PROSPECTUS SUPPLEMENT
JUNE 11, 2002
(To prospectus dated June 11, 2002)
$50,000,000
Reckson Operating Partnership, L. P.
6.00% Notes due 2007
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The notes will bear interest at the rate of 6.00% per year. Interest on
the notes will be payable semi-annually on June 15 and December 15 of each
year, beginning December 15, 2002 and will begin to accrue interest on June
17, 2002. We may redeem some or all of the notes at any time at the redemption
price described in this prospectus supplement. Unless we redeem them earlier,
the notes will mature on June 15, 2007.
The notes will be unsecured and will rank equally with all of our other
unsecured senior indebtedness and junior to our secured indebtedness. The
notes will not be subject to any mandatory sinking fund.
See "Risk Factors" beginning on page 2 of the accompanying prospectus for
a discussion of certain risks that you should consider in connection with an
investment in the notes.
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Per Note Total
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Public offering price(1)...................................... 99.465% $49,732,500
Underwriting discount......................................... .600% $300,000
Proceeds, before expenses, to us ............................. 98.865% $49,432,500
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(1) Plus accrued interest from June 17, 2002, if settlement occurs after that
date.
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We do not intend to list the notes on any securities exchange or to
include the notes in any automated quotation system. Currently, there is no
public market for the notes.
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.
We expect that the notes will be ready for delivery in book-entry only
form through The Depository Trust Company on or about June 17, 2002.
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Wachovia Securities
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TABLE OF CONTENTS
Page
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Prospectus Supplement
Summary of the Notes........................................................................................... S-3
Reckson Operating Partnership, L.P............................................................................. S-4
Use of Proceeds................................................................................................ S-4
Description of Notes........................................................................................... S-4
Certain Federal Income Tax Considerations...................................................................... S-8
Underwriting................................................................................................... S-12
Legal Matters.................................................................................................. S-13
Experts........................................................................................................ S-14
Prospectus
Risk Factors...................................................................................................... 2
Cautionary Statements Concerning Forward-Looking Information..................................................... 14
Available Information............................................................................................ 14
Incorporation of Certain Documents By Reference.................................................................. 15
Reckson Associates and The Operating Partnership................................................................. 15
Use of Proceeds.................................................................................................. 16
Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends ...................................... 16
Description of Debt Securities................................................................................... 17
Description of Common Stock...................................................................................... 35
Description of Preferred Stock................................................................................... 36
Description of Depositary Shares................................................................................. 44
Restrictions on Ownership of Capital Stock....................................................................... 48
Description of Warrants.......................................................................................... 50
Federal Income Tax Considerations................................................................................ 51
Plan of Distribution............................................................................................. 52
Legal Matters.................................................................................................... 53
Experts.......................................................................................................... 53
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You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not, and the underwriter has not, authorized any other person to provide
you with different or additional information. If anyone provides you with
different or additional information, you should not rely on it. We are not,
and the underwriter is 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 is accurate as of their dates. Our business, financial condition,
results of operations and prospects may have changed since then.
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SUMMARY OF THE NOTES
Set forth below is a summary description of certain terms of the notes.
You should review the section entitled "Description of the Notes" in this
prospectus supplement as well as the section entitled "Description of Debt
Securities" in the accompanying prospectus.
Securities Offered................................ $50,000,000 principal amount of 6.00% notes due 2007.
Interest Payment Dates............................ Interest on the notes will be payable semi-annually on June 15
and December 15 of each year, beginning on December 15, 2002.
Interest on the notes will begin to accrue on June 17, 2002.
Maturity.......................................... The notes will mature on June 15, 2007, unless we exercise our
option to redeem the notes prior to that date.
Optional Redemption............................... We may redeem the notes at any time, in whole or from time to
time in part, at our option at a redemption price equal to the
sum of (i) the principal amount of the notes being redeemed,
(ii) unpaid interest accrued thereon to the redemption date
and (iii) the make-whole amount, if any, referred to herein
under "Description of Notes--Optional Redemption."
Ranking........................................... The notes will be unsecured obligations and will rank equally
with all of our other unsecured senior indebtedness. However,
the notes will be effectively subordinated to all of our
secured debt and to all liabilities of our subsidiaries.
Use of Proceeds................................... We will use the net proceeds from the sale of the notes to
repay borrowings under our revolving credit facility.
Limitations on Incurrence of Debt................. (1) We may not incur any debt if our consolidated debt is
greater than 60% of our total assets.
(2) We may not incur any debt if our consolidated income
available for debt service for the four most recent quarters
is less than 1.5 times the annual service charge on
our consolidated debt.
(3) We may not incur any secured debt if our consolidated secured
debt is greater than 40% of our total assets.
Maintenance of Unencumbered Assets Ratio.......... We must maintain unencumbered assets of at least 150% of our
consolidated debt.
Form.............................................. Book-entry only through the facilities of The Depository Trust
Company.
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RECKSON OPERATING PARTNERSHIP, L.P.
We are a limited partnership engaged in the business of owning,
developing, re-positioning, acquiring, constructing, managing and leasing
office and industrial properties in the New York Metropolitan Tri-State area.
We are the entity through which our general partner Reckson Associates Realty
Corp. ("Reckson Associates"), a real estate investment trust, conducts its
business. Based on industry surveys, we believe that we are one of the largest
owners and managers of Class A suburban office and industrial properties in
the New York Metropolitan Tri-State area. As of March 31, 2002, we owned and
controlled, directly or indirectly, 181 properties encompassing approximately
20.6 million rentable square feet, all of which we manage. Our properties
consist of 60 Class A suburban office properties encompassing approximately
8.5 million rentable square feet, 17 Class A commercial business district
office properties encompassing approximately 5.3 million rentable square feet,
102 industrial properties encompassing approximately 6.8 million rentable
square feet and two retail properties encompassing 19,200 rentable square
feet.
Our executive offices are located at 225 Broadhollow Road, Melville, New
York 11747 and our telephone number is (631) 694-6900.
USE OF PROCEEDS
We will use the net proceeds from the offering of the notes,
approximately $49,257,500 after deducting the underwriting discount and other
expenses, to repay an equal amount of the outstanding balance on our revolving
credit facility. As of June 11, 2002, the outstanding amount of indebtedness
under the credit facility to be repaid with the proceeds from this offering
bore interest at an annual rate of 3.05% and had a remaining maturity of
approximately 15 months.
DESCRIPTION OF NOTES
The following description sets forth certain terms and provisions of the
notes and the indenture and is qualified in its entirety by reference to the
terms and provisions of the notes and the indenture, which are incorporated
herein by reference. Capitalized terms not otherwise defined herein shall have
the meanings given to them in the notes or the indenture, as applicable. The
following description of the particular terms of the notes does not purport to
be complete and is subject to, and, to the extent inconsistent therewith,
replaces the description of the general terms and provisions of the Debt
Securities set forth in the accompanying prospectus.
General
The notes will be issued pursuant to an indenture, dated as of March 26,
1999, which we have entered into with The Bank of New York, as Trustee.
The terms of the notes include those provisions contained in the notes
and the indenture and those made part of the indenture by reference to the
Trust Indenture Act of 1939, as amended. The notes are subject to all such
terms, and holders of notes are referred to the notes, the indenture and the
Trust Indenture Act for a statement thereof. Copies of the indenture and the
form of the notes are available for inspection at the corporate trust office
of the Trustee located at 101 Barclay Street, New York, New York 10286. The
statements made hereunder relating to the indenture and the notes to be issued
thereunder are summaries of certain provisions thereof, and do not purport to
be complete and are subject to, and are qualified in their entirety by
reference to, all provisions of the indenture and the notes. You should
carefully read the accompanying prospectus and the notes as they, and not the
prospectus supplement, govern your rights.
The notes will be direct, unsecured senior obligations and will rank
equally with each other and with all of our other unsecured senior
indebtedness. However, the notes will be effectively subordinated to our
mortgages and
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other secured indebtedness and to all liabilities, whether secured or
unsecured, of our subsidiaries. As of March 31, 2002, we and our subsidiaries
had outstanding $666.5 million of unsecured senior indebtedness and $748.6
million of secured indebtedness. We and our subsidiaries may incur additional
indebtedness, including secured indebtedness, subject to the provisions
described in the accompanying prospectus under "Debt Securities - Certain
Covenants - Limitations on Incurrence of Indebtedness."
The notes will initially be limited to the aggregate principal amount of
$50,000,000 and will mature on June 15, 2007, unless we exercise our option to
redeem the notes prior to that date. The notes will be issued only in fully
registered, book-entry form, in denominations of $1,000 and integral multiples
thereof, except under the limited circumstances described below under
"--Book-Entry System."
The notes will be entitled to the benefits of the covenants described
under "Description of Debt Securities--Certain Covenants" in the accompanying
prospectus. In addition, the notes will be subject to the defeasance and
covenant defeasance provisions described under "Description of Debt
Securities--Defeasance and Covenant Defeasance" in the accompanying
Prospectus.
The notes will not be guaranteed by Reckson Associates.
Payment of Interest
Interest on the notes will accrue at the rate of 6.00% per year from June
17, 2002, or the most recent interest payment date to which interest has been
paid or provided for, and will be payable in U.S. dollars semi-annually in
arrears on June 15 and December 15 of each year, commencing December 15, 2002.
The interest so payable will be paid to the holder in whose name the note is
registered at the close of business on the June 1 or December 1 (whether or
not a business day in The City of New York) immediately preceding the
applicable interest payment date. Interest on the notes will be computed on
the basis of a 360-day year consisting of twelve 30-day months.
Maturity
The notes will mature on June 15, 2007, and will be paid in U.S. dollars
against presentation and surrender thereof at the corporate trust office of
the Trustee. However, we may redeem the notes at our option prior to that
date. See "--Optional Redemption." The notes will not be entitled to the
benefit of any sinking fund.
Optional Redemption
We may redeem the notes at any time, in whole or in part from time to
time, at our option at a redemption price equal to the sum of (i) the
principal amount of the notes being redeemed, (ii) unpaid interest accrued
thereon to the redemption date and (ii) the Make-Whole Amount, if any, with
respect to such notes. We will, however, pay any interest installment due on
an interest payment date which occurs on or prior to a redemption date to
holders as of the close of business on the record date immediately preceding
such interest payment date.
If notice has been given as provided in the indenture and funds for the
redemption of any notes (or any portion thereof) called for redemption shall
have been made available on the redemption date referred to in such notice,
such notes (or any portion thereof) will cease to bear interest on the date
fixed for such redemption specified in such notice and the only right of the
holders of such notes will be to receive payment of the redemption price.
Notice of any optional redemption of notes (or any portion thereof) will
be given to holders at their addresses, as shown in the security register for
such notes, not more than 60 nor less than 30 days prior to the date fixed for
redemption. The notice of redemption will specify, among other items, the
redemption price and the principal amount of the notes held by such holder to
be redeemed. If less than all of the notes are to be redeemed by us, the
Trustee shall select, in such manner as it shall deem fair and appropriate,
the notes to be redeemed.
As used herein:
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"Make-Whole Amount" means, in connection with any optional redemption,
the excess, if any, of (i) the aggregate present value as of the date of such
redemption of each dollar of principal being redeemed and the amount of
interest (exclusive of interest accrued to the date of redemption) that would
have been payable in respect of each such dollar if such redemption had not
been made, determined by discounting, on a semi-annual basis, such principal
and interest at the Reinvestment Rate (determined on the third business day in
The City of New York preceding the date such notice of redemption is given)
from the respective dates on which such principal and interest would have been
payable if such redemption had not been made, to the date of such redemption
over (ii) the aggregate principal amount of the notes being redeemed.
"Reinvestment Rate" means 0.25% plus the arithmetic mean of the yields
under the heading "Week Ending" published in the most recent Statistical
Release under the caption "Treasury Constant Maturities" for the maturity
(rounded to the nearest month) corresponding to the remaining life to
maturity, as of the redemption date, of the principal being redeemed. If no
maturity exactly corresponds to such maturity, yields for the two published
maturities most closely corresponding to such maturity shall be calculated
pursuant to the immediately preceding sentence and the Reinvestment Rate shall
be interpolated or extrapolated from such yields on a straight-line basis,
rounding each of such relevant periods to the nearest month. For the purpose
of calculating the Reinvestment Rate, the most recent Statistical Release
published prior to the date of determination of the Make-Whole Amount shall be
used.
"Statistical Release" means the statistical release designated "H.15
(519)" or any successor publication which is published weekly by the Board of
Governors of the Federal Reserve System and which establishes yields on
actively traded United States government securities adjusted to constant
maturities or, if such statistical release is not published at the time of any
determination under the indenture, then such other reasonably comparable index
designated by us.
Book-Entry System
The notes will be issued in the form of one or more fully-registered
global notes in book-entry form, which will be deposited with, or on behalf
of, The Depository Trust Company and registered in the name of DTC's nominee,
Cede & Co. Except as set forth below, the global notes may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC or by DTC or any such nominee to a successor of DTC or
a nominee of such successor.
So long as DTC or its nominee is the registered owner of a global note,
DTC or its nominee, as the case may be, will be considered the sole holder of
the notes represented by such global note for all purposes under the indenture
and the beneficial owners of such notes will be entitled only to those rights
and benefits afforded to them in accordance with DTC's regular operating
procedures. Upon specified written instructions of a participant in DTC, DTC
will have its nominee assist participants in the exercise of certain holders'
rights, such as demand for acceleration of maturity or an instruction to the
Trustee. Except as provided below, owners of beneficial interests in a global
note will not be entitled to have notes registered in their names, will not
receive or be entitled to receive physical delivery of notes in certificated
form and will not be considered the registered owners or holders thereof under
the indenture.
If with respect to a particular series of notes (i) DTC is at any time
unwilling or unable to continue as depository or if at any time DTC ceases to
be a clearing agency registered under the Securities Exchange Act of 1934, as
amended, and a successor depository is not appointed by us within 90 days,
(ii) an event of default under the indenture relating to such notes has
occurred and is continuing or (iii) we, in our sole discretion, determine at
any time that such notes shall no longer be represented by a global note, we
will issue individual notes in certificated form of the same series and like
tenor and in the applicable principal amount in exchange for the notes
represented by the global note. In any such instance, an owner of a beneficial
interest in a global note will be entitled to physical delivery of individual
notes in certificated form of the same series and like tenor, equal in
principal amount to such beneficial interest and to have such notes in
certificated form registered in its name. Notes so issued in certificated form
will be issued in denominations of $1,000 or any integral multiple thereof and
will be issued in registered form only, without coupons.
S-6
The following is based on information furnished by DTC:
DTC will act as securities depositary for the notes. The notes will be
issued as fully-registered notes registered in the name of Cede & Co. (DTC's
partnership nominee) or such other name as may be requested by an authorized
representative of DTC. Generally, one fully registered global note will be
issued for all of the principal amount of the notes.
DTC, the world's largest depositary, 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 Securities Exchange Act of 1934. DTC holds and provides asset
servicing for over 2 million issues of U.S. and non-U.S. equity issues,
corporate and municipal debt issues and money market instruments from over 85
countries that DTC's 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 ("DTCC"). DTCC, in turn, is owned by a
number of direct participants of DTC and members of the National Securities
Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing
Corporation, and Emerging Markets Clearing Corporation, as well as by The New
York Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. 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. DTC has Standard & Poor's highest rating: AAA. The DTC
rules applicable to its participants are on file with the Securities and
Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of the notes under the DTC system must be made by or through
direct participants, which will receive a credit for the notes on DTC's
records. The beneficial interest of each actual purchaser of each note is in
turn to be recorded on the direct and indirect participants' records.
Beneficial owners will not receive written confirmation from DTC of their
purchase. Beneficial owners are, however, expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the direct or indirect participant through
which the beneficial owner entered into the transaction. Transfers of
beneficial interests in the notes are to be accomplished by entries made on
the books of direct and indirect participants acting on behalf of beneficial
owners. Beneficial owners will not receive certificates representing their
beneficial interests in notes, except in the event that use of the book-entry
system for the notes is discontinued. The laws of some states require that
certain persons take physical delivery in definitive form of securities which
they own. Such limits and such laws may impair the ability of such persons to
own, transfer or pledge beneficial interests in a global note.
To facilitate subsequent transfers, all notes deposited by direct
participants with DTC will be registered in the name of DTC's partnership
nominee, Cede & Co. or such other name as may be requested by an authorized
representative of DTC. The deposit of the notes with DTC and their
registration in the name of Cede & Co. or such other nominee do not effect any
change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of the notes; DTC's records reflect only the identity of the direct
participants to whose accounts such notes will be credited, which may or may
not be the beneficial owners. The direct and indirect participants will remain
responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to
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time. Beneficial owners of the notes may wish to take certain steps to augment
the transmission to them of notices of significant events with respect to the
notes, such as redemption, tenders, defaults, and proposed amendments to the
security documents. For example, beneficial owners of the notes may wish to
ascertain that the nominee holding the notes for their benefit has agreed to
obtain and transmit notices to beneficial owners. In the alternative,
beneficial owners may wish to provide their names and addresses to the
registrar of the notes and request that copies of the notices be provided to
them directly. Any such request may or may not be successful.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or
vote with respect to the notes unless authorized by a direct participant in
accordance with DTC's procedures. Under its usual procedures, DTC mails an
Omnibus Proxy to us as soon as possible after the regular record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those direct
participants to whose accounts the notes are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
We will pay principal, premium, if any, and interest payments on the
notes in same-day funds to the Trustee and from the Trustee to DTC, or such
other nominee as may be requested by an authorized representative of DTC.
DTC's practice is to credit direct participants' accounts on the applicable
payment date in accordance with their respective holdings shown on DTC's
records upon DTC's receipt of funds and corresponding detail information.
Payments by participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of these participants and not of us, the Trustee,
DTC, or any other party, subject to any statutory or regulatory requirements
that may be in effect from time to time. Payment of principal, premium, if
any, and interest to Cede & Co., or such other nominee as may be requested by
an authorized representative of DTC, is the responsibility of us or the
Trustee, disbursement of such payments to direct participants is the
responsibility of DTC, and disbursement of such payments to the beneficial
owners is the responsibility of the direct or indirect participants.
We will send any redemption notices to DTC. If less than all of the notes
are being redeemed, DTC's practice is to determine by lot the amount of the
interest of each direct participant in such issue to be redeemed.
DTC may discontinue providing its services as securities depository for
the notes at any time by giving us reasonable notice. Under such
circumstances, if a successor securities depositary is not obtained, we will
print and deliver certificated notes. We may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor securities
depositary). In that event, we will print and deliver certificated notes.
Neither we nor the underwriter or the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of the beneficial interests in a global note, or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
The information in this section concerning DTC and DTC's system has been
obtained from sources that we believe to be reliable, but we take no
responsibility for its accuracy.
Same-Day Settlement and Payment
Settlement for the notes will be made in immediately available funds. We
will make all payments of principal, premium, if any, and interest in respect
of the notes in immediately available funds while the notes are held in
book-entry only form.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations relating to the purchase, ownership and disposition of the
notes, but does not purport to be a complete analysis of all the potential tax
considerations relating thereto. This summary is based on laws, regulations,
rulings and decisions now in effect (or, in the case of certain United States
Treasury Regulations ("Treasury Regulations"), now in proposed
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form), all of which are subject to change, possibly on a retroactive basis.
This summary deals only with notes held as "capital assets" (within the
meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the
"Code")) by purchasers who purchase the notes as part of the initial offering
for the issue price stated on the cover page of this prospectus supplement
(unless otherwise specified) and does not address tax considerations
applicable to investors that may be subject to special tax rules, such as
banks, tax-exempt organizations, insurance companies, dealers in securities or
currencies, persons subject to the mark-to-market rules of the Code, persons
that will hold notes as a position in a hedging transaction, "straddle" or
"conversion transaction" for tax purposes, or persons that have a "functional
currency" other than the United States dollar.
This prospectus supplement does not address the taxation of Reckson
Associates or us, nor does it address the impact on Reckson Associates or us
of Reckson Associates' election to be taxed as a REIT. Such matters are
addressed in the accompanying prospectus under "Federal Income Tax
Considerations--Taxation of the Company."
We have not sought any ruling from the Internal Revenue Service ("IRS")
with respect to the statements made and the conclusions reached in the
following summary, and there can be no assurance that the IRS will agree with
such statements and conclusions.
Investors considering the purchase of notes should consult their own tax
advisors with respect to the application of the United States federal income
tax laws to their particular situations as well as any tax consequences
arising under the laws of any state, local or foreign taxing jurisdiction or
under any applicable tax treaty.
U.S. Holders of the Notes
As used herein, the term "U.S. Holder" means any beneficial owner of a
note that is, for United States federal income tax purposes, (i) a citizen or
resident of the United States, (ii) a corporation created or organized in or
under the laws of the United States, any state thereof or the District of
Columbia, (iii) an estate the income of which is subject to United States
federal income taxation regardless of its source, or (iv) a trust if (A) a
court within the United States is able to exercise primary supervision over
the administration of the trust and (B) one or more United States persons have
the authority to control all substantial decisions of the trust. As used
herein, the term "Non-U.S. Holder" means a beneficial owner of a note that is
not a U.S. Holder. If a partnership (including for this purpose any entity
treated as a partnership for United States federal income tax purposes) is a
beneficial owner of notes, the treatment of a partner in the partnership will
generally depend upon the status of the partner and upon the activities of the
partnership. A holder of notes that is a partnership and partners in such
partnership should consult their tax advisors about the United States federal
income tax consequences of purchasing, holding and disposing of notes.
The notes will not be issued with original issue discount ("OID") for
federal income tax purposes in excess of the statutory de minimis amount. The
following discussion assumes that the notes have not been issued with OID in
excess of the statutory de minimis amount.
Payment of Interest. Interest on a note without OID generally will be
included in the income of a U.S. Holder as ordinary income at the time such
interest is received or accrued, in accordance with the U.S. Holder's regular
method of tax accounting.
A note generally will be treated as issued with de minimis original issue
discount if the excess of its "stated redemption price" at maturity over its
issue price is less than 1/4 of 1 percent of its stated redemption price at
maturity multiplied by the number of complete years to its maturity from its
issue date. It is expected that the notes will be issued with de minimis
original issue discount. Generally, the issue price of a note should be the
first price at which a substantial amount of the notes included in the issue
of which the note is a part is sold to other than bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. The stated redemption price at maturity of a
debt instrument is the total of all payments to be made under the debt
instrument other than qualified stated interest (generally, stated interest
that is unconditionally payable in cash or property at least annually at a
single fixed rate or at certain floating rates that
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properly takes into account the length of the interval between stated interest
payments) and, in the case of the notes, is expected to equal the principal
amount of the related note. De minimis original issue discount generally must
be included in income as gain from the sale of the related note as principal
payments are received on such note in the proportion that each such payment
bears to the original principal amount of such note.
Market Discount. If a U.S. Holder purchases a note at original issue for
an amount that is less than its issue price (or, in the case of a subsequent
purchaser, its stated redemption price at maturity), such U.S. Holder will be
treated as having purchased such note at a "market discount," unless such
market discount is less than a de minimis amount (generally 1/4 of 1 percent
of the stated redemption price of the note at maturity times the number of
complete years to maturity after the U.S. Holder acquires the note).
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment on a note, or any gain realized on the sale,
exchange, retirement or other disposition of a note, as ordinary income to the
extent of the lesser of (i) the amount of such payment or realized gain or
(ii) the market discount which has not previously been included in income and
is treated as having accrued on such note at the time of such payment or
disposition. Market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the note, unless
the U.S. Holder elects to accrue market discount on a constant yield basis.
Once made, such an election may be revoked only with the consent of the IRS.
A U.S. Holder may be required to defer the deduction of all or a portion
of the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a note with market discount until the maturity of the note
or certain earlier dispositions, because a current deduction is only allowed
to the extent that the interest expense exceeds the portion of market discount
allocable to the days during the taxable year in which the note was held by
the taxpayer. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or constant yield basis), in
which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the note and upon the receipt of
certain cash payments and regarding the deferral of interest deductions will
not apply. Generally, such currently included market discount is treated as
ordinary interest for federal income tax purposes. Such an election will apply
to all debt instruments with market discount acquired by the U.S. Holder on or
after the first day of the taxable year to which such election applies and may
be revoked only with the consent of the IRS.
Amortizable Bond Premium. If a U.S. Holder purchases a debt instrument
for an amount that is greater than the sum of all amounts payable on the debt
instrument after the purchase date, other than payments of qualified stated
interest, such U.S. Holder will be considered to have purchased the debt
instrument with "amortizable bond premium," generally equal in amount to such
excess. However, in the case of a debt instrument that may be optionally
redeemed prior to maturity (such as the notes), recently issued Treasury
Regulations (the "Bond Premium Regulations") provide that the amount of
amortizable bond premium is determined by substituting the first date on which
the debt instrument may be redeemed (the "redemption date") for the maturity
date and the applicable redemption price on the redemption date for the amount
payable at maturity, if the result would increase the holder's yield to
maturity (i.e, result in a smaller amount of amortizable bond premium properly
allocable to the period before the redemption date). If the issuer does not in
fact exercise its right to redeem the debt instrument on the applicable
redemption date, the debt instrument will be treated (solely for purposes of
the amortizable bond premium rules) as having matured and then as having been
reissued for the holder's "adjusted acquisition price," which is an amount
equal to the holder's basis in the debt instrument (as determined under the
Bond Premium Regulations), less the sum of (i) any amortizable bond premium
allocable to prior accrual periods and (ii) any payments previously made on
the debt instrument (other than payments of qualified stated interest). The
debt instrument deemed to have been reissued will again be subject to the
amortizable bond premium rules with respect to the remaining dates on which
the debt instrument is redeemable.
A U.S. Holder may elect to amortize bond premium on a debt instrument.
Once made, the election applies to all taxable debt instruments then owned and
thereafter acquired by the U.S. Holder on or after the first day of the
taxable year to which such election applies, and may be revoked only with the
consent of the IRS. In general, a holder amortizes bond premium by offsetting
the qualified stated interest allocable to an accrual period with the bond
premium allocable to the accrual period, which is determined under a constant
yield method pursuant to the
S-10
Bond Premium Regulations. If the bond premium allocable to an accrual period
exceeds the qualified stated interest allocable to such period, the excess is
treated by the holder as a bond premium deduction. The bond premium deduction
for each accrual period is limited to the amount by which the holder's total
interest inclusions on the debt instrument in prior accrual periods exceed the
total amount treated by such holder as a bond premium deduction on the debt
instrument in prior accrual periods. Any amounts not deductible in an accrual
period may be carried forward to the next accrual period and treated as bond
premium allocable to that period.
Disposition of the Notes. Upon the sale, exchange, redemption, retirement
or other disposition of a note, a U.S. Holder generally will recognize capital
gain or loss equal to the difference between (i) the amount of cash proceeds
and the fair market value of any property received on the disposition (except
to the extent such amount is attributable to accrued but unpaid stated
interest, which is taxable as ordinary income) and (ii) such U.S. Holder's
adjusted tax basis in the note. A U.S. Holder's adjusted tax basis in a note
generally will equal the cost of the note to such Holder increased by any
accrued market discount if the U.S. Holder has included in income and
decreased by the amount of any payments, other than qualified stated interest
payments, received, and amortizable bond premium taken, with respect to such
note. Capital gain or loss recognized upon the disposition of a note will be a
long-term capital gain or loss if the note was held for more than one year.
Non-U.S. Holders of the Notes
The rules governing the United States federal income taxation of a
Non-U.S. Holder are complex and no attempt will be made herein to provide more
than a summary of such rules. Non-U.S. Holders should consult their own tax
advisors to determine the effect of federal, state, local and foreign tax
laws, as well as tax treaties, with regard to an investment in the notes.
A Non-U.S. Holder holding the notes on its own behalf generally will be
exempt from United States federal income taxes and withholding on payments of
principal, premium and interest on a note, unless, in the case of interest
payments, such Non-U.S. Holder is a direct or indirect 10% or greater partner
(as defined in section 871(h)(3) of the Code) in the Operating Partnership, a
controlled foreign corporation related to the Operating Partnership or a bank
extending credit pursuant to a loan agreement entered into in the ordinary
course of its trade or business. In order for a Non-U.S. Holder that is an
individual or corporation (or entity treated as such for United States federal
income tax purposes) to qualify for the exemption from taxation, the
"withholding agent" (generally, the last U.S. payor or a non-U.S. payor who is
a qualified intermediary, U.S. branch of a foreign person or withholding
foreign partnership) must have received a statement (generally made on IRS
Form W-8BEN) from the individual or corporation that: (i) is signed under
penalties of perjury by the beneficial owner of the note, (ii) certifies that
such owner is not a U.S. Holder and (iii) provides the beneficial owner's name
and address. Certain securities clearing organizations and other entities that
are not beneficial owners, may provide a signed statement accompanied by a
copy of the to the withholding agent instead of the beneficial owner. However,
in such case, the signed statement may require a copy of the beneficial
owner's IRS Form W-8BEN (or a substitute form). An IRS Form W-8BEN is
generally effective for the remainder of the year of signature plus three full
calendar years unless a change in circumstances renders any information on the
form incorrect. Notwithstanding the preceding sentence, a W-8BEN with a U.S.
taxpayer identification number will remain effective until a change in
circumstances makes any information on the form incorrect, provided that the
withholding agent reports at least annually to the beneficial owner. The
beneficial owner must inform the withholding agent within 30 days of such
change and furnish a new IRS Form W-8BEN. A Non-U.S. Holder that is not an
individual or corporation (or an entity treated as a corporation for United
States federal income tax purposes) holding the notes on its own behalf may
have substantially increased reporting requirements and should consult its tax
advisor.
Any gain realized on the sale, redemption, retirement or other taxable
disposition of a note by a Non-U.S. Holder will be exempt from United States
federal income and withholding tax so long as: (i) the gain is not effectively
connected with the conduct of a trade or business in the United States by the
Non-U.S. Holder, and (ii) in the case of a foreign individual, the Non-U.S.
Holder is not present in the United States for 183 days or more in the taxable
year.
S-11
Except to the extent that an applicable treaty otherwise provides, a
Non-U.S. Holder whose gain or income with respect to a note is effectively
connected with the conduct of a trade or business in the United States by such
Non-U.S. Holder, although exempt from the withholding tax previously discussed
if an appropriate statement is furnished, will generally be subject to United
States federal income tax on the interest, gain or income at regular United
States federal income tax rates, as if the holder were a U.S. person, provided
that the holder files an IRS Form W-8ECI. In addition, if the Non-U.S. Holder
is a foreign corporation, it may be subject to a branch profits tax equal to
30 percent of its "dividend equivalent amount" within the meaning of the
Internal Revenue Code for the taxable year, subject to adjustment, unless it
qualifies for a lower rate under an applicable tax treaty.
Certain United States Federal Estate Tax Considerations Applicable to a
Non-U.S. Holder. A note beneficially owned by an individual who is not a
citizen or resident of the United States at the time of death will not be
included in the decedent's gross estate for United States federal estate tax
purposes, unless the individual is a direct or indirect 10% or greater partner
of ours, or, at the time of death, payments with respect to such note would
have been effectively connected with the conduct by such Non-U.S. Holder of a
trade or business within the United States.
Information Reporting and Backup Withholding
In general, information reporting requirements and back-up withholding at
the applicable rate will apply to payments on a note (including stated
interest payments and payments of the proceeds from the sale, exchange,
redemption, retirement or other disposition of a note), unless the holder of
the note (i) is a corporation or comes within certain exempt categories and,
when required, demonstrates that fact or (ii) provides a correct taxpayer
identification number, certifies as to its exemption from backup withholding
and otherwise complies with applicable requirements of the backup withholding
rules. Certain penalties may be imposed by the IRS on a holder that is
required to supply information but does not do so in the proper manner.
Information reporting requirements and backup withholding generally will
not apply to payments on a note to a Non-U.S. Holder if the statement
described in "Non-U.S. Holders--Payment of Interest" is duly provided by such
Holder, provided that the Withholding Agent does not have actual knowledge
that the Holder is a United States person. Information reporting requirements
and backup withholding will not apply to any payment of the proceeds of the
sale of a note effected outside the United States by a foreign office of a
"broker" (as defined in applicable Treasury Regulations), unless such broker
(i) is a United States person, (ii) derives 50% or more of its gross income
for certain periods from the conduct of a trade or business in the United
States, (iii) is a controlled foreign corporation as to the United States or
(iv) is a U.S. branch of a foreign bank or a foreign insurance company.
Payment of the proceeds of any such sale effected outside the United States by
a foreign office of any broker that is described in (i), (ii) or (iii) of the
preceding sentence will not be subject to backup withholding, but will be
subject to the information reporting requirements unless such broker has
documentary evidence in its records that the beneficial owner is a Non-U.S.
Holder and certain other conditions are met, or the beneficial owner otherwise
establishes an exemption. Payment of the proceeds of any such sale to or
through the United States office of a broker is subject to information
reporting and backup withholding requirements, unless the beneficial owner of
the note provides the statement described in "Non-U.S. Holders--Payment of
Interest" or otherwise establishes an exemption.
Any amount withheld from a payment to a holder of a note under the backup
withholding rules is allowable as a credit against such holder's United States
federal income tax liability (which might entitle such holder to a refund),
provided that such holder furnishes the required information to the IRS.
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated June 11, 2002 that relates to the notes, we have agreed to sell to First
Union Securities, Inc., the underwriter, and the underwriter has agreed to
purchase from us, all of the notes offered hereby.
S-12
The underwriting agreement states that the obligation of the underwriter
to purchase and accept delivery of the notes offered by this prospectus
supplement is subject to the approval of certain legal matters by its counsel
and certain other conditions. Pursuant to the underwriting agreement, the
underwriter has agreed to purchase all of the notes if any of them are
purchased.
Notes sold by the underwriter to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus
supplement. Any notes sold by the underwriter to securities dealers may be
sold at a discount from the initial public offering price of up to .350% of
the principal amount of the notes. Any such securities dealers may resell any
notes purchased from the underwriter to certain other brokers or dealers at a
discount from the initial public offering price of up to .250% of the
principal amount of the notes. If all the notes are not sold at the public
offering price, the underwriter may change the offering price and the other
selling terms.
Prior to this offering, there has been no public market for the notes.
The underwriter has informed us that it may make a market in the notes from
time to time. The underwriter is not obligated to do this, and it may
discontinue this market making at any time without notice. Therefore, no
assurance can be given that an active trading market will develop or that any
trading market for the notes will be liquid or maintained. We do not intend to
apply for the notes to be listed on any national securities exchange or
national securities quotation system.
In connection with this offering, the underwriter may engage in
transactions that stabilize, maintain or otherwise affect the price of the
notes. These transactions may include short sales, stabilizing transactions
and purchases to cover positions created by short sales. Short sales involve
the sale by the underwriter of a greater aggregate principal amount of notes
than they are required to purchase in this offering. Stabilizing transactions
consist of certain bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the notes while the offering is in
progress. These activities by the underwriter may stabilize, maintain or
otherwise affect the market price of the notes. As a result, the price of the
notes 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
underwriter at any time. These transactions may be effected in the
over-the-counter market or otherwise.
We have agreed to indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
Alternatively, we may contribute to payments the underwriter may be required
to make as a result of these liabilities.
We estimate that our share of the total expenses of this offering,
excluding the underwriting discount, will be approximately $175,000, including
up to $40,000 which we will reimburse to the underwriter for certain of its
expenses incurred in connection with this offering.
The underwriter and its affiliates have in the past performed, and may
from time to time in the future perform, certain investment banking,
commercial banking and advisory services for us and our affiliates.
First Union Securities, Inc. ("FUSI"), a subsidiary of Wachovia
Corporation, conducts its investment banking, institutional, and capital
markets businesses under the trade name of Wachovia Securities. Any references
to "Wachovia Securities" in this prospectus supplement, however, do not
include Wachovia Securities, Inc., a separate broker-dealer subsidiary of
Wachovia Corporation and sister affiliate of FUSI which may or may not be
participating as a separate selling dealer in the distribution of the notes.
LEGAL MATTERS
The legality of the notes offered hereby and certain federal tax matters
will be passed upon for us by Sidley Austin Brown & Wood LLP, New York, New
York. In addition, certain legal matters will be passed upon for the
underwriter by Clifford Chance Rogers & Wells LLP, New York, New York.
S-13
EXPERTS
The consolidated financial statements and schedule appearing in our
Annual Report (Form 10-K) for the year ended December 31, 2001 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
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PROSPECTUS
- ----------
$744,739,654
RECKSON ASSOCIATES REALTY CORP.
Common Stock, Common Stock Warrants,
Preferred Stock, Depositary Shares and Preferred Stock Warrants
$200,000,000
RECKSON OPERATING PARTNERSHIP, L.P.
Debt Securities
_________________
Reckson Associates Realty Corp. may offer up to $744,739,654 of
shares of its Class A common stock, shares of its preferred stock, depositary
shares representing interests in its preferred stock, and warrants to purchase
shares of its Class A common stock or preferred stock. Reckson Associates'
Class A common stock is listed on the New York Stock Exchange under the symbol
"RA."
Reckson Operating Partnership, L.P. may offer up to $200,000,000 of
its debt securities in one or more series. If any of the Operating
Partnership's debt securities are not rated investment grade by at least one
nationally recognized statistical rating organization at the time of issuance,
these non-investment grade debt securities will be fully and unconditionally
guaranteed by Reckson Associates as to payment of principal, premium, if any,
and interest.
We may offer the securities at prices and on terms to be set forth in
one or more supplements to this prospectus. The securities may be offered
directly, through agents on our behalf or through underwriters or dealers.
The terms of the securities may include limitations on ownership and
restrictions on transfer thereof as may be appropriate to preserve the status
of Reckson Associates as a real estate investment trust for United States
federal income tax purposes.
See "Risk Factors" beginning on page 2 of this prospectus for a
description of risks that should be considered by purchasers of the
securities.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The date of this prospectus is June 11, 2002.
RISK FACTORS
This prospectus contains forward-looking statements which involve
risks and uncertainties. Our actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
a difference include, but are not limited to, those discussed below. An
investment in the securities involves various risks. Prospective investors
should carefully consider the following information in conjunction with the
other information contained in this prospectus and the related prospectus
supplement before purchasing the securities offered by the related prospectus
supplement.
o We are dependent on the New York Tri-State area market due to limited
geographic diversification and our financial results may suffer as a result of
a decline in economic conditions in such area
A decline in the economic conditions in the New York tri-state area
(the "Tri-State Area") and for commercial real estate could adversely affect
our business, financial condition and results of operations. All of our
properties, except one office property located in Orlando, Florida, are
located in the Tri-State Area, although our organizational documents do not
restrict us from owning properties outside this area. Each of our five markets
are located in New York City and the suburbs of New York City and may be
similarly affected by economic changes in this area. A significant downturn in
the financial services industry and related industries would likely have a
negative effect on these markets and on the performance of our properties.
The following is a breakdown of our office and industrial properties
for each of our five markets at March 31, 2002:
Number of Properties(1) Square Footage Annual Base Rent(2)
----------------------- --------------- -------------------
Long Island
Office 25 3,952,783 $85,863,196
Industrial 94 5,839,377 $38,137,422
Westchester
Office 23 3,232,474 $66,072,041
Industrial 2 139,690 $1,749,740
New Jersey
Office 16 1,963,754 $40,837,422
Industrial 5 324,468 $2,777,438
Connecticut
Office 8 1,123,915 $24,599,347
Industrial 1 452,414 $2,032,502
New York City
Office 5 3,498,393 $128,491,548
_______________
(1) We also own one 357,000 square foot office building located in
Orlando, Florida, two retail properties encompassing 19,200 square
feet on Long Island and 254 acres of land on which the Company can
develop approximately two million square feet of office space and
approximately 450,000 square feet of industrial space.
2
(2) Represents base rents from leases in place as of April 1, 2002, for
the period April 1, 2002 through March 31, 2003, excluding the
reimbursement by tenants of electrical costs.
o Debt servicing and refinancing, increases in interest rates and financial
and other covenants could adversely affect our economic performance
Dependence upon debt financing; risk of inability to service or
refinance debt. In order to qualify as a real estate investment trust, or
REIT, for federal income tax purposes, we are required to distribute at least
90% of our taxable income. As a result, we are more reliant on debt or equity
financings than many other non-REIT companies that are able to retain more of
their income.
We are subject to the risks associated with debt financing. Our cash
flow could be insufficient to meet required payments of principal and
interest. We may not be able to refinance existing indebtedness, which in
virtually all cases requires substantial principal payments at maturity, or
the terms of such refinancing might not be as favorable as the terms of the
existing indebtedness. As of March 31, 2002, the weighted average maturity of
our existing indebtedness was approximately 7.0 years and our total existing
indebtedness was approximately $1.4 billion. We also may not be able to
refinance any indebtedness we incur in the future. Finally, we may not be able
to obtain funds by selling assets or raising equity to make required payments
on maturing indebtedness.
Rising interest rates could adversely affect cash flow. We conduct
all of our operations through, and serve as the sole general partner of, the
Operating Partnership. Increases in interest rates could increase the
Operating Partnership's interest expense, which could adversely affect its
ability to service its indebtedness or to pay dividends to our stockholders.
As of March 31, 2002, approximately 15.3% of our debt was variable rate debt
and our total debt was approximately $1.4 billion. Outstanding advances under
the Operating Partnership's credit facility bear interest at variable rates.
In addition, we may incur indebtedness in the future that also bears interest
at a variable rate.
Covenants in our debt agreements could adversely affect our financial
condition and our ability to make distributions. The Operating Partnership has
a three-year unsecured credit facility from JPMorgan Chase Bank, as
Administrative Agent, which provides for a maximum borrowing amount of up to
$575 million. The credit facility matures in September 2003. The ability of
the Operating Partnership to borrow under the credit facility is subject to
certain covenants, including covenants relating to limitations on unsecured
and secured borrowings, minimum interest and fixed charge coverage ratios, a
minimum equity value and a maximum dividend payout ratio. The credit facility
also contains a financial covenant limiting the amount of cash distributions
that we may pay to holders of our common stock during any fiscal quarter if
they exceed, when added to all distributions paid during the three immediately
preceding quarters, the greater of:
o 90% of our funds from operations; and
o the amounts required in order for us to continue to qualify as a
REIT.
We rely on borrowings under the Operating Partnership's credit
facility to finance acquisition and development activities and for working
capital purposes. Although the Operating Partnership presently is in
compliance with the covenants under the credit facility, the Operating
Partnership's ability to borrow under such facility is subject to continued
compliance with the financial and other covenants contained therein. There is
no assurance that the Operating Partnership will continue to be in compliance.
If the
3
Operating Partnership is unable to borrow under its credit facility, it
could adversely affect our financial condition, including our ability to
service our indebtedness or pay dividends to our stockholders.
In addition, the mortgage loans which are secured by certain of our
properties contain customary covenants, including covenants that require us to
maintain property insurance in an amount equal to replacement cost of the
properties. There can be no assurance that the lenders under our mortgage
loans will not take the position that exclusions from our coverage for losses
due to terrorist acts is a breach of a covenant which, if uncured, could allow
the lenders to declare an event of default and accelerate repayment of the
mortgage loans. Other outstanding debt instruments contain standard cross
default provisions that would be triggered in the event of an acceleration of
the mortgage loans. This matter could adversely affect our financial results
and our ability to finance and/or refinance our properties or to buy or sell
properties. Our current insurance coverage provides for full replacement cost
of the properties, except that the coverage for acts of terrorism on our
properties covers losses in an amount up to $100 million, per occurrence
(except for our largest property which has an additional aggregate $150
million of coverage). Certain of our properties have a replacement cost in
excess of $100 million.
No limitation on debt. Currently, we have a policy of incurring debt
only if our Debt Ratio is 50% or less. As of March 31, 2002, our Debt Ratio
was 39.0%. For these purposes, Debt Ratio is defined as the total debt of the
Operating Partnership as a percentage of the market value of outstanding
shares of common stock, including the conversion of outstanding partnership
units in the Operating Partnership, the liquidation preference of our
preferred stock and the liquidation preference of the preferred units of the
Operating Partnership, excluding all units of general partnership owned by us,
plus total debt (including our share of joint venture debt and net of minority
partners' share of joint venture debt). Under this policy, we could incur
additional debt if our stock price increases, even if we may not have a
corresponding increase in our ability to repay the debt. In addition, as of
March 31, 2002, our debt-to-equity ratio was 1:1.56. We calculated our
debt-to-equity ratio by comparing the total debt of the Operating Partnership
to the value of our outstanding common stock and the common units of limited
partnership interest of the Operating Partnership (including its share of
joint venture debt and net of minority partners' share of joint venture debt),
each based upon the market value of the common stock, and the liquidation
preference of our preferred stock and the preferred units of limited
partnership interest in the Operating Partnership, excluding all units of
general partnership interest owned by us.
As described above, our credit facility contains financial covenants
which limit the ability of the Operating Partnership to incur additional
indebtedness. However, our organizational documents do not contain any
limitation on the amount of indebtedness we may incur. Accordingly, our Board
of Directors could alter or eliminate this policy and would do so, for
example, if it were necessary in order for us to continue to qualify as a
REIT. If this policy were changed, we could become more highly leveraged,
resulting in higher interest payments that could adversely affect our ability
to pay dividends to our stockholders and could increase the risk of default on
the Operating Partnership's existing indebtedness.
o The value of our investments in loans to FrontLine Capital Group
("FrontLine") and in joint venture investments with Reckson Strategic Venture
Partners LLC ("RSVP") may be subject to further loss
In June 1998, the Operating Partnership established an unsecured
credit facility with FrontLine (the "FrontLine Facility") in the amount of
$100 million for FrontLine to use in its investment activities, operations and
other general corporate purposes. As of March 31, 2002, we had advanced
approximately $93.4 million under the FrontLine Facility. In addition, in June
1998, the Operating Partnership approved the funding of investments of up to
$100 million relating to RSVP (the "RSVP Commitment"), through
4
RSVP-controlled joint ventures (for REIT-qualified investments) or advances
made to FrontLine under an unsecured loan facility on terms similar to the
FrontLine Facility (advances made under the RSVP Facility and the FrontLine
Facility are hereafter referred to as the "FrontLine Loans). During March
2001, we increased the RSVP Commitment to $110 million and as of March 31,
2002, approximately $109.1 million had been funded through the RSVP
Commitment, of which $59.8 million represents investments in RSVP-controlled
(REIT-qualified) joint ventures and $49.3 million represents advances loaned
to FrontLine. As of March 31, 2002, interest accrued (net of reserves) under
the FrontLine Facility and RSVP Commitment was approximately $19.6 million.
Scot H. Rechler, who serves as our Co-Chief Executive Officer and as one of
our directors, serves as the Chief Executive Officer and Chairman of the Board
of FrontLine.
At June 30, 2001, we assessed the recoverability of the FrontLine
Loans and reserved approximately $3.5 million of the interest accrued during
the three-month period then ended. In addition, we formed a committee of our
Board of Directors, comprised solely of independent directors, to consider any
actions to be taken by us in connection with the FrontLine Loans and its
investments in joint ventures with RSVP. During the third quarter of 2001, we
noted a significant deterioration in FrontLine's operations and financial
condition and, based on our assessment of value and recoverability and
considering the findings and recommendations of the committee and its
financial advisor, we recorded a $163 million valuation reserve charge,
inclusive of anticipated costs, in our consolidated statements of operations
relating to our investments in the FrontLine Loans and joint ventures with
RSVP. We also discontinued the accrual of interest income with respect to the
FrontLine Loans. We have also reserved against our share of GAAP equity in
earnings from the RSVP controlled joint ventures funded through the RSVP
Commitment until such income is realized through cash distributions.
At December 31, 2001, pursuant to Section 166 of the Internal Revenue
Code of 1986, as amended, we charged off $70 million of the aforementioned
reserve directly related to the FrontLine Facility, including accrued
interest. On February 14, 2002, we charged off an additional $38 million of
the reserve directly related to the FrontLine Facility, including accrued
interest, and $47 million of the reserve directly related to the RSVP
Facility, including accrued interest. Currently, the net carrying value of our
investments in the FrontLine Loans and joint venture investments with RSVP,
inclusive our share of previously accrued GAAP equity in earnings on those
investments, is approximately $65.0 million.
FrontLine is in default under the FrontLine Loans. FrontLine has
reported that it is currently considering seeking protection from its
creditors under the federal bankruptcy laws. Management anticipates that
FrontLine will seek protection under the federal bankruptcy laws, in which
case the value of our investments in the FrontLine Loans and in joint venture
investments with RSVP may further decline.
o Our acquisition, development and construction activities could result in
losses
We intend to acquire existing office and industrial properties to the
extent that suitable acquisitions can be made on advantageous terms.
Acquisitions of commercial properties entail risks, such as the risks that we
may not be in a position or have the opportunity in the future to make
suitable property acquisitions on advantageous terms and that our investments
will fail to perform as expected. Some of the properties that we acquire may
require significant additional investment and upgrades and are subject to the
risk that estimates of the cost of improvements to bring such properties up to
standards established for the intended market position may prove inaccurate.
Since our IPO in June 1995, we have acquired 66 office properties (excluding
the office property located in Orlando, Florida) with aggregate square footage
of approximately 11.9 million and 39 industrial properties with aggregate
square footage of approximately 3.3 million. In addition, we have developed
one office building encompassing
5
approximately 277,500 square feet and four industrial buildings encompassing
approximately 483,000 square feet.
We also intend to continue the selective development and construction
of office and industrial properties in accordance with our development and
underwriting policies as opportunities arise. Our development and construction
activities include the risks that:
o we may abandon development opportunities after expending resources
to pursue development;
o construction costs of a project may exceed our original estimates;
o occupancy rates and rents at a newly completed property may not be
sufficient to make the property profitable;
o financing may not be available to us on favorable terms
for development of a property; and
o we may not complete construction and lease-up on schedule,
resulting in increased carrying costs to complete construction,
construction costs and, in some instances, penalties owed to
tenants with executed leases.
Our development activities are also subject to risks relating to the
inability to obtain, or delays in obtaining, all necessary zoning, land-use,
building, occupancy and other required governmental permits and
authorizations. If any of the above events occur, our ability to pay dividends
to our stockholders and service the Operating Partnership's indebtedness could
be adversely affected. In addition, new development activities, regardless of
whether or not they are ultimately successful, typically require a substantial
portion of management's time and attention.
o Adverse real estate market conditions, increases in operating expenses or
capital expenditures, tenant defaults and uninsured losses could adversely
affect our financial results
Our properties' revenues and value may be adversely affected by a
number of factors, including:
o the national, state and local economic climate and real estate
conditions, such as oversupply of or reduced demand for space and
changes in market rental rates;
o the need to periodically renovate, repair and relet our space;
o increasing operating costs, including real estate taxes and
utilities, which may not be passed through to tenants;
o defaults by our tenants or their failure to pay rent on a timely
basis; and
o uninsured losses.
A significant portion of our expenses of real estate investments,
such as mortgage payments, real estate taxes, insurance and maintenance costs,
are generally not reduced when circumstances cause a decrease in income from
our properties. In addition, our real estate values and income from properties
are also affected by our compliance with laws, including tax laws, interest
rate levels and the availability of financing.
We may suffer losses as a result of tenant bankruptcies. If any of
our tenants file for protection from creditors under federal bankruptcy laws,
they generally have the right, subject to certain conditions, to reject their
leases with us. In the event this occurs, we may not be able to readily lease
the space or to lease it on equal or better terms.
6
In this regard, HQ Global Workplaces, Inc., ("HQ") one of the largest
providers of flexible officing solutions in the world, and which is controlled
by FrontLine, had leases at eleven of our properties. The leases under which
these office centers operate expire between 2008 and 2011, encompass
approximately 225,000 square feet and have current contractual annual base
rents of approximately $6.7 million. On March 13, 2002, as a result of
experiencing financial difficulties, HQ voluntarily filed a petition for
relief under Chapter 11 of the U.S. Bankruptcy Code. As of March 31, 2002,
HQ's leases with the Operating Partnership were in default under their lease
terms and further, HQ petitioned the Bankruptcy Court to reject two of their
leases with the Operating Partnership effective March 13, 2002. The two
rejected leases aggregate approximately 23,900 square feet and provided for
contractual base rents of approximately $548,000 for the 2002 calendar year.
In addition, commencing April 1, 2002 and pursuant to the bankruptcy filing,
HQ has been paying current rental charges, other than the two leases which are
being petitioned for rejection, under their leases with Operating Partnership.
There can be no assurances as to whether HQ will affirm or reject the
remaining leases with the Operating Partnership or whether or not the
Bankruptcy Court will grant HQ's petition to reject the two aforementioned
leases. The Operating Partnership reserved approximately $500,000 (net of
minority partners' interests and including the Operating Partnership's share
of unconsolidated joint venture interest), or 74%, of the amounts due from HQ
as of March 31, 2002. Scott H. Rechler, who serves as our Co-Chief Executive
Officer and as one of our directors, serves as the non-executive chairman of
HQ.
In addition, in May 2002, MetroMedia Fiber Network Services, Inc.,
which leases approximately 112,075 square feet at one of our properties,
voluntarily filed a petition for relief under Chapter 11 of the U.S.
Bankruptcy Code. The lease provides for contractual base rent of approximately
$2,791,323 for the 2002 calendar year and expires in May 2010. MetroMedia is
current on its base rental obligations through May 31, 2002. We are currently
in discussions with them relating to restructuring and reduction of space
under this lease.
Because real estate investments are illiquid, we may not be able to
sell properties when appropriate. Real estate investments generally cannot be
sold quickly. We may not be able to vary our portfolio promptly in response to
economic or other conditions. In addition, provisions of the Internal Revenue
Code of 1986, as amended (the "Code") limit a REIT's ability to sell
properties in some situations when it may be economically advantageous to do
so, thereby adversely affecting returns to our stockholders.
Competition in our markets is significant. The competition for
tenants in the office and industrial markets in the Tri-State Area is
significant and includes properties owned by other REITs, local privately-held
companies, institutional investors and other owners. There is also significant
competition for acquisitions in our markets from the same types of
competitors. In addition, many users of industrial space in our markets own
the buildings that they occupy.
Increasing operating costs could adversely affect cash flow. Our
properties are subject to operating risks common to commercial real estate,
any and all of which may adversely affect occupancy or rental rates. Our
properties are subject to increases in our operating expenses such as
cleaning, electricity, heating, ventilation and air conditioning; elevator
repair and maintenance; insurance and administrative costs; and other costs
associated with security, landscaping, repairs and maintenance of our
properties. As a result of the events of September 11, 2001, we are
experiencing higher operating expenses due to significantly increased
insurance costs and security measures. While our tenants generally are
currently obligated to pay a portion of these costs, there is no assurance
that tenants will agree to pay these costs upon renewal or that new tenants
will agree to pay these costs initially. If operating expenses increase, the
local rental market may limit the extent to which rents may be increased to
meet increased expenses without at the same time decreasing occupancy rates.
While we have cost
7
saving measures at each of our properties, if any of the above
occurs, our ability to pay dividends to our stockholders and service our
indebtedness could be adversely affected.
Some potential losses are not covered by insurance; losses could
result from terrorist acts. We carry comprehensive liability, fire, extended
coverage and rental loss insurance on all of our properties. Five of our
properties are located in New York City. As a result of the events of
September 11, 2001, insurance companies are limiting and/or excluding coverage
for acts of terrorism in all risk policies. Our current insurance coverage
provides for full replacement cost of our properties, except that the coverage
for acts of terrorism on our properties covers losses in an amount up to $100
million, per occurrence (except for one property which has an additional
aggregate $150 million of coverage). As a result we may suffer losses from
acts of terrorism that are not covered by insurance. Furthermore, losses
arising from acts of war or relating to pollution are not generally insured
because they are either uninsurable or not economically insurable. If an
uninsured loss or a loss in excess of insured limits should occur, we could
lose our capital invested in a property, as well as any future revenue from
the property. We would remain obligated on any mortgage indebtedness or other
obligations related to the property. Any such loss could materially and
adversely affect our business and financial condition and results of
operations.
Investments in mortgage debt could lead to losses. We may invest in
mortgages secured by office or industrial properties. We may acquire the
mortgaged properties through foreclosure proceedings or negotiated
settlements. In addition to the risks associated with investments in
commercial properties, investments in mortgage indebtedness present additional
risks, including the risk that the fee owners of such properties may not make
payments of interest on a current basis and we may not realize our anticipated
return or sustain losses relating to the investments. Although we currently
have no intention to originate mortgage loans as a significant part of our
business, we may make loans to a seller in connection with our purchase of
real estate. The underwriting criteria we would use for these loans would be
based upon the credit and value of the underlying real estate.
o Property ownership through partnerships and joint ventures creates
additional investment risks
Partnership or joint venture investments may involve risks not
otherwise present for investments made solely by us, including the possibility
that our partners or co-venturer might become bankrupt, that our partners or
co-venturer might at any time have different interests or goals than we do,
and that our partners or co-venturer may take action contrary to our
instructions, requests, policies or objectives, including our policy with
respect to maintaining our qualification as a REIT. Other risks of joint
venture investments include impasse on decisions, such as a sale, because
neither our partner or co-venturer nor us would have full control over the
partnership or joint venture. There is no limitation under our organizational
documents as to the amount of funds that may be invested in partnerships or
joint ventures.
The following is a description of the significant joint ventures in
which we are involved:
Our joint venture in 919 Third Avenue, New York, New York, includes
the risks that we cannot enter into large leases or refinance or dispose of
the property in our discretion. In December 2001, we formed a joint venture
with the New York State Teachers' Retirement System ("NYSTRS") whereby NYSTRS
acquired a 49% indirect interest in the property located at 919 Third Avenue,
New York, NY for approximately $220.5 million, representing approximately $98
million of net cash proceeds to us. A subsidiary of ours serves as the
managing member of the joint venture, maintaining responsibility for its
day-to-day operations. In addition, a two-member management committee must
unanimously approve certain major decisions, including a sale of the property,
purchasing any additional property or entering
8
into significant leases. We and NYSTRS each have the right to appoint one
member to the management committee. Prior to December 21, 2002, neither we nor
NYSTRS may transfer our respective joint venture interest to an unaffiliated
third-party without the other member's consent. On or after December 21, 2002,
we and NYSTRS each have the right to transfer our interest subject to a right
of first offer in favor of the non-transferring member. Prior to April 1,
2005, under certain limited circumstances, we and NYSTRS may each deliver to
the other a buy/sell offer for the other's respective interest in the
property. From and after April 1, 2005, both we and NYSTRS each have the right
to deliver a buy/sell offer or recommend a sale of the property, with the
non-recommending member having the ability to purchase the other's interest in
lieu of such sale.
Our joint venture in a portfolio of eight office properties includes
the risks that we cannot enter into large leases or refinance or dispose of
the properties in our discretion. In September 2000, we formed a joint venture
(the "Tri-State JV") with Teachers Insurance and Annuity Association ("TIAA")
and contributed eight Class A suburban office properties aggregating
approximately 1.5 million square feet to the Tri-State JV in exchange for
approximately $136 million and a 51% majority ownership interest in the
Tri-State JV. Our subsidiary acts as the operating member of the Tri-State JV.
The agreement governing the joint venture provides that if the operating
member transfers its interest in Tri-State JV, or a change in control occurs
with respect to the operating member or certain of our affiliates, under
certain limited circumstances, TIAA may elect to cause the operating member to
purchase TIAA's interest in the Tri-State JV.
Our investment in the Omni includes the risks that we cannot
refinance or dispose of the property in our sole discretion and we could have
our general partnership interest converted into a limited partnership
interest. The Operating Partnership owns a 60% general partner interest in
Omni Partners, L.P. (the "Omni Partnership"), the partnership that owns the
Omni, a 575,000 square foot office building located in our Nassau West
Corporate Center office park. Odyssey Partners, L.P. ("Odyssey") and an
affiliate of Odyssey own the remaining 40% interest. Through our partnership
interest, we act as managing partner and have the sole authority to conduct
the business and affairs of the Omni Partnership subject to the limitations
set forth in the amended and restated agreement of limited partnership of Omni
Partners, L.P. (the "Omni Partnership Agreement"). These limitations include
Odyssey's right to negotiate under certain circumstances a refinancing of the
mortgage debt encumbering the Omni and the right to approve any sale of the
Omni made on or before March 13, 2007 (the "Acquisition Date"). The Operating
Partnership will continue to act as the sole managing partner of the Omni
Partnership unless certain conditions specified in the Omni Partnership
Agreement shall occur. Upon the occurrence of any of these conditions, the
Operating Partnership's general partnership interest shall convert to a
limited partnership interest and an affiliate of Odyssey shall be the sole
managing partner, or, at the option of Odyssey, the Operating Partnership
shall be a co-managing partner with an affiliate of Odyssey. In addition, on
the Acquisition Date, the Operating Partnership will have the right to
purchase Odyssey's interest in the Omni Partnership at a price (the "Option
Price") based on 90% of its fair market value. If the Operating Partnership
fails to exercise this option, Odyssey has the right to require the Operating
Partnership to purchase Odyssey's interest in the Omni Partnership on the
Acquisition Date at the Option Price. The Operating Partnership has the right
to extend the Acquisition Date until March 13, 2012. The Option Price shall
apply to the payment of all sums due under a loan made by the Operating
Partnership in March 1997 to Odyssey in the amount of approximately $17
million. The Odyssey loan matures on the Acquisition Date, subject to the
Operating Partnership's right to extend the Acquisition Date as set forth
above, and is secured by a pledge of Odyssey's interest in the Omni
Partnership.
Our joint venture in an office building in Tarrytown, New York
includes the risks that we cannot enter into large leases or refinance or
dispose of the building in our discretion. The Operating
9
Partnership owns a 60% managing member interest in a limited liability company
that owns 520 White Plains Road, a 171,761 square foot office building located
in Tarrytown, New York. The remaining 40% member interest is held by Tarrytown
Corporate Center III, L.P. ("TCC"), a partnership affiliated with the Halpern
organization, the organization from which we acquired eight Class A office
properties for approximately $86 million in February 1996. The member
agreement governing the joint venture arrangement requires us to obtain the
consent of TCC prior to engaging in activities such as entering into or
modifying a lease for more than 25,000 rentable square feet, financing or
refinancing indebtedness encumbering the property and selling or otherwise
transferring the property.
o Environmental problems are possible
Federal, state and local laws and regulations relating to the
protection of the environment may require a current or previous owner or
operator of real estate to investigate and clean up hazardous or toxic
substances or petroleum product releases at a property. An owner of real
estate is liable for the costs of removal or remediation of certain hazardous
or toxic substances on or in the property. These laws often impose such
liability without regard to whether the owner knew of, or caused, the presence
of the contaminants. Clean-up costs and the owner's liability generally are
not limited under the enactments and could exceed the value of the property
and/or the aggregate assets of the owner. The presence of, or the failure to
properly remediate, the substances may adversely affect the owner's ability to
sell or rent the property or to borrow using the property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances may also be liable for the clean-up costs of the substances at a
disposal or treatment facility, whether or not such facility is owned or
operated by the person. Even if more than one person was responsible for the
contamination, each person covered by the environmental laws may be held
responsible for the clean-up costs incurred. In addition, third parties may
sue the owner or operator of a site for damages and costs resulting from
environmental contamination emanating from that site.
Environmental laws also govern the presence, maintenance and removal
of asbestos-containing materials ("ACMs"). These laws impose liability for
release of ACMs into the air and third parties may seek recovery from owners
or operators of real properties for personal injury associated with ACMs. In
connection with the ownership (direct or indirect), operation, management and
development of real properties, we may be considered an owner or operator of
properties containing ACMs. Having arranged for the disposal or treatment of
contaminants we may be potentially liable for removal, remediation and other
costs, including governmental fines and injuries to persons and property.
All of our office properties and all of our industrial properties
have been subjected to a Phase I or similar environmental site assessment
after April 1, 1994 that were completed by independent environmental
consultant companies, except for the property located at 35 Pinelawn Road
which was originally developed by us and subjected to a Phase I in April 1992.
These Phase I or similar environmental site assessments involved general
inspections without soil sampling, ground water analysis or radon testing and,
for our properties constructed in 1978 or earlier, survey inspections to
ascertain the existence of ACMs. These environmental site assessments have not
revealed any environmental liability that we believe would have a material
adverse effect on our business.
o Failure to qualify as a REIT would be costly
We have operated (and intend to operate) so as to qualify as a REIT
under the Code beginning with our taxable year ended December 31, 1995.
Although our management believes that we are organized and operated in a
manner to so qualify, no assurance can be given that we will qualify or remain
qualified as a REIT.
10
If we fail to qualify as a REIT in any taxable year, we will be
subject to federal income tax (including any applicable alternative minimum
tax) on our taxable income at regular corporate rates. Moreover, unless
entitled to relief under certain statutory provisions, we also will be
disqualified from treatment as a REIT for the four taxable years following the
year during which qualification was lost. This treatment would significantly
reduce net earnings available to service indebtedness, make investments or pay
dividends to stockholders because of the additional tax liability to us for
the years involved. Also, we would not then be required to pay dividends to
our stockholders.
o Tax consequences upon a sale or refinancing of properties may result in
conflicts of interest for our directors and officers
Holders of units of limited partnership interest of the Operating
Partnership or co-owners of properties not owned entirely by us may suffer
different and more adverse tax consequences than we will upon the sale or
refinancing of our properties. We may have different objectives from these
co-owners and holders of limited partnership units regarding the appropriate
pricing and timing of any sale or refinancing of these properties. While we,
as the sole general partner of the Operating Partnership, have the exclusive
authority as to whether and on what terms to sell or refinance each property
owned solely by the Operating Partnership, our directors and officers who hold
limited partnership units may seek to influence us not to sell or refinance
the properties, even though such a sale might otherwise be financially
advantageous to us, or may seek to influence us to refinance a property with a
higher level of debt.
o Limits on ownership and changes in control may deter changes in management
and third party acquisition proposals
Ownership limit. To maintain our qualification as a REIT, five or
fewer individuals (as defined in the Code, to include certain entities) may
not own, directly or indirectly, more than 50% in value of our outstanding
capital stock at any time during the last half of a taxable year (other than
the first year). In order to protect against the risk of losing REIT status,
our charter limits ownership of our issued and outstanding Class A common
stock by any single stockholder to 9% of the lesser of the number or value of
the outstanding shares of common stock. It also limits ownership of our Class
B exchangeable common stock by any single stockholder to 9% in value of the
outstanding shares of all of our common stock and limits ownership of our
issued and outstanding 7 5/8% Series A Convertible Cumulative Preferred Stock
and Series B Convertible Cumulative Preferred Stock to 9% in value of the
outstanding shares of all of our capital stock. In addition, a stockholder may
not acquire shares of our Series A preferred stock that would result in the
stockholder's owning in excess of 20% of the lesser of the number or value of
outstanding shares of the Series A preferred stock. See "Restrictions on
Ownership of Capital Stock," "Description of Common Stock--Restrictions on
Ownership" and "Description of Preferred Stock--Restrictions on Ownership."
These provisions may delay, defer or prevent a change of control in our
company or other transaction by a third party without the consent of the Board
of Directors even if a change in control were in the best interests of our
stockholders.
Staggered board. Our Board of Directors is divided into three
classes. The terms of the Class I, Class II and Class III directors expire in
2005, 2003, and 2004, respectively. Directors are chosen for a three-year
term. These provisions may deter changes in control because of the increased
time period necessary for a third party to acquire control of management
through positions on the Board of Directors.
Supermajority Vote for Removal of Directors. In our charter, we have
opted into a provision of the Maryland General Corporation Law (the "MGCL")
requiring a vote of two-thirds of the common stock to remove one or more
directors.
11
Majority of Votes Required to Call Special Meetings of Stockholders.
Our bylaws provide that a special meeting of stockholders need only be called
if requested by holders of the majority of votes eligible to be cast at such
meeting.
Future issuances of common stock. Our charter authorizes the Board of
Directors to issue additional shares of common stock without stockholder
approval. We also may issue shares of Class A common stock in exchange for
limited partnership units pursuant to the Operating Partnership's partnership
agreement. We currently have outstanding approximately 10.3 million shares of
Class B exchangeable common stock. These shares are exchangeable at the option
of the holder at any time on a one-for-one basis for shares of our Class A
common stock and are entitled currently to an annual dividend of $2.5968 per
share, which is subject to adjustment annually based upon a formula which
measures increases or decreases in Reckson Associates' FFO over a base year.
At our option, we may redeem any or all of the Class B common stock in
exchange for an equal number of shares of our Class A common stock (subject to
customary antidilution adjustments as well as certain other adjustments) at
any time following November 23, 2003. Additional issuances of Class A common
stock could have the effect of diluting existing common stockholders'
interests.
Our charter permits the issuance of preferred stock which could
delay, defer or prevent a change in control. Our charter authorizes the Board
of Directors to issue up to 25 million shares of preferred stock, of which
9,192,000 shares of 7 5/8% Series A preferred stock and 2,000,000 shares of
Series B preferred stock are issued and outstanding, to reclassify unissued
shares of capital stock, and to establish the preferences, conversion and
other rights, voting powers, restrictions, limitations and restrictions on
ownership, limitations as to dividends or other distributions, qualifications,
and terms and conditions of redemption for each class or series of any capital
stock issued.
In October 2000, the Board of Directors adopted a Stockholder Rights
Plan (the "Rights Plan") designed to protect our stockholders from various
abusive takeover tactics, including attempts to acquire control at an
inadequate price, depriving stockholders of the full value of their
investment. The Rights Plan is designed to allow the Board of Directors to
secure the best available transaction for all of our stockholders. The Rights
Plan was not adopted in response to any known effort to acquire control of our
company.
Under the Rights Plan, each of our stockholders received a dividend
of one Right for each share of our outstanding Class A common stock owned. The
Rights are exercisable only if a person or group acquires, or announces their
intent to acquire, 15% or more of our Class A common stock, or announces a
tender offer the consummation of which would result in beneficial ownership by
a person or group of 15% or more of the Class A common stock. Each Right
entitles the holder to purchase one one-thousandth of a share of a new series
of junior participating preferred stock of ours at an initial exercise price
of $84.44.
If any person acquires beneficial ownership of 15% or more of the
outstanding shares of Class A common stock, then all Rights holders except the
acquiring person are entitled to purchase our Class A common stock at a price
discounted from the then market price. If we are acquired in a merger after
such an acquisition, all Rights holders except the acquiring person are also
entitled to purchase stock in the buyer at a discount in accordance with the
Rights Plan.
Limitations on acquisition of and changes in control pursuant to
Maryland law. The MGCL contains provisions, referred to as the "control share
acquisition statute," which eliminate the voting rights
12
of shares acquired in a Maryland corporation in quantities so as to constitute
"control shares," as defined under the MGCL. The MGCL also contains
provisions, referred to as the "business combination statute," which generally
limit business combinations between a Maryland corporation and any 10% owners
of the company's stock or any affiliate thereof. These provisions may have the
effect of inhibiting a third party from making an acquisition proposal for our
company or of delaying, deferring or preventing a change in control of our
company under circumstances that otherwise could provide the holders of shares
of common stock with the opportunity to realize a premium over the
then-prevailing market price. As permitted by the MGCL, our bylaws contain a
provision exempting any and all acquisitions by any person of shares of our
capital stock from the control share acquisition statute. The Board of
Directors, however, has approved our opting into the "business combination
statute."
o The market value of securities could decrease based on our performance and
market perception and conditions
Effect of earnings and cash dividends. The market value of the equity
securities of a REIT may be based primarily upon the market's perception of
the REIT's growth potential and its current and future cash dividends, and may
be secondarily based upon the real estate market value of the underlying
assets. For the year ended December 31, 2001, we distributed approximately
101.6% of our cash available for distribution to our common stockholders. This
rate reflects certain future capital expenditure commitments relating to
leases executed during this period. A portion of the cash for such
expenditures is not actually expended until future periods. Additionally, this
rate was impacted by $26.9 million of "free rent" from the property located at
919 Third Avenue in New York City, which is primarily attributable to the
property's three largest tenants. As of March 1, 2002, the "free rent" periods
for these tenants have expired.
Adverse impact of rising interest rates. One factor which influences
the price of securities is the dividend or interest rate on the securities
relative to market interest rates. Rising interest rates may lead potential
buyers of our equity securities to expect a higher dividend rate, which would
adversely affect the market price of the securities. In addition, rising
interest rates would result in increased expense, thereby adversely affecting
cash flow and the ability of the Operating Partnership to service its
indebtedness.
o Transactions by the Operating Partnership or Reckson Associates could
adversely affect debt holders
Except with respect to a covenant limiting the incurrence of
indebtedness, a covenant requiring the Operating Partnership to maintain a
certain percentage of unencumbered assets and a covenant requiring any
successor in a business combination with the Operating Partnership to assume
all of the obligations of the Operating Partnership under the indenture
pursuant to which the debt securities will be issued, the indenture does not
contain any provisions that would protect holders of debt securities in the
event of (i) a highly leveraged or similar transaction involving the Operating
Partnership, the management of the Operating Partnership or Reckson
Associates, or any affiliate of any these parties, (ii) a change of control,
or (iii) certain reorganizations, restructuring, mergers or similar
transactions involving the Operating Partnership or Reckson Associates.
o We may not be able to pay on guarantees
A guarantee of the Operating Partnership's debt securities by Reckson
Associates effectively provides no benefit to investors and should not be
viewed by investors as enhancing the credit of the debt securities or as
providing any additional value to the debt securities. The Operating
Partnership conducts
13
all of Reckson Associates' operations, and the only asset of Reckson
Associates is its interest in the Operating Partnership. As a result, if the
Operating Partnership is unable to meet its obligations on the debt
securities, Reckson Associates will not have any assets from which to pay on
its guarantee of such debt securities.
CAUTIONARY STATEMENTS CONCERNING
FORWARD-LOOKING INFORMATION
Certain information both included and incorporated by reference in
this prospectus may contain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act, and as
such may involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of our company
to be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. Forward-looking
statements, which are based on certain assumptions and describe our future
plans, strategies and expectations are generally identifiable by use of the
words "may," "will," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative thereof or other variations thereon or
comparable terminology. Factors which could have a material adverse effect on
the operations and future prospects of our company are described below under
"Risk Factors." These risks and uncertainties should be considered in
evaluating any forward-looking statements contained or incorporated by
reference herein. Our actual results may differ significantly from the results
discussed in the forward-looking statements.
AVAILABLE INFORMATION
Reckson Associates and the Operating Partnership are each subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith both Reckson
Associates and the Operating Partnership file annual, quarterly and current
reports and other information with the Securities and Exchange Commission (the
"Commission"). These reports and other information may be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. You may
access the Commission's web site at http://www.sec.gov. These materials can
also be inspected at the office of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, the exchange on which Reckson Associates'
common stock and Series A preferred stock is listed.
We have filed with the Commission a registration statement on Form
S-3 under the Securities Act, with respect to the securities. This prospectus
does not contain all of the information set forth in the registration
statement, certain parts of which have been omitted in accordance with the
rules and regulations of the Commission. For further information regarding us
and the securities, reference is made to the registration statement, including
the exhibits filed as a part thereof, and the documents incorporated by
reference in this prospectus. Statements made in this prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete; with respect to each contract, agreement or other
document filed as an exhibit to the registration statement or to an Exchange
Act report, reference is made to the exhibit for a more complete description
of the matter involved, and each statement shall be deemed qualified in its
entirety by reference. Copies of the registration statement and the exhibits
may be inspected, without charge, at the offices of the Commission, or
obtained at prescribed rates from the Public Reference Section of the
Commission at the address set forth above.
14
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the
information we file with it, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is considered to be part of
this prospectus, and information we file later with the SEC will automatically
update and supersede this information. We incorporate by reference the
documents listed below (other than information in such documents that is
deemed not to be filed), which we have previously filed with the SEC and are
considered a part of this prospectus, and any future filings made with the SEC
prior to the termination of this offering under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934. These filings contain important
information about Reckson Associates and the Operating Partnership.
Reckson Associates SEC Filings Period
(File No. 1-13762) ------
-----------------
Annual Report on Form 10-K Year ended December 31, 2001
Quarterly Report on Form 10-Q Quarter ended March 31, 2002
Current Reports on Form 8-K Filed January 8, 2002
Registration Statement on Form 8-A Filed May 9, 1995 (as amended)
Registration Statement on Form 8-A Filed April 9, 1998
Reckson Operating Partnership
SEC Filings (File No. 1-13762)
------------------------------
Annual Report on Form 10-K Year ended December 31, 2001
Quarterly Report on Form 10-Q Quarter ended March 31, 2002
Current Reports on Form 8-K Filed January 8, 2002
Reckson Associates and the Operating Partnership will provide a copy
of any or all of these documents (exclusive of exhibits unless the exhibits
are specifically incorporated by reference therein), without charge, to each
person to whom this prospectus is delivered, upon written or oral request to
Reckson Associates Realty Corp., 225 Broadhollow Road, Melville, New York
11747, Attn: Susan McGuire, Investor Relations, telephone number (631)
694-6900.
RECKSON ASSOCIATES AND THE OPERATING PARTNERSHIP
Reckson Associates was incorporated in September 1994 and commenced
operations effective with the completion of its initial public offering (the
"IPO") on June 2, 1995. Reckson Associates, together with the Operating
Partnership, was formed for the purpose of continuing the commercial real
estate business of the predecessors of Reckson Associates, its affiliated
partnerships and other entities. For more than 40 years, we have been engaged
in the business of owning, developing, acquiring, constructing, managing and
leasing office and industrial properties in the in the New York tri-state area
(the "Tri-State Area"). Based on industry surveys, we believe that we are one
of the largest owners and operators of Class A suburban and commercial
business district ("CBD") office properties and industrial properties in the
Tri-State Area. When we refer to Class A office buildings in this prospectus,
we mean well maintained, high quality buildings that achieve rental rates that
are at the higher end of the range of rental rates for office properties in
the particular market. We operate as a self-managed REIT with in-house
capabilities in property management, development, construction and
acquisitions.
As of March 31, 2002, we owned 181 properties (including 11 joint
venture properties) in the Tri-State Area suburban and CBD markets,
encompassing approximately 20.6 million rentable square feet, all
15
of which are managed by us (the "Properties"). These Properties include 60
Class A suburban office properties encompassing approximately 8.5 million
rentable square feet, of which 42 of these properties or 74% as measured by
square footage, are located within our ten office parks. Reckson has
historically emphasized the development and acquisition of properties that are
part of large-scale suburban office parks. The properties also include 17
Class A CBD office properties encompassing approximately 5.3 million rentable
square feet. The CBD office properties consist of five properties located in
New York City, eight properties located in Stamford, CT and four properties
located in White Plains, NY. Additionally, the properties include 102
industrial properties encompassing approximately 6.8 million rentable square
feet, of which 72 of these properties, or 59% as measured by square footage,
are located within the Company's three industrial parks. The properties also
include two retail properties comprising 19,200 rentable square feet. In
addition, the Company has entered into a contract to sell, for approximately
$18.5 million, two Properties located in Westchester County, NY aggregating
approximately 157,000 square feet. The closing is scheduled to occur during
the second quarter of 2002.
As of March 31, 2002, we also owned approximately 254 acres of land
in 12 separate parcels on which the Company can develop approximately two
million square feet of office space and approximately 450,000 square feet of
industrial space. During April 2002 we acquired a 32 acre land parcel located
in Rye Brook, NY for approximately $22.3 million.
The office properties are Class A office buildings that are
well-located, well-maintained and professionally managed. In addition, these
properties are modern or have been modernized to compete with newer buildings
in their markets. We believe that these properties achieve among the highest
rent and occupancy rates within their markets. The majority of the office
properties are located in eleven planned office parks and central business
districts and are tenanted by, among others, national service firms, such as
telecommunications firms, "big five" accounting firms, securities brokerage
houses, insurance companies and health care providers. The industrial
properties are utilized for distribution, warehousing, research and
development and light manufacturing/assembly activities and are located
primarily in three planned industrial parks.
Our executive offices are located at 225 Broadhollow Road, Melville,
New York 11747 and our telephone number at that location is (631) 694-6900. At
March 31, 2002, we had approximately 310 employees.
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement,
the net proceeds to Reckson Associates or the Operating Partnership, as the
case may be, from the sale of the securities offered by the applicable
prospectus supplement will be used for the repayment of existing indebtedness,
the development or acquisition of additional properties as suitable
opportunities arise and the renovation, expansion and improvement of our
existing properties, in each case, as described in detail in the prospectus
supplement depending on the circumstances at the time of the related offering,
and for other general corporate purposes.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the consolidated ratios of earnings to
fixed charges and preferred stock dividends of Reckson Associates and the
Operating Partnership for the periods shown:
16
Year Ended December 31,
For the three months ----------------------
Ended March 31, 2002 2001 2000 1999 1998 1997
-------------------- ---- ---- ---- ---- ----
Reckson Associates:
- ------------------
Ratio of Earnings to Fixed Charges 2.05x 2.22x 2.09x 2.06x 1.98x 2.68x
Ratio of Earnings to Combined Fixed 1.66x 1.79x 1.61x 1.52x 1.59x (A)
Charges and Preferred Stock Dividends
Operating Partnership:
- ---------------------
Ratio of Earnings to Fixed Charges 2.09x 2.26x 2.11x 2.07x 2.00x 2.69x
Ratio of Earnings to Combined Fixed 1.69x 1.82x 1.62x 1.54x 1.60x (A)
Charges and Preferred Stock Dividends
- --------------
(A) Neither Reckson Associates nor the Operating Partnership had any preferred capital outstanding prior to April 1998.
The ratios of earnings to fixed charges were computed by dividing
earnings by fixed charges. The ratio of earnings to combined fixed charges and
preferred dividends were computed by dividing earnings by the aggregate of
fixed charges and preferred dividends. For this purpose, earnings consist of
income from continuing operations before minority interest, fixed charges and,
for the ratio of earnings to combined fixed charges and preferred dividends,
preferred dividends. Fixed charges consist of interest expense (including
interest costs capitalized), ground rent expense and the amortization of debt
issuance costs.
DESCRIPTION OF DEBT SECURITIES
The debt securities of the Operating Partnership covered by this
prospectus (the "Debt Securities") will be issued under an Indenture (the
"Indenture") among the Operating Partnership, Reckson Associates and The Bank
of New York (the "Trustee"). The Indenture has been filed as an exhibit to the
Registration Statement of which this prospectus is a part and is available for
inspection at the corporate trust office of the trustee at One Wall Street,
New York, NY 10286. The Indenture is subject to, and governed by, the Trust
Indenture Act of 1939, as amended (the "TIA"). The statements made hereunder
relating to the Indenture and the Debt Securities to be issued thereunder are
summaries of the material provisions thereof and do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
provisions of the Indenture and the Debt Securities. All section references
appearing herein are to sections of the Indenture, and capitalized terms used
but not defined herein shall have the respective meanings set forth in the
Indenture.
General
The Debt Securities will be direct, unsecured obligations of the
Operating Partnership and will rank equally with all other unsecured and
unsubordinated indebtedness of the Operating Partnership. The Debt Securities
may be issued without limit as to aggregate principal amount, in one or more
series, in each case as established from time to time in or pursuant to
authority granted by a resolution of the Board of Directors of Reckson
Associates as sole general partner of the Operating Partnership, or as
established in one or more indentures supplemental to the Indenture. All Debt
Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of
17
the holders of the Debt Securities of the series, for issuances of additional
Debt Securities of the same series.
The Indenture provides that there may be more than one Trustee
thereunder, each with respect to one or more series of Debt Securities. Any
Trustee under the Indenture may resign or be removed with respect to one or
more series of Debt Securities, and a successor Trustee may be appointed to
act with respect to the series. In the event that two or more persons are
acting as Trustee with respect to different series of Debt Securities, each
Trustee shall be a trustee of a trust under the Indenture separate and apart
from the trust administered by any other Trustee, and, except as otherwise
indicated herein, any action described herein to be taken by a Trustee may be
taken by each Trustee with respect to, and only with respect to, the one or
more series of Debt Securities for which it is Trustee under the Indenture.
Reference is made to the prospectus supplement relating to the series
of Debt Securities being offered for the specific terms thereof, including:
(1) the title of the Debt Securities;
(2) the aggregate principal amount of the Debt Securities and any
limit on the aggregate principal amount;
(3) the percentage of the principal amount at which the Debt
Securities will be issued and, if other than the principal
amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity
thereof;
(4) the date or dates, or the method for determining the date or
dates, on which the principal of such Debt Securities will be
payable;
(5) the rate or rates (which may be fixed or variable), or the
method by which the rate or rates shall be determined, at
which the Debt Securities will bear interest, if any;
(6) the date or dates, or the method for determining the date or
dates, from which any interest will accrue, the dates on which
any interest will be payable, the record dates for such
interest payment dates, or the method by which any date shall
be determined, the person to whom the interest shall be
payable, and the basis upon which interest shall be calculated
if other than that of a 360-day year of twelve 30-day months;
(7) the place or places where the principal of (and premium, if
any) and interest, if any, on the Debt Securities will be
payable, the Debt Securities may be surrendered for
registration of transfer or exchange and notices or demands to
or upon the Operating Partnership in respect of the Debt
Securities and the Indenture may be served;
(8) the date or dates on which or the period or periods within
which, the price or prices at which and the terms and
conditions upon which the Debt Securities may be redeemed, as
a whole or in part, at the option of the Operating
Partnership, if the Operating Partnership is to have an
option;
18
(9) the obligation, if any, of the Operating Partnership to
redeem, repay or purchase the Debt Securities pursuant to any
sinking fund or analogous provision or at the option of a
holder thereof, and the date or dates on which or the period
or periods within which, the price or prices at which and the
terms and conditions upon which the Debt Securities will be
redeemed, repaid or purchased, as a whole or in part, pursuant
to its obligation;
(10) if other than U.S. dollars, the currency or currencies in
which the Debt Securities are denominated and payable, which
may be a foreign currency or units of two or more foreign
currencies or a composite currency or currencies, and the
terms and conditions relating thereto;
(11) whether the amount of payments of principal of (and premium,
if any) or interest, if any, on the Debt Securities may be
determined with reference to an index, formula or other method
(which index, formula or method may, but need not be, based on
a currency, currencies, currency unit or units or composite
currency or currencies) and the manner in which the amounts
shall be determined;
(12) any additional events of default or covenants of the Debt
Securities;
(13) whether the Debt Securities will be issued in certificated
and/or book-entry form;
(14) whether the Debt Securities will be in registered or bearer
form and, if in registered form, the denominations thereof if
other than $1,000 and any integral multiple thereof and, if in
bearer form, the denominations thereof if other than $5,000
and terms and conditions relating thereto;
(15) whether the Debt Securities will be fully and unconditionally
guaranteed by Reckson Associates pursuant to the Guarantees
(the "Guaranteed Securities");
(16) if the defeasance and covenant defeasance provisions described
herein are to be inapplicable or any modification of these
provisions;
(17) if the Debt Securities are to be issued upon the exercise of
debt warrants, the time, manner and place for the Debt
Securities to be authenticated and delivered;
(18) whether and under what circumstances the Operating Partnership
will pay additional amounts on the Debt Securities in respect
of any tax, assessment or governmental charge and, if so,
whether the Operating Partnership will have the option to
redeem such Debt Securities in lieu of making a payment;
(19) if other than the Trustee, the identity of each security
registrar and/or paying agent; and
(20) any other material terms of the Debt Securities.
The Debt Securities may provide for less than the entire principal
amount thereof to be payable upon declaration of acceleration of the maturity
thereof ("Original Issue Discount Securities"). If material
19
or applicable, special U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable prospectus supplement.
Except with respect to a covenant limiting the incurrence of
indebtedness, a covenant requiring a certain percentage of unencumbered assets
and a covenant requiring any successor in a business combination with the
Operating Partnership to assume all of the obligations of the Operating
Partnership under the Indenture, the Indenture does not contain any other
provisions that would limit the ability of the Operating Partnership or
Reckson Associates to incur indebtedness or that would afford Holders of the
Debt Securities protection in the case of any of the following events:
o a highly leveraged or similar transaction involving the
Operating Partnership, the management of the Operating
Partnership or Reckson Associates, or any affiliate of any
these parties;
o a change of control; or
o a reorganization, restructuring, merger or similar transaction
involving the Operating Partnership or Reckson Associates that
may adversely affect the Holders of the Debt Securities.
In addition, subject to the covenants referred to above, the
Operating Partnership or Reckson Associates may, in the future, enter into
certain transactions, such as the sale of all or substantially all of its
assets or the merger or consolidation of the Operating Partnership or Reckson
Associates, that would increase the amount of the Operating Partnership's
indebtedness or substantially reduce or eliminate the Operating Partnership's
assets, which may have an adverse effect on the Operating Partnership's
ability to service its indebtedness, including the Debt Securities. In
addition, restrictions on ownership and transfers of Reckson Associates'
common stock and preferred stock which are designed to preserve its status as
a REIT may act to prevent or hinder a change of control. See "Description of
Common Stock--Restrictions on Ownership" and "Description of Preferred
Stock--Restrictions on Ownership."
Guarantees
Reckson Associates will fully and unconditionally guarantee the due
and punctual payment of principal of, premium, if any, and interest on any
Debt Securities not rated investment grade by at least one nationally
recognized statistical rating organization at the time of issuance by the
Operating Partnership, whether at a maturity date, by declaration of
acceleration, call for redemption or otherwise.
Denominations, Interest, Registration and Transfer
Unless otherwise described in the applicable prospectus supplement,
the Debt Securities of any series which are registered securities, other than
registered securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $1,000 and any integral
multiple thereof and the Debt Securities which are bearer securities, other
than bearer securities issued in global form (which may be of any
denomination), shall be issuable in denominations of $5,000.
Unless otherwise specified in the applicable prospectus supplement,
the principal of (and premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office
20
of the Trustee provided that, at the option of the Operating Partnership,
payment of interest may be made by check mailed to the address of the Person
entitled thereto as it appears in the applicable Security Register or by wire
transfer of funds to the Person at an account maintained within the United
States.
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the Person in whose name the Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of the Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of the Debt Security not
less than 10 days prior to the Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the Indenture.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of the
Debt Securities at the corporate trust office of the Trustee referred to
above. In addition, subject to certain limitations imposed upon Debt
Securities issued in book-entry form, the Debt Securities of any series may be
surrendered for registration of transfer thereof at the corporate trust office
of the Trustee referred to above. Every Debt Security surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by
a written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Trustee
or the Operating Partnership may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith. If the
applicable prospectus supplement refers to any transfer agent (in addition to
the Trustee) initially designated by the Operating Partnership with respect to
any series of Debt Securities, the Operating Partnership may at any time
rescind the designation of any transfer agent or approve a change in the
location through which any transfer agent acts, except that the Operating
Partnership will be required to maintain a transfer agent in each place of
payment for the series. The Operating Partnership may at any time designate
additional transfer agents with respect to any series of Debt Securities.
Neither the Operating Partnership nor the Trustee shall be required
to:
o issue, register the transfer of or exchange any Debt Security
if the Debt Security may be among those selected for
redemption during a period beginning at the opening of
business 15 days before selection of the Debt Securities to be
redeemed and ending at the close of business on the day of
selection;
o register the transfer of or exchange any Registered Security
so selected for redemption in whole or in part, except, in the
case of any Registered Security to be redeemed in part, the
portion thereof not to be redeemed;
o exchange any Bearer Security so selected for redemption except
that the Bearer Security may be exchanged for a Registered
Security of that series and like tenor, provided that the
Registered Security shall be simultaneously surrendered for
redemption; or
o issue, register the transfer of or exchange any Security which
has been surrendered for repayment at the option of the
Holder, except the portion, if any, of the Debt Security not
to be so repaid.
21
Merger, Consolidation or Sale
The Operating Partnership or, with respect to the Guaranteed
Securities, Reckson Associates may consolidate with, or sell, lease or convey
all or substantially all of its assets to, or merge with or into, any other
entity, provided that the following conditions are met:
o the Operating Partnership or Reckson Associates, as the case
may be, shall be the continuing entity, or the successor
entity (if other than the Operating Partnership or Reckson
Associates, as the case may be) formed by or resulting from
any consolidation or merger or which shall have received the
transfer of assets shall expressly assume payment of the
principal of (and premium, if any) and interest on all the
Debt Securities and the due and punctual performance and
observance of all of the covenants and conditions contained in
the Indenture and, if applicable, the Guarantees;
o immediately after giving effect to the transaction, no Event
of Default under the Indenture, and no event which, after
notice or the lapse of time, or both, would become an Event of
Default, shall have occurred and be continuing; and
o an officer's certificate and legal opinion covering these
conditions shall be delivered to the Trustee.
Certain Covenants
Limitations on Incurrence of Debt. The Operating Partnership will
not, and will not permit any Subsidiary (as defined below) to, incur any
Indebtedness (as defined below), other than Permitted Debt (as defined below),
if, immediately after giving effect to the incurrence of additional
Indebtedness, the aggregate principal amount of all outstanding Indebtedness
of the Operating Partnership, and of its Subsidiaries determined at the
applicable proportionate interest of the Operating Partnership in each
Subsidiary, determined in accordance with GAAP (as defined below), is greater
than 60% of the sum of:
(1) the Total Assets (as defined below) as of the end of the calendar
quarter covered in the Operating Partnership's Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, most recently filed with
the Commission prior to the incurrence of such additional Indebtedness or, if
the Operating Partnership is not then subject to the reporting requirements of
the Exchange Act, as of its most recent calendar quarter and
(2) any increase in the Total Assets since the end of the quarter,
including, without limitation, any increase in Total Assets resulting from the
incurrence of additional Indebtedness (the Total Assets adjusted by this
increase are referred to as the "Adjusted Total Assets").
The Operating Partnership will not, and will not permit any
Subsidiary to, incur any Indebtedness, other than Permitted Debt, if, for the
period consisting of the four consecutive fiscal quarters most recently ended
prior to the date on which additional Indebtedness is to be incurred, the
ratio of Consolidated Income Available for Debt Service (as defined below) to
the Annual Service Charge (as defined below) shall have been less than 1.5 to
1, on a pro forma basis after giving effect to the incurrence of Indebtedness
and to the application of the proceeds therefrom, and calculated on the
assumption that:
o the Indebtedness and any other Indebtedness incurred by the
Operating Partnership or its Subsidiaries since the first day
of the four-quarter period and the application of the
22
proceeds therefrom, including to refinance other Indebtedness,
had occurred at the beginning of the period,
o the repayment or retirement of any other Indebtedness by the
Operating Partnership or its Subsidiaries since the first day
of the four-quarter period had been incurred, repaid or
retained at the beginning of the period (except that, in
making the computation, the amount of Indebtedness under any
revolving credit facility shall be computed based upon the
average daily balance of borrowings under the credit facility
during the period),
o any income earned as a result of any increase in Adjusted
Total Assets since the end of the four-quarter period had been
earned, on an annualized basis, for the period, and
o in the case of an acquisition or disposition by the Operating
Partnership or any of its Subsidiaries of any asset or group
of assets since the first day of the four-quarter period,
including, without limitation, by merger, stock purchase or
sale, or asset purchase or sale, the acquisition or
disposition or any related repayment of Indebtedness had
occurred as of the first day of the period with the
appropriate adjustments with respect to the acquisition or
disposition being included in the pro forma calculation of
Consolidated Income Available for Debt Service to the Annual
Service Charge.
The Operating Partnership will not, and will not permit any
Subsidiary to, incur any Indebtedness secured by any Lien (as defined below)
of any kind upon any of the property of the Operating Partnership or any of
its Subsidiaries (the "Secured Debt") if, immediately after giving effect to
the incurrence of the additional Secured Debt, the aggregate principal amount
of all outstanding Secured Debt of the Operating Partnership, and of its
Subsidiaries determined at the applicable proportionate interest of the
Operating Partnership in each Subsidiary, is greater than 40% of the Adjusted
Total Assets.
Maintenance of Total Unencumbered Assets. The Operating Partnership
will maintain Total Unencumbered Assets (as defined below) of not less than
150% of the aggregate principal amount of all outstanding Unsecured Debt.
Existence. Except as permitted under "Merger, Consolidation or Sale,"
the Operating Partnership is required to do or cause to be done all things
necessary to preserve and keep in full force and effect its existence and that
of each Subsidiary and their respective, rights and franchises; provided,
however, that the Operating Partnership shall not be required to preserve any
right or franchise if it determines that the preservation thereof is no longer
desirable in the conduct of its business and that the loss thereof is not
disadvantageous in any material respect to the Holders of the Debt Securities.
Maintenance of Properties. The Operating Partnership is required to
cause all of its material properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and to cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Operating
Partnership may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that the Operating Partnership and its Subsidiaries shall not be
prevented from selling or otherwise disposing for value their respective
properties in the ordinary course of business.
23
Insurance. The Operating Partnership is required to, and is required
to cause each of its Subsidiaries to, keep all of its insurable properties
insured against loss or damage at least equal to their then full insurable
value with financially sound and reputable insurance companies.
Payment of Taxes and Other Claims. The Operating Partnership is
required to pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (1) all taxes, assessments and governmental
charges levied or imposed upon them or any Subsidiary or upon their income,
profits or property or that of any Subsidiary, and (2) all lawful claims for
labor, materials and supplies which, if unpaid, might by law become a lien
upon the property of the Operating Partnership or any Subsidiary; provided,
however, that the Operating Partnership shall not be required to pay or
discharge or cause to be paid or discharged any tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings.
Provision of Financial Information. The Holders of Debt Securities
will be provided with copies of the annual reports and quarterly reports of
the Operating Partnership. Whether or not the Operating Partnership is subject
to Section 13 or 15(d) of the Exchange Act and for so long as any Debt
Securities are outstanding, the Operating Partnership will, to the extent
permitted under the Exchange Act, be required to file with the Commission the
annual reports, quarterly reports and other documents which the Operating
Partnership would have been required to file with the Commission pursuant to
such Section 13 or 15(d) (the "Financial Statements") if the Operating
Partnership were so subject, the documents to be filed with the Commission on
or prior to the respective dates (the "Required Filing Dates") by which the
Operating Partnership would have been required so to file the documents if the
Operating Partnership were so subject. If the Operating Partnership is no
longer required to file with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act, the Operating Partnership will also in any event:
o within 15 days of each Required Filing Date (1) transmit by
mail to all Holders of Debt Securities, as their names and
addresses appear in the Security Register, without cost to
the Holders, copies of the annual reports and quarterly
reports which the Operating Partnership would have been
required to file with the Commission pursuant to Section 13
or 15(d) of the Exchange Act if the Operating Partnership
were subject to these Sections and (2) file with the Trustee
copies of the annual reports, quarterly reports and other
documents which the Operating Partnership would have been
required to file with the Commission pursuant to Section 13
or 15(d) of the Exchange Act if the Operating Partnership
were subject to these Sections and
o if filing these documents by the Operating Partnership with
the Commission is not permitted under the Exchange Act,
promptly upon written request and payment of the reasonable
cost of duplication and delivery, supply copies of the
documents to any prospective Holder.
As used herein and in the prospectus supplement:
"Annual Service Charge" as of any date means the amount which is
expensed in any 12-month period for interest on Indebtedness.
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income of the Operating Partnership and its Subsidiaries (1)
plus amounts which have been deducted for (a) interest on Indebtedness of the
Operating Partnership and its Subsidiaries, (b) provision for taxes of
24
the Operating Partnership and its Subsidiaries based on income, (c)
amortization of debt discount, (d) depreciation and amortization, (e) the
effect of any noncash charge resulting from a change in accounting principles
in determining Consolidated Net Income for the period, (f) amortization of
deferred charges, and (g) provisions for or realized losses on properties and
(2) less amounts which have been included for gains on properties.
"GAAP" means accounting principles as are generally accepted in the
United States of America as of the date or time of any required computation.
"Indebtedness" means any indebtedness, whether or not contingent, in
respect of (1) borrowed money evidenced by bonds, notes, debentures or similar
instruments, (2) indebtedness secured by any mortgage, pledge, lien, charge,
encumbrance or any security interest existing on property, (3) the
reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued or amounts representing the balance deferred
and unpaid of the purchase price of any property except any balance that
constitutes an accrued expense or trade payable or (4) any lease of property
as lessee which would be reflected on a balance sheet as a capitalized lease
in accordance with GAAP, in the case of items of indebtedness under (1)
through (3) above to the extent that any items (other than letters of credit)
would appear as a liability on a balance sheet in accordance with GAAP, and
also includes, to the extent not otherwise included, any obligation to be
liable for, or to pay, as obligor, guarantor or otherwise (other than for
purposes of collection in the ordinary course of business), indebtedness of
another Person.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of
any vendor, lessor, lender or other secured party to or of the Person under
any conditional sale or other title retention agreement or Capital Lease, upon
or with respect to any property or asset of the Person. A Capital Lease is a
lease to which the lessee is required concurrently to recognize the
acquisition of an asset and the incurrence of a liability in accordance with
GAAP.
"Permitted Debt" means Indebtedness of the Operating Partnership or
any Subsidiary owing to any Subsidiary or the Operating Partnership; provided
that any Indebtedness is made pursuant to an intercompany note and is
subordinated in right of payment to the Securities; provided further that any
disposition, pledge or transfer of any Indebtedness to a Person (other than
the Operating Partnership or another Subsidiary) shall be deemed to be an
incurrence of Indebtedness by the Operating Partnership or a Subsidiary, as
the case may be, and not Permitted Debt.
"Significant Subsidiary" means each significant subsidiary (as
defined in Regulation S-X promulgated under the Securities Act) of the
Operating Partnership or Reckson Associates.
"Subsidiary" means any entity of which the Operating Partnership or
one or more other Subsidiaries owns or controls, directly or indirectly, more
than 50% of the shares of Voting Stock.
"Total Assets" as of any date means the sum of (1) the Undepreciated
Real Estate Assets, (2) all other assets of the Operating Partnership, and of
its Subsidiaries determined at the applicable proportionate interest of the
Operating Partnership in each Subsidiary, determined in accordance with GAAP
(but excluding intangibles and accounts receivable) and (3) the cost of any
property of the Operating Partnership, or any Subsidiary thereof, in which the
Operating Partnership, or Subsidiary, as the case may be, has a firm,
non-contingent purchase obligation.
25
"Total Unencumbered Assets" means the sum of (1) those Undepreciated
Real Estate Assets not subject to a Lien on a consolidated basis, (2) all
other assets of the Operating Partnership, and of its Subsidiaries determined
at the applicable proportionate interest of the Operating Partnership in each
such Subsidiary, which are not subject to a Lien determined in accordance with
GAAP (but excluding intangibles and accounts receivable) and (3) the cost of
any property of the Operating Partnership, or any Subsidiary thereof, in which
the Operating Partnership, or Subsidiary, as the case may be, has a firm,
non-contingent purchase obligation and which is not subject to a Lien.
"Undepreciated Real Estate Assets" means as of any date the cost
(original cost plus capital improvements) of real estate assets of the Issuer
and its Subsidiaries on the date, before depreciating and amortization,
determined on a consolidated basis in accordance with GAAP.
"Unsecured Debt" means Indebtedness of the Operating Partnership or
any Subsidiary which is not secured by any mortgage, lien, charge, pledge or
security interest of any kind upon any of the properties owned by the
Operating Partnership or any of its Subsidiaries.
"Voting Stock" means stock having general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees, provided that stock that carries only the right to vote
conditionally on the happening of an event shall not be considered Voting
Stock.
Additional Covenants. Any additional or different covenants of the
Operating Partnership or Reckson Associates with respect to any series of Debt
Securities will be set forth in the prospectus supplement relating thereto.
Events of Default, Notice and Waiver
The Indenture provides that the following events are "Events of
Default" with respect to any series of Debt Securities issued thereunder:
a. default for 30 days in the payment of any installment of
interest on any Debt Security of the series;
b. default in the payment of the principal of (or premium, if any,
on) any Debt Security of the series at its maturity;
c. default in making any sinking fund payment as required for any
Debt Security of the series;
d. default in the performance of any other covenant of the
Operating Partnership or Reckson Associates (if the Debt
Securities of the series are Guaranteed Securities) contained in
the Indenture (other than a covenant added to the Indenture
solely for the benefit of a series of Debt Securities issued
thereunder other than the series), the default having continued
for 60 days after written notice as provided in the Indenture;
e. the Operating Partnership, Reckson Associates (if the Debt
Securities of the series are Guaranteed Securities), any
Subsidiary in which the Operating Partnership has invested at
least $20,000,000 in capital or any entity in which the
Operating Partnership is the general partner shall fail to pay
any principal of, premium or interest on or any other amount
payable
26
in respect of, any recourse Indebtedness that is
outstanding in a principal or notional amount of at least
$20,000,000 (or the equivalent thereof in one or more other
currencies), either individually or in the aggregate (but
excluding Indebtedness outstanding hereunder), of the Operating
Partnership and its consolidated Subsidiaries, taken as a whole,
when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or
otherwise), and the failure shall continue after the applicable
grace period, if any, specified in any agreement or instrument
relating to Indebtedness, or any other event shall occur or
condition shall exist under any agreement or instrument
evidencing, securing or otherwise relating to any the
Indebtedness and shall continue after the applicable grace
period, if any, specified in the agreement or instrument, if the
effect of the event or condition is to accelerate, or to permit
the acceleration of, the maturity of the Indebtedness or
otherwise to cause, or to permit the holder or holders thereof
(or a trustee or agent on behalf of the holders) to cause the
Indebtedness to mature prior to its stated maturity;
f. one or more final, non-appealable judgments or orders for the
payment of money aggregating $20,000,000 (or the equivalent
thereof in one or more other currencies) or more are rendered
against one or more of the Operating Partnership, Reckson
Associates (if the Debt Securities of the series are Guaranteed
Securities), any Subsidiary in which the Operating Partnership
has invested at least $20,000,000 in capital and remain
unsatisfied and either (1) enforcement proceedings shall have
been commenced by any creditor upon any judgment or order or (2)
there shall be a period of at least 60 days after entry thereof
during which a stay of enforcement of any judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect;
provided, however, that any judgment or order shall not give
rise to an Event of Default under this clause if and for so long
as (A) the amount of the judgment or order is covered by a valid
and binding policy of insurance between the defendant and the
insurer covering full payment thereof and (B) the insurer has
been notified, and has not disputed the claim made for payment,
of the amount of the judgment or order; or
g. certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the
Operating Partnership, Reckson Associates (if the Debt
Securities of the series are Guaranteed Securities) or any
Significant Subsidiary or any substantial part of their
respective property;
h. any other Event of Default provided with respect to a particular
series of Debt Securities.
If an Event of Default under the Indenture with respect to Debt
Securities of any series at the time Outstanding occurs and is continuing
(other than an Event of Default specified in subsection (g) above, which shall
result in an automatic acceleration), then in every case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Debt
Securities of that series may declare the principal amount (or, if the Debt
Securities of that series are Original Issue Discount Securities or Indexed
Securities, the portion of the principal amount as may be specified in the
terms thereof) of all of the Debt Securities of that series , or such lesser
amount as may be provided for in the Debt Securities of that series, to be due
and payable immediately by written notice thereof to the Operating Partnership
and Reckson Associates (and to the Trustee if given by the Holders). However,
at any time after the declaration of acceleration with respect to Debt
Securities of the series has been made, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the Holders of not
less than a majority in principal amount of Outstanding Debt Securities of the
series may rescind and annul the declaration and its consequences if
27
(a) the Operating Partnership or Reckson Associates shall have
deposited with the Trustee all required payments of the principal of (and
premium, if any) and interest on the Debt Securities of the series, plus
certain fees, expenses, disbursements and advances of the Trustee and
(b) all Events of Default, other than the non-payment of accelerated
principal of (or specified portion thereof), or premium (if any) or interest
on the Debt Securities of the series have been cured or waived as provided in
the Indenture.
The Indenture also provides that the Holders of not less than a
majority in principal amount of the Outstanding Debt Securities of any series
may waive any past default with respect to the series and its consequences,
except a default
o in the payment of the principal of (or premium, if any) or
interest on any Debt Security of the series or
o in respect of a covenant or provision contained in the Indenture
that cannot be modified or amended without the consent of the
Holder of each Outstanding Debt Security of the series affected
thereby.
The Trustee will be required to give notice to the Holders of Debt
Securities within 90 days of a default under the Indenture unless the default
has been cured or waived; provided, however, that the Trustee may withhold
notice to the Holders of any series of Debt Securities of any default with
respect to the series (except a default in the payment of the principal of (or
premium, if any) or interest on any Debt Security of the series or in the
payment of any sinking fund installment in respect of any Debt Security of the
series) if specified Responsible Officers of the Trustee consider the
withholding to be in the interest of the Holders.
The Indenture provides that no Holders of Debt Securities of any
series may institute any proceedings, judicial or otherwise, with respect to
the Indenture or for any remedy thereunder, except in the case of failure of
the Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the Holders of
not less than 25% in principal amount of the Outstanding Debt Securities of
the series, as well as an offer of reasonable indemnity. This provision will
not prevent, however, any holder of Debt Securities from instituting suit for
the enforcement of payment of the principal of (and premium, if any) and
interest on the Debt Securities at the respective due dates thereof.
Subject to provisions in the Indenture relating to its duties in case
of default, the Trustee is under no obligation to exercise any of its rights
or powers under the Indenture at the request or direction of any Holders of
any series of Debt Securities then Outstanding under the Indenture, unless the
Holders shall have offered to the Trustee thereunder reasonable security or
indemnity. The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series (or of all Debt Securities then
Outstanding under the Indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or of exercising any trust or power conferred upon
the Trustee. However, the Trustee may refuse to follow any direction which is
in conflict with any law or the Indenture, or which may be unduly prejudicial
to the Holders of Debt Securities of the series not joining therein.
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Within 120 days after the close of each fiscal year, the Operating
Partnership and Reckson Associates must deliver a certificate of an officer
certifying to the Trustee whether or not the officer has knowledge of any
default under the Indenture and, if so, specifying each default and the nature
and status thereof.
Modification of the Indenture
Modifications and amendments of the Indenture will be permitted to be
made only with the consent of the Holders of not less than a majority in
principal amount of all Outstanding Debt Securities of each series which are
affected by the modification or amendment; provided, however, that no
modification or amendment may, without the consent of the Holder of each Debt
Security affected thereby:
o change the Stated Maturity of the principal of, or premium (if
any) or any installment of interest on, any Debt Security,
reduce the principal amount of, or the rate or amount of
interest on, or any premium payable on redemption of, any Debt
Security, or reduce the amount of principal of an Original Issue
Discount Security that would be due and payable upon declaration
of acceleration of the maturity thereof or would be provable in
bankruptcy, or adversely affect any right of repayment of the
holder of any Debt Security, change the place of payment, or the
coin or currency, for payment of principal of, premium, if any,
or interest on any Debt Security or impair the right to
institute suit for the enforcement of any payment on or with
respect to any Debt Security;
o reduce the above-stated percentage of outstanding Debt
Securities of any series necessary to modify or amend the
Indenture, to waive compliance with certain provisions thereof
or certain defaults and consequences thereunder or to reduce the
quorum or voting requirements set forth in the Indenture;
o modify or affect in any manner adverse to the Holders the terms
and conditions of the obligations of Reckson Associates in
respect of the payment of principal (and premium, if any) and
interest on any Guaranteed Securities; or
o modify any of the foregoing provisions or any of the provisions
relating to the waiver of certain past defaults or certain
covenants, except to increase the required percentage to effect
the action or to provide that certain other provisions may not
be modified or waived without the consent of the Holder of the
Debt Security.
In addition to the Operating Partnership's obligation to pay the
principal of, and premium (if any) and interest on, the Debt Securities, the
Indenture contains several other affirmative and negative covenants as
described under "--Certain Covenants." None of the Operating Partnership,
Reckson Associates and the Trustee may waive compliance with the other
covenants unless the Holders of not less than a majority in principal amount
of a series of Outstanding Debt Securities consent to the waiver.
Modifications and amendments of the Indenture will be permitted to be
made by the Operating Partnership, Reckson Associates and the Trustee without
the consent of any Holder of Debt Securities for any of the following
purposes:
29
1. to evidence the succession of another Person to the Operating
Partnership as obligor or Reckson Associates as guarantor under
the Indenture;
2. to add to the covenants of the Operating Partnership or Reckson
Associates for the benefit of the Holders of all or any series
of Debt Securities or to surrender any right or power conferred
upon the Operating Partnership or Reckson Associates in the
Indenture;
3. to add Events of Default for the benefit of the Holders of all
or any series of Debt Securities;
4. to add or change any provisions of the Indenture to facilitate
the issuance of, or to liberalize certain terms of, Debt
Securities in bearer form, or to permit or facilitate the
issuance of Debt Securities in uncertificated form, provided
that this action shall not adversely affect the interests of the
Holders of the Debt Securities of any series in any material
respect;
5. to amend or supplement any provisions of the Indenture, provided
that no amendment or supplement shall materially adversely
affect the interests of the Holders of any Debt Securities then
Outstanding;
6. to secure the Debt Securities;
7. to establish the form or terms of Debt Securities of any series;
8. to provide for the acceptance of appointment by a successor
Trustee or facilitate the administration of the trusts under the
Indenture by more than one Trustee;
9. to cure any ambiguity, defect or inconsistency in the Indenture,
provided that this action shall not adversely affect the
interests of Holders of Debt Securities of any series in any
material respect; or
10. to supplement any of the provisions of the Indenture to the
extent necessary to permit or facilitate defeasance and
discharge of any series of the Debt Securities, provided that
the action shall not adversely affect the interests of the
Holders of the Debt Securities of any series in any material
respect.
In addition, with respect to Guaranteed Securities, without the
consent of any Holder of Debt Securities, Reckson Associates, or a subsidiary
thereof, may directly assume the due and punctual payment of the principal of,
any premium and interest on all the Guaranteed Securities and the performance
of every covenant of the Indenture on the part of the Operating Partnership to
be performed or observed. Upon any assumption, Reckson Associates or the
subsidiary shall succeed to, and be substituted for and may exercise every
right and power of, the Operating Partnership under the Indenture with the
same effect as if Reckson Associates or the subsidiary had been the issuer of
the Guaranteed Securities and the Operating Partnership shall be released from
all obligations and covenants with respect to the Guaranteed Securities. No
assumption shall be permitted unless Reckson Associates has delivered to the
Trustee (1) an officers' certificate and an opinion of counsel, stating, among
other things, that the
30
Guarantee and all other covenants of Reckson Associates in the Indenture
remain in full force and effect and (2) an opinion of independent counsel that
the Holders of Guaranteed Securities shall have no materially adverse United
States federal tax consequences as a result of the assumption, and that, if
any Debt Securities are then listed on the New York Stock Exchange, that the
Debt Securities shall not be delisted as a result of the assumption.
In determining whether the Holders of the requisite principal amount
of Outstanding Debt Securities of a series have given any request, demand,
authorization, direction, notice, consent or waiver thereunder or whether a
quorum is present at a meeting of Holders of Debt Securities, the Indenture
provides that:
1. the principal amount of an Original Issue Discount Security
that shall be deemed to be Outstanding shall be the amount of
the principal thereof that would be due and payable as of the
date of the determination upon declaration of acceleration of
the maturity thereof;
2. the principal amount of a Debt Security denominated in a
foreign currency that shall be deemed Outstanding shall be the
U.S. dollar equivalent, determined on the issue date for the
Debt Security, of the principal amount (or, in the case of an
Original Issue Discount Security, the U.S. dollar equivalent on
the issue date of the Debt Security of the amount determined as
provided in (1) above);
3. the principal amount of an Indexed Security that shall be
deemed Outstanding shall be the principal face amount of the
Indexed Security at original issuance, unless otherwise
provided with respect to the Indexed Security pursuant to the
Indenture; and
4. Debt Securities owned by the Operating Partnership or any other
obligor upon the Debt Securities or any affiliate of the
Operating Partnership or of the other obligor shall be
disregarded.
The Indenture contains provisions for convening meetings of the
Holders of Debt Securities of a series. A meeting will be permitted to be
called at any time by the Trustee, and also, upon request, by the Operating
Partnership, Reckson Associates (in respect of a series of Guaranteed
Securities) or the Holders of at least 10% in principal amount of the
Outstanding Debt Securities of the series, in any case upon notice given as
provided in the Indenture. Except for any consent that must be given by the
Holder of each Debt Security affected by certain modifications and amendments
of the Indenture, any resolution presented at a meeting or adjourned meeting
duly reconvened at which a quorum is present will be permitted to be adopted
by the affirmative vote of the Holders of a majority in principal amount of
the Outstanding Debt Securities of that series; provided, however, that,
except as referred to above, any resolution with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
may be made, given or taken by the Holders of a specified percentage, which is
less than a majority, in principal amount of the Outstanding Debt Securities
of a series may be adopted at a meeting or adjourned meeting duly reconvened
at which a quorum is present by the affirmative vote of the Holders of the
specified percentage in principal amount of the Outstanding Debt Securities of
that series. Any resolution passed or decision taken at any meeting of Holders
of Debt Securities of any series duly held in accordance with the Indenture
will be binding on all Holders of Debt Securities of that series. The quorum
at any meeting called to adopt a resolution, and at any reconvened meeting,
will be Persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at the meeting with respect to a consent or waiver
31
which may be given by the Holders of not less than a specified percentage in
principal amount of the Outstanding Debt Securities of a series, the Persons
holding or representing the specified percentage in principal amount of the
Outstanding Debt Securities of the series will constitute a quorum.
Notwithstanding the foregoing provisions, any action to be taken at a
meeting of Holders of Debt Securities of any series with respect to any action
that the Indenture expressly provides may be taken by the Holders of a
specified percentage which is less than a majority in principal amount of the
Outstanding Debt Securities of a series may be taken at a meeting at which a
quorum is present by the affirmative vote of Holders of the specified
percentage in principal amount of the Outstanding Debt Securities of the
series.
Discharge, Defeasance and Covenant Defeasance
The Operating Partnership may discharge certain obligations to
Holders of any series of Debt Securities that have not already been delivered
to the Trustee for cancellation and that either have become due and payable or
will become due and payable within one year (or scheduled for redemption
within one year) by irrevocably depositing with the Trustee, in trust, funds
in the currency or currencies, currency unit or units or composite currency or
currencies in which the Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on the Debt Securities in respect of principal
(and premium, if any) and interest to the date of the deposit (if the Debt
Securities have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be.
The Indenture provides that, unless these provisions are made
inapplicable to the Debt Securities of or within any series pursuant to the
Indenture, the Operating Partnership may elect either (a) to defease and
discharge itself and Reckson Associates (if the Debt Securities are Guaranteed
Securities) from any and all obligations with respect to the Debt Securities
(except for the obligation to pay additional amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on the Debt Securities and the obligations to register the
transfer or exchange of Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of the Debt Securities and to hold moneys for payment in trust)
("defeasance") or (b) to release itself and Reckson Associates (if the Debt
Securities are Guaranteed Securities) from their obligations with respect to
the Debt Securities under certain sections of the Indenture (including the
restrictions described under "Certain Covenants") and, if provided pursuant to
the Indenture, their obligations with respect to any other covenant, and any
omission to comply with the obligations shall not constitute a default or an
Event of Default with respect to the Debt Securities ("covenant defeasance"),
in either case upon the irrevocable deposit by the Operating Partnership or
Reckson Associates with the Trustee, in trust, of an amount, in the currency
or currencies, currency unit or units or composite currency or currencies in
which the Debt Securities are payable at Stated Maturity, or Government
Obligations (as defined below), or both, applicable to the Debt Securities
which through the scheduled payment of principal and interest in accordance
with their terms will provide money in an amount sufficient to pay the
principal of (and premium, if any) and interest on the Debt Securities, and
any mandatory sinking fund or analogous payments thereon, on the scheduled due
dates therefor.
A trust will only be permitted to be established if, among other
things, the Operating Partnership or Reckson Associates has delivered to the
Trustee an Opinion of Counsel (as specified in the Indenture) to the effect
that the Holders of the Debt Securities will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of the defeasance or
covenant defeasance and will be subject to U.S. federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if the defeasance or covenant defeasance had not occurred, and the Opinion of
Counsel, in
32
the case of defeasance, must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable United States federal
income tax law.
"Government Obligations" means securities which are (1) direct
obligations of the United States of America or the government which issued the
foreign currency in which the Debt Securities of a particular series are
payable, for the payment of which its full faith and credit is pledged or (2)
obligations of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or the government which issued
the foreign currency in which the Debt Securities of the series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or other government, which, in
either case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any Government Obligation or a specific
payment of interest on or principal of any Government Obligation held by the
custodian for the account of the holder of a depository receipt, provided that
(except as required by law) the custodian is not authorized to make any
deduction from the amount payable to the holder of the depository receipt from
any amount received by the custodian in respect of the Government Obligation
or the specific payment of interest on or principal of the Government
Obligation evidenced by the depository receipt.
Unless otherwise provided in the applicable prospectus supplement, if
after the Operating Partnership or Reckson Associates has deposited funds
and/or Government Obligations to effect defeasance or covenant defeasance with
respect to Debt Securities of any series:
(a) the Holder of a Debt Security of the series is entitled to, and
does, elect pursuant to the Indenture or the terms of the Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which the deposit has been made in respect of the Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the
currency, currency unit or composite currency in which the deposit has been
made, the indebtedness represented by the Debt Security shall be deemed to
have been, and will be, fully discharged and satisfied through the payment of
the principal of (and premium, if any) and interest on the Debt Security as
they become due out of the proceeds yielded by converting the amount so
deposited in respect of the Debt Security into the currency, currency unit or
composite currency in which the Debt Security becomes payable as a result of
the election or the Conversion Event based on the applicable market exchange
rate.
"Conversion Event" means the cessation of use of:
o a currency, currency unit or composite currency both by the
government of the country which issued the currency and for
the settlement of transactions by a central bank or other
public institutions of or within the international banking
community or
o the euro both within the European Monetary System and for
the settlement of transactions by public institutions of or
within the European Community.
Unless otherwise provided in the applicable prospectus supplement,
all payments of principal of (and premium, if any) and interest on any Debt
Security that is payable in a foreign currency that ceases to be used by its
government of issuance shall be made in U.S. dollars.
33
In the event the Operating Partnership effects covenant defeasance
with respect to any Debt Securities and the Debt Securities are declared due
and payable because of the occurrence of any Event of Default other than the
Event of Default described in clause (d) under "Event of Default, Notice and
Waiver" with respect to sections no longer applicable to the Debt Securities
or described in clause (h) under "Events of Default, Notice and Waiver" with
respect to any other covenant as to which there has been covenant defeasance,
the amount in the currency, currency unit or composite currency in which the
Debt Securities are payable, and Government Obligations on deposit with the
Trustee, will be sufficient to pay amounts due on the Debt Securities at the
time of their Stated Maturity but may not be sufficient to pay amounts due on
the Debt Securities at the time of the acceleration resulting from the Event
of Default. However, the Operating Partnership and Reckson Associates (if the
Debt Securities are Guaranteed Securities) would remain liable to make payment
of the amounts due at the time of acceleration.
Governing Law
The Indenture and the Debt Securities shall be governed by the laws
of the State of New York.
Conversion Rights
The terms and conditions, if any, upon which any Debt Securities are
convertible into debt securities of the Operating Partnership or exchangeable
for equity securities of Reckson Associates will be set forth in the
applicable prospectus supplement. The terms will include the number or
principal amount of securities into which the debt securities are convertible
or for which the debt securities are exchangeable, the conversion or exchange
price (or manner of calculation thereof), the conversion or exchange period,
provisions as to whether conversion or exchange will be at the option of the
holders of the debt securities, Reckson Associates or the Operating
Partnership, the events requiring an adjustment of the conversion or exchange
price (or the manner of calculation thereof) and any provisions affecting
conversion or exchange in the event of the redemption of the debt securities.
Global Securities
The Debt Securities of a series may be issued in whole or in part in
the form of one or more global securities (the "Global Securities") that will
be deposited with, or on behalf of, a depositary (the "Depositary") identified
in the applicable prospectus supplement relating to the series. Global
Securities may be issued in either registered or bearer form and in either
temporary or permanent form. The specific terms of the depositary arrangement
with respect to a series of Debt Securities will be described in the
applicable prospectus supplement relating to the series.
34
DESCRIPTION OF COMMON STOCK
General
The charter of Reckson Associates (the "Charter") provides that
Reckson Associates may issue up to 100 million shares of common stock, $.01
par value per share. In addition, units of limited partnership interest in the
Operating Partnership may be redeemed for cash or, at the option of Reckson
Associates, exchanged for Class A common stock of Reckson Associates on a
one-for-one basis. As of June 10, 2002, there were 50,841,244 shares of Class
A common stock outstanding and 10,283,513 shares of Class B exchangeable
common stock outstanding.
The shares of Class B common stock currently are entitled to receive
an annual dividend of $2.5968 per share, which is subject to adjustment
annually based upon a formula which measures increases or decreases in Reckson
Associates' FFO over a base year. The shares of Class B common stock are
exchangeable at any time, at the option of the holder, into an equal number of
shares of Reckson Associates' Class A common stock, subject to customary
antidilution adjustments as well as certain other adjustments. Reckson
Associates, at its option, may redeem any or all of the Class B common stock
in exchange for an equal number of shares of its Class A common stock (subject
to customary antidilution adjustments as well as certain other adjustments) at
any time following November 23, 2003. The Class B common stock ranks pari
passu with the Class A common stock.
All shares of Class A common stock have been duly authorized and will
be fully paid and nonassessable. Subject to the preferential rights of any
other shares or series of stock and to the provisions of the Charter regarding
Excess Stock (as defined under "Restrictions on Ownership of Capital Stock"),
holders of shares of Class A common stock offered hereby will be entitled to
receive distributions on the stock if, as and when authorized and declared by
the Board of Directors of Reckson Associates out of assets legally available
therefor and to share ratably in the assets of Reckson Associates legally
available for distribution to its common stockholders in the event of
liquidation, dissolution or winding up after payment of or adequate provision
for all known debts and liabilities of Reckson Associates.
Subject to the provisions of the Charter regarding Excess Stock, each
outstanding share of Reckson Associates' Class A common stock and Class B
common stock entitles the holder to one vote on all matters submitted to a
vote of stockholders, including the election of directors, and, except as
provided with respect to any other class or series of stock, the holders of
these shares will possess the exclusive voting power. There is no cumulative
voting in the election of directors, which means that the holders of a
majority of the outstanding shares of Reckson Associate's Class A common stock
and Class B common stock can elect all of the directors then standing for
election and the holders of the remaining shares will not be able to elect any
directors.
Holders of shares of Class A common stock have no preference,
conversion, exchange, sinking fund, redemption or appraisal rights and have no
preemptive rights to subscribe for any other securities. Subject to the
provisions of the Charter regarding Excess Stock, shares of common stock will
have equal dividend, liquidation and other rights.
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Certain Provisions of the Charter
Under the MGCL, a Maryland corporation generally cannot dissolve,
amend its charter, merge, sell all or substantially all of its assets, engage
in a share exchange or engage in similar transactions outside the ordinary
course of business unless approved by the affirmative vote of stockholders
holding at least two-thirds of the shares entitled to vote on the matter
unless a lesser percentage (but not less than a majority of all of the votes
entitled to be cast on the matter) is set forth in the corporation's charter.
The Charter does not provide for a lesser percentage in these situations.
The Charter authorizes the Board of Directors of Reckson Associates
to reclassify any unissued shares of common stock into other classes or series
of classes of capital stock and to establish the number of shares in each
class or series and to set the preferences, conversion and other rights,
voting powers, restrictions, limitations and restrictions on ownership,
limitations as to dividends or other distributions, qualifications and terms
or conditions of redemption for each class or series.
Prospective investors should review the section captioned "Risk
Factors-Limits on Ownership and Changes in Control May Delay Changes in
Management and Third Party Acquisition Proposals."
Restrictions on Ownership
In order to qualify as a REIT under the Code, not more than 50% in
value of the outstanding capital stock of Reckson Associates may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code)
at any time during the last half of a taxable year and the stock must be
beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months (or during a proportionate part of a shorter taxable
year). To satisfy the above ownership requirements and certain other
requirements for qualification as a REIT, the Board of Directors of Reckson
Associates has adopted, and the stockholders prior to the IPO approved, a
provision in the Charter restricting the ownership or acquisition of shares of
Reckson Associates' common stock and preferred stock. See "Restrictions on
Ownership of Capital Stock."
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is American
Stock Transfer & Trust Company.
DESCRIPTION OF PREFERRED STOCK
General
The Charter of Reckson Associates provides that Reckson Associates
may issue up to 25 million shares of preferred stock, $.01 par value per
share. As of June 10, 2002, there were 9,192,000 shares of 7 5/8% Series A
Convertible Cumulative preferred stock outstanding and 2,000,000 shares of
Series B Convertible Cumulative Preferred Stock outstanding. Dividends on the
Series A Preferred Stock are payable quarterly in arrears at an annual rate of
7 5/8% of the liquidation preference of $25 per share. The Series A Preferred
Stock is convertible at any time at the option of the holder at a conversion
price of $28.51 per share of Class A common stock, subject to adjustment in
certain circumstances. On or after April 13, 2003, the shares of Series A
Preferred Stock will be redeemable, in whole or in part, at the option of
Reckson Associates into shares of Class A common stock. The Series B Preferred
Stock
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accumulates dividends at a rate of 8.85% per year. Shares of the Series
B Preferred Stock are currently redeemable, at a premium to the liquidation
preference value of $25 per share, by Reckson Associates. The Series B
Preferred Stock is convertible at any time at the option of the holder at a
conversion price of $26.05 per share of Class A common stock, subject to
adjustment in certain circumstances.
During 1998, in connection with the acquisition of certain real
property, the Amended and Restated Agreement of Limited Partnership of the
Operating Partnership was supplemented (the "Supplements") to establish a
series of 25,000 preferred units of limited partnership interest of the
Operating Partnership designated as Series B preferred units, a series of
11,518 preferred units designated as Series C preferred units and a series of
6,000 preferred units designated as Series D preferred units. Each of the
Series B, C and D preferred units have a liquidation preference of $1,000 per
unit. Distributions on each Series B, C and D preferred unit are payable in
arrears quarterly in an amount equal to the greater of: (1) $17.50 or (2) the
quarterly distribution attributable to each Series B, C and D preferred unit
if the unit was converted into Class A common stock, subject to a maximum
increase of 5% of the distributions on the Series B, C or D preferred units
over the immediately preceding year. The distribution amount due on all Series
B, C or D preferred units is reduced during any period which certain
indebtedness remains on certain of the acquired properties subject to a
prepayment premium or prepayment penalty. The distribution amount on the
Series B, C or D preferred units may be adjusted to reflect increases or
decreases in the dividends on the Class A common stock of Reckson Associates.
The holders of Series B, C or D preferred units have the right to
convert their preferred units into common units of limited partnership
interest of the Operating Partnership at a price per unit of $32.51, $29.39 or
$29.12, respectively. Each Series B, C or D preferred unit is exchangeable, at
the option of its holder, for shares of preferred stock of Reckson Associates
with a liquidation preference equal to the liquidation preference of the
Series B, C or D preferred units and otherwise with the same terms as the
Series B, C or D preferred units other than the conversion and exchange rights
referred to above. The Operating Partnership, with regard to any notice of an
exchange, may elect to redeem all of the Series B, C or D preferred units that
are the subject of the exchange for cash in an amount equal to the stated
value of Series B, C or D preferred units plus any accrued distributions
thereon. As of June 10, 2002, there were 3,081, 10,581, and 6,000 Series B, C
and D preferred units outstanding, respectively.
The statements made hereunder relating to the preferred stock are
summaries of the material terms thereof and do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, the
applicable provisions of the Charter and Bylaws and any applicable articles
supplementary to the Charter designating terms of a series of preferred stock
(a "Designating Amendment").
The issuance of preferred stock could adversely affect the voting
power, dividend rights and other rights of holders of common stock. Although
the Board of Directors has no intention at the present time, it could
establish a series of preferred stock that could, depending on the terms of
the series, delay, defer or prevent a transaction or a change in control of
Reckson Associates that might involve a premium price for the common stock or
otherwise be in the best interest of the holders thereof. Management believes
that the availability of preferred stock will provide us with increased
flexibility in structuring possible future financing and acquisitions and in
meeting other needs that might arise.
Terms
Subject to the limitations prescribed by the Charter, the Board of
Directors is authorized to fix the number of shares constituting each series
of preferred stock and the designations and powers, preferences
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and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, including the provisions
as may be desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and other subjects or matters
as may be fixed by resolution of the Board of Directors. The preferred stock
will, when issued, be fully paid and nonassessable and will have no preemptive
rights.
Reference is made to the prospectus supplement relating to the series
of preferred stock offered thereby for the specific terms thereof, including:
o The title and stated value of the preferred stock;
o The number of shares of the preferred stock, the liquidation
preference per share of the preferred stock and the offering
price of the preferred stock;
o The dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to the preferred
stock;
o The date from which dividends on the preferred stock shall
accumulate, if applicable; o The procedures for any auction and
remarketing, if any, for the preferred stock;
o The provision for a sinking fund, if any, for the preferred
stock;
o The provisions for redemption, if applicable, of the preferred
stock;
o Any listing of the preferred stock on any securities exchange;
o The terms and conditions, if applicable, upon which the
preferred stock may or will be convertible into our Class A
common stock, including the conversion price or manner of
calculation thereof;
o The relative ranking and preferences of the preferred stock as
to dividend rights and rights upon liquidation, dissolution or
winding up of the affairs of Reckson Associates;
o Any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to
preserve the status of Reckson Associates as a REIT;
o A discussion of material federal income tax considerations
applicable to the preferred stock; and
o Any other specific terms, preferences, rights, limitations or
restrictions of the preferred stock.
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Rank
Unless otherwise specified in the applicable prospectus supplement,
the preferred stock will, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of Reckson Associates, rank:
i. senior to the common stock and to all classes or series of
equity securities issued by Reckson Associates the terms of
which provide that the equity securities shall rank junior to
the preferred stock;
ii. on a parity with all classes or series of equity securities
issued by Reckson Associates, including the Series A and Series
B preferred stock, other than those referred to in clauses (i)
and (iii); and
iii. junior to all classes or series of equity securities issued by
Reckson Associates which the terms of the preferred stock
provide will rank senior to it. The term "equity securities"
does not include convertible debt securities.
Dividends
Unless otherwise specified in the applicable prospectus supplement,
the preferred stock will have the rights with respect to payment of dividends
set forth below.
Holders of the preferred stock of each series will be entitled to
receive, when, as and if declared by the Board of Directors of Reckson
Associates, out of assets of Reckson Associates legally available for payment,
cash dividends in the amounts and on the dates as will be set forth in, or
pursuant to, the applicable prospectus supplement. Each dividend shall be
payable to holders of record as they appear on the stock transfer books of
Reckson Associates on the record dates as shall be fixed by the Board of
Directors of Reckson Associates.
Dividends on any series of preferred stock may be cumulative or
non-cumulative, as provided in the applicable prospectus supplement.
Dividends, if cumulative, will be cumulative from and after the date set forth
in the applicable prospectus supplement. If the Board of Directors of Reckson
Associates fails to declare a dividend payable on a dividend payment date on
any series of preferred stock for which dividends are non-cumulative, then the
holders of the series of preferred stock will have no right to receive a
dividend in respect of the related dividend period and Reckson Associates will
have no obligation to pay the dividend accrued for the period, whether or not
dividends on the series of preferred stock are declared payable on any future
dividend payment date.
If preferred stock of any series is outstanding, no full dividends
will be declared or paid or set apart for payment on any of the capital stock
of Reckson Associates of any other series ranking, as to dividends, on a
parity with or junior to the preferred stock of the series for any period
unless:
o if the series of preferred stock has a cumulative dividend,
full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the
payment thereof set apart for the payment for all past dividend
periods and the then current dividend period or
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o if the series of preferred stock does not have a cumulative
dividend, full dividends for the then current dividend period
have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart
for the payment on the preferred stock of the series.
When dividends are not paid in full (or a sum sufficient for the full
payment is not so set apart) upon preferred stock of any series and the shares
of any other series of preferred stock ranking on a parity as to dividends
with the preferred stock of the series, all dividends declared upon preferred
stock of the series and any other series of preferred stock ranking on a
parity as to dividends with the preferred stock shall be declared pro rata so
that the amount of dividends declared per share of preferred stock of the
series and the other series of preferred stock shall in all cases bear to each
other the same ratio that accrued dividends per share on the preferred stock
of the series and the other series of preferred stock (which shall not include
any accumulation in respect of unpaid dividends for prior dividend periods if
the preferred stock does not have a cumulative dividend) bear to each other.
No interest, or sum of money in lieu of interest, shall be payable in respect
of any dividend payment or payments on preferred stock of the series which may
be in arrears.
Except as provided in the immediately preceding paragraph, unless (1)
if the series of preferred stock has a cumulative dividend, full cumulative
dividends on the preferred stock of the series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past dividend periods and the then current
dividend period, and (2) if the series of preferred stock does not have a
cumulative dividend, full dividends on the preferred stock of the series have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, no dividends (other than in shares of common stock or other
capital stock ranking junior to the preferred stock of the series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment or other distribution shall be declared or made upon the common stock,
or any other of the capital stock of Reckson Associates ranking junior to or
on a parity with the preferred stock of the series as to dividends or upon
liquidation, nor shall any shares of common stock, or any other capital stock
of Reckson Associates ranking junior to or on a parity with the preferred
stock of the series as to dividends or upon liquidation, be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be paid
to or made available for a sinking fund for the redemption of any shares) by
Reckson Associates except:
(1) by conversion into or exchange for other capital stock of Reckson
Associates ranking junior to the preferred stock of the series as to dividends
and upon liquidation or
(2) redemption's for the purpose of preserving the status of Reckson
Associates as a REIT.
Redemption
If so provided in the applicable prospectus supplement, the preferred
stock will be subject to mandatory redemption or redemption at the option of
Reckson Associates, as a whole or in part, in each case upon the terms, at the
times and at the redemption prices set forth in the prospectus supplement.
The prospectus supplement relating to a series of preferred stock
that is subject to mandatory redemption will specify the number of shares of
the preferred stock that Reckson Associates will redeem in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to all accumulated and unpaid
dividends thereon (which shall not, if the
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preferred stock does not have a cumulative dividend, include any accumulation
in respect of unpaid dividends for prior dividend periods) to the date of
redemption. The redemption price may be payable in cash or other property, as
specified in the applicable prospectus supplement. If the redemption price for
preferred stock of any series is payable only from the net proceeds of the
issuance of capital stock of Reckson Associates, the terms of the preferred
stock may provide that, if no capital stock shall have been issued or to the
extent the net proceeds from any issuance are insufficient to pay in full the
aggregate redemption price then due, the preferred stock shall automatically
and mandatorily be converted into the applicable capital stock of Reckson
Associates pursuant to conversion provisions specified in the applicable
prospectus supplement.
Notwithstanding the foregoing, unless (1) if the series of preferred
stock has a cumulative dividend, full cumulative dividends on all shares of
any series of preferred stock shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past dividend periods and the then current dividend
period, and (2) if the series of preferred stock does not have a cumulative
dividend, full dividends on the preferred stock of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend
period, no shares of any series of preferred stock shall be redeemed unless
all outstanding preferred stock of the series is simultaneously redeemed;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of preferred stock of the series to preserve the status of Reckson
Associates as a REIT or pursuant to a purchase or exchange offer made on the
same terms to holders of all outstanding preferred stock of the series. In
addition, unless (1) if the series of preferred stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of any series of
preferred stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period, and (2) if
the series of preferred stock does not have a cumulative dividend, full
dividends on the preferred stock of any series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period, Reckson Associates
shall not purchase or otherwise acquire, directly or indirectly, any shares of
preferred stock of the series (except by conversion into or exchange for
capital stock of Reckson Associates ranking junior to the preferred stock of
the series as to dividends and upon liquidation); provided, however, that the
foregoing shall not prevent the purchase or acquisition of preferred stock of
the series to preserve the status of Reckson Associates as a REIT or pursuant
to a purchase or exchange offer made on the same terms to holders of all
outstanding preferred stock of the series.
If fewer than all of the outstanding shares of preferred stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by Reckson Associates and the shares may be redeemed pro rata from
the holders of record of the shares in proportion to the number of the shares
held or for which redemption is requested by the holder (with adjustments to
avoid redemption of fractional shares) or by lot or in any other reasonable
manner.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of record of preferred
stock of any series to be redeemed at the address shown on the stock transfer
books. Each notice shall state:
o the redemption date;
o the number of shares and series of the preferred stock to be
redeemed;
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o the redemption price;
o the place or places where certificates for the preferred stock
are to be surrendered for payment of the redemption price;
o that dividends on the shares to be redeemed will cease to
accumulate on the redemption date; and
o the date upon which the holder's conversion rights, if any, as
to the shares shall terminate.
If fewer than all the shares of preferred stock of any series are to
be redeemed, the notice mailed to each holder thereof shall also specify the
number of shares of preferred stock to be redeemed from each holder. If notice
of redemption of any preferred stock has been given and if the funds necessary
for redemption have been set aside by Reckson Associates in trust for the
benefit of the holders of any preferred stock so called for redemption, then
from and after the redemption date dividends will cease to accumulate on the
preferred stock, and all rights of the holders of the preferred stock will
terminate, except the right to receive the redemption price.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of Reckson Associates (referred to herein as a
"liquidation"), then, before any distribution or payment shall be made to the
holders of any common stock or any other class or series of capital stock of
Reckson Associates ranking junior to the preferred stock of the series in the
distribution of assets upon any liquidation, dissolution or winding up of
Reckson Associates, the holders of the preferred stock shall be entitled to
receive out of assets of Reckson Associates legally available for distribution
to shareholders liquidating distributions in the amount of the liquidation
preference per share (set forth in the applicable prospectus supplement), plus
an amount equal to all dividends accumulated and unpaid thereon (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if the preferred stock does not have a cumulative dividend). After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of preferred stock will have no rights or claim to any
remaining assets. In the event that, upon any voluntary or involuntary
liquidation, dissolution or winding up, the available assets of Reckson
Associates are insufficient to pay the amount of the liquidating distributions
on all outstanding preferred stock of the series and the corresponding amounts
payable on all shares of other classes or series of capital stock of Reckson
Associates ranking on a parity with the preferred stock in the distribution of
assets, then the holders of the preferred stock and all other classes or
series of capital stock shall share ratably in any distribution of assets in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled.
The consolidation or merger of Reckson Associates with or into any
other entity, or the merger of another entity with or into Reckson Associates,
or a statutory share exchange by Reckson Associates, or the sale, lease or
conveyance of all or substantially all of the property or business of Reckson
Associates, shall not be deemed to constitute a liquidation, dissolution or
winding up of Reckson Associates.
Voting Rights
Holders of the preferred stock will not have any voting rights,
except as set forth below or as otherwise from time to time required by law or
as indicated in the applicable prospectus supplement.
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Whenever dividends on any series of preferred stock shall be in
arrears for six or more quarterly periods, the holders of the preferred stock
(voting separately as a class with all other series of preferred stock upon
which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of two additional directors of Reckson
Associates at a special meeting called by the holders of record of at least
ten percent (10%) of any series of preferred stock so in arrears, unless the
request is received less than 90 days before the date fixed for the next
annual or special meeting of the stockholders, or at the next annual meeting
of stockholders, and at each subsequent annual meeting until (i) if the series
of preferred stock has a cumulative dividend, all dividends accumulated on the
shares of preferred stock for the past dividend periods and the then current
dividend period shall have been fully paid or declared and a sum sufficient
for the payment thereof set aside for payment or (ii) if the series of
preferred stock does not have a cumulative dividend, four quarterly dividends
shall have been fully paid or declared and a sum sufficient for the payment
thereof set aside for payment. In these cases, the entire Board of Directors
of Reckson Associates will be increased by two directors.
Unless provided otherwise for any series of preferred stock, so long
as any shares of the preferred stock remain outstanding, Reckson Associates
will not, without the affirmative vote or consent of the holders of at least
two-thirds of the shares of the series of preferred stock outstanding at the
time, given in person or by proxy, either in writing or at a meeting (the
series voting separately as a class):
(1) authorize or create, or increase the authorized or issued amount
of, any class or series of capital stock ranking senior to the preferred stock
with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up of Reckson Associates, or reclassify
any authorized capital stock of Reckson Associates into preferred stock, or
create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any stock; or
(2) amend, alter or repeal the provisions of the Charter or the
Designating Amendment for the series of preferred stock, whether by merger,
consolidation or otherwise (an "Event"), so as to materially and adversely
affect any right, preference, privilege or voting power of the series of
preferred stock or the holders thereof;
provided, however, with respect to the occurrence of any of the
Events set forth in (2) above, so long as the series of preferred stock
remains outstanding with the terms thereof materially unchanged, taking into
account that upon the occurrence of an Event Reckson Associates may not be the
surviving entity, the occurrence of any Event shall not be deemed to
materially and adversely affect the rights, preferences, privileges or voting
powers of holders of the series of preferred stock; and provided, further,
that (x) any increase in the amount of the authorized preferred stock or the
creation or issuance of any other series of preferred stock, or (y) any
increase in the amount of authorized shares of the series of preferred stock
or any other series of preferred stock, in each case ranking on a parity with
or junior to the preferred stock of the series with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or
winding up of Reckson Associates, shall not be deemed to materially and
adversely affect the rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which the vote or consent would otherwise be
required shall be effected, all outstanding shares of the series of preferred
stock shall have been converted, redeemed or called for redemption and
sufficient funds shall have been deposited in trust to effect the redemption.
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Conversion Rights
The terms and conditions, if any, upon which any series of preferred
stock is convertible into shares of Class A common stock will be set forth in
the applicable prospectus supplement. The terms will include the number of
shares of Class A common stock into which the shares of preferred stock are
convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option
of the holders of the preferred stock of Reckson Associates, the events
requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of the preferred stock.
Shareholder Liability
As discussed below under "Description of Common Stock-- General,"
applicable Maryland law provides that no shareholder, including holders of
preferred stock, shall be personally liable for the acts and obligations of
Reckson Associates and that the funds and property of Reckson Associates shall
be the only recourse for these acts or obligations.
Restrictions on Ownership
As discussed below under "Restrictions on Ownership of Capital
Stock," for Reckson Associates to qualify as a REIT under the Code, not more
than 50% in value of the outstanding capital stock of Reckson Associates may
be owned, directly or indirectly, by five or fewer individuals (as defined in
the Code to include certain entities) during the last half of a taxable year.
Therefore, the Designating Amendment for each series of preferred stock may
contain provisions restricting the ownership and transfer of the preferred
stock. The applicable prospectus supplement will specify any additional
ownership limitation relating to a series of preferred stock.
Registrar and Transfer Agent
Unless otherwise specified in the applicable prospectus supplement,
the Registrar and Transfer Agent for the preferred stock will be American
Stock Transfer & Trust Company.
DESCRIPTION OF DEPOSITARY SHARES
General
Reckson Associates may issue receipts ("Depositary Receipts") for
Depositary Shares, each of which will represent a fractional interest or a
share of a particular series of a class of preferred stock, as specified in
the applicable prospectus supplement. Preferred stock of each series of each
class represented by Depositary Shares will be deposited under a separate
Deposit Agreement (each, a "Deposit Agreement") among Reckson Associates, the
depositary named therein (the depositary or its successor, the "Preferred
Stock Depositary") and the holders from time to time of the Depositary
Receipts. Subject to the terms of the Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest
of a share of the particular series of a class of preferred stock represented
by the Depositary Shares evidenced by the Depositary Receipt, to all the
rights and preferences of the preferred stock represented by the Depositary
Shares, including dividend, voting, conversion, redemption and liquidation
rights.
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The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the
issuance and delivery of the preferred stock by Reckson Associates to the
Preferred Stock Depositary, Reckson Associates will cause the Preferred Stock
Depositary to issue, on our behalf, the Depositary Receipts. Copies of the
applicable form of Deposit Agreement and Depositary Receipt may be obtained
from Reckson Associates upon request.
Dividends and Other Distributions
The Preferred Stock Depositary will distribute all cash dividends or
other cash distributions received in respect of the preferred stock to the
record holders of the Depositary Receipts evidencing the related Depositary
Shares in proportion to the number of the Depositary Receipts owned by the
holder, subject to certain obligations of holders to file proofs, certificates
and other information and to pay certain charges and expenses to the Preferred
Stock Depositary.
In the event of a distribution other than in cash, the Preferred
Stock Depositary will distribute property received by it to the record holders
of Depositary Receipts entitled thereto, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to the Preferred Stock Depositary, unless the Preferred
Stock Depositary determines that it is not feasible to make the distribution,
in which case the Preferred Stock Depositary may, with the approval of Reckson
Associates, sell the property and distribute the net proceeds from the sale to
holders.
Withdrawal of Shares
Upon surrender of the Depositary Receipts at the corporate trust
office of the Preferred Stock Depositary (unless the related Depositary Shares
have previously been called for redemption), the holders thereof will be
entitled to delivery at the office, to or upon the holder's order, of the
number of whole or fractional shares of preferred stock and any money or other
property represented by the Depositary Shares evidenced by the Depositary
Receipts. Holders of Depositary Receipts will be entitled to receive whole or
fractional shares of the related preferred stock on the basis of the
proportion of preferred stock represented by each Depositary Share as
specified in the applicable prospectus supplement, but holders of the
preferred stock will not thereafter be entitled to receive Depositary Shares
therefor. If the Depositary Receipts delivered by the holder evidence a number
of Depositary Shares in excess of the number of Depositary Shares representing
the number of shares of preferred stock to be withdrawn, the Preferred Stock
Depositary will deliver to the holder at the same time a new Depositary
Receipt evidencing the excess number of Depositary Shares.
Redemption of Depositary Shares
Whenever Reckson Associates redeems preferred stock held by the
Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of
the same redemption date the number of Depositary Shares representing the
preferred stock so redeemed, provided Reckson Associates shall have paid in
full to the Preferred Stock Depositary the redemption price of the preferred
stock to be redeemed plus an amount equal to any accrued and unpaid dividends
thereon to the date fixed for redemption. The redemption price per Depositary
Share will be equal to the redemption price and any other amounts per share
payable with respect to the preferred stock. If less than all the Depositary
Shares are to be redeemed, the Depositary Shares to be redeemed will be
selected by the Preferred Stock Depositary by lot.
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After the date fixed for redemption, the Depositary Shares so called
for redemption will no longer be deemed to be outstanding and all rights of
the holders of the Depositary Receipts evidencing the Depositary Shares so
called for redemption will cease, except the right to receive any moneys
payable upon redemption and any money or other property to which the holders
of the Depositary Receipts were entitled upon redemption upon surrender
thereof to the Preferred Stock Depositary.
Voting of the Underlying Preferred Shares
Upon receipt of notice of any meeting at which the holders of the
preferred stock are entitled to vote, the Preferred Stock Depositary will mail
the information contained in the notice of meeting to the record holders of
the Depositary Receipts evidencing the Depositary Shares which represent the
preferred stock. Each record holder of Depositary Receipts evidencing
Depositary Shares on the record date (which will be the same date as the
record date for the preferred stock) will be entitled to instruct the
Preferred Stock Depositary as to the exercise of the voting rights pertaining
to the amount of preferred stock represented by the holder's Depositary
Shares. The Preferred Stock Depositary will vote the amount of preferred stock
represented by the Depositary Shares in accordance with the instructions, and
we will agree to take all reasonable action which may be deemed necessary by
the Preferred Stock Depositary in order to enable the Preferred Stock
Depositary to do so. The Preferred Stock Depositary will abstain from voting
the amount of preferred stock represented by the Depositary Shares to the
extent it does not receive specific instructions from the holders of
Depositary Receipts evidencing the Depositary Shares.
Liquidation Preference
In the event of liquidation, dissolution or winding up of Reckson
Associates, whether voluntary or involuntary, each holder of a Depositary
Receipt will be entitled to the fraction of the liquidation preference
accorded each share of preferred stock represented by the Depositary Share
evidenced by the Depositary Receipt, as set forth in the applicable prospectus
supplement.
Conversion of Preferred Shares
The Depositary Shares, as such, are not convertible into common stock
or any other securities or property of Reckson Associates. Nevertheless, if so
specified in the applicable prospectus supplement relating to an offering of
Depositary Shares, the Depositary Receipts may be surrendered by holders
thereof to the Preferred Stock Depositary with written instructions to the
Preferred Stock Depositary to instruct Reckson Associates to cause conversion
of the preferred stock represented by the Depositary Shares evidenced by
Depositary Receipts into whole shares of common stock, other preferred stock
of Reckson Associates or other shares of capital stock of Reckson Associates,
and Reckson Associates has agreed that upon receipt of instructions and any
amounts payable in respect thereof, it will cause the conversion thereof
utilizing the same procedures as those provided for delivery of preferred
stock to effect the conversion. If the Depositary Shares evidenced by a
Depositary Receipt are to be converted in part only, one or more new
Depositary Receipts will be issued for any Depositary Shares not to be
converted. No fractional shares of common stock will be issued upon
conversion, and if the conversion will result in a fractional share being
issued, an amount will be paid in cash by Reckson Associates equal to the
value of the fractional interest based upon the closing price of the common
stock on the last business day prior to the conversion.
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Amendment and Termination of the Deposit Agreement
The form of Depositary Receipt evidencing the Depositary Shares which
represent the preferred stock and any provision of the Deposit Agreement may
at any time be amended by agreement between Reckson Associates and the
Preferred Stock Depositary. However, any amendment that materially and
adversely alters the rights of the holders of Depositary Receipts will not be
effective unless the amendment has been approved by the existing holders of at
least a majority of the Depositary Shares evidenced by the Depositary Receipts
then outstanding.
The Deposit Agreement may be terminated by Reckson Associates upon
not less than 30 days' prior written notice to the Preferred Stock Depositary
if (1) the termination is to preserve the status of Reckson Associates as a
REIT or (2) a majority of each class of preferred stock affected by the
termination consents to the termination, whereupon the Preferred Stock
Depositary shall deliver or make available to each holder of Depositary
Receipts, upon surrender of the Depositary Receipts held by the holder, the
number of whole or fractional shares of preferred stock as are represented by
the Depositary Shares evidenced by Depositary Receipts. In addition, the
Deposit Agreement will automatically terminate if (1) all outstanding
Depositary Shares shall have been redeemed, (2) there shall have been a final
distribution in respect of the related preferred stock in connection with any
liquidation, dissolution or winding up of Reckson Associates and the
distribution shall have been distributed to the holders of Depositary Receipts
evidencing the Depositary Shares representing the preferred stock or (iii)
each related share of preferred stock shall have been converted into capital
stock of Reckson Associates not so represented by Depositary Shares.
Charges of Preferred Shares Depositary
Reckson Associates will pay all transfer and other taxes and
governmental charges arising solely from the existence of the Deposit
Agreement. In addition, Reckson Associates will pay the fees and expenses of
the Preferred Stock Depositary in connection with the performance of its
duties under the Deposit Agreement. However, holders of Depositary Receipts
will pay the fees and expenses of the Preferred Stock Depositary for any
duties requested by the holders to be performed which are outside of those
expressly provided for in the Deposit Agreement.
Resignation and Removal of Depositary
The Preferred Stock Depositary may resign at any time by delivering
to Reckson Associates notice of its election to do so, and Reckson Associates
may at any time remove the Preferred Stock Depositary, any resignation or
removal to take effect upon the appointment of a successor Preferred Stock
Depositary. A successor Preferred Shares Depositary must be appointed within
60 days after delivery of the notice of resignation or removal and must be a
bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000.
Miscellaneous
The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from Reckson Associates which are
received by the Preferred Stock Depositary with respect to the related
preferred stock.
Neither Reckson Associates nor the Preferred Stock Depositary will be
liable if the Preferred Stock Depositary is prevented from or delayed in, by
law or any circumstances beyond its control,
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performing its obligations under the Deposit Agreement. The obligations of
Reckson Associates and the Preferred Stock Depositary under the Deposit
Agreement will be limited to performing specified duties thereunder in good
faith and without negligence, gross negligence or willful misconduct, and
Reckson Associates and the Preferred Stock Depositary will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary
Receipts, Depositary Shares or preferred stock represented thereby unless
satisfactory indemnity is furnished. Reckson Associates and the Preferred
Stock Depositary may rely on written advice of counsel or accountants, or
information provided by persons presenting the preferred stock represented
thereby for deposit, holders of Depositary Receipts or other persons believed
to be competent to give information, and on documents believed to be genuine
and signed by a proper party.
If the Preferred Stock Depositary shall receive conflicting claims,
requests or instructions from any holders of Depositary Receipts, on the one
hand, and from Reckson Associates, on the other hand, the Preferred Stock
Depositary shall be entitled to act on claims, requests or instructions
received from Reckson Associates.
RESTRICTIONS ON OWNERSHIP OF CAPITAL STOCK
Excess Stock
The Charter provides that Reckson Associates may issue up to 75
million shares of excess stock, par value $.01 per share ("Excess Stock"). For
a description of Excess Stock, see "--Restrictions on Ownership" below.
Restrictions on Ownership
In order for Reckson Associates to qualify as a REIT under the Code,
among other things, not more than 50% in value of the outstanding capital
stock of Reckson Associates may be owned, directly or indirectly, by five or
fewer individuals (defined in the Code to include certain entities) at any
time during the last half of a taxable year (other than the first year) (the
"Five or Fewer Requirement"), and the shares of capital stock must be
beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months (other than the first year) or during a
proportionate part of a shorter taxable year. Pursuant to the Code, stock held
by certain types of entities, the pension trusts qualifying under Section
401(a) of the Code, United States investment companies registered under the
Investment Company Act of 1940, partnerships, trusts and corporations, will be
attributed to the beneficial owners of the entities for purposes of the Five
or Fewer Requirement (i.e., the beneficial owners of the entities will be
counted as shareholders of Reckson Associates).
In order to protect Reckson Associates against the risk of losing its
status as a REIT due to a concentration of ownership among stockholders, the
Charter, subject to certain exceptions, provides that no stockholder may own,
or be deemed to own by virtue of the attribution provisions of the Code, more
than 9.0% (the "Ownership Limit") of the aggregate number or value of the
outstanding shares of common stock. Reckson Associates may also impose
limitations on the ownership of preferred stock. See "Description of Preferred
Stock - Restrictions on Ownership." Any transfer of shares of stock that would
result in a violation of the Ownership Limit or that would result in
disqualification as a REIT, including any transfer that results in shares of
capital stock being owned by fewer than 100 persons or results in Reckson
Associates being "closely held" within the meaning of Section 856(h) of the
Code, shall be null and void, and the intended transferee will acquire no
rights to the shares of capital stock. The foregoing restrictions on
transferability and ownership will not apply if the Board of Directors
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determines that it is no longer in the best interests of Reckson Associates to
attempt to qualify, or to continue to qualify, as a REIT. The Board of
Directors may, in its sole discretion, waive the Ownership Limit if evidence
satisfactory to the Board of Directors and tax counsel is presented that the
changes in ownership will not then or in the future jeopardize REIT status and
the Board of Directors otherwise decides that waiving the Ownership Limit is
in the best interests of Reckson Associates.
Shares of capital stock owned, or deemed to be owned, or transferred
to a stockholder in excess of the Ownership Limit will automatically be
converted into shares of Excess Stock that will be transferred, by operation
of law, to the trustee of a trust for the exclusive benefit of one or more
charitable organizations described in Section 170(b)(1)(A) and 170(c) of the
Code (the "Charitable Beneficiary"). The trustee of the trust will be deemed
to own the Excess Stock for the benefit of the Charitable Beneficiary on the
date of the violative transfer to the original transferee-stockholder. Any
dividend or distribution paid to the original transferee-stockholder of Excess
Stock prior to our discovery that capital stock has been transferred in
violation of the provisions of the Charter shall be repaid to the trustee upon
demand. Any dividend or distribution authorized and declared but unpaid shall
be rescinded as void ab initio with respect to the original
transferee-stockholder and shall instead be paid to the trustee of the trust
for the benefit of the Charitable Beneficiary. Any vote cast by an original
transferee-stockholder of shares of capital stock constituting Excess Stock
prior to the discovery by us that shares of capital stock have been
transferred in violation of the provisions of the Charter shall be rescinded
as void ab initio. While the Excess Stock is held in trust, the original
transferee-stockholder will be deemed to have given an irrevocable proxy to
the trustee to vote the capital stock for the benefit of the Charitable
Beneficiary. The trustee of the trust may transfer the interest in the trust
representing the Excess Stock to any person whose ownership of the shares of
capital stock converted into Excess Stock would be permitted under the
Ownership Limit. If the transfer is made, the interest of the Charitable
Beneficiary shall terminate and the proceeds of the sale shall be payable to
the original transferee-stockholder and to the Charitable Beneficiary as
described herein. The original transferee-stockholder shall receive the lesser
of (1) the price paid by the original transferee-stockholder for the shares of
capital stock that were converted into Excess Stock or, if the original
transferee-stockholder did not give value for the shares (e.g., the stock was
received through a gift, devise or other transaction), the average closing
price for the class of shares from which the shares of capital stock were
converted for the ten trading days immediately preceding the sale or gift, and
(2) the price received by the trustee from the sale or other disposition of
the Excess Stock held in trust. The trustee may reduce the amount payable to
the original transferee-stockholder by the amount of dividends and
distributions relating to the shares of Excess Stock which have been paid to
the original transferee-stockholder and are owed by the original
transferee-stockholder to the trustee. Any proceeds in excess of the amount
payable to the original transferee-stockholder shall be paid by the trustee to
the Charitable Beneficiary. Any liquidation distributions relating to Excess
Stock shall be distributed in the same manner as proceeds of a sale of Excess
Stock. If the foregoing transfer restrictions are determined to be void or
invalid by virtue of any legal decision, statute, rule or regulations, then
the original transferee-stockholder of any shares of Excess Stock may be
deemed, at the option of Reckson Associates, to have acted as an agent for
Reckson Associates in acquiring the shares of Excess Stock and to hold the
shares of Excess Stock for Reckson Associates.
In addition, Reckson Associates will have the right, for a period of
90 days during the time any shares of Excess Stock are held in trust, to
purchase all or any portion of the shares of Excess Stock at the lesser of (i)
the price initially paid for the shares by the original
transferee-stockholder, or if the original transferee-stockholder did not give
value for the shares (e.g., the shares were received through a gift, devise or
other transaction), the average closing price for the class of stock from
which the shares of Excess Stock were converted for the ten trading days
immediately preceding the sale or gift, and (ii) the average closing price for
the class of stock from which the shares of Excess Stock were converted for
the ten trading days immediately preceding the date Reckson Associates elects
to purchase the shares.
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Reckson Associates may reduce the amount payable to the original
transferee-stockholder by the amount of dividends and distributions relating
to the shares of Excess Stock which have been paid to the original
transferee-stockholder and are owed by the original transferee-stockholder to
the trustee. Reckson Associates may pay the amount of the reductions to the
trustee for the benefit of the Charitable Beneficiary. The 90-day period
begins on the later date of which notice is received of the violative transfer
if the original transferee-stockholder gives notice to Reckson Associates of
the transfer or, if no notice is given, the date the Board of Directors
determines that a violative transfer has been made.
These restrictions will not preclude settlement of transactions
through the New York Stock Exchange.
All certificates representing shares of stock will bear a legend
referring to the restrictions described above.
Each stockholder shall upon demand be required to disclose to Reckson
Associates in writing any information with respect to the direct, indirect and
constructive ownership of the capital stock of Reckson Associates as the Board
of Directors deems necessary to comply with the provisions of the Code
applicable to REITs, to comply with the requirements of any taxing authority
or governmental agency or to determine any compliance.
The Ownership Limit may have the effect of delaying, deferring or
preventing a change in control of Reckson Associates unless the Board of
Directors determines that maintenance of REIT status is no longer in the best
interests of Reckson Associates.
DESCRIPTION OF WARRANTS
Reckson Associates may issue Warrants for the purchase of common
stock or preferred stock. Warrants may be issued independently or together
with any securities and may be attached to or separate from the securities.
Each series of Warrants will be issued under a separate warrant agreement
(each, a "Warrant Agreement") to be entered into between Reckson Associates
and a warrant agent specified therein ("Warrant Agent"). The Warrant Agent
will act solely for Reckson Associates in connection with the Warrants of the
series and will not assume any obligation or relationship of agency or trust
for or with any holders or beneficial owners of Warrants.
The applicable prospectus supplement will describe the following
terms, where applicable, of the Warrants in respect of which this prospectus
is being delivered:
o the title of the Warrants;
o the aggregate number of the Warrants;
o the price or prices at which the Warrants will be issued;
o the currencies in which the price or prices of the Warrants may
be payable;
o the designation, amount and terms of the Securities purchasable
upon exercise of the Warrants;
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o the designation and terms of the other Securities, if any, with
which the Warrants are issued and the number of the Warrants
issued with each security;
o if applicable, the date on and after which the Warrants and the
Securities purchasable upon exercise of the Warrants will be
separately transferable;
o the price or prices at which and currency or currencies in
which the Securities purchasable upon exercise of the Warrants
may be purchased;
o the date on which the right to exercise the Warrants shall
commence and the date on which the right shall expire;
o the minimum or maximum amount of the Warrants which may be
exercised at any one time;
o information with respect to book-entry procedures, if any;
o a discussion of material federal income tax considerations; and
o any other material terms of the Warrants, including terms,
procedures and limitations relating to the exchange and
exercise of the Warrants.
FEDERAL INCOME TAX CONSIDERATIONS
Based on various assumptions and factual representations made by us
regarding our operations, in the opinion of Sidley Austin Brown & Wood LLP,
our counsel, commencing with our taxable year ended December 31, 1995, Reckson
Associates has been organized in conformity with the requirements for
qualification as a REIT under the Code, and the proposed method of operating
Reckson Associates will enable it to meet the requirements for qualification
and taxation as a REIT. The qualification of Reckson Associates depends upon
our ability to meet the various requirements imposed under the Code through
actual operations, as discussed below. Sidley Austin Brown & Wood LLP will not
review our operations, and no assurance can be given that actual operations
will meet these requirements. The opinion of Sidley Austin Brown & Wood LLP is
not binding on the IRS or any court. The opinion of Sidley Austin Brown & Wood
LLP is based upon existing law, IRS regulations and currently published
administrative positions of the IRS and judicial decisions, which are subject
to change either prospectively or retroactively.
The provisions of the Code pertaining to REITs are highly technical
and complex. The following is a brief and general summary of certain
provisions that currently govern Reckson Associates and its stockholders'
federal income tax treatment. For the particular provisions that govern
Reckson Associates and its stockholders' federal income tax treatment,
reference is made to Sections 856 through 860 of the Code and the regulations
thereunder. The following summary is qualified in its entirety by reference.
Under the Code, if certain requirements are met in a taxable year, a
REIT generally will not be subject to federal income tax with respect to
income that it distributes to its stockholders. If Reckson Associates fails to
qualify during any taxable year as a REIT, unless certain relief provisions
are available, it will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, which could
have a material adverse effect upon its stockholders. See "Risk Factors-Risks
of Failure to Qualify as a REIT."
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In any year in which Reckson Associates qualifies to be taxed as a
REIT, distributions made to its stockholders out of current or accumulated
earnings and profits will be taxed to stockholders as ordinary income except
that distributions of net capital gains designated by Reckson Associates as
capital gain dividends will be taxed as long-term capital gain income to the
stockholders. To the extent that distributions exceed current or accumulated
earnings and profits, they will constitute a return of capital, rather than
dividend or capital gain income, and will reduce the basis for the
stockholder's common stock or preferred stock with respect to which the
distribution is paid or, to the extent that they exceed the basis, will be
taxed in the same manner as gain from the sale of that common stock or
preferred stock. Beginning in 1998, Reckson Associates may elect to retain
long-term capital gains and pay corporate-level income tax on them and treat
the retained gains as if they had been distributed to stockholders. In this
case, each stockholder would include in income, as long-term capital gain, its
proportionate share of the undistributed gains and would be deemed to have
paid its proportionate share of the tax paid by Reckson Associates with
respect thereto. In addition, the basis for a stockholder's common stock or
preferred stock would be increased by the amount of the undistributed
long-term capital gain included in its income, less the amount of the tax it
is deemed to have paid with respect thereto.
Investors are urged to consult their own tax advisors with respect to
the appropriateness of an investment in the securities offered hereby and with
respect to the tax consequences arising under federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from the investor's own tax characteristics. In particular, foreign
investors should consult their own tax advisors concerning the tax
consequences of an investment in Reckson Associates, including the possibility
of United States income tax withholding on our distributions.
PLAN OF DISTRIBUTION
Reckson Associates and the Operating Partnership may sell the
securities to one or more underwriters for public offering and sale by them or
may sell the securities to investors directly or through agents. Any
underwriter or agent involved in the offer and sale of the securities will be
named in the applicable prospectus supplement.
Underwriters may offer and sell the securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market
prices at the time of sale or at negotiated prices. Reckson Associates and the
Operating Partnership also may, from time to time, authorize underwriters
acting as their agents to offer and sell the securities upon the terms and
conditions as are set forth in the applicable prospectus supplement. In
connection with the sale of securities, underwriters may be deemed to have
received compensation from Reckson Associates or the Operating Partnership in
the form of underwriting discounts or commissions and may also receive
commissions from purchasers of securities for whom they may act as agent.
Underwriters may sell securities to or through dealers, and dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act
as agent.
Any underwriting compensation paid by Reckson Associates or the
Operating Partnership to underwriters or agents in connection with the
offering of securities, and any discounts, concessions for commissions allowed
by underwriters to participating dealers, will be set forth in the applicable
prospectus supplement. Underwriters, dealers and agents participating in the
distribution of the securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the securities may be deemed to be underwriting discounts and
commissions, under the Securities Act. Underwriters, dealers and agents may be
entitled, under
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agreements entered into with Reckson Associates and the Operating Partnership,
to indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with, and perform services for, Reckson Associates and
the Operating Partnership and its subsidiaries in the ordinary course of
business.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby and
certain legal matters described under "Federal Income Tax Considerations" will
be passed upon for Reckson Associates and the Operating Partnership by Sidley
Austin Brown & Wood LLP, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the
consolidated financial statements and schedule of each of Reckson Associates
and the Operating Partnership included in their respective Annual Reports on
Form 10-K for the year ended December 31, 2001, as set forth in their reports,
which are incorporated by reference in this prospectus and elsewhere in the
registration statement. These financial statements are incorporated by
reference in reliance on Ernst & Young's reports, given on their authority as
experts in accounting and auditing.
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RECKSON OPERATING PARTNERSHIP, L.P.
$50,000,000
6.00% NOTES DUE 2007
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PROSPECTUS SUPPLEMENT
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WACHOVIA SECURITIES
JUNE 11, 2002
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