you may not be able to obtain
payment of the shortfall.
Conversion and Exchange Rights
The terms and conditions, if any, upon which the debt securities are convertible into or exchangeable for common or preferred shares,
other debt securities or other property will be set forth in the applicable prospectus supplement. Such terms will include whether the debt securities are convertible into or exchangeable for common
or preferred shares, other debt securities or other property, the conversion or exchange price (or manner of calculation thereof), the conversion or exchange period, whether conversion or exchange
will be at the option of the holders, the events requiring an adjustment of the conversion or exchange price, provisions affecting conversion or exchange in the event of the redemption of such debt
securities and any restrictions on conversion or exchange, including restrictions directed at maintaining our REIT status under the Internal Revenue Code of 1986, as amended, or the Code.
Subordination
We will describe in the applicable prospectus supplement the terms and conditions, if any, upon which any series of senior subordinated
securities or junior subordinated securities is subordinated to debt securities of another series or to our other indebtedness. The terms will include a description of:
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the indebtedness ranking senior to the debt securities being offered;
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the restrictions, if any, on payments to the holders of the debt securities being offered while a default with respect to
the senior indebtedness is continuing;
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the restrictions, if any, on payments to the holders of the debt securities being offered following an event of default
with respect to such debt securities; and
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provisions requiring holders of the debt securities being offered to remit payments to holders of senior indebtedness.
Global Securities
We may issue the debt securities of a series in whole or in part in the form of one or more registered global securities that we will
deposit with a depositary or with a nominee for a depositary identified in the applicable prospectus supplement and registered in the name of such depositary or nominee. In such case, we will issue
one or more registered global securities denominated in an amount equal to the aggregate principal amount of all of the debt securities of the series to be issued and represented by such registered
global security or securities.
Unless
and until it is exchanged in whole or in part for debt securities in definitive registered form, a registered global security may not be transferred except as a
whole:
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by the depositary for such registered global security to its nominee;
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by a nominee of the depositary to the depositary or another nominee of the depositary;
or
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by the depositary or its nominee to a successor of the depositary or a nominee of the successor.
The
prospectus supplement relating to a series of debt securities will describe the specific terms of the depositary arrangement with respect to any portion of such series represented by
a registered global security. We currently anticipate that the following provisions will apply to all depositary arrangements for debt securities:
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ownership of beneficial interests in a registered global security will be limited to persons that have accounts with the
depositary for the registered global security, those persons being referred to as "participants," or persons that may hold interests through participants;
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upon the issuance of a registered global security, the depositary for the registered global security will credit, on its
book-entry registration and transfer system, the participants' accounts with the respective principal amounts of the debt securities represented by the registered global security beneficially owned by
the participants;
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any dealers, underwriters or agents participating in the distribution of the debt securities will designate the accounts
to be credited; and
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ownership of any beneficial interest in the registered global security will be shown on, and the transfer of any ownership
interest will be effected only through, records maintained by the depositary for the registered global security (with respect to interests of participants) and on the records of participants (with
respect to interests of persons holding through participants).
15
The
laws of some states may require that certain purchasers of securities take physical delivery of the securities in definitive form. These laws may limit the ability of those persons
to own, transfer or pledge beneficial interests in registered global securities.
So
long as the depositary for a registered global security, or its nominee, is the registered owner of the registered global security, the depositary or the nominee, as the case may be,
will be considered the sole owner or holder of the debt securities represented by the registered global security for all purposes under the applicable indenture. Except as set forth below, owners of
beneficial interests in a registered global security:
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will not be entitled to have the debt securities represented by a registered global security registered in their names;
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will not receive or be entitled to receive physical delivery of the debt securities in the definitive form;
and
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will not be considered the owners or holders of the debt securities under the applicable indenture.
Accordingly,
each person owning a beneficial interest in a registered global security must rely on the procedures of the depositary for the registered global security and, if the person
is not a participant, on the procedures of a participant through which the person owns its interest, to exercise any rights of a holder under the applicable indenture.
We
understand that under currently existing industry practices, if we request any action of holders or if an owner of a beneficial interest in a registered global security desires to
give or take any action that a holder is entitled to give or take under an indenture, the depositary for the registered global security would authorize the participants holding the relevant beneficial
interests to give or take the action, and those participants would authorize beneficial owners owning through those participants to give or take the action or would otherwise act upon the instructions
of beneficial owners holding through them.
We
will make payments of principal of and premium, if any, and interest, if any, on debt securities represented by a registered global security registered in the name of a depositary or
its nominee to the depositary or its nominee, as the case may be, as the registered owners of the registered global security. Neither we nor any trustee or any other agent of us or a trustee will be
responsible or liable for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the registered global security or for maintaining, supervising or
reviewing any records relating to the beneficial ownership interests.
We
expect that the depositary for any debt securities represented by a registered global security, upon receipt of any payments of principal and premium, if any, and interest, if any, in
respect of the registered global security, will immediately credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the registered global
security as shown on the records of the depositary. We also expect that standing customer instructions and customary practices will govern payments by participants to owners of beneficial interests in
the registered global security held through the participants, as is now the case with the securities held for the accounts of customers in bearer form or registered in "street name." We also expect
that any of these payments will be the responsibility of the participants.
If
the depositary for any debt securities represented by a registered global security is at any time unwilling or unable to continue as depositary or ceases to be a clearing agency
registered under the
16
Exchange
Act, we will appoint an eligible successor depositary. If we fail to appoint an eligible successor depositary within 90 days, we will issue the debt securities in definitive form in
exchange for the registered global security. In addition, we may at any time and in our sole discretion decide not to have any of the debt securities of a series represented by one or more registered
global securities. In such event, we will issue debt securities of that series in a definitive form in exchange for all of the registered global securities representing the debt securities. The
applicable trustee will register any debt securities issued in definitive form in exchange for a registered global security in such name or names as the depositary, based upon instructions from its
participants, shall instruct such trustee.
We
currently anticipate that certain registered global securities will be deposited with, or on behalf of, The Depository Trust Company, New York, New York, or DTC, and will be
registered in the name of Cede & Co., as the nominee of DTC. DTC has advised us that DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants, or direct participants, deposit with DTC. DTC also
facilitates the post-trade settlement among direct participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges
between direct participants' accounts. This eliminates the need for physical movement of securities certificates. Direct participants include both U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust & Clearing Corporation, or DTCC. DTCC is the holding
company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated
subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or
maintain a custodial relationship with a direct participant, either directly or indirectly. The rules applicable to DTC and its direct participants are on file with the SEC. The information in this
paragraph concerning DTC and DTC's book-entry system has been obtained from sources that we believe to be reliable, but we take no responsibility for the accuracy thereof. In the event registered
global securities are deposited with, or on behalf of, a depositary other than DTC, we will describe additional or differing terms of the depositary arrangements in the applicable prospectus
supplement relating to that particular series of debt securities.
We
may also issue bearer debt securities of a series in the form of one or more global securities, referred to as "bearer global securities." We currently anticipate that we will deposit
these bearer global securities with a common depositary for Euroclear Bank S.A./N.V. and Clearstream Banking, société anonyme, or with a nominee for the depositary
identified in the prospectus supplement relating to that series. The prospectus supplement relating to a series of debt securities represented by a bearer global
security will describe the specific terms and procedures, including the specific terms of the depositary arrangement and any specific procedures for the issuance of debt securities in definitive form
in exchange for a bearer global security, with respect to the portion of the series represented by a bearer global security.
Neither
we nor any trustee assumes any responsibility for the performance by DTC or any other depositary or its participants of their respective obligations, including obligations that
they have under the rules and procedures that govern their operations.
17
Governing Law
The indentures and our debt securities will be governed by and construed in accordance with the laws of the State of New York.
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST
Our declaration of trust authorizes us to issue up to an aggregate of 175,000,000 shares of beneficial interest, of which 174,700,000
are currently designated as common shares of beneficial interest, par value $.01 per share. As of June 28, 2012, we had 162,675,108 common shares issued and outstanding. In addition, in
connection with the adoption of our shareholders' rights plan (see "Description of Certain Provisions of Maryland Law and of Our Declaration of Trust and BylawsRights Plan" below),
300,000 of our shares of beneficial interest were designated as Junior Participating Preferred Shares, par value $.01 per share, or the Junior Participating Preferred Shares, none of which were
outstanding.
Our
declaration of trust contains a provision permitting our Board of Trustees, without any action by our shareholders, to amend the declaration of trust to increase or decrease the
total number of shares of beneficial interest or the number of shares of any class that we have authority to issue. Our declaration of trust further authorizes our Board of Trustees to reclassify any
unissued shares into other classes or series that we choose. We believe that giving these powers to our Board of Trustees will provide us with increased flexibility in structuring possible future
financings and acquisitions and in meeting other business needs which might arise. Although our Board of Trustees has no intention at
the present time of doing so, it could authorize us to issue a class or series that could, depending upon the terms of the class or series, delay or prevent a change in control.
Common Shares
The following is a summary of the material terms of our common shares of beneficial interest. Because it is a summary, it does not
contain all of the information that may be important to you. If you want more information, you should read our declaration of trust and bylaws, copies of which have been filed with the SEC. See "Where
You Can Find More Information." This summary is also subject to and qualified by reference to the description of the particular terms of your securities described in any applicable prospectus
supplement.
Except
as otherwise described in any applicable prospectus supplement, and subject to the preferential rights of any other class or series of shares currently outstanding or which may be
issued, and to the ownership restrictions described below, all of our common shares are entitled:
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to receive distributions on our shares if, as and when authorized by our Board of Trustees and declared by us out of
assets legally available for distribution; and
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to share ratably in our assets legally available for distribution to our shareholders in the event of our liquidation,
dissolution or winding up after payment of or adequate provision for all of our known debts and liabilities.
Subject
to the provisions of our declaration of trust regarding the restriction on the transfer of shares of beneficial interest, each outstanding common share entitles the holder to one
vote on all matters submitted to a vote of shareholders, including the election of trustees. Holders of our common shares do not have cumulative voting rights in the election of trustees.
18
Holders
of our common shares have no preference, conversion, exchange, sinking fund, redemption or appraisal rights, or preemptive rights to subscribe for any of our securities.
For
additional information about our common shares, including the potential effects that provisions in our declaration of trust and bylaws may have in delaying or preventing a change in
our control, see "Description of Certain Provisions of Maryland Law and Our Declaration of Trust and Bylaws" below.
Preferred Shares
In March 2004, our Board of Trustees authorized a dividend distribution of one preferred share purchase right for each
outstanding common share under a shareholders' rights plan. Each right currently entitles the registered holder to purchase from us 1/1000th of a Junior Participating Preferred Share (or in
certain circumstances, to receive cash, property, common shares or other securities). The rights may delay or prevent a change in our control. Additional information concerning the shareholders'
rights plan rights and the rights to purchase our Junior Participating Preferred Shares appears below under "Description of Certain Provisions of Maryland Law and of Our Declaration of Trust and
BylawsRights Plan," and a description of those rights is set forth in our registration statement on Form 8-A dated March 18, 2004, as filed with the SEC, which is
incorporated herein by reference.
The
following is a summary of the general terms and provisions of the preferred shares that we may offer by this prospectus. We may issue preferred shares in one or more series; each
series of preferred shares will have its own rights and preferences. We will describe in a prospectus supplement (1) the specific terms of the series of any preferred shares offered through
that prospectus supplement and (2) any general terms outlined in this section that will not apply to such preferred shares. Because this is a summary, it does not contain all of the information
that may be important to you. If you want more information, you should read our declaration of trust, including the applicable articles supplementary, and bylaws, copies of which have been filed with
the SEC. See "Where You Can Find More Information." This summary is also subject to and qualified by reference to the description of the particular terms of our securities described in the applicable
prospectus supplement. If indicated in a prospectus supplement, the terms of such securities may differ from those described below.
General.
Our declaration of trust authorizes our Board of Trustees to determine the preferences, conversion or other rights, voting
powers,
restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption of our authorized and unissued preferred shares.
The
preferred shares will have the distribution, liquidation, redemption, voting and conversion rights described in this section unless we state otherwise in the applicable prospectus
supplement. The liquidation preference is not indicative of the price at which the preferred shares will actually trade on or after the date of issuance. You should read the prospectus supplement
relating to the particular series of the preferred shares for specific terms, including:
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the distinctive designation of the applicable series of preferred shares and the number of shares that will constitute the
series;
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the initial offering price of such preferred shares;
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relative ranking and preference of such preferred shares as to distribution rights and rights upon liquidation,
dissolution or winding up of our affairs;
19
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the distribution rate or rates (or method of calculation) on that series, the distribution periods, the date(s) on which
distributions will be payable and whether the distributions will be cumulative, noncumulative or partially cumulative, and, if cumulative, the dates from which the distributions will start to
cumulate;
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any redemption or sinking fund provisions of that series;
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any voting rights;
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any conversion or exchange provisions;
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any other specific terms, preferences, rights, limitations or restrictions of such preferred shares;
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any limitations on issuance of any series of preferred shares ranking senior to or on a parity with such preferred shares
as to distribution rights and rights upon liquidation, dissolution or winding up of our affairs;
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any procedures for any auction and remarketing;
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any listing of such preferred shares on any securities exchange; and
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any limitations on record or beneficial ownership and restrictions on transfer, including those as may be appropriate to
preserve our status as a REIT.
Holders
of our preferred shares have no preemptive rights to subscribe for any of our securities.
If
material, we will discuss in the applicable prospectus supplement U.S. federal income tax considerations applicable to the preferred shares offered by such prospectus supplement.
The
issuance of preferred shares, the issuance of rights to purchase preferred shares or the possibility of the issuance of preferred shares or such rights could have the effect of
delaying or preventing a change in our control. In addition, the rights of holders of common shares will be subject to, and may be adversely affected by, the rights of holders of any preferred shares
that we have issued or may issue in the future.
For
additional information about our preferred shares, including the potential effects that provisions in our declaration of trust and bylaws may have in delaying or preventing a change
in our control, see "Description of Certain Provisions of Maryland Law and Our Declaration of Trust and Bylaws" below.
As
described under "Description of Depositary Shares," we may, at our option, elect to offer depositary shares evidenced by depositary receipts. If we elect to do this, each depositary
receipt will represent a fractional interest in a share of the particular series of the preferred shares issued and deposited with a depositary. The applicable prospectus supplement will specify that
fractional interest.
Rank.
Unless our Board of Trustees otherwise determines and we so specify in the applicable prospectus supplement, we expect that the
preferred
shares will, with respect to distribution rights and rights upon liquidation, dissolution or winding up of our affairs, rank senior to all our common shares.
20
Distributions.
Holders of preferred shares of each series will be entitled to receive cash and/or share distributions at the rates and
on the dates
shown in the applicable prospectus supplement. We will pay each distribution to holders of record as they appear on our share transfer books on the record dates fixed by our Board of Trustees. In the
case of preferred shares represented by depositary receipts, the records of the depositary referred to under "Description of Depositary Shares" will determine the persons to whom distributions are
payable.
We
will not authorize or pay any distributions on a series of preferred shares or set aside funds for the payment of distributions if restricted or prohibited by law, or if the terms of
any of our agreements, including agreements relating to our indebtedness or our other series of preferred shares, prohibit that authorization, payment or setting aside of funds or provide that the
authorization, payment or setting aside of funds is a breach of or a default under that agreement. We are now, and may in the future
become, a party to agreements which restrict or prevent the payment of distributions on, or the purchase or redemption of, our shares of beneficial interest, including preferred shares. These
restrictions may be indirect, such as covenants which require us to maintain specified levels of net worth or assets.
Distributions
on any series of preferred shares may be cumulative, noncumulative or partially cumulative, as specified in the applicable prospectus supplement. Cumulative distributions
will be cumulative from and after the date shown in the applicable prospectus supplement. If our Board of Trustees fails to authorize a distribution that is noncumulative, the holders of the
applicable series will have no right to receive, and we will have no obligation to pay, a distribution in respect of the applicable distribution period, whether or not distributions on that series are
declared payable in the future.
We
refer to our common shares or other shares, now or hereafter issued, that rank junior to an applicable series of preferred shares with respect to distribution rights as junior shares.
To the extent that the applicable series is entitled to a cumulative distribution, we may not declare or pay any distributions, or set aside any funds for the payment of distributions, on junior
shares, or redeem or otherwise acquire junior shares, unless we also have declared and either paid or set aside for payment the full cumulative distributions on such series of preferred shares and on
all our other series of preferred shares ranking senior to or on a parity with such series of preferred shares for all past distribution periods. The preceding sentence does not
prohibit:
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distributions payable in junior shares or options, warrants or rights to subscribe for or purchase junior shares;
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conversions into or exchanges for junior shares;
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pro rata offers to purchase or a concurrent redemption of all, or a pro rata portion of, the outstanding preferred shares
of such series and any other class or series of shares ranking on a parity with such series of preferred shares with respect to distribution rights and rights upon our liquidation, dissolution or
winding up; or
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our redemption, purchase or other acquisition of shares under incentive, benefit or share purchase plans for officers,
trustees or employees or others performing or providing similar services, for the purposes of enforcing restrictions upon ownership and transfer of our equity securities contained in our declaration
of trust or bylaws or our redemption or other acquisition of rights issued under our shareholder rights plan or any successor plan we adopt.
To
the extent an applicable series is noncumulative, we need only declare, and pay or set aside for payment, the distribution for the then current distribution period, before making
distributions on or acquiring junior shares.
21
Unless
full cumulative distributions on a series of preferred shares have been or are contemporaneously declared and either paid or set aside for payment for all past distribution
periods, no distributions (other than in junior shares) may be declared or paid or set aside for payment on any other series of preferred shares ranking on a parity with such series with respect to
distribution rights. When distributions are not paid in full upon a series of preferred shares and any other series ranking on a parity with such series with respect to distribution rights, all
distributions declared upon such series and any series ranking on a parity with such series with respect to distribution rights shall be allocated pro rata so that the amount of distributions declared
per share on such series and such other shares shall in all cases bear to each other the same ratio that the accrued distributions per share on such series and such other shares bear to each other.
Unless
otherwise specified in the applicable prospectus supplement, we will credit any distribution payment made on an applicable series, including any capital gain distribution, first
against the earliest accrued but unpaid distribution due with respect to the series.
Redemption.
We may have the right or may be required to redeem one or more series of preferred shares, as a whole or in part, in each
case upon the
terms, if any, and at the times and at the redemption prices shown in the applicable prospectus supplement.
If
a series of preferred shares is subject to mandatory redemption, we will specify in the applicable prospectus supplement the number of shares we are required to redeem, when those
redemptions start, the redemption price and any other terms and conditions affecting the redemption. The redemption price will include all accrued and unpaid distributions, except in the case of
noncumulative preferred shares. The redemption price may be payable in cash or other property, as specified in the applicable prospectus supplement. If the redemption price for preferred shares of any
series is payable only from the net proceeds of our issuance of shares of beneficial interest, the terms of the preferred shares may provide that, if no shares of beneficial interest shall have been
issued or to the extent the net proceeds from any issuance are insufficient to pay in full the aggregate redemption price then due, the preferred
shares will automatically and mandatorily be converted into shares of beneficial interest pursuant to conversion provisions specified in the applicable prospectus supplement.
Liquidation Preference.
The applicable prospectus supplement will specify the liquidation preference of the applicable series. Upon our
voluntary or
involuntary liquidation, dissolution or winding up of our affairs, before any distribution may be made to the holders of our common shares or any other shares of beneficial interest ranking junior in
the distribution of assets upon any liquidation, dissolution or winding up of our affairs, to the applicable series, the holders of that series will be entitled to receive, out of our assets legally
available for distribution to shareholders, liquidating distributions in the amount of the liquidation preference, plus an amount equal to all distributions accrued and unpaid. In the case of a
noncumulative applicable series, accrued and unpaid distributions include only the then current distribution period. If liquidating distributions shall have been made in full to all holders of
preferred shares, our remaining assets will be distributed among the holders of any other shares of beneficial interest ranking junior to the preferred shares upon liquidation, according to their
rights and preferences and in each case according to their number of shares.
If,
upon any voluntary or involuntary liquidation, dissolution or winding up of our affairs, our available assets are insufficient to pay the amount of the liquidating distributions on
all outstanding shares of that series and the corresponding amounts payable on all shares of beneficial interest ranking on a parity in the distribution of assets with that series, then the holders of
that series and all other equally ranking shares of beneficial interest shall share ratably in the distribution in proportion to the full liquidating distributions to which they would otherwise be
entitled.
22
After
payment of the full amount of the liquidating distribution to which they are entitled, the holders of a series of preferred shares will have no right or claim to any of our
remaining assets. Neither the sale, lease, transfer or conveyance of all or substantially all of our property or business, nor the merger or consolidation of us into or with any other entity or the
merger or consolidation of any other entity into or with us or a statutory share exchange by us, shall be deemed to constitute our dissolution, liquidation or winding up of our affairs. In determining
whether a distribution (other than upon voluntary or involuntary dissolution), by dividend, redemption or other acquisition of shares 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 the holders of a series of preferred shares will not be added to our total
liabilities.
Voting Rights.
Holders of our preferred shares will not have any voting rights, except as described below or as otherwise from time to
time specified
in the applicable prospectus supplement.
Unless
otherwise specified in the applicable prospectus supplement, holders of our preferred shares (voting separately as a class with all other series of preferred shares with similar
voting rights) will be entitled to elect two additional trustees to our Board of Trustees at our next annual meeting of shareholders and at each subsequent annual meeting if at any time distributions
on the applicable series are in arrears for six consecutive quarterly periods. If the applicable series has a cumulative distribution, the right to elect additional trustees described in the preceding
sentence shall remain in effect until we declare or pay and set aside for payment all distributions accrued and unpaid on the applicable series. If the applicable series does not have a cumulative
distribution, the right to elect additional trustees described above shall remain in effect until we declare or pay and set aside for payment distributions accrued and unpaid on four consecutive
quarterly periods on the applicable series. In the event the preferred shareholders are so entitled to elect trustees, the entire Board of Trustees will be increased by two trustees.
Unless
otherwise provided for in an applicable series, so long as any preferred shares are outstanding, we may not, without the affirmative vote or consent of a majority of the shares of
each affected series of preferred shares outstanding at that time:
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authorize, create or increase the authorized or issued amount of any class or series of shares of beneficial interest
ranking senior to that series of preferred shares with respect to distribution and liquidation rights;
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reclassify any authorized shares of beneficial interest into a series of shares of beneficial interest ranking senior to
that series of preferred shares with respect to distribution and liquidation rights;
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create, authorize or issue any security or obligation convertible into or evidencing the right to purchase any shares of
beneficial interest ranking senior to that series of preferred shares with respect to distribution and liquidation rights; and
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amend, alter or repeal the provisions of our declaration of trust or any articles supplementary relating to that series of
preferred shares, whether by merger, consolidation or otherwise, that materially and adversely affects the series of preferred shares.
The
authorization, creation or increase of the authorized or issued amount of any class or series of shares of beneficial interest ranking on parity or junior to a series of preferred shares with
respect to distribution and liquidation rights will not be deemed to materially and adversely affect that series. Further, with respect to any merger, consolidation or similar event, so long as a
series of preferred shares remains
23
outstanding
with the terms thereof materially unchanged or the holders of shares of that series receive shares of the successor with substantially identical rights, taking into account that, upon the
occurrence of such event, we may not be the surviving entity, the occurrence of such event will not be deemed to materially and adversely affect that series.
The
foregoing voting provisions will not apply if all of the outstanding shares of the series of preferred shares with the right to vote have been redeemed or called for redemption and
sufficient funds have been deposited in trust for the redemption either at or prior to the act triggering these voting rights.
As
more fully described under "Description of Depositary Shares" below, if we elect to issue depositary shares, each representing a fraction of a share of a series, each depositary share
will in effect be entitled to a fraction of a vote.
Conversion and Exchange Rights.
We will describe in the applicable prospectus supplement the terms and conditions, if any, upon which
you may, or we
may require you to, convert or exchange shares of any series of preferred shares into common shares or any other class or series of shares of beneficial interest or debt securities or other property.
The terms will include the number of common shares or other securities or property into which the preferred shares are convertible or exchangeable, the conversion or exchange price (or the manner of
determining it), the conversion or exchange period, provisions as to whether conversion or exchange will be at the option of the holders of the series or at our option, the events requiring an
adjustment of the conversion or exchange price and provisions affecting conversion or exchange upon the redemption of shares of the series.
Transfer Agent and Registrar
The transfer agent and registrar for our common shares is Wells Fargo Bank, National Association. The transfer agent and registrar for
each class or series of preferred shares that may be issued and sold pursuant to this prospectus will be designated in the applicable prospectus supplement.
DESCRIPTION OF DEPOSITARY SHARES
General
The following is a summary of the material provisions of any deposit agreement and of the depositary shares and depositary receipts
representing depositary shares. Because it is a summary, it does not contain all of the information that may be important to you. If you want more information, you should read the form of deposit
agreement and depositary receipts which will be filed as exhibits to the registration statement of which this prospectus is a part prior to an offering of depositary shares. See "Where You Can Find
More Information." This summary is also subject to and qualified by reference to the descriptions of the particular terms of our securities described in the applicable prospectus supplement. If
indicated in a prospectus supplement, the terms of such securities may differ from those described below.
We
may, at our option, elect to offer fractional interests in preferred shares, rather than whole preferred shares. If we exercise this option, we will appoint a depositary to issue
depositary receipts representing those fractional interests. Preferred shares of each series represented by depositary shares will be deposited under a separate deposit agreement between us and the
depositary. The prospectus supplement relating to a series of depositary shares will show the name and address of the depositary. Subject to the terms of the applicable deposit agreement, each owner
of depositary shares will be entitled to all of the distribution, voting, conversion, redemption, liquidation and other rights and preferences of the preferred shares represented by those depositary
shares.
24
Depositary
receipts issued pursuant to the applicable deposit agreement will evidence ownership of depositary shares. Upon surrender of depositary receipts at the office of the
depositary, and upon payment of the charges provided in and subject to the terms of the deposit agreement, a holder of depositary shares will be entitled to receive the preferred shares underlying the
surrendered depositary receipts.
Distributions
A depositary will be required to distribute all cash distributions received in respect of the applicable preferred shares to the record
holders of depositary receipts evidencing the related depositary shares, which will be the same date as the record date for determining holders of preferred shares entitled to receive the
distribution, in proportion to the number of depositary receipts owned by the holders. Fractions will be rounded down to the nearest whole cent.
If
the distribution is other than in cash, a depositary will be required to distribute property received by it to the record holders of depositary receipts entitled thereto, unless the
depositary determines that it is not feasible to make the distribution. In that case, the depositary may, with our approval, sell the property and distribute the net proceeds from the sale to the
holders.
Depositary
shares that represent preferred shares converted or exchanged will not be entitled to distributions. The deposit agreement will also contain provisions relating to the manner
in which any subscription or similar rights we offer to holders of the preferred shares will be made available to holders of depositary shares. All distributions will be subject to obligations of
holders to file proofs, certificates and other information and to pay certain charges and expenses to the depositary.
Withdrawal of Preferred Shares
You may receive the number of whole preferred shares and any money or other property represented by your depositary receipts after
surrendering the depositary receipts at the corporate trust office of the depositary. Partial preferred shares will not be issued. If the depositary
shares that you surrender exceed the number of depositary shares that represent the number of whole preferred shares you wish to withdraw, then the depositary will deliver to you at the same time a
new depositary receipt evidencing the excess number of depositary shares. Once you have withdrawn your preferred shares, you will not be entitled to re-deposit those preferred shares under the deposit
agreement in order to receive depositary shares. We do not expect that there will be any public trading market for withdrawn preferred shares.
Redemption of Depositary Shares
If we redeem a series of the preferred shares underlying the depositary shares, the depositary will redeem those shares from the
proceeds received by it. The depositary will mail notice of redemption not less than 30 and not more than 60 days before the date fixed for redemption to the record holders of the depositary
receipts evidencing the depositary shares we are redeeming at their addresses appearing in the depositary's books. The redemption price per depositary share will be equal to the applicable fraction of
the redemption price per share payable with respect to the series of the preferred shares. The redemption date for depositary shares will be the same as that of the preferred shares. If we are
redeeming less than all of the depositary shares, the depositary will select the depositary shares we are redeeming by lot or pro rata as the depositary may determine.
After
the date fixed for redemption, the depositary shares called for redemption will no longer be deemed outstanding. All rights of the holders of the depositary shares and the related
depositary receipts
25
will
cease at that time, except the right to receive the money or other property to which the holders of depositary shares were entitled upon redemption. Receipt of the money or other property is
subject to surrender to the depositary of the depositary receipts evidencing the redeemed depositary shares.
Voting of the Preferred Shares
Upon receipt of notice of any meeting at which the holders of the applicable preferred shares are entitled to vote, a depositary will
be required to mail the information contained in the notice of meeting to the record holders of the applicable depositary receipts. Each record holder of depositary receipts on the record date, which
will be the same date as the record date for voting preferred shares, will be entitled to instruct the depositary as to the exercise of the voting rights pertaining to the amount of preferred shares
represented by the holder's depositary shares. If you do not instruct the depositary how to vote your shares, the depositary will abstain from voting those shares. The depositary will not be
responsible for any failure to carry out an instruction to vote or for the effect of any such vote made so long as the action or inaction of the depositary is in good faith and is not the result of
the depositary's gross negligence or willful misconduct.
Liquidation Preference
Upon our liquidation, whether voluntary or involuntary, each holder of depositary shares will be entitled to the fraction of the
liquidation preference accorded each preferred share represented by the depositary shares, as described in the applicable prospectus supplement.
Conversion or Exchange of Preferred Shares
The depositary shares will not themselves be convertible into or exchangeable for common shares, preferred shares or any of our other
securities or property. Nevertheless, if so specified in the applicable prospectus supplement, the depositary receipts may be surrendered by holders to the applicable depositary with written
instructions to it to instruct us to cause conversion or exchange of the preferred shares represented by the depositary shares. Similarly, if so specified in the applicable prospectus supplement, we
may require you to surrender all of your depositary receipts to the applicable depositary upon our requiring the conversion or exchange of the preferred shares represented by the depositary shares. We
will agree that, upon receipt of the instruction and any amounts payable in connection with the conversion or exchange, we will cause the conversion or exchange using the same procedures as those
provided for delivery of preferred shares to effect the conversion or exchange. If you are converting or exchanging only a part of the depositary shares, the depositary will issue you a new depositary
receipt for any unconverted or unexchanged depositary shares.
Taxation
As an owner of depositary shares, you will be treated for U.S. federal income tax purposes as if you were an owner of the preferred
shares represented by the depositary shares. Therefore, you will be required to take into account for U.S. federal income tax purposes income and deductions to which you would be entitled if you were
a holder of the underlying series of preferred shares. In addition:
-
-
no gain or loss will be recognized for U.S. federal income tax purposes upon the withdrawal of preferred shares in
exchange for depositary shares provided in the deposit agreement;
-
-
the tax basis of each preferred share to you as exchanging owner of depositary shares will, upon exchange, be the same as
the aggregate tax basis of the depositary shares exchanged for the preferred shares; and
26
-
-
if you held the depositary shares as a capital asset at the time of the exchange for preferred shares, the holding period
for the preferred shares will include the period during which you owned the depositary shares.
Amendment and Termination of a Deposit Agreement
We and the applicable depositary are permitted to amend the provisions of the depositary receipts and the deposit agreement. However,
the holders of at least a majority of the
applicable depositary shares then outstanding must approve any amendment that adds or increases fees or charges or prejudices an important right of holders. Every holder of an outstanding depositary
receipt at the time any amendment becomes effective, by continuing to hold the receipt, will be bound by the applicable deposit agreement, as amended.
Any
deposit agreement may be terminated by us upon not less than 30 days' prior written notice to the applicable depositary if (1) the termination is necessary to preserve
our status as a REIT or (2) a majority of each series of preferred shares affected by the termination consents to the termination. When either event occurs, the depositary will be required to
deliver or make available to each holder of depositary receipts, upon surrender of the depositary receipts held by the holder, the number of whole or fractional preferred shares as are represented by
the depositary shares evidenced by the depositary receipts, together with any other property held by the depositary with respect to the depositary receipts. In addition, a deposit agreement will
automatically terminate if:
-
-
all depositary shares have been redeemed;
-
-
there shall have been a final distribution in respect of the related preferred shares in connection with our liquidation
and the distribution has been made to the holders of depositary receipts evidencing the depositary shares underlying the preferred shares; or
-
-
each related preferred share shall have been converted or exchanged into securities not represented by depositary shares.
Charges of a Depositary
We will pay all transfer and other taxes and governmental charges arising solely from the existence of a deposit agreement. In
addition, we will pay the fees and expenses of a depositary in connection with the initial deposit of the preferred shares and any redemption of preferred shares. However, holders of depositary
receipts will pay any transfer or other governmental charges and the fees and expenses of a depositary for any duties the holders request to be performed that are outside of those expressly provided
for in the applicable deposit agreement.
Resignation and Removal of Depositary
A depositary may resign at any time by delivering to us notice of its election to do so. In addition, we may at any time remove a
depositary. Any resignation or removal will take effect when we appoint a successor depositary and it accepts the appointment. We must appoint a successor depositary within 60 days after
delivery of the notice of resignation or removal. A depositary must be a bank or trust company having its principal office in the United States that has a combined capital and surplus of at least
$50 million.
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Miscellaneous
The depositary will be required to forward to holders of depositary receipts any reports and communications from us that it receives
with respect to the related preferred shares. Holders of depository receipts will be able to inspect the transfer books of the depository and the list of holders of depositary receipts upon reasonable
notice.
Neither
we nor the depositary will be liable if the depositary is prevented from or delayed in performing its obligations under a deposit agreement by law or any circumstances beyond its
control. Our obligations and those of the depositary under a deposit agreement will be limited to performing duties in good faith and without gross negligence or willful misconduct. Neither we nor the
depositary will be obligated to prosecute or defend any legal proceeding in respect of any depositary receipts, depositary shares or related preferred shares unless satisfactory indemnity is
furnished. We and the depositary will be permitted to rely on written advice of counsel or accountants, on information provided by persons presenting preferred shares for deposit, by holders of
depositary receipts, or by other persons believed in good faith to be competent to give the information, and on documents believed in good faith to be genuine and signed by a proper party.
If
the depositary receives conflicting claims, requests or instructions from any holders of depositary receipts, on the one hand, and us, on the other hand, the depositary shall be
entitled to act on the claims, requests or instructions received from us.
DESCRIPTION OF WARRANTS
The following is a summary of the material terms of our warrants and the warrant agreement. Because it is a summary, it does not
contain all of the information that may be important to you. If you want more information, you should read the forms of warrants and the warrant agreement which will be filed as exhibits to the
registration statement of which this prospectus is a part. See "Where You Can Find More Information." This summary is also subject to and qualified by reference to the descriptions of the particular
terms of our securities described in the applicable prospectus supplement. If indicated in a prospectus supplement, the terms of such securities may differ from those described below.
We
may issue, together with any other securities being offered or separately, warrants entitling the holder to purchase from or sell to us, or to receive from us the cash value of the
right to purchase or sell, debt securities, preferred shares, depositary shares or common shares. We and a warrant agent will enter a warrant agreement pursuant to which the warrants will be issued.
The warrant agent will act solely as our agent in connection with the warrants and will not assume any obligation or relationship of agency or trust for or with any holders or beneficial owners of
warrants. We will file a copy of the forms of warrants and the warrant agreement with the SEC at or before the time of the offering of the applicable series of warrants.
In
the case of each series of warrants, the applicable prospectus supplement will describe the terms of the warrants being offered thereby. These include the following, if
applicable:
-
-
the offering price;
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-
the currencies in which such warrants are being offered;
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-
the number of warrants offered;
-
-
the securities underlying the warrants;
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-
-
the exercise price, the procedures for exercise of the warrants and the circumstances, if any, that will cause the
warrants to be automatically exercised;
-
-
the date on which the warrants will expire;
-
-
the rights, if any, we have to redeem the warrants;
-
-
the name of the warrant agent; and
-
-
the other terms of the warrants.
If
material, we will discuss in the applicable prospectus supplement U.S. federal income tax considerations applicable to the warrants offered by such prospectus supplement.
Warrants
may be exercised at the appropriate office of the warrant agent or any other office indicated in the applicable prospectus supplement. Before the exercise of warrants, holders
will not have any of the rights of holders of the securities purchasable upon exercise and will not be entitled to payments made to holders of those securities.
The
warrant agreement may be amended or supplemented without the consent of the holders of the warrants to which the amendment or supplement applies to effect changes that are not
inconsistent with the provisions of the warrants and that do not adversely affect the interests of the holders of the warrants. However, any amendment that materially and adversely alters the rights
of the holders of warrants will not be effective unless the holders of at least a majority of the applicable warrants then outstanding approve the amendment. Every holder of an outstanding warrant at
the time any amendment becomes effective, by continuing to hold the warrant, will be bound by the applicable warrant agreement as amended thereby. The prospectus supplement applicable to a particular
series of warrants may provide that certain provisions of the warrants, including the securities for which they may be exercisable, the exercise price and the expiration date may not be altered
without the consent of the holder of each warrant.
DESCRIPTION OF CERTAIN PROVISIONS OF MARYLAND LAW
AND OF OUR DECLARATION OF TRUST AND BYLAWS
We are organized as a REIT under Maryland law. The following is a summary of our declaration of trust and bylaws and several provisions
of Maryland law. Because it is a summary, it does not contain all the information that may be important to you. If you want more information, you should read our entire declaration of trust and
bylaws, copies of which we have filed with the SEC, and the provisions of Maryland law.
Trustees
Our declaration of trust and bylaws provide that our Board of Trustees will establish the number of trustees. The number of trustees
constituting our entire Board of Trustees may be increased or decreased from time to time only by a vote of the trustees, provided however that the tenure of office of a trustee will not be affected
by any decrease in the number of trustees. Any vacancy on the Board of Trustees may be filled only by a majority of the remaining trustees, even if the remaining trustees do not constitute a quorum.
Any trustee elected to fill a vacancy will hold office for the remainder of the full term of the class of trustees in which the vacancy occurred or was created and until a successor is elected and
qualifies.
29
Our
declaration of trust and bylaws divide our Board of Trustees into three classes. Shareholders elect the trustees of each class for three year terms upon the expiration of their
current terms. Shareholders elect only one class of trustees each year.
We
believe that classification of our Board of Trustees helps to assure the continuity of our business strategies and policies. There is no cumulative voting in the election of trustees.
Our bylaws provide that a plurality of all the votes cast at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to elect a trustee in an uncontested election
and a majority of all the shares entitled to vote at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to elect a trustee in a contested election (which is an
election at which the number of nominees exceeds the number of trustees to be elected at the meeting).
The
classified board provision could have the effect of making the replacement of our incumbent trustees more time consuming and difficult. At least two annual meetings of shareholders
are generally required to effect a change in a majority of our Board of Trustees.
Under
our bylaws, our trustees are qualified as "independent trustees" or "managing trustees," and our bylaws require that (except for temporary periods due to vacancies), a majority of
the trustees holding office will at all times be independent trustees. For those purposes, an "independent trustee" is not involved in our day to day activities, is not an employee of our manager,
RMR, and qualifies as independent under our declaration of trust, if applicable, and applicable rules of the NYSE and the SEC. A "managing trustee" is a trustee who is not an independent trustee and
who has been an employee of RMR or has been involved in our day to day activities for at least one year prior to his or her election. Our Board of Trustees is currently composed of three independent
trustees and two managing trustees.
Our
declaration of trust and bylaws provide that a trustee may be removed with or without cause by the affirmative vote of the holders of not less than two-thirds of our common shares
entitled to vote in the election of trustees. This provision precludes shareholders from removing our incumbent trustees unless they can obtain a substantial affirmative vote of shares. Under our
bylaws, a trustee may also be removed with or without cause by the affirmative vote of all the remaining trustees.
Advance Notice of Trustee Nominations and New Business
Shareholder recommendations for nominees.
A responsibility of our Nominating and Governance Committee is to consider candidates for
election as
trustees who are properly recommended by shareholders. To be considered by our Nominating and Governance Committee, a shareholder recommendation for a nominee must be made by written notice to the
chair of our Nominating and Governance Committee and our secretary. Any such notice should contain or be accompanied by the information and documents with respect to such recommended nominee and
shareholder that such shareholder believes to be relevant or helpful to the Nominating and Governance Committee's deliberations. Our Nominating and Governance Committee may request additional
information about the shareholder nominee or about a recommending shareholder. Shareholder recommendations will be considered by the Nominating and Governance Committee in its discretion.
The
preceding paragraph applies only to shareholder recommendations for nominees. A shareholder nomination must be made in accordance with the provisions of our bylaws, including the
procedures discussed below.
Shareholder nominations and proposals at annual meetings.
Our bylaws require compliance with certain procedures for a shareholder to
properly propose
a nominee for election to our Board of Trustees or other business. If a shareholder who is entitled to do so under our bylaws wishes to propose a
30
person
for election to our Board of Trustees, that shareholder must provide a written notice to our secretary. The shareholder or shareholders giving notice must (1) have held, individually or
in the aggregate, at least 3% of our shares entitled to vote at the meeting on the election continuously for at least three years from the date the shareholder gives its advance notice, and
continuously hold such shares through and including the time of the meeting, (2) each be a shareholder of record at the time of giving notice through and including the time of the meeting,
(3) each be entitled to make nominations and to vote at the meeting on such election and (4) have complied in all respects with the notice
procedures for shareholder nominations and proposals of other business set forth in our bylaws. If a shareholder who is entitled to do so under our bylaws wishes to propose other business to be
considered by the shareholders at an annual meeting of shareholders, other than the nomination of individuals for election to the Board of Trustees, that shareholder must provide a written notice to
our secretary. The shareholder giving notice must (1) have continuously held at least $2,000 in market value (as determined under our bylaws), or 1%, of our shares entitled to vote at the
meeting on the proposal of other business for at least one year from the date the shareholder gives its advance notice and continuously hold such shares through and including the time of the meeting,
(2) be a shareholder of record at the time of giving notice through and including the time of the meeting, (3) be entitled to propose such business and to vote at the meeting on the
proposal for such business, and (4) have complied in all respects with the notice procedures for shareholder nominations and proposals of other business set forth in our bylaws.
The
notice must set forth detailed specified information about the proposed nominee and the proposed nominee's affiliates and associates, the shareholder making the nomination or other
proposal of business and affiliates and associates of that shareholder, and provide to the extent known by the shareholder giving the notice, the name and address of any other shareholder supporting
the shareholder's nomination or proposal. With respect to nominations, the notice must state whether the nominee is proposed for nomination as an independent trustee or a managing trustee. In
addition, at the same time as or prior to the submission of a shareholder nomination or proposal for consideration at a meeting of our shareholders that, if approved and implemented by us, would cause
us to be in breach of any covenant in or in default under any debt instrument or agreement or other material agreement of ours or any subsidiary of ours, the shareholder must submit to our secretary
(1) evidence satisfactory to our Board of Trustees of the lender's or contracting party's willingness to waive the breach of covenant or default, or (2) a detailed plan for repayment of
the indebtedness or curing the contractual breach or default and satisfying any resulting damage claim, specifically identifying the actions to be taken or the source of funds, which plan must be
satisfactory to our Board of Trustees in its discretion, and evidence of the availability to us of substitute credit or contractual arrangements similar to the credit or contractual arrangements which
are implicated by the shareholder nomination or other proposal that are at least as favorable to us, as determined by our Board of Trustees in its discretion. Additionally, if (1) the
submission of a shareholder nomination or proposal of other business to be considered at a shareholders meeting could not be considered or, if approved, implemented by us without our or any subsidiary
of ours, or the proponent shareholder, the nominee, the holder of proxies or their respective affiliates or associates filing with or otherwise notifying or obtaining the consent, approval or other
action of any governmental or regulatory body, or a governmental action, or (2) such shareholder's ownership of our shares or any solicitation of proxies or votes or holding or exercising
proxies by such shareholder, the proposed nominee or their respective affiliates or associates would require governmental action, then, at the same time as the submission of the shareholder nomination
or proposal of other business, the proponent shareholder shall submit to our secretary (x) evidence satisfactory to our Board of Trustees that any and all governmental action has been given or
obtained, including, without limitation, such evidence as our Board of Trustees may require so that any nominee may be determined to satisfy any suitability or other requirements or (y) if such
evidence was not obtainable from a governmental or regulatory body by such time despite the shareholder's diligent and best efforts, a detailed plan for making or obtaining the governmental action
prior to the election of the nominee or the implementation of the proposal for other business, which plan must be satisfactory to our Board of Trustees in its discretion.
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Under
our bylaws, in order for a shareholder's notice of nominations for trustee or other business to be properly brought before an annual meeting of shareholders, the shareholder must
deliver the notice to our secretary at our principal executive offices not later than the close of business on the 120th day, and not earlier than the close of business on the 150th day,
prior to the first anniversary of the date of the proxy statement for the preceding year's annual meeting. If the date of the annual meeting is more than 30 days earlier or later than the first
anniversary of the date of the preceding year's annual meeting, other time requirements may be applicable to shareholder notices, as specified in our bylaws. In addition, no shareholder may give a
notice to nominate or propose other business unless the shareholder holds a certificate for all our shares of beneficial interest owned by such shareholder during all applicable times described in the
first paragraph of this section "Shareholder nominations and other proposals at annual meetings," and a copy of each certificate held by the shareholder must accompany the shareholder's
notice. Also, we may request that any shareholder proposing a nominee for election to our Board of Trustees or other business at a meeting of our shareholders provide us, within three business days of
such request, with written verification of the information submitted by the shareholder as well as other information.
The
foregoing description of the procedures for a shareholder to propose a nomination for election to our Board of Trustees or other business for consideration at an annual meeting is
only a summary and is not complete. Our bylaws, including the provisions which concern the requirements for shareholder nominations and other proposals, are incorporated by reference as an exhibit to
the registration statement of which this prospectus is a part.
Meetings of Shareholders; Actions by Written Consent
Meetings of shareholders may be called only by our Board of Trustees.
Whenever
shareholders are required or permitted to take any action by a vote, the action may only be taken by a vote at a shareholders meeting. Under our bylaws, shareholders do not have
the right to take any action by written consent instead of a vote at a shareholders meeting.
Liability and Indemnification of Trustees and Officers
To the maximum extent permitted by Maryland law, our declaration of trust includes provisions limiting the liability of our present and
former trustees and officers for money damages and obligating us to indemnify our present and former trustees and officers against any claim or liability to which they may become subject by reason of
their status or actions as our present or former trustees or officers.
Our
declaration of trust also obligates us to pay or reimburse the people described above for reasonable expenses in advance of final disposition of a proceeding.
The
laws relating to Maryland real estate investment trusts, or the Maryland REIT Law, permit a REIT formed under Maryland law to indemnify and advance expenses to its trustees,
officers, employees and agents to the same extent permitted by the Maryland General Corporation Law, or the MGCL, for directors and officers of Maryland corporations. The MGCL permits a corporation to
indemnify its present and former directors and officers against judgments, penalties, fines, settlements and reasonable expenses incurred in connection with any proceeding to which they may be made,
or are threatened to be made, a party by reason of their service in those capacities. However, a Maryland corporation is not permitted to provide this type of indemnification if the following is
established:
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the act or omission of the director or officer was material to the matter giving rise to the proceeding and was committed
in bad faith or was the result of active and deliberate dishonesty;
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the director or officer actually received an improper personal benefit in money, property or services;
or
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in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission
was unlawful.
Additionally,
a Maryland corporation may not indemnify a director or officer for an adverse judgment in a suit by or in the right of that 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. The MGCL permits a corporation to advance reasonable expenses
to a director or officer upon the corporation's receipt of the following:
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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
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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 this standard of conduct was not met.
We
have also entered into indemnification agreements with our trustees and our officers providing for procedures for indemnification by us to the fullest extent permitted by law and
advancements by us of certain expenses and costs relating to claims, suits or proceedings arising from their service to us.
The
SEC has expressed the opinion that indemnification of trustees, officers or persons otherwise controlling a company for liabilities arising under the Securities Act is against public
policy and is therefore unenforceable.
Shareholder Liability
Under the Maryland REIT Law, a shareholder is not personally liable for the obligations of a REIT formed under Maryland law solely as a
result of his status as a shareholder. Our declaration of trust provides that no shareholder will be liable for any debt, claim, demand, judgment or obligation of any kind of, against or with respect
to us by reason of being a shareholder. Despite these facts, our legal counsel has advised us that in some jurisdictions the possibility exists that shareholders of a trust entity such as ours may be
held liable for acts or obligations of the trust. While we intend to conduct our business in a manner designed to minimize potential shareholder liability, we
can give no assurance that you can avoid liability in all instances in all jurisdictions. We have not provided in the past and do not intend to provide insurance covering these risks to our
shareholders.
Our
declaration of trust and bylaws provide that any shareholder who violates the declaration of trust or bylaws will indemnify us and hold us harmless from and against all costs,
expenses, penalties, fines and other amounts, including attorneys' and other professional fees, arising from the shareholder's violation, together with interest on such amounts. Our bylaws further
provide that matters for which a shareholder is liable and obligated to indemnify and hold us harmless include, to the fullest extent permitted by law, any breach or failure to fully comply with any
covenant, condition or provision of our declaration of trust or bylaws, including the advance notice provisions pertaining to shareholder nominations and other proposals, and these provisions of our
declaration of trust and bylaws apply to derivative actions brought against us in which the shareholder is not the prevailing party.
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Disputes by Shareholders
Our bylaws provide that actions brought against us or any trustee, officer, manager (including RMR or its successor), agent or employee
of us, by a shareholder, including derivative and class actions, shall, on the demand of any party to such dispute, be resolved through binding arbitration in accordance with the procedures set forth
in our bylaws.
Transactions with Affiliates
Our declaration of trust allows us to enter into contracts and transactions of any kind with any person, including any of our trustees,
officers, employees or agents or any person affiliated with them, and that a transaction between us and any of our trustees or RMR shall not be void or voidable, if (1) the affiliate's interest
in the transaction is disclosed or known to the (a) trustees, and the contract or transaction is authorized, approved or ratified by a majority vote of the disinterested trustees or
(b) the shareholders entitled to vote, and the contract or transaction is authorized, approved or ratified by a majority of votes cast, or (2) the contract or transaction is fair and
reasonable to the Trust. Other than general legal principles applicable to self-dealing by fiduciaries,
there are no prohibitions in our declaration of trust or bylaws which would prohibit dealings between us and our affiliates.
Restrictions on Transfer of Shares
Our declaration of trust provides that no person may own, or be deemed to own by virtue of the attribution provisions of the Code, more
than 9.8% of the number or value of our outstanding shares. Our declaration of trust also prohibits any person from beneficially or constructively owning shares if that ownership would result in us
being closely held under Section 856(h) of the Code or would otherwise cause us to fail to qualify as a REIT.
Our
Board of Trustees, in its discretion, may exempt a proposed transferee from the share ownership limitation if (1) it obtains such representations and undertakings from the
person who makes a request therefor, as are reasonably necessary to ascertain that no individual's ownership of shares would result in our being closely held under Section 856(h) of the Code or
our otherwise failing to qualify as a REIT; (2) such person does not and represents that it will not own, actually or constructively, an interest in one of our tenants (or a tenant of any
entity which we own or control) that would cause us to own, actually or constructively, more than a 9.9% interest in the tenant; and (3) such person agrees that any violation or attempted
violation of such representations or undertakings (or other action which is contrary to the restrictions contained in the declaration of trust) will result in such shares being automatically
transferred to a charitable trust in accordance with the declaration of trust. In connection with any requested exemption, our Board of Trustees may require such rulings from the IRS or opinions of
counsel as it deems advisable in order to determine or ensure our status as a REIT and such representations, undertakings and agreements it deems advisable in order for it to make the foregoing
determinations.
In
determining whether to grant an exemption, our Board of Trustees may consider, among other factors, the following:
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the general reputation and moral character of the person requesting an exemption;
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whether the person's ownership of shares would be direct or through ownership attribution;
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whether the person's ownership of shares would adversely affect our ability to acquire additional properties or engage in
other business; and
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whether granting an exemption would adversely affect any of our existing contractual arrangements.
If
a person attempts a transfer of our shares in violation of the ownership limitations described above, then the that number of shares which would cause the violation will (a) be
automatically transferred to a charitable trust for the exclusive benefit of one or more charitable beneficiaries designated by us or (b) to the fullest extent provided by law, be void
ab initio
. A
transfer to the charitable trust will be deemed to be effective as of the close of business on the business day prior to the purported
transfer or other event that results in the transfer to the charitable trust. The prohibited owner will not acquire any rights in these excess shares, will not benefit economically from ownership of
any excess shares, will have no rights to distributions and will not possess any rights to vote. Subject to Maryland law, the trustee of the charitable trust will have the authority to rescind as void
any vote cast by the proposed transferee prior to our discovery that the shares have been transferred to the trust and to recast the vote in accordance with the desires of the trustee acting for the
benefit of the charitable beneficiary. However, if we have already taken irreversible trust action, then the trustee will not have the authority to rescind and recast the vote.
Within
20 days after receiving notice from us that our shares have been transferred to a charitable trust, the trustee will sell the shares held in the charitable trust to a
person designated by the trustee whose ownership of the shares will not violate the ownership limitations set forth in our declaration of trust. Upon this sale, the interest of the charitable
beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited owner and to the charitable beneficiary as
follows:
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-
the prohibited owner will receive the lesser of:
-
(1)
-
the
price paid by the prohibited owner for the shares or, if the prohibited owner did not give value for the shares in connection with the event causing the
shares to be held in the charitable trust, for example, a gift, devise or other similar transaction, the market price (as defined in our declaration of trust) of the shares on the day of the event
causing the shares to be transferred to the charitable trust; and
-
(2)
-
the
price per share received by the trustee from the sale of the shares held in the charitable trust.
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any net sale proceeds in excess of the amount payable to the prohibited owner shall be paid immediately to the charitable
beneficiary.
If,
prior to our discovery that shares have been transferred to the charitable trust, a prohibited owner sells those shares, then:
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those shares will be deemed to have been sold on behalf of the charitable trust;
and
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to the extent that the prohibited owner received an amount for those shares that exceeds the amount that the prohibited
owner was entitled to receive from a sale by a trustee, the prohibited owner must pay the excess to the trustee upon demand.
Also,
shares held in the charitable trust will be offered for sale to us, or our designee, at a price per share equal to the lesser of:
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-
-
the price per share in the transaction that resulted in the transfer to the charitable trust or, in the case of a devise
or gift, the market price at the time of the devise or gift; and
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the market price on the date we or our designee accepts the offer.
We
will have the right to accept the offer until the trustee has sold the shares held in the charitable trust. The net proceeds of the sale to us will be distributed similar to any other
sale by a trustee.
Any
person who acquires or attempts or intends to acquire beneficial or constructive ownership of any shares that will or may violate the foregoing share ownership limitations, or any
person who would have owned shares that resulted in a transfer to a charitable trust, is required to immediately give written notice to us of such event, or in the case of such a proposed or attempted
transaction, give at least 15 days' prior written notice, and to provide to us such other information as we may request.
Every
owner of more than 5% of our shares is required to give written notice to us within 30 days after the end of each taxable year stating the name and address of the owner, the
number of our shares which the owner beneficially owns and a description of the manner in which those shares are held. If the Code or applicable tax regulations specify a threshold below 5%, this
notice provision will apply to those persons who own our shares of beneficial interest at the lower percentage. In addition, each shareholder is required to provide us upon demand with any additional
information that we may request in order to determine our status as a REIT, to ensure compliance with the foregoing share ownership limitations and determine our compliance with the requirements of
any taxing authority or government.
The
restrictions in our declaration of trust described above will not preclude the settlement of any transaction entered into through the facilities of any national securities exchange
or automated interdealer quotation system. Our declaration of trust provides, however, that the fact that the settlement of any transaction occurs will not negate the effect of any of the foregoing
limitations and any transferee in this kind of transaction will be subject to all of the provisions and limitations described above.
All
certificates evidencing our shares and any share statements for our uncertificated shares may bear legends referring to the foregoing restrictions.
The
restrictions on transfer in our governing documents are intended to assist with REIT compliance under the Code and otherwise to promote our orderly governance. These restrictions do
not apply to CWH, RMR or their affiliates.
Regulatory Compliance and Disclosure
Our bylaws provide that any shareholder who, by virtue of such shareholder's ownership of our shares of beneficial interest or actions
taken by the shareholder affecting us, triggers the application of any requirement or regulation of any federal, state, municipal or other governmental or regulatory body on us or any of our
subsidiaries shall promptly take all actions necessary and fully cooperate with us to ensure that such requirements or regulations are satisfied without restricting, imposing additional obligations on
or in any way limiting our business, assets, operations or prospects or any of our subsidiaries. If the shareholder fails or is otherwise unable to promptly take such actions so to cause satisfaction
of such requirements or regulations, such shareholder shall promptly divest a sufficient number of our shares necessary to cause the application of such requirement or regulation to not apply to us or
any of our subsidiaries. If the shareholder fails to cause such satisfaction or divest itself of such sufficient number of our shares by not later than the 10th day after triggering such
requirement or regulation referred to in the bylaws, then any of our shares beneficially owned by such shareholder at and
36
in
excess of the level triggering the application of such requirement or regulation shall, to the fullest extent permitted by law, be deemed to constitute shares held in violation of the ownership
limitations set forth in the declaration of trust. Also, our bylaws provide that if the shareholder who triggers the application of any regulation or requirement fails to satisfy the requirements or
regulations or to take curative actions within such 10 day period, we may take all other actions which the Board of Trustees deems appropriate to require compliance or to preserve the value of
our assets, and we may charge the offending shareholder for our costs and expenses as well as any damages which may result.
Our
bylaws also provide that if a shareholder, by virtue of such shareholder's ownership of our shares of beneficial interest or its receipt or exercise of proxies to vote shares owned
by other shareholders, would not be permitted to vote such shareholder's shares or proxies for such shares in excess of a certain amount pursuant to applicable law but the Board of Trustees determines
that the excess shares or shares represented by the excess proxies are necessary to obtain a quorum, then such shareholder shall not be entitled to vote any such excess shares or proxies, and instead
such excess shares or proxies may, to the fullest extent permitted by law, be voted by the Advisor (as defined in our declaration of trust) or another person designated by the Board of Trustees, in
proportion to the total shares otherwise voted on such matter.
Business Combinations
The MGCL contains a provision which regulates business combinations with interested shareholders. This provision applies to REITs
formed under Maryland law like us. Under the MGCL, business combinations such as mergers, consolidations, share exchanges and the like between a REIT formed under Maryland law and an interested
shareholder or an affiliate of an interested shareholder are prohibited for five years after the most recent date on which the shareholder becomes an interested shareholder. Under the MGCL the
following persons are deemed to be interested shareholders:
-
-
any person who beneficially owns 10% or more of the voting power of the trust's shares;
or
-
-
an affiliate or associate of the trust 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 shares of the trust.
After
the five year prohibition period has ended, a business combination between the trust and an interested shareholder must be recommended by the board of trustees of the trust and
must receive the following shareholder approvals:
-
-
the affirmative vote of at least 80% of the votes entitled to be cast;
and
-
-
the affirmative vote of at least two-thirds of the votes entitled to be cast by holders of shares other than shares held
by the interested shareholder with whom or with whose affiliate or associate the business combination is to be effected or held by an affiliate or associate of the interested shareholder.
The
shareholder approvals discussed above are not required if the trust's shareholders receive the minimum price set forth in the MGCL for their shares and the consideration is received
in cash or in the same form as previously paid by the interested shareholder for its shares.
The
foregoing provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by the board of trustees prior to the time that the interested
shareholder becomes an interested shareholder. A person is not an interested shareholder under the MGCL if the board of trustees
37
approved
in advance the transaction by which the person otherwise would have become an interested shareholder. The board of trustees may provide that its approval is subject to compliance with any
terms and conditions determined by the board of trustees.
Our
Board of Trustees has adopted a resolution that any business combination between us and any other person is exempted from the provisions of the MGCL described in the preceding
paragraphs, provided that the business combination is first approved by our Board of Trustees, including the approval of a majority of the members of our Board of Trustees who are not affiliates or
associates of the acquiring person. This resolution, however, may be altered or repealed in whole or in part at any time by our Board of Trustees.
Control Share Acquisitions
The MGCL contains a provision which regulates control share acquisitions. This provision applies to REITs formed under Maryland law
like us. The MGCL provides that control shares of a REIT formed under Maryland law acquired in a control share acquisition have
no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquiror, by officers or by trustees who are employees of the
trust are excluded from shares entitled to vote on the matter. Control shares are voting shares which, if aggregated with all other shares previously acquired by the acquiror, or in respect of which
the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing trustees within
one of the following ranges of voting power:
-
-
one-tenth or more but less than one-third;
-
-
one-third or more but less than a majority; or
-
-
a majority or more of all voting power.
Control
shares do not include shares which the acquiring person is entitled to vote as a result of having previously obtained shareholder approval. A control share acquisition means the
acquisition of control shares, subject to certain exceptions.
A
person who has made or proposes to make a control share acquisition may compel the board of trustees to call a special meeting of shareholders to be held within 50 days of
demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the
expenses of the meeting. If no request for a meeting is made, the trust may itself present the question at any shareholders meeting.
If
voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the MGCL, then the trust may redeem for fair
value any or all of the control shares, except those for which voting rights have previously been approved. The right of the trust to redeem control shares is subject to conditions and limitations.
Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquiror or of any meeting of shareholders
at which the voting rights of the shares are considered and not approved. If voting rights for control shares are approved at a shareholders meeting and the acquiror becomes entitled to vote a
majority of the shares entitled to vote, all other shareholders may exercise appraisal rights. The fair value of the shares as determined for purposes of appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition.
The
control share acquisition statute of the MGCL does not apply to the following:
38
-
-
shares acquired in a merger, consolidation or share exchange if the trust is a party to the transaction;
or
-
-
acquisitions approved or exempted by a provision in the declaration of trust or bylaws of the trust adopted before the
acquisition of shares.
Our
bylaws contain a provision exempting from the control share statute of the MGCL any and all acquisitions by any person of our shares. This provision may be amended or eliminated at
any time in the future.
Rights Plan
The following is a summary of the material terms of our shareholders' rights plan. Because it is a summary, it does not contain all of
the information that may be important to you. If you want more information, you should read our shareholders' rights plan, a copy of which has been filed with the SEC. See "Where You Can Find More
Information."
Our
Board of Trustees adopted a shareholders' rights plan which provides for the distribution of one Junior Participating Preferred Share purchase right for each common share. Each right
currently entitles the registered holder to purchase from us 1/1,000th of a Junior Participating Preferred Share (or in certain circumstances, to receive cash, property, common shares or our
other securities) at an exercise price of $35 per 1/1,000th of a Junior Participating Preferred Share. The preferences, conversion and other rights, voting powers, restrictions, limitations as
to dividends or other distributions, qualifications and terms and conditions of redemption of the Junior Participating
Preferred Shares are set forth in our registration statement on Form 8-A dated March 18, 2004, as filed with the SEC, which is incorporated herein by reference.
Initially,
the rights are attached to common shares. The rights will separate from the common shares upon a rights distribution date which is the earlier of (1) 10 business days
following a public announcement by us that a person or group of persons has acquired beneficial ownership of 10% or more of the outstanding common shares or (2) 10 business days following the
commencement of a tender offer or exchange offer that would result in a person acquiring beneficial ownership of 10% or more of the outstanding common shares. In each instance, the Board of Trustees
may determine that the distribution date will be a date later than 10 days following the triggering event.
Until
they become exercisable, the rights will be evidenced by the certificates for common shares, if any, and will be transferred with and only with such common shares. The surrender
for transfer of any certificates for common shares outstanding will also constitute the transfer of the rights associated with the common shares evidenced by such certificates.
The
rights are not exercisable until a rights distribution date and will expire at the close of business on April 10, 2014, unless earlier redeemed or exchanged by us as described
below. Until a right is exercised, the holder thereof, as such, has no rights as a shareholder of us including, without limitation, the right to vote or to receive dividends.
Upon
the occurrence of a "flip-in event," each holder of a right will have the ability to exercise it for a number of common shares (or, in certain circumstances, other property) having
a current market price equal to two times the exercise price of the right. Notwithstanding the foregoing, following the occurrence of a "flip-in event," all rights that are, or were held by beneficial
owners of 10% or more of our common shares will be void in several circumstances described in the rights agreement. Rights will not be exercisable following the occurrence of any "flip-in event" until
the rights are no longer
39
redeemable
by us as set forth below. A "flip-in event" occurs when a person or group of persons acquires more than 10% of the beneficial ownership of the outstanding common shares pursuant to any
transaction other than a tender or exchange offer for all outstanding common shares on terms which a majority of our independent trustees determine to be fair to and otherwise in the best interests of
us and our shareholders.
A
"flip-over event" occurs when, at any time on or after the announcement of a share acquisition which will result in a person or group becoming the beneficial owner of more than 10% of
our outstanding common shares, we take part in a merger or other business combination transaction (other than certain mergers that follow a fair offer) in which we are not the surviving entity or our
common shares are changed or exchanged or 50% or more of our assets or earning power is sold or transferred. Upon the occurrence of a "flip-over event" each holder of a right (except rights which
previously have been voided, as set forth above) will have the option to exchange their right for a number of shares of common stock of the acquiring company having a current market price equal to two
times the exercise price of the right.
The
purchase price and the number of Junior Participating Preferred Shares issuable upon exercise of the rights are subject to adjustment from time to time to prevent dilution. With
certain exceptions, no adjustment in the purchase price will be required until cumulative adjustments amount to at least 1% of the purchase price. We will make a cash payment in lieu of any fractional
shares resulting from the exercise of any right. We have 10 days from the date of an announcement of a share acquisition which will result in a person or group becoming the beneficial owner of
more than 10% of our outstanding common shares to redeem the rights in whole, but not in part, at a price of $.01 per right, payable, at our option in cash, common shares or other consideration as our
Board of Trustees may determine. Immediately upon the effectiveness of the action of our Board of Trustees ordering redemption of the rights, the rights will terminate and the only right of the
holders of rights will be to receive the redemption price.
The
terms of the rights may be amended by our Board of Trustees prior to the distribution date. After the distribution date, the provisions of the rights agreement may be amended by our
Board of Trustees only in order to:
-
-
cure ambiguities, defects or inconsistencies;
-
-
make changes which do not adversely affect the interests of holders of rights (other than the rights of a person that has
obtained beneficial ownership of more than 10% of our outstanding shares and certain other related parties); or
-
-
shorten or lengthen any time period under the rights agreement.
However,
no amendment, other than to cure ambiguities, defects or inconsistencies, is permitted to be made at such time as the rights are not redeemable.
Amendment to our Declaration of Trust, Dissolution and Mergers
Under the Maryland REIT Law, a REIT formed under Maryland law generally cannot dissolve, amend its declaration of trust or merge,
unless these actions are approved by at least two-thirds of all shares entitled to be cast on the matter. The Maryland REIT Law allows a trust's declaration of trust to set a lower percentage, so long
as the percentage is not less than a majority. Our declaration of trust provides for approval of any of the foregoing actions (except amendments to certain provisions of the declaration of trust) by a
majority of shares entitled to vote on these actions provided the action in question has been approved by a majority of our Board of Trustees. Our declaration of trust further provides that if
permitted in the future by Maryland law, the majority required to approve any of the foregoing actions (subject to such exceptions) will be the majority of shares voted. Under the Maryland REIT
40
Law,
a declaration of trust may permit the trustees by a two-thirds vote to amend the declaration of trust from time to time to qualify as a REIT under the Code or the Maryland REIT Law without the
affirmative vote or written consent of the shareholders. Our declaration of trust permits this type of action by our Board of Trustees. Our declaration of trust also permits our Board of Trustees to
effect changes in our unissued shares, as described more fully above, and to change our name without shareholder approval, and provides that, to the extent permitted in the future by Maryland law, our
Board of Trustees may amend any other provision of our declaration of trust without shareholder approval. The Maryland REIT Law provides that a majority of our entire board, without action by the
shareholders, may, among other things, amend our declaration of trust to change the name or other designation or the par value of any class or series of our shares and the aggregate par value of our
shares.
Anti-Takeover Effect of Maryland Law and of our Declaration of Trust and Bylaws
The following provisions in our declaration of trust and bylaws and in Maryland law could delay or prevent a change in our
control:
-
-
the prohibition in our declaration of trust of any shareholder other than CWH, RMR and their affiliates from owning more
than 9.8% of the number or value of our outstanding shares;
-
-
the division of our trustees into three classes, with the term of one class expiring each year and, in each case, until a
successor is elected and qualifies;
-
-
shareholder voting rights and standards for the election of trustees and other matters which generally require larger
majorities for approval of actions which are not approved by our trustees or for the election of trustees in contested elections than for actions which are approved by our trustees or for the election
of trustees in uncontested elections;
-
-
required qualifications for an individual to serve as a trustee and a requirement that certain of our trustees be
"managing trustees" and other trustees be "independent trustees";
-
-
limitations on the ability of, and various requirements that must be satisfied in order for, our shareholders to propose
nominees for election as trustees and propose other business to be considered at a meeting of our shareholders;
-
-
the requirement that an individual trustee may be removed by the shareholders, with or without cause, by the affirmative
vote of holders at least two-thirds of our common shares entitled to vote in the election of trustees or by the affirmative vote of all remaining trustees;
-
-
the authority of our Board of Trustees, and not our shareholders, to adopt, amend or repeal our bylaws;
-
-
the fact that only our Board of Trustees may call shareholder meetings and that shareholders are not entitled to act
without a meeting;
-
-
the authority of our Board of Trustees to adopt certain amendments to our declaration of trust without shareholder
approval, including the authority to increase or decrease the number of authorized shares, to create new classes or series of shares (including a class or series of shares that could delay or prevent
a transaction or a change in our control that might involve a premium for our shares or otherwise be in the best interests of our shareholders), to increase or decrease the number of shares of any
class or series, and to classify or reclassify any unissued shares from time to time by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to
41
Because
of our ownership of AIC, we are an insurance holding company under applicable state law; accordingly, anyone who intends to solicit proxies for a person to serve as one of our
trustees or for another proposal of business not approved by our Board of Trustees may be required to receive pre-clearance from the concerned insurance regulators.
We
maintain a rights agreement whereby, in the event a person or group of persons acquires 10% or more of our outstanding common shares, our shareholders, other than such person or
group, may be entitled to purchase additional shares or other securities or property at a discount. See "Rights Plan" above.
In
addition, our revolving credit agreement, our property management agreement with RMR and our shareholders agreement with AIC each also contain change in control provisions, which are
further described below.
For
all of these reasons, our shareholders may be unable to realize a change of control premium for any of our shares they own or otherwise effect a change of our policies.
Liability of Shareholders for Breach of Restrictions on Ownership
Our revolving credit agreement provides that a change in our control, as defined in that agreement and including that RMR ceases to be
our sole business manager and property manager, without the consent of the applicable lenders, constitutes a default under that agreement, and a default under that agreement could result in a
cross-default under our senior unsecured notes or other debt. In addition, our property management agreement with RMR provides that our rights and benefits under that agreement may be terminated in
the event that anyone acquires more than 9.8% of our shares or we experience some other change in control, as defined in that
agreement, without the consent of RMR, and our shareholders agreement with respect to AIC provides that AIC and the other shareholders of AIC may have rights to acquire our interests in AIC if such an
acquisition occurs or if we experience some other change in control. If a breach of the ownership limitations or other provisions of our declaration of trust or bylaws results in a default under our
revolving credit agreement or other debt, a loss of the benefits of our property management agreement or a loss of our ownership interests in AIC, the shareholder or shareholders causing the breach
may be liable to us and may be liable to our other shareholders for damages. These damages may be in addition to the loss of beneficial ownership and voting rights of the shares owned by the breaching
shareholder or shareholders, as described above, and these damages may be material.
42
SELLING SECURITY HOLDERS
Information about selling security holders, where applicable, will be set forth in a prospectus supplement, in a post-effective
amendment, or in filings we make with the SEC, which are incorporated into this prospectus by reference.
PLAN OF DISTRIBUTION
We or our selling security holders may sell the securities to one or more underwriters for public offering and sale by them or may sell
the securities to investors directly or through agents or through a combination of any of these methods of sale. Any underwriter or agent involved in the offer and sale of the securities will be named
in the applicable prospectus supplement.
The
distribution of the securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, at market prices prevailing at the time
of sale, at prices related to the prevailing market prices or at negotiated prices. We or our selling security holders may engage in at the market offerings into an existing trading market in
accordance with Rule 415(a)(4) of the Securities Act. We or our selling security holders also may, from time to time, authorize underwriters acting as their agents to offer and sell the
securities upon the terms and conditions as are set forth in the applicable prospectus supplement. In connection with the sale of securities, underwriters may be deemed to have received compensation
from us or our selling security holders in the form of underwriting discounts or commissions and may also receive commissions from purchasers
of securities for whom they may act as agent. Underwriters may sell securities to or through dealers, and the dealers may receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as agent.
Any
underwriting compensation paid by us or our selling security holders to underwriters or agents in connection with the offering of securities offered by means of this prospectus, and
any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in the applicable prospectus supplement. Underwriters, dealers and agents participating in
the distribution of the securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the securities may be deemed to be
underwriting discounts and commissions, under the Securities Act. Underwriters, dealers and agents may be entitled, under agreements entered into with us or our selling security holders, to
indemnification against and contribution toward civil liabilities, including liabilities under the Securities Act.
Unless
otherwise specified in the applicable prospectus supplement, any securities issued hereunder (other than common shares) will be new issues of securities with no established
trading market. Any underwriters or agents to or through whom such securities are sold by us or our selling security holders for public offering and sale may make a market in such securities, but such
underwriters or agents will not be obligated to do so and may discontinue any market making at any time without notice. We cannot assure you as to the liquidity of the trading market for any such
securities.
We
or our selling security holders may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated
transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus
supplement, including in short sale transactions. If so, the third party may use securities pledged by us or our selling security holders or borrowed from us, our selling security holders or others to
settle those sales or to close out any related open borrowings of shares, and may use securities received from us or our selling security holders in
43
settlement
of those derivatives to close out any related open borrowings of shares. The third party in such sale transactions will be an underwriter and will be identified in the applicable prospectus
supplement.
From
time to time, one or more of the selling security holders may pledge, hypothecate or grant a security interest in some or all of the securities owned by them. The pledgees, secured
parties or persons to whom the securities have been hypothecated will, upon foreclosure in the event of default, be deemed to be selling security holders. The number of the initial selling security
holder's securities offered under this prospectus will decrease as and when any pledgee, secured party or other person takes such actions. The plan of distribution for that selling security holder's
securities will otherwise remain unchanged. In addition, a selling security holder may, from time to time, sell the securities short, and, in those instances, this prospectus may be delivered in
connection with the short sales and the securities offered under this prospectus may be used to cover short sales.
We
will not receive any proceeds from sales of any securities by the selling security holders. We cannot assure you that the selling security holders will sell all or any portion of
their securities, if any, covered by this prospectus.
In
connection with an offering of securities, the underwriters may engage in stabilizing and syndicate covering transactions. These transactions may include overallotments or short sales
of the securities, which involves sales of securities in excess of the principal amount of securities to be purchased by the underwriters in an offering, which creates a short position for the
underwriters. Covering transactions involve purchases of the securities in the open market after the distribution has been completed in order to cover short positions. Stabilizing transactions consist
of certain bids or purchases of securities made for the purpose of preventing or retarding a decline in the market price of the securities while the offering is in progress. Any of these activities
may have the effect of preventing or retarding a decline in the market price of the securities being offered. They may also cause the price of the securities being offered to be higher than the price
that otherwise would exist in the open market in the absence of these transactions. The underwriters may conduct these transactions on the NYSE, in the over-the-counter market or otherwise. If the
underwriters commence any of these transactions, they may discontinue them at any time.
The
underwriters, dealers and agents that participate in the offer of securities covered by this prospectus, or their affiliates or associates, may engage in transactions with and
perform services for us or our selling security holders and our or their affiliates in the ordinary course of business for which they may have received or receive customary fees and reimbursement of
expenses.
LEGAL MATTERS
Sullivan & Worcester LLP, as to certain matters of New York law, and Venable LLP, as to certain matters of
Maryland law, will pass upon the validity of the offered securities for us. Sullivan & Worcester LLP also has passed upon our qualification and taxation as a REIT in an opinion filed
with the registration statement of which this prospectus is a part. Sullivan & Worcester LLP and Venable LLP also represent Five Star and certain of its affiliates on various
matters, and Sullivan &
Worcester LLP represents RMR, our manager, and certain of its affiliates on various matters.
EXPERTS
Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated financial statements and
schedule included in our Annual Report on Form 10-K for the year ended December 31, 2011, and the effectiveness of our internal control over financial reporting as of December 31,
2011, as set forth in their reports, which are incorporated by reference in this prospectus and
44
elsewhere
in the registration statement. Our financial statements and schedule are incorporated by reference in reliance on Ernst & Young LLP's reports, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports,
statements or other information on file at the SEC's public reference room at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of those documents upon payment of a duplicating
fee to the SEC. This prospectus is part of a registration statement and does not contain all of the information set forth in the registration statement. You may call the SEC at 1-800-SEC-0330 for
further information on the operation of the public reference rooms. You can review our SEC filings and the registration statement by accessing the SEC's Internet site at www.sec.gov or by accessing
our Internet site at www.snhreit.com. Website addresses are included in this prospectus as textual references only and the information in such websites is not incorporated by reference into this
prospectus or related registration statement.
Our
common shares are traded on the NYSE under the symbol "SNH," and you can review similar information concerning us at the office of the NYSE at 20 Broad Street, New York, New York
10005.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus. Statements in this prospectus regarding the contents of
any contract or other document may not be complete. You should refer to the copy of the contract or other document filed as an exhibit to the registration statement. Later information filed with the
SEC will update and supersede information we have included or incorporated by reference in this prospectus.
We
incorporate by reference the documents listed below and any filings made after the date of the initial filing of the registration statement of which this prospectus is a part made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until the offering of the securities made by this prospectus is completed or
terminated:
-
-
our Annual Report on Form 10-K for the fiscal year ended December 31, 2011;
-
-
our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012;
-
-
our Current Reports on Form 8-K dated December 30, 2011, January 12, 2012, April 13, 2012,
May 17, 2012, May 29, 2012 and June 29, 2012;
-
-
the information identified as incorporated by reference under Items 10, 11, 12, 13 and 14 of Part III of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2011, from our definitive Proxy Statement for our 2012 Annual Meeting of Shareholders dated February 21, 2012;
-
-
the description of our common shares contained in our registration statement on Form 8-A dated September 21,
1999; and
45
-
-
the description of our Junior Participating Preferred Share Rights contained in our registration statement on
Form 8-A dated March 18, 2004.
We
will provide you with a copy of the information we have incorporated by reference, excluding exhibits other than those which we specifically incorporate by reference in this
prospectus. You may obtain this information at no cost by writing or telephoning us at: Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts, 02458-1634,
(617) 796-8234, Attention: Investor Relations.
STATEMENT CONCERNING LIMITED LIABILITY
THE AMENDED AND RESTATED DECLARATION OF TRUST ESTABLISHING SENIOR HOUSING PROPERTIES TRUST, DATED SEPTEMBER 20,
1999, AS AMENDED AND SUPPLEMENTED, AS FILED WITH THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND, PROVIDES THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SENIOR HOUSING
PROPERTIES TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SENIOR HOUSING PROPERTIES TRUST. ALL PERSONS DEALING WITH SENIOR HOUSING
PROPERTIES TRUST IN ANY WAY SHALL LOOK ONLY TO THE ASSETS OF SENIOR HOUSING PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
46
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