AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 22, 2004
REGISTRATION NO. 333-[ ]
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3/S-11
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------------
ENTERTAINMENT PROPERTIES TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
MARYLAND 43-1790877
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer Identification No.)
Organization)
30 W. PERSHING ROAD, SUITE 201
KANSAS CITY, MISSOURI 64108
(816) 472-1700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
GREGORY K. SILVERS, ESQ.
VICE PRESIDENT, SECRETARY, GENERAL COUNSEL
AND CHIEF DEVELOPMENT OFFICER
ENTERTAINMENT PROPERTIES TRUST
30 W. PERSHING ROAD, SUITE 201
KANSAS CITY, MISSOURI 64108
(816) 472-1700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPY TO:
MARC SALLE, ESQ.
SONNENSCHEIN NATH & ROSENTHAL LLP
4520 MAIN STREET, SUITE 1100
KANSAS CITY, MISSOURI 64111
(816) 460-2555
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement pursuant to Rule
415.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED PER SECURITY(1) OFFERING PRICE(1)
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Common shares of beneficial interest... $747,243 $34.67 $25,906,915
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AMOUNT OF
REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED FEE
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Common shares of beneficial interest... $3,283
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(1) Calculated pursuant to Rule 457(c) under the Securities Act of 1933, as
amended. The above calculation is based on the average of the high and low
prices of the registrant's common shares as reported on the New York Stock
Exchange on April 16, 2004.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL 22, 2004
PROSPECTUS
747,243 COMMON SHARES
ENTERTAINMENT PROPERTIES TRUST
Entertainment Properties Trust is a self-administered real estate
investment trust formed to invest in entertainment-related properties. As of
April 1, 2004, our real estate portfolio was comprised of 52 megaplex theatre
properties (including three joint venture properties) located in twenty states
and Ontario, Canada, six entertainment retail centers (including one joint
venture property) located in Westminster, Colorado, New Rochelle, New York and
Ontario, Canada, a water park located in Garland, Texas, and land parcels leased
to restaurant and retail operators adjacent to several of our theatre
properties. The four entertainment-themed retail centers anchored by megaplex
movie theatres located in metropolitan Toronto and Ottawa, Ontario are referred
to in this prospectus as the Canada Properties. Our theatre properties are
leased to prominent theatre operators, including American Multi-Cinema, Inc.
("AMC"), Muvico Entertainment LLC ("Muvico"), Regal Cinemas ("Regal"),
Consolidated Theatres ("Consolidated"), Loews Cineplex Entertainment ("Loews"),
Rave Motion Pictures ("Rave"), AmStar Cinemas LLC ("AmStar"), Wallace Theatres
("Wallace") and Crown Theatres ("Crown").
To preserve our qualification as a real estate investment trust for U.S.
federal income tax purposes and for other purposes, we impose restrictions on
ownership of our common shares. See "Description of Common Shares" and "U.S.
Federal Income Tax Consequences" in this prospectus.
This prospectus relates to the proposed sale from time to time of up to an
aggregate of 747,243 common shares by the selling shareholders named in this
prospectus. The selling shareholders may sell the shares held for their own
account or the shares may be sold by donees, transferees, pledgees, their
beneficiaries or other successors in interest that receive shares from a selling
shareholder as a gift, trust distribution or other non-sale related transfer.
The selling shareholders are the sellers of the Canada Properties. The
shares were issued to the selling shareholders as part of the consideration for
the Canada Properties. The shares are being offered pursuant to a Registration
Rights Agreement entered into between us and the selling shareholders as of
February 24, 2004 (the "Registration Rights Agreement").
The selling shareholders may offer and sell shares from time to time in one
or more transactions at fixed prices, at prevailing market prices at the time of
sale, at varying prices determined at the time of sale or at negotiated prices.
The selling shareholders may sell all or a portion of the shares in market
transactions on the New York Stock Exchange, in privately negotiated
transactions, through the writing of options, in a block trade in which a
broker-dealer will attempt to sell a block of shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction,
through broker-dealers which may act as agents or principals, directly to one or
more purchasers, through agents, or in any combination of the above or by any
other legally available means. The selling shareholders will receive all of the
proceeds from the sale of the shares. We will not receive any proceeds from such
sales. We are paying the expenses of this offering.
Our common shares and 9.50% Series A Cumulative Redeemable Preferred Shares
("Series A Preferred Shares") are traded on the New York Stock Exchange under
the ticker symbols EPR and EPR PrA, respectively. The last reported sales price
of our common shares on April 21, 2004 was $33.10 per share.
We have paid regular quarterly dividends to our common and preferred
shareholders. See "About EPR" and "Description of Securities."
INVESTING IN THESE SECURITIES INVOLVES CERTAIN RISKS. SEE THE "RISK
FACTORS" BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 2004.
TABLE OF CONTENTS
PAGE
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About this Prospectus....................................... 1
Where You Can Find More Information......................... 1
Incorporation of Certain Information by Reference........... 1
Forward-Looking Statements.................................. 2
Risk Factors................................................ 4
About EPR................................................... 10
Properties.................................................. 14
Use of Proceeds............................................. 16
U.S. Federal Income Tax Consequences........................ 16
Description of Common Shares................................ 26
Selling Shareholders........................................ 27
Plan of Distribution........................................ 29
Legal Opinions.............................................. 32
Experts..................................................... 32
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement (No. 333- )
that we filed with the Securities and Exchange Commission ("SEC") using a "shelf
registration" process. Under this shelf process, the selling shareholders may
sell the shares described in this prospectus. This prospectus provides you with
a general description of the shares to be sold by the selling shareholders. You
should read this prospectus and the other information described in "Where You
Can Find More Information" and "Incorporation of Certain Information by
Reference" prior to investing.
WHERE YOU CAN FIND MORE INFORMATION
As a public company with securities listed on the New York Stock Exchange
("NYSE"), Entertainment Properties Trust ("we," "EPR," or the "Company") must
comply with the Securities Exchange Act of 1934 ("Exchange Act"). This requires
that we file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, proxy statements or
other information we file at the SEC's Public Reference Room at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at the SEC's
regional offices at 233 Broadway, New York, New York 10279 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the Public
Reference Room. Copies of these materials may be obtained by mail from the
Public Reference Room of the SEC. You may also access our SEC filings at the
SEC's Internet website at www.sec.gov. You can inspect reports and other
information we file at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
We have filed a registration statement which includes this prospectus plus
related exhibits with the SEC under the Securities Act of 1933 (the "Securities
Act"). The registration statement contains additional information about EPR and
the shares. You may view the registration statement and exhibits on file at the
SEC's website. You may also inspect the registration statement and exhibits
without charge at the SEC's offices at 450 Fifth Street, N.W., Washington, D.C.
20549, and you may obtain copies from the SEC at prescribed rates.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means we can disclose important information to you by
referring to those documents. The information incorporated by reference is an
important part of this prospectus. Any statement contained in a document which
is incorporated by reference in this prospectus is automatically updated and
superseded if information contained in this prospectus, or information we later
file with the SEC, modifies or replaces that information.
The documents listed below have been filed by EPR under the Exchange Act
(File No. 1-13561) and are incorporated by reference in this prospectus:
1. EPR's annual report on Form 10-K for the year ended December 31,
2003, as amended by EPR's Amendment No. 1 on Form 10-K/A for the year ended
December 31, 2003.
2. EPR's definitive proxy statement filed April 8, 2004.
3. EPR's current report on Form 8-K/A dated October 27, 2003 and filed
on January 12, 2004, amending EPR's current report on Form 8-K, filed on
November 12, 2003 and Amendment No. 1 thereto filed on January 12, 2004;
EPR's current report on Form 8-K filed on March 15, 2004 and Amendment No.
1 thereto filed on March 16, 2004; a current report on Form 8-K filed on
April 5, 2004 and a current report on Form 8-K filed on April 21, 2004.
4. The description of EPR's common shares of beneficial interest, $.01
par value contained in EPR's registration statement on Form 8-A filed
November 4, 1997, and the description of such common shares included in
EPR's prospectus included as a part of EPR's registration statement on Form
S-11
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(Registration No. 333-35281) in the form in which it was filed on September
10, 1997, as amended from time to time.
5. All documents filed by EPR under Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this prospectus and prior to the
termination of the offering of the securities covered by this prospectus,
and all documents filed by EPR under Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of the initial registration statement of
which this prospectus forms a part and prior to the effectiveness of the
registration statement.
To obtain a free copy of any of the documents incorporated by reference in
this prospectus (other than exhibits, unless they are specifically incorporated
by reference in the documents) please contact us at:
INVESTOR RELATIONS DEPARTMENT
ENTERTAINMENT PROPERTIES TRUST
30 W. PERSHING ROAD, SUITE 201
KANSAS CITY, MISSOURI 64108
(816) 472-1700/FAX (816) 472-5794
EMAIL INFO@EPRKC.COM
Our SEC filings are also available from our Internet website at
www.eprkc.com. The information on our website is not, and you must not consider
the information to be, a part of this prospectus.
As you read these documents, you may find some differences in information
from one document to another. If you find differences between the documents and
this prospectus, you should rely on the statements made in the most recent
document.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR
INCORPORATED BY REFERENCE. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS MAY ONLY BE USED IN STATES WHERE
THE OFFER IS PERMITTED. YOU SHOULD NOT ASSUME THE INFORMATION IN THIS PROSPECTUS
IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
FORWARD-LOOKING STATEMENTS
With the exception of historical information, this prospectus and our
reports filed under the Exchange Act and incorporated by reference in this
prospectus contain forward-looking statements, such as those pertaining to the
acquisition and leasing of properties, our capital resources and our results of
operations. Forward-looking statements involve numerous risks and uncertainties
and you should not rely on them as predictions of actual events. There is no
assurance the events or circumstances reflected in the forward-looking
statements will occur. You can identify forward-looking statements by use of
words such as "will be," "intend," "continue," "believe," "may," "expect,"
"hope," "anticipate," "goal," "forecast," or other comparable terms, or by
discussions of strategy, plans or intentions. Forward-looking statements are
necessarily dependent on assumptions, data or methods that may be incorrect or
imprecise. Our actual financial condition, results of operations or business may
vary materially from those contemplated by these forward-looking statements and
involve various uncertainties, including but not limited to the factors
described below:
- The performance of lease terms by tenants;
- Risk of our tenants filing for bankruptcy;
- The concentration of leases with our single largest tenant;
- Our continued qualification as a REIT;
- Risks related to real estate ownership and development;
- Risks associated with use of leverage to acquire properties;
- Risk of potential uninsured losses;
- Risks involved in joint ventures;
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- Risks in leasing multi-tenant properties;
- Risks of environmental liability;
- Our continued ability to pay dividends at historical rates; and
- Certain limits on change in control imposed under law and by our charter
and bylaws.
We urge you to review carefully the "Risk Factors" section in this
prospectus for a more complete discussion of the risks involved in an investment
in our securities. We caution you not to place undue reliance on any
forward-looking statements, which reflect our analysis only.
3
RISK FACTORS
BEFORE YOU INVEST IN THE SHARES, YOU SHOULD BE AWARE THAT PURCHASING OUR SHARES
INVOLVES VARIOUS RISKS, INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CAREFULLY
CONSIDER THESE RISK FACTORS, TOGETHER WITH THE OTHER INFORMATION IN THIS
PROSPECTUS, BEFORE PURCHASING SHARES.
RISKS THAT MAY IMPACT OUR FINANCIAL CONDITION OR PERFORMANCE
WE COULD BE ADVERSELY AFFECTED BY A TENANT'S BANKRUPTCY
If a tenant becomes bankrupt or insolvent, that could diminish the income
we expect from that tenant's leases. We may not be able to evict a tenant solely
because of its bankruptcy. On the other hand, a bankruptcy court might authorize
the tenant to terminate its leases with us. If that happens, our claim against
the bankrupt tenant for unpaid future rent would be subject to statutory
limitations that might be substantially less than the remaining rent owed under
the leases. In addition, any claim we have for unpaid past rent would likely not
be paid in full.
The development of megaplex movie theatres has rendered many older
multiplex theatres obsolete. To the extent our tenants own a substantial number
of multiplexes, they have been, or may in the future be, required to take
significant charges against earnings resulting from the impairment of those
assets. Megaplex theatre operators have also been and may in the future be
adversely affected by any overbuilding of megaplex theatres in their markets and
the cost of financing, building and leasing megaplex theatres. Two of our
tenants, Edwards Theatre Circuits, Inc. (now part of Regal Entertainment Group),
which operates two of our theatres, and Loews Cineplex Entertainment, which
operates two of our theatres, have filed for, and emerged from, bankruptcy
reorganization. We did not incur any significant expenses or loss of revenue as
a result of those bankruptcy reorganizations.
OPERATING RISKS IN THE ENTERTAINMENT INDUSTRY MAY AFFECT THE ABILITY OF OUR
TENANTS TO PERFORM UNDER THEIR LEASES
The ability of our tenants to operate successfully in the entertainment
industry and remain current on their lease obligations depends on a number of
factors, including the availability and popularity of motion pictures, the
performance of those pictures in tenants' markets, the allocation of popular
pictures to tenants and the terms on which the pictures are licensed. Neither we
nor our tenants control the operations of motion picture distributors. Megaplex
theatres represent a greater capital investment, and generate higher rents, than
the previous generation of multiplex theatres. For this reason, the ability of
our tenants to operate profitably and perform under their leases could be
dependent on their ability to generate higher revenues per screen than multiplex
theatres typically produce.
The success of "out-of-home" entertainment venues such as megaplex theatres
and entertainment retail centers also depends on general economic conditions and
the willingness of consumers to spend time and money on out-of-home
entertainment.
A SINGLE TENANT REPRESENTS A SUBSTANTIAL PORTION OF OUR LEASE REVENUES
As of April 1, 2004, approximately 67% of our megaplex theatre properties
were leased to AMC, a subsidiary of AMC Entertainment, Inc. ("AMCE") and one of
the nation's largest movie exhibition companies. AMCE has guaranteed AMC's
performance under the leases. We have diversified and expect to continue to
diversify our real estate portfolio by entering into lease transactions with a
number of other leading theatre operators and acquiring other types of
entertainment-related properties. Nevertheless, our revenues and our continuing
ability to pay shareholder dividends are currently substantially dependent on
AMC's performance under its leases and AMCE's performance under its guaranty.
It is also possible, although not verifiable, that some theatre operators
may be reluctant to lease from us because of our strong relationship with AMC.
We believe AMC occupies a strong position in the industry and we intend to
continue acquiring and leasing back AMC theatres. However, if for any reason AMC
failed to
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perform under its lease obligations and AMCE did not perform under its guaranty,
we could be required to reduce or suspend our shareholder dividends, and may not
have sufficient funds to support operations, until substitute tenants are
obtained. If that happened, we cannot predict when or whether we could obtain
substitute quality tenants on acceptable terms.
THERE IS RISK IN USING DEBT TO FUND PROPERTY ACQUISITIONS
We have used leverage to acquire properties and expect to continue to do so
in the future. Although the use of leverage is common in the real estate
industry, our use of debt to acquire properties does expose us to some risks. If
a significant number of our tenants fail to make their lease payments and we
don't have sufficient cash to pay principal and interest on the debt, we could
default on our debt obligations. Our debt financing is secured by mortgages on
our properties. If we fail to make our mortgage payments, the lenders could
declare a default and foreclose on those properties.
A PORTION OF OUR SECURED DEBT HAS "HYPER-AMORTIZATION" PROVISIONS WHICH MAY
REQUIRE US TO REFINANCE THE DEBT OR SELL THE PROPERTIES SECURING THE DEBT
PRIOR TO MATURITY
As of December 31, 2003, we had approximately $98.1 million outstanding
under a single secured loan agreement that contains a "hyper-amortization"
feature, in which the principal payment schedule is rapidly accelerated, and our
principal payments are substantially increased, if we fail to pay the balance on
the anticipated prepayment date of July 11, 2008. We undertook this debt on the
assumption that we can refinance the debt prior to the hyper-amortization
payments becoming due. If we cannot obtain acceptable refinancing at the
appropriate time, the hyper-amortization payments will require substantially all
of the revenues from those properties securing the debt to be applied to the
debt repayment, which would substantially reduce our common share dividend rate
and could adversely affect our financial condition and liquidity.
WE MUST OBTAIN NEW FINANCING IN ORDER TO GROW
As a REIT, we are required to distribute at least 90% of our net income to
shareholders in the form of dividends. This means we are limited in our ability
to use internal capital to acquire properties and must continually raise new
capital in order to continue to grow and diversify our real estate portfolio.
Our ability to raise new capital depends in part on factors beyond our control,
including conditions in equity and credit markets, conditions in the cinema
exhibition industry and the performance of real estate investment trusts
generally. We continually consider and evaluate a variety of potential
transactions to raise additional capital, but we cannot assure that attractive
alternatives will always be available to us, nor that our common share price
will increase or remain at a level that will permit us to continue to raise
equity capital privately or publicly.
IF WE FAIL TO QUALIFY AS A REIT WE WOULD BE TAXED AS A CORPORATION, WHICH
WOULD SUBSTANTIALLY REDUCE FUNDS AVAILABLE FOR PAYMENT OF DIVIDENDS TO OUR
SHAREHOLDERS
If we fail to qualify as a REIT for U.S. federal income tax purposes, we
will be taxed as a corporation. We are organized and believe we qualify as a
REIT, and intend to operate in a manner that will allow us to continue to
qualify as a REIT. However, we cannot assure you that we will remain qualified
in the future. This is because qualification as a REIT involves the application
of highly technical and complex provisions of the Internal Revenue Code on which
there are only limited judicial and administrative interpretations, and depends
on facts and circumstances not entirely within our control. In addition, future
legislation, new regulations, administrative interpretations or court decisions
may significantly change the tax laws, the application of the tax laws to our
qualification as a REIT or the U.S. federal income tax consequences of that
qualification.
If we fail to qualify as a REIT we will face tax consequences that will
substantially reduce the funds available for payment of dividends:
- We would not be allowed a deduction for dividends paid to shareholders in
computing our taxable income and would be subject to U.S. federal income
tax at regular corporate rates
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- We could be subject to the U.S. federal alternative minimum tax and
possibly increased state and local taxes
- Unless we are entitled to relief under statutory provisions, we could not
elect to be treated as a REIT for four taxable years following the year
in which we were disqualified
In addition, if we fail to qualify as a REIT, we will no longer be required
to pay dividends on our common shares. As a result of these factors, our failure
to qualify as a REIT could adversely affect the market price for our shares.
OUR DEVELOPMENT FINANCING ARRANGEMENTS EXPOSE US TO FUNDING AND PURCHASE RISKS
Our ability to meet our construction financing obligations which we may
enter into from time to time depends on our ability to obtain equity or debt
financing in the required amounts. There is no assurance we can obtain this
financing at rates which will lock-in a spread between our cost of capital and
the rent payable under the leases to be entered into upon completion of
construction. We will be obligated to purchase and lease-back the theatres that
are subject to these arrangements at predetermined rates.
RISKS THAT APPLY TO OUR REAL ESTATE BUSINESS
THERE ARE RISKS ASSOCIATED WITH OWNING AND LEASING REAL ESTATE
Although the terms of our single-tenant leases obligate the tenants to bear
substantially all of the costs of operating the properties, investing in real
estate involves a number of risks, including:
- The risk that tenants will not perform under their leases, reducing our
income from the leases or requiring us to assume the cost of performing
obligations (such as taxes, insurance and maintenance) that are the
tenant's responsibility under a net lease
- The risk that changes in economic conditions or real estate markets may
adversely affect the value of our properties
- The risk that local conditions (such as oversupply of megaplex theatres
or other entertainment-related properties) could adversely affect the
value of our properties
- We may not always be able to lease properties at favorable rates
- We may not always be able to sell a property when we desire to do so at a
favorable price
- Changes in tax, zoning or other laws could make properties less
attractive or less profitable
If a tenant fails to perform on its lease covenants, that would not excuse
us from meeting any mortgage debt obligation secured by the property and could
require us to fund reserves in favor of our mortgage lenders, thereby reducing
funds available for payment of dividends on our shares and interest payments on
any debt securities we may offer. We cannot be assured that tenants will elect
to renew their leases when the terms expire. If a tenant does not renew its
lease or if a tenant defaults on its lease obligations, there is no assurance we
could obtain a substitute tenant on acceptable terms. If we cannot obtain
another quality movie exhibitor to lease a megaplex theatre property, we may be
required to modify the property for a different use, which may involve a
significant capital expenditure and a delay in re-leasing the property.
SOME POTENTIAL LOSSES ARE NOT COVERED BY INSURANCE
Our net leases require the tenants to carry comprehensive liability,
casualty, workers' compensation, extended coverage and rental loss insurance on
our properties. We believe the required coverage is of the type, and amount,
customarily obtained by an owner of similar properties. We believe all of our
properties are adequately insured. However, there are some types of losses, such
as catastrophic acts of nature, for which we or our tenants cannot obtain
insurance at an acceptable cost. If there is an uninsured loss or a loss in
excess of insurance limits, we could lose both the revenues generated by the
affected property and the capital we have
6
invested in the property. We would, however, remain obligated to repay any
mortgage indebtedness or other obligations related to the property. Since
September 11, 2001, the cost of insurance protection against terrorist acts has
risen dramatically. There can be no assurance our tenants will be able to obtain
terrorism coverage, or that any coverage they do obtain will adequately protect
our properties against loss from terrorist attacks.
THERE ARE RISKS INVOLVED IN JOINT VENTURE INVESTMENTS
We may continue to acquire or develop properties in joint ventures with
third parties when those transactions appear desirable. We would not own the
entire interest in any property acquired by a joint venture. Significant
decisions with respect to the ownership, leasing, management or disposition of a
joint venture property may require the consent of the joint venture partner. If
we have a dispute with a joint venture partner, we may feel it necessary or
become obligated to acquire the partner's interest in the venture. However, we
cannot assure you that the price we would have to pay or the timing of the
acquisition would be favorable to us. If we own less than a 50% interest in a
joint venture, or if the joint venture is jointly controlled, the assets and
financial results of the joint venture may not be reportable by us on a
consolidated basis, and the liabilities of the joint venture may not be included
within the liabilities reported on our consolidated balance sheet. To the extent
we owe commitments to, or are dependent on, any such "off-balance sheet"
arrangements, or if those arrangements or their properties or leases are subject
to material contingencies, our liquidity, financial condition and operating
results could be adversely affected by those commitments to off-balance sheet
arrangements.
OUR MULTI-TENANT PROPERTIES EXPOSE US TO ADDITIONAL RISKS
Our entertainment retail centers in Westminster, Colorado, New Rochelle,
New York and Ontario, Canada and similar properties we may seek to acquire or
develop in the future involve risks not typically encountered in the purchase
and lease-back of megaplex theatres which are operated by a single tenant. The
ownership or development of multi-tenant retail centers exposes us to the risk
that a sufficient number of suitable tenants may not be found to enable the
center to operate profitably and provide a return to us. Retail centers are also
subject to tenant turnover and fluctuations in occupancy rates, which could
affect our operating results. Multi-tenant retail centers also expose us to the
risk of potential "CAM slippage," which may occur if common area maintenance
fees paid by tenants are exceeded by the actual cost of taxes, insurance and
maintenance at the property.
FAILURE TO COMPLY WITH THE AMERICANS WITH DISABILITIES ACT AND OTHER LAWS
COULD RESULT IN SUBSTANTIAL COSTS
The operators of our U.S. properties must comply with the Americans with
Disabilities Act ("ADA"). The ADA requires that public accommodations reasonably
accommodate individuals with disabilities and that new construction or
alterations be made to commercial facilities to conform to accessibility
guidelines. Failure to comply with the ADA can result in injunctions, fines,
damage awards to private parties and additional capital expenditures to remedy
noncompliance. Our U.S. leases require the tenants to comply with the ADA.
The operators of our properties are also subject to various other federal,
state or provincial and local regulatory requirements. We believe the properties
are in material compliance with all applicable regulatory requirements. However,
we do not know whether existing requirements will change or whether compliance
with future requirements will involve significant unanticipated expenditures.
Although these expenditures would be the responsibility of our tenants, if
tenants fail to perform these obligations, we may be required to do so.
POTENTIAL LIABILITY FOR ENVIRONMENTAL CONTAMINATION COULD RESULT IN
SUBSTANTIAL COSTS
Under federal, state and local environmental laws, we may be required to
investigate and clean up any release of hazardous or toxic substances or
petroleum products at our properties, regardless of our knowledge or actual
responsibility, simply because of our current or past ownership of the real
estate. If unidentified
7
environmental problems arise, we may have to make substantial payments, which
could adversely affect our cash flow and our ability to make distributions to
our shareholders. This is so because:
- As owner we may have to pay for property damage and for investigation and
clean-up costs incurred in connection with the contamination
- The law may impose clean-up responsibility and liability regardless of
whether the owner or operator knew of or caused the contamination
- Even if more than one person is responsible for the contamination, each
person who shares legal liability under environmental laws may be held
responsible for all of the clean-up costs
- Governmental entities and third parties may sue the owner or operator of
a contaminated site for damages and costs
These costs could be substantial and in extreme cases could exceed the
value of the contaminated property. The presence of hazardous substances or
petroleum products or the failure to properly remediate contamination may
adversely affect our ability to borrow against, sell or lease an affected
property. In addition, some environmental laws create liens on contaminated
sites in favor of the government for damages and costs it incurs in connection
with a contamination.
Most of our loan agreements require the Company or a subsidiary to
indemnify the lender against environmental liabilities. Our leases require the
tenants to operate the properties in compliance with environmental laws and to
indemnify us against environmental liability arising from the operation of the
properties. We believe all of our properties are in material compliance with
environmental laws. However, we could be subject to strict liability under
environmental laws because we own the properties. There is also a risk that
tenants may not satisfy their environmental compliance and indemnification
obligations under the leases. Any of these events could substantially increase
our cost of operations, require us to fund environmental indemnities in favor of
our secured lenders and reduce our ability to service our debt and pay dividends
to shareholders.
REAL ESTATE INVESTMENTS ARE RELATIVELY NON-LIQUID
We may desire to sell a property in the future because of changes in market
conditions or poor tenant performance or to avail ourselves of other
opportunities. We may also be required to sell a property in the future to meet
obligations or avoid a loan default. Specialty real estate projects such as
megaplex theatres cannot always be sold quickly, and we cannot assure you that
we could always obtain a favorable price. We may be required to invest in the
restoration or modification of a property before we can sell it.
RISKS THAT MAY AFFECT THE MARKET PRICE OF OUR SECURITIES
WE CANNOT ASSURE YOU WE WILL CONTINUE PAYING DIVIDENDS AT HISTORICAL RATES
Our ability to continue paying dividends on our common shares at historical
rates or to increase our common share dividend rate will depend on a number of
factors, including our financial condition and results of future operations, the
performance of lease terms by tenants, provisions in our secured loan covenants,
and our ability to acquire, finance and lease additional properties at
attractive rates. If we do not maintain or increase our common share dividend
rate, that could have an adverse effect on the market price of our common shares
and other securities. Our Series A Preferred Shares have a fixed dividend rate
which does not increase with any increases in the dividend rate on our common
shares. Conversely, payment of dividends on our common shares may be subject to
payment in full of the dividends on preferred shares and payment of interest on
any debt securities we may offer.
MARKET INTEREST RATES MAY HAVE AN EFFECT ON THE VALUE OF OUR SECURITIES
One of the factors that investors may consider in deciding whether to buy
or sell our securities is our dividend rate as a percentage of our share price,
relative to market interest rates. If market interest rates
8
increase, prospective investors may desire a higher dividend or interest rate on
our securities or seek securities paying higher dividends or interest.
MARKET PRICES FOR OUR SECURITIES MAY BE AFFECTED BY PERCEPTIONS ABOUT THE
FINANCIAL HEALTH OR SHARE VALUE OF OUR TENANTS OR THE PERFORMANCE OF REIT
STOCKS GENERALLY
To the extent any of our tenants or other movie exhibitors report losses or
slower earnings growth, take charges against earnings resulting from the
obsolescence of multiplex theatres or enter bankruptcy proceedings, the market
price for our securities could be adversely affected. The market price for our
securities could also be affected by any weakness in movie exhibitor stocks
generally. We believe these trends had an adverse impact on our common share
price in 2000 and 2001.
LIMITS ON CHANGES IN CONTROL MAY DISCOURAGE TAKEOVER ATTEMPTS WHICH MAY BE
BENEFICIAL TO OUR SHAREHOLDERS
There are a number of provisions in our Declaration of Trust, Maryland law
and agreements we have with others which could make it more difficult for a
party to make a tender offer for our common shares or complete a takeover of EPR
which is not approved by our Board of Trustees. These include:
- A staggered Board of Trustees that can be increased in number without
shareholder approval
- A limit on beneficial ownership of our shares, which acts as a defense
against a hostile takeover or acquisition of a significant or controlling
interest, in addition to preserving our REIT status
- The ability of the Board of Trustees to issue preferred shares and to
reclassify preferred or common shares, without shareholder approval
- Limits on the ability of shareholders to remove trustees without cause
- Requirements for advance notice of shareholder proposals at annual
shareholder meetings
- Provisions of Maryland law restricting business combinations and control
share acquisitions not approved by the Board of Trustees
- Provisions of Maryland law protecting corporations (and by extension
REITs) against unsolicited takeovers by limiting the duties of the
trustees in unsolicited takeover situations
- Provisions of Maryland law providing that the trustees are not subject to
any higher duty or greater scrutiny than that applied to any other
director under Maryland law in transactions relating to the acquisition
or potential acquisition of control
- Provisions of Maryland law creating a statutory presumption that an act
of the trustees satisfies the applicable standards of conduct for
directors under Maryland law
- Provisions in secured loan or joint venture agreements putting EPR in
default upon a change in control
- Provisions of employment agreements with our officers calling for
forgiveness of share purchase loans upon a hostile change in control
Any or all of these provisions could delay or prevent a change in control
of EPR, even if the change was in our shareholders' interest or offered a
greater return to our shareholders.
THE JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003 MAY ADVERSELY AFFECT
THE VALUE OF OUR SHARES
On May 28, 2003, the President signed the Jobs and Growth Tax Relief and
Reconciliation Act of 2003 into law, which provides favorable income tax rates
for certain corporate dividends received by individuals through December 31,
2008. Under this new law, REIT dividends are generally not eligible for the
preferential rates applicable to dividends unless the dividends are attributable
to income that has been subject to corporate-level tax or are attributable to
certain other dividends received by us. As a result, substantially all of the
dividends paid on our shares are not expected to qualify for such lower rates.
This new law could cause
9
stock in non-REIT corporations to be more attractive to investors than stock in
REITs, which may negatively affect the value of, and the market for, our shares.
THE MARKET PRICE FOR OUR COMMON SHARES COULD BE ADVERSELY AFFECTED BY ANY
PREFERRED SHARES, WARRANTS OR DEBT SECURITIES WE MAY OFFER
We have filed a universal shelf registration statement on Form S-3/S-11 to
register $400,000,000 of securities, which may include common shares, preferred
shares, warrants and debt securities. If we offer any additional preferred
shares or any warrants or debt securities on terms which are not deemed
accretive to our common shareholders, that may adversely affect the market price
for our common shares. In addition, the issuance of warrants may create a
significant market "overhang" which could be dilutive to our common shareholders
and adversely affect our common share price.
ABOUT EPR
BUSINESS
EPR is a self-administered REIT. As of April 1, 2004, our real estate
portfolio was comprised of 52 megaplex theatre properties (including three joint
venture properties) located in twenty states and Ontario, Canada, six
entertainment retail centers (including one joint venture property) located in
Westminster, Colorado, New Rochelle, New York and Ontario, Canada, a water park
located in Garland, Texas, and land parcels leased to restaurant and retail
operators adjacent to several of our theatre properties. Our theatre properties
are leased to prominent theatre operators, including AMC, Muvico, Regal,
Consolidated, Loews, Rave, AmStar, Wallace and Crown.
As of April 1, 2004, approximately 67% of our megaplex theatre properties
were leased to AMC as a result of a series of sale-leaseback transactions
pertaining to a number of AMC megaplex theatres, and approximately 65% of our
annual lease revenues were derived from rental payments by AMC under these
leases.
Megaplex theatres typically have at least 14 screens with stadium-style
seating (seating with elevation between rows to provide unobstructed viewing)
and are equipped with amenities that significantly enhance the audio and visual
experience of the patron. We believe the development of megaplex theatres has
accelerated the obsolescence of many previously existing movie theatres by
setting new standards for moviegoers, who, in our experience, have demonstrated
their preference for the more attractive surroundings, wider variety of films
and superior customer service typical of megaplex theatres (see "Operating risks
in the entertainment industry may affect the ability of our tenants to perform
under their leases" and "Market prices for our securities may be affected by
perceptions about the financial health or share value of our tenants or the
performance of REIT stocks generally" under "Risk Factors").
We expect the development of megaplex theatres to continue in the United
States and abroad for the foreseeable future. With the development of the
stadium style megaplex theatre as the preeminent store format for cinema
exhibition, the older generation of flat-floor theatres has generally
experienced a significant downturn in attendance and performance. As a result of
the significant capital commitment involved in building new megaplex theatre
properties and the experience and industry relationships of our management, we
believe we will continue to have opportunities to provide capital to businesses
that seek to develop and operate these properties but would prefer to lease
rather than own the properties in order to minimize the impact of real estate
ownership on their financial statements. We believe our ability to finance these
properties will enable us to continue to grow and diversify our asset base.
EPR was formed on August 22, 1997 as a Maryland real estate investment
trust. We completed an initial public offering of our common shares on November
18, 1997.
10
RECENT DEVELOPMENTS
Since January 1, 2004, we have acquired approximately $216.2 million in
rental properties, increasing our asset base by approximately 22%.
On March 1, 2004, we acquired, through our wholly-owned subsidiaries, four
separate entertainment retail centers anchored by AMC megaplex theatres located
in Ontario, Canada (the "Canada Properties"). The Canada Properties are the
Mississauga Entertainment Centrum located in suburban Toronto, the Oakville
Entertainment Centrum located in suburban Toronto, the Whitby Entertainment
Centrum located in suburban Toronto, and the Kanata Centrum Walk located in
suburban Ottawa. These properties contain an aggregate of approximately 893,000
square feet of retail and entertainment space. Our total acquisition cost for
this properties was approximately US $152 million, plus transaction costs.
Approximately US $27 million of the purchase price was paid in the form of
747,243 restricted common shares of EPR valued at US $36.25 per share. The cash
portion of the purchase price was paid in Canadian dollars and financed through
Canadian-dollar nonrecourse fixed rate mortgage loans provided by GMAC
Commercial Mortgage of Canada, Limited in the aggregate amount of approximately
US $97 million. The registration statement of which this prospectus forms a part
is being filed pursuant to the Registration Rights Agreement to register such
shares for resale by the selling shareholders. For additional information about
the acquisitions, see our current report on Form 8-K filed with the SEC on March
15, 2004 and amended on March 16, 2004 incorporated by reference herein.
On March 31, 2004, we acquired three megaplex theatre properties from AMC
for an aggregate purchase price of approximately $64.2 million. The theatres,
located in Phoenix, Arizona, Mesa, Arizona and Hamilton, New Jersey, contain an
aggregate of 78 screens and have been leased-back to AMC under long-term
triple-net leases.
On April 20, 2004, we commenced a public offering of 2,587,500 common
shares (including 337,500 shares to cover underwriter over-allotments) at the
public offering price of $33.00 per share. Closing on the sale of these shares
is expected to occur on April 26, 2004.
DIVIDEND INCREASE
On March 17, 2004, our Board of Trustees approved a 12.5% increase in our
quarterly common share dividend to $0.5625 per share for the first quarter of
2004. The record date for the first quarter dividend was March 31, 2004. We
anticipate that the aggregate dividend paid on our common shares for 2004 will
be approximately $2.25 per share, compared to an aggregate dividend of $2.00 per
share paid in 2003.
BUSINESS OBJECTIVES AND STRATEGIES
Our primary business objective is to continue to enhance shareholder value
by achieving predictable and increasing Funds from Operations ("FFO") per share
through the acquisition of high-quality properties leased to leading
entertainment and entertainment-related business operators. FFO, a non-GAAP
financial measure, is defined as net income (computed in accordance with GAAP),
excluding gains and losses from sales of depreciable operating properties, plus
depreciation and amortization, and after adjustments for unconsolidated joint
ventures and other affiliates. See our annual report on Form 10-K for the year
ended December 31, 2003 incorporated by reference herein for a reconciliation of
FFO to GAAP Net Income Available to Common Shareholders. We intend to achieve
this objective by continuing to execute the Growth Strategies, Operating
Strategies and Capitalization Strategies described below.
GROWTH STRATEGIES
FUTURE PROPERTIES
We intend to continue pursuing acquisitions of high-quality
entertainment-related properties from operators with a strong market presence.
As a part of our growth strategy, we will consider entering into additional
joint ventures with other developers or investors in real estate, developing
additional megaplex theatre properties and developing or acquiring additional
multi-tenant, entertainment retail centers and single-tenant, out-of-home,
location-based entertainment and entertainment-related properties.
11
OPERATING STRATEGIES
LEASE RISK MINIMIZATION
To avoid initial lease-up risks and produce a predictable income stream, we
typically acquire single-tenant properties that are leased under long-term
leases. We believe our willingness to make long-term investments in properties
offers tenants financial flexibility and allows tenants to allocate capital to
their core businesses. Although we will continue to emphasize single-tenant
properties, we have acquired and may continue to acquire multi-tenant properties
that we believe add value to our shareholders.
LEASE STRUCTURE
We typically structure leases on a triple-net basis under which the tenants
bear the principal portion of the financial and operational responsibility for
the properties. During each lease term and any renewal periods, the leases
typically provide for periodic increases in rent and/or percentage rent based
upon a percentage of the tenant's gross sales over a pre-determined level. In
our multi-tenant property leases and some of our theatre leases, we require the
tenant to pay a common area maintenance charge to defray its pro rata share of
insurance, taxes and common area maintenance costs.
TENANT RELATIONSHIPS
We intend to continue developing and maintaining long-term working
relationships with theatre, retail, restaurant and other entertainment-related
business operators and developers by providing capital for multiple properties
on a national, international or regional basis, thereby enhancing efficiency and
value to those operators and to the Company.
PORTFOLIO DIVERSIFICATION
We will endeavor to further diversify our asset base by property type,
geographic location and tenant. In pursuing this diversification strategy, we
will target theatre, restaurant, retail and other entertainment-related business
operators which management views as leaders in their market segments and which
have the financial strength to compete effectively and perform under their
leases with us.
CAPITALIZATION STRATEGIES
USE OF LEVERAGE; DEBT TO TOTAL CAPITALIZATION
We seek to enhance shareholder return through the use of leverage (see
"Risk Factors -- There is risk in using debt to fund property acquisitions"). In
addition, we have issued and may in the future issue additional equity as
circumstances warrant and opportunities to do so become available. We expect to
maintain a debt to total capitalization ratio (defined as total debt of the
Company as a percentage of shareholders' equity plus total debt) of
approximately 50% to 55%.
JOINT VENTURES
We will examine and pursue additional potential joint venture opportunities
with institutional investors or developers if they are considered to add value
to our shareholders. We may employ higher leverage in joint ventures (see "Risk
Factors -- There are risks involved in joint venture investments").
PAYMENT OF REGULAR DISTRIBUTIONS
We have paid and expect to continue paying quarterly dividend distributions
to our common and preferred shareholders. Our Series A Preferred Shares have a
fixed dividend rate of 9.5%. Among the factors the Board of Trustees considers
in setting our common share dividend rate are the applicable REIT rules and
regulations that apply to distributions, our results of operations, including
FFO per share, and our Cash Available for Distribution (defined as net cash flow
available for distribution after payment of operating
12
expenses, debt service, and other obligations). We expect to periodically
increase distributions on our common shares as FFO and Cash Available for
Distribution increase and as other considerations and factors warrant (see "Risk
Factors -- We cannot assure you we will continue paying dividends at historical
rates").
13
PROPERTIES
The following table lists, as of March 1, 2004, the Company's properties,
their locations, acquisition dates, number of theatre screens, number of seats,
gross square footage, and the tenant. Except as otherwise noted, all of the real
estate investments listed below are owned or ground leased directly by the
Company.
ACQUISITION BUILDING
PROPERTY LOCATION DATE SCREENS SEATS (GROSS SQ. FT) TENANT
-------- ----------------- ----------- ------- ------- -------------- -----------------
MEGAPLEX THEATRE PROPERTIES
Grand 24(3)............. Dallas, TX 11/97 24 5,067 98,175 AMC
Mission Valley
20(1)(3).............. San Diego, CA 11/97 20 4,361 84,352 AMC
Promenade 16(3)......... Los Angeles, CA 11/97 16 2,860 129,822 AMC
Ontario Mills 30(3)..... Los Angeles, CA 11/97 30 5,469 131,534 AMC
Lennox 24(1)(3)......... Columbus, OH 11/97 24 4,412 98,261 AMC
West Olive 16(3)........ St. Louis, MO 11/97 16 2,817 60,418 AMC
Studio 30(3)............ Houston, TX 11/97 30 6,032 136,154 AMC
Huebner Oaks 24(3)...... San Antonio, TX 11/97 24 4,400 96,004 AMC
First Colony 24(1)(6)... Houston, TX 11/97 24 5,098 107,690 AMC
Oakview 24(1)(6)(10).... Omaha, NE 11/97 24 5,098 107,402 AMC
Leawood Town Center
20(6)................. Kansas City, MO 11/97 20 2,995 75,224 AMC
Gulf Pointe 30(2)(6).... Houston, TX 2/98 30 6,008 130,891 AMC
South Barrington
30(6)................. Chicago, IL 3/98 30 6,210 130,891 AMC
Cantera 30(2)(5)........ Chicago, IL 3/98 30 6,210 130,757 AMC
Mesquite 30(2)(6)....... Dallas, TX 4/98 30 6,008 130,891 AMC
Hampton Town Center
24(6)................. Norfolk, VA 6/98 24 5,098 107,396 AMC
Raleigh Grande Cinema
16(4)................. Raleigh, NC 8/98 16 2,596 51,450 Consolidated
Pompano 18(4)........... Pompano Beach, FL 8/98 18 3,424 73,637 Muvico
Paradise 24(6).......... Davie, FL 11/98 24 4,180 96,497 Muvico
Boise Stadium(1)(4)..... Boise, ID 12/98 20 4,734 140,300 Edwards
Aliso Viejo 20(6)....... Los Angeles, CA 12/98 20 4,352 98,557 Edwards
Westminster 24(7)....... Westminster, CO 6/99 24 4,812 107,000 AMC
Woodridge 18(2)(10)..... Woodridge, IL 6/99 18 4,405 80,600 Loews
Starlight 20(10)........ Tampa, FL 6/99 20 3,928 83,000 Muvico
Palm Promenade 24(10)... San Diego, CA 1/00 24 4,577 88,610 AMC
Crossroads 20(10)....... Raleigh, NC 1/00 20 3,936 77,475 Consolidated
Elmwood Palace 20(10)... New Orleans, LA 3/02 20 4,357 90,391 AMC
Clearview Palace
12(10)................ New Orleans, LA 3/02 12 2,479 70,000 AMC
Hammond Palace 10(10)... New Orleans, LA 3/02 10 1,531 39,850 AMC
Houma Palace 10(10)..... New Orleans, LA 3/02 10 1,871 44,450 AMC
WestBank Palace 16(10).. New Orleans, LA 3/02 16 3,176 71,607 AMC
Olathe Station 30(10)... Kansas City, MO 6/02 30 4,200 125,000 AMC
Forum 30(10)............ Detroit, MI 6/02 30 5,041 131,000 AMC
Cherrydale 16(10)....... Greenville, SC 6/02 16 2,744 51,450 Consolidated
Livonia 20(10).......... Detroit, MI 8/02 20 3,808 78,000 AMC
Hoffman Town Centre
22(10)................ Alexandria, VA 10/02 22 4,150 132,903 AMC
Colonel Glenn 18(8)..... Little Rock, AR 12/02 18 4,122 79,330 Rave
AmStar Cinema 16(12).... Macon, GA 3/03 16 2,950 66,660 AmStar
Star Southfield 20...... Detroit, MI 5/03 20 7,000 110,000 Loews
Southwind 12(12)........ Lawrence, KS 6/03 12 2,481 42,497 Wallace
Veterans 24(9).......... Tampa, FL 6/03 24 4,580 94,774 AMC
Columbiana Grande
14(12)................ Columbia, SC 9/03 14 2,952 55,400 Consolidated
New Roc City 18 and
IMAX(11).............. New Rochelle, NY 10/03 18 3,240 99,127 Regal
14
ACQUISITION BUILDING
PROPERTY LOCATION DATE SCREENS SEATS (GROSS SQ. FT) TENANT
-------- ----------------- ----------- ------- ------- -------------- -----------------
Harbour View Grand
16(12)................ Suffolk, VA 11/03 16 3,098 61,500 Consolidated
The Grand 18(12)(13).... Hialeah, FL 12/03 18 4,012 77,400 Crown
Mississauga 16(14)...... Toronto, ON 3/04 16 3,856 91,000 AMC
Oakville 24(14)......... Toronto, ON 3/04 24 4,772 95,000 AMC
Whitby 24(14)........... Toronto, ON 3/04 24 4,688 91,000 AMC
Kanata 24(14)........... Ottawa, ON 3/04 24 4,764 89,290 AMC
----- ------- ---------
SUBTOTAL................ 1,031 207,528 4,499,362
===== ======= =========
RETAIL, RESTAURANT AND OTHER PROPERTIES
Westminster
Promenade(8).......... Westminster, CO 10/98 -- -- 140,000 Multi-Tenant
Pompano Kmart(8)........ Pompano Beach, FL 11/98 -- -- 80,540 Kmart
Pompano Restaurant(8)... Pompano Beach, FL 11/98 -- -- 5,600 Nickels
On-The-Border(8)........ Dallas, TX 1/99 -- -- 6,580 Brinkers
Texas Roadhouse(8)...... Dallas, TX 1/99 -- -- 6,000 TX Roadhouse
Bennigan's(8)........... Houston, TX 5/00 -- -- 6,575 S & A
Bennigan's(8)........... Dallas, TX 5/00 -- -- 6,575 S & A
Texas Land &
Cattle(8)............. Houston, TX 5/00 -- -- 6,600 Tx.C.C., Inc.
Roadhouse Grill(8)...... Atlanta, GA 8/00 -- -- 6,850 Roadhouse Grill
Johnnie Carino's........ Dallas, TX 3/03 -- -- 6,200 Kona Rest. Group
Star Southfield
Center................ Detroit, MI 5/03 -- -- 51,964 Multi-Tenant
Hawaiian Falls Adventure
Water Park............ Garland, TX 5/03 -- -- -- Horizon Amusement
Cherrydale Shops........ Greenville, SC 6/03 -- -- 10,000 Multi-Tenant
New Roc City(11)........ New Rochelle, NY 10/03 -- -- 447,000 Multi-Tenant
Harbor View
Station(12)........... Suffolk, VA 11/03 -- -- 21,855 Multi-Tenant
Whitby Entertainment
Centrum(14)........... Toronto, ON 3/04 -- -- 222,000 Multi-Tenant
Oakville Entertainment
Centrum(14)........... Toronto, ON 3/04 -- -- 305,900 Multi-Tenant
Mississauga
Entertainment
Centrum(14)........... Toronto, ON 3/04 -- -- 285,000 Multi-Tenant
Kanata Entertainment
Centrum(14)........... Ottawa, ON 3/04 -- -- 780,000 Multi-Tenant
----- ------- ---------
SUBTOTAL.............. 2,395,239
----- ------- ---------
TOTAL................. 1,031 207,528 6,894,601
===== ======= =========
---------------
(1) Third party ground leased property. Although the Company is the tenant
under the ground leases and has assumed responsibility for performing the
obligations thereunder, pursuant to the theatre leases, the theatre tenants
are responsible for performing the Company's obligations under the ground
leases.
(2) In addition to the theatre property itself, the Company has acquired land
parcels adjacent to the theatre property, which the Company has or intends
to ground lease or sell to restaurant or other entertainment themed
operators.
(3) Property is included as security for a $105 million mortgage facility.
(4) Property is included as security for a $20 million mortgage facility.
(5) Property is included in the Atlantic-EPR I joint venture.
15
(6) Property is included as security for a $125 million mortgage facility.
(7) Property is included as security for a $17 million mortgage.
(8) Property is included as security for a $75 million mortgage facility.
(9) Property is included as security for a $14.7 million mortgage facility.
(10) Property is included as security for $155.5 million in commercial mortgage
pass-through certificates.
(11) Property is included in a joint venture and as security for a $66 million
mortgage facility and a $4 million credit facility.
(12) Property is included as security for a $50 million mortgage facility.
(13) We own the ground on which the theatre is constructed and have entered into
a ground lease with the theatre operator.
(14) Property is included as security for a $97 million mortgage facility.
OFFICE LOCATION
Our executive office is located in Kansas City, Missouri and is leased from
a third party landlord. The office occupies approximately 10,960 square feet
with annual rentals of $192,000. The lease expires in December 2009.
TENANTS AND LEASES
As of March 1, 2004, our existing megaplex theatre leases provided for
aggregate annual rentals of approximately $95.7 million (on a consolidated
basis, excluding two unconsolidated joint venture properties), or an average
annual rental of approximately $2 million per property. The leases are typically
triple-net leases that require the tenant to pay substantially all expenses
associated with the operation of the properties, including taxes, other
governmental charges, insurance, utilities, service, maintenance and any ground
lease payments. As of March 1, 2004, our existing retail and other leases
provided for aggregate annual rentals of approximately $16.8 million (on a
consolidated basis, including joint venture properties), or an average annual
rental of approximately $148,600 per property.
USE OF PROCEEDS
All net proceeds from the sale of the shares will go to the selling
shareholders. EPR will not receive any of the proceeds from the sale of shares
by the selling shareholders.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain material U.S. federal income tax
consequences is based on current law and does not address all aspects of
taxation that may be relevant to particular shareholders in light of their
personal investment or tax circumstances, or to certain types of shareholders
(including insurance companies, financial institutions and broker-dealers)
subject to special treatment under U.S. federal income tax laws.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF SHARES.
We believe we have operated in a manner that permits EPR to satisfy the
requirements for qualification and taxation as a REIT under the applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"). We
intend to continue to satisfy those requirements. No assurance can be given,
however, that these requirements will be met.
The provisions of the Code and the Treasury Regulations thereunder relating
to qualification and operation as a REIT are highly technical and complex. The
following describes certain material aspects of the laws that govern the U.S.
federal income tax treatment of a REIT and its shareholders. This summary is
16
qualified in its entirety by the applicable Code provisions, rules and Treasury
Regulations thereunder, and administrative and judicial interpretations thereof.
In the opinion of Sonnenschein Nath & Rosenthal LLP, the Company is
organized in conformity with the requirements for qualification as a REIT for
U.S. federal income tax purposes, and its current method of operation has
enabled and will continue to enable it to meet the requirements for
qualification and taxation as a REIT under the Code. It must be emphasized that
this opinion is based solely on information and representations made by our
management. Moreover, our qualification and taxation as a REIT depend upon our
ability to meet, through actual annual operating results, distribution levels
and diversity of share ownership, and various qualification tests imposed under
the Code discussed below, the results of which will not be reviewed by
Sonnenschein Nath & Rosenthal LLP. Accordingly, no assurance can be given by
counsel or the Company that the actual results of our operations for any
particular taxable year will satisfy these requirements (see "Failure to
Qualify"). Sonnenschein Nath & Rosenthal LLP will not review our compliance with
these tests, and has not undertaken to update its opinion subsequent to the date
of this prospectus.
In brief, if certain detailed conditions imposed by the REIT provisions of
the Code are satisfied, entities such as EPR that invest primarily in real
estate and that otherwise would be treated for U.S. federal income tax purposes
as corporations are generally not taxed at the corporate level on their "REIT
Taxable Income" (generally the REIT's taxable income adjusted for, among other
things, the disallowance of the dividends-received deduction generally available
to corporations) that is currently distributed to shareholders. This treatment
substantially eliminates the "double taxation" (i.e., taxation at both the
corporate and shareholder levels) that generally results from investing in
corporations.
If EPR fails to qualify as a REIT in any year, we will be subject to U.S.
federal income tax as if we were a domestic corporation, and our shareholders
will be taxed in the same manner as shareholders of ordinary corporations. In
this event, EPR could be subject to potentially significant tax liabilities and
the amount of cash available for distribution to our shareholders could be
reduced.
TAXATION OF THE COMPANY
GENERAL
In any year in which EPR qualifies as a REIT, in general, we will not be
subject to U.S. federal income tax on that portion of our net income that we
distribute to shareholders. However, EPR will be subject to U.S. federal income
tax in these regards: (1) EPR will be taxed at regular corporate rates on any
undistributed REIT Taxable Income, including undistributed net capital gains
(however, a REIT can elect to "pass through" any of its taxes paid on its
undistributed net capital gain to its shareholders on a pro rata basis), (2)
under certain circumstances, EPR may be subject to the "alternative minimum tax"
on any items of tax preference, (3) if EPR has: (i) net income from the sale or
other disposition of "foreclosure property" which is held primarily for sale to
customers in the ordinary course of business; or (ii) other nonqualifying income
from foreclosure property, we will be subject to tax at the highest corporate
rate on such income, (4) if EPR has net income from "prohibited transactions"
(which are, in general, certain sales or other dispositions of property held
primarily for sale to customers in the ordinary course of business other than
(i) foreclosure property, and (ii) property held for at least four years,
meeting certain additional requirements), such income will be subject to a 100%
tax, (5) if EPR fails to satisfy the 75% gross income test or a 90% gross income
threshold (as discussed below), and has nonetheless maintained its qualification
as a REIT because certain other requirements have been met, we will be subject
to a 100% tax on an amount equal to (a) the gross income attributable to the
greater of the amount by which EPR fails the 75% gross income test or the 95%
gross income test, multiplied by (b) a fraction intended to reflect EPR's
profitability, (6) if EPR fails to distribute during each calendar year at least
the sum of: (i) 85% of our ordinary income for that year; (ii) 95% of our
capital gain net income for that year; and (iii) any undistributed taxable
income from prior periods, EPR would be subject to a 4% excise tax on the excess
of such required distribution over the amounts actually distributed, (7) if EPR
acquires any asset from a C corporation (generally, a corporation subject to
full corporate-level tax) in a transaction in which the basis of the asset in
EPR's hands is determined by reference
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to the basis of the asset (or any other property) in the hands of the C
corporation and no election is made for any gains on such transaction to be
taxed currently, and EPR recognizes gain on the disposition of such asset during
the 10-year period beginning on the date on which that asset was acquired by
EPR, then, to the extent of any built-in gain at the time of acquisition, such
gain will be subject to tax at the highest regular corporate rate, (8) if EPR
has certain redetermined rents, deductions and excess interest between itself
and a taxable REIT subsidiary, a 100% tax could apply to such amounts, and (9) a
35% tax could apply to any excess inclusions allocable to any disqualified
entities that hold interests in EPR.
REQUIREMENTS FOR QUALIFICATION
The Code defines a REIT as a corporation, trust or association (1) which is
managed by one or more trustees or directors, (2) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest, (3) which would be taxable as a domestic corporation but
for Sections 856 through 859 of the Code, (4) which is neither a financial
institution nor an insurance company subject to certain provisions of the Code,
(5) the beneficial ownership of which is held by 100 or more persons (the "100
person test"), (6) not more than 50% in value of the outstanding shares of which
is owned, directly or indirectly, by five or fewer individuals (as defined in
the Code) at any time during the last half of each taxable year (the
"closely-held test"), (7) which has elected to be treated as a REIT, and (8)
which meets certain other tests, described below, regarding distributions and
the nature of its income and assets. The Code provides that conditions (1)
through (4) must be met during the entire taxable year and that condition (5)
must be met during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a taxable year of less than 12 months. Conditions (5) and
(6) did not apply until after the first taxable year for which an election was
made by EPR to be taxed as a REIT. A REIT's failure to satisfy condition (6)
during a taxable year will not result in its disqualification as a REIT under
the Code for that taxable year as long as (i) the REIT satisfies the shareholder
demand statement requirements described in the succeeding paragraph and (ii) the
REIT did not know, or exercising reasonable diligence, would not have known,
whether it had failed condition (6). A REIT must also report its income for U.S.
federal income tax purposes based on the calendar year.
In order to assist EPR in complying with the 100 person test and the
closely-held test, and for certain non-tax purposes, we have placed certain
restrictions on the transfer of our shares to prevent further concentration of
share ownership (See "Description of Securities"). To evidence compliance with
these requirements, we must maintain records which disclose the actual ownership
of our outstanding shares. In fulfilling our obligations to maintain records, we
must demand written statements each year from the record holders of designated
percentages of our shares disclosing the actual owners of the shares. A list of
those persons failing or refusing to comply with such demand must be maintained
as part of EPR's records. A shareholder failing or refusing to comply with EPR's
written demand must submit with his or her tax returns a similar statement
disclosing the actual ownership of shares and certain other information. EPR's
Declaration of Trust imposes restrictions on the transfer of shares that are
intended to assist EPR in continuing to satisfy the share ownership
requirements, among other purposes.
Although EPR intends to satisfy the shareholder demand letter rules
described in the preceding paragraph, our failure to satisfy these requirements
may result in the imposition of IRS penalties.
In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the income
of the partnership attributable to that share. In addition, the character of the
assets and gross income of a partnership shall retain the same character in the
hands of a partner qualifying as a REIT for purposes of Section 856 of the Code,
including satisfying the gross income tests and the asset tests described below.
ASSET TESTS
At the close of each quarter of EPR's taxable year, EPR must satisfy two
tests relating to the nature of its assets. First, at least 75% of the value of
EPR's total assets must be represented by (1) interests in real
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property, (2) interests in mortgages on real property, (3) shares in other
REIT's, (4) cash, (5) cash items (including receivables arising in the ordinary
course of the REIT's business) and (6) government securities (as well as certain
temporary investments in stock or debt instruments purchased with the proceeds
of new capital raised by EPR for the one-year period beginning on the date of
receipt of such new capital). Second, (a) not more than 25% of the value of a
REIT's total assets can consist of securities except for items described in
paragraphs (1) through (6), (b) not more than 20% of the value of a REIT's total
assets can be represented by securities of one or more taxable REIT
subsidiaries, and (c) except with respect to taxable REIT subsidiaries and the
securities previously mentioned in paragraphs (1) through (6), (i) not more than
5% of the value of the REIT's total assets can consist of securities of any one
issuer, (ii) the REIT cannot hold securities having a value of more than 10% of
the total voting power of the outstanding securities of any one issuer and (iii)
the REIT cannot hold securities having a value of more than 10% of the total
value of the outstanding securities of any one issuer. For purposes of the
requirements of paragraph (iii), certain "straight debt" obligations may be
disregarded if certain requirements are met. EPR may own "qualified REIT
subsidiaries," which are, in general, corporate subsidiaries 100% owned by a
REIT which do not elect to be treated as a taxable REIT subsidiary. All assets,
liabilities and items of income, deduction and credit of a qualified REIT
subsidiary will be treated as owned and realized directly by EPR. For purposes
of the asset requirements, the securities of a qualified REIT subsidiary will be
ignored.
A taxable REIT subsidiary is generally any corporation the stock of which
is owned in whole or in part by a REIT and with respect to which both the REIT
and the subsidiary elect that it be taxed as a taxable REIT subsidiary.
GROSS INCOME TESTS
There are two separate percentage tests relating to the sources of EPR's
gross income which must be satisfied for each taxable year.
THE 75% TEST. At least 75% of EPR's gross income for each taxable year
must be "qualifying income." Qualifying income generally includes (i) "rents
from real property" (except as modified below), (ii) interest on obligations
collateralized by mortgages on, or interests in, real property, (iii) gain from
the sale or other disposition of interests in real property and real estate
mortgages, other than gain from property held primarily for sale to customers in
the ordinary course of EPR's trade or business ("dealer property"), (iv)
dividends or other distributions on shares in other REITs, as well as gain from
the sale of those shares, (v) abatements and refunds of real property taxes,
(vi) income from the operation, and gain from the sale, of property acquired at
or in lieu of a foreclosure of the mortgage collateralized by such property
("foreclosure property"), (vii) commitment fees received for agreeing to make
loans collateralized by mortgages on real property or to purchase or lease real
property, (viii) "qualified temporary investment income," and (ix) gain from the
sale or other disposition of a real estate asset which is not a prohibited
transaction.
In addition, rents received from a tenant generally will not qualify as
rents from real property in satisfying the 75% test (or the 95% test described
below) if EPR, or an owner of 10% or more of EPR, directly or constructively
owns 10% or more of the voting power or value of that tenant, if that tenant is
a corporation, or 10% or more of the assets or net profits of the tenant, if the
tenant is not a corporation (a "related party tenant"). In addition, if rent
attributable to personal property, leased in connection with a lease of real
property, is greater than 15% of the total rent received under the lease on a
fair market value basis, then the portion of rent attributable to such personal
property will not qualify as rents from real property. Moreover, any amount
received or accrued, directly or indirectly, generally will not qualify as rents
from real property (or as interest income) for purposes of the 75% and 95% gross
income tests if it is based in whole or in part on the income or profits of any
person. Rent or interest will not be disqualified, however, solely by reason of
being based on a fixed percentage of receipts or sales. Finally, for rents
received to qualify as rents from real property, EPR generally must not operate
or manage the property or furnish or render services to tenants, other than
through an "independent contractor" from whom EPR does not derive or receive any
income, or through a taxable REIT subsidiary. The "independent contractor"
requirement, however, does not apply to the extent the services provided by EPR
are "usually or customarily rendered" in connection with the rental of space for
occupancy only, and are not otherwise considered "rendered to the occupant." For
both the related
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party tenant rules and determining whether an entity qualifies as an independent
contractor, certain attribution rules of the Code apply, pursuant to which
shares held by one entity are deemed held by another.
Amounts paid to a REIT by a taxable REIT subsidiary as rent will not be
excluded from rents from real property if at least 90% of the leased space of
the property is rented to persons other than the taxable REIT subsidiary of such
REIT and other than persons that are considered related under Section
856(d)(2)(B) of the Code and the amount paid is substantially comparable to
rents paid by other tenants of the REIT's property for comparable space.
THE 95% TEST. In addition to deriving 75% of its gross income from the
sources listed above, at least 95% of EPR's gross income for each taxable year
must be derived from the above-described qualifying income, or from dividends,
interest or gains from the sale or disposition of stock or other securities that
are not dealer property. Dividends and interest on any obligation not
collateralized by an interest in real property are included for purposes of the
95% test, but not for purposes of the 75% test. Furthermore, income earned on
interest rate swaps and caps entered into as liability hedges against
indebtedness qualify for the 95% test (but not the 75% test). Income earned on
liability hedges against all of a REIT's indebtedness, such as options, futures,
and forward contracts, qualify for the 95% test (but not the 75% test). In
certain cases, Treasury Regulations treat a debt instrument and a liability
hedge as a synthetic debt instrument for all purposes of the Code. If a
liability hedge entered into by a REIT is subject to these rules, income earned
thereon will operate to reduce its interest expense, and, therefore such income
will not affect the REIT's compliance with either the 75% or 95% tests.
Even if EPR fails to satisfy one or both of the 75% or 95% tests for any
taxable year, it may still qualify as a REIT for that year if it is entitled to
relief under certain provisions of the Code. These relief provisions will
generally be available if (i) EPR's failure to comply was due to reasonable
cause and not to willful neglect, (ii) EPR reports the nature and amount of each
item of its income included in the 75% and 95% tests on a schedule attached to
its tax return, and (iii) any incorrect information on this schedule is not due
to fraud with intent to evade tax. It is not possible, however, to state whether
in all circumstances EPR would be entitled to the benefit of these relief
provisions. If these relief provisions apply, EPR will, as discussed above,
still be subject to a special tax upon the greater of the amount by which it
fails either the 75% test or 90% threshold for that year.
ANNUAL DISTRIBUTION REQUIREMENTS
In order to qualify as a REIT, we are required to make distributions (other
than capital gain distributions) to our shareholders each year in an amount at
least equal to (A) the sum of (i) 90% of EPR's REIT Taxable Income (computed
before deductions for dividends paid and excluding net capital gain), and (ii)
90% of the net income (after tax), if any, from foreclosure property, minus (B)
the sum of certain items of non-cash income. Such distributions must be paid in
the taxable year to which they relate, or in the following taxable year if
declared before we timely file our tax return for that year and if paid on or
before the first regular distribution payment after such declaration. To the
extent we do not distribute all of our net capital gain or distribute at least
90%, but less than 100%, of our REIT Taxable Income, as adjusted, we will be
subject to tax on the undistributed amount at regular capital gains or ordinary
corporate tax rates, as the case may be. (However, a REIT can elect to "pass
through" any of its taxes paid on its undistributed net capital gain to its
shareholders on a pro rata basis). Furthermore, if the REIT should fail to
distribute during each calendar year at least the sum of (i) 85% of its ordinary
income for that year, (ii) 95% of its net capital gain for that year, and (iii)
any undistributed taxable income from prior periods, the REIT would be subject
to a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. For these purposes, dividends declared to shareholders of
record in October, November or December of one calendar year and paid by January
31 of the following calendar year are deemed paid as of December 31 of the
initial calendar year.
We believe that we have made and will make timely distributions sufficient
to satisfy the annual distribution requirements. It is possible that in the
future we may not have sufficient cash or other liquid assets to meet the 90%
distribution requirement, due to timing differences between the actual receipt
of income and
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actual payment of expenses on the one hand, and the inclusion of such income and
deduction of such expenses in computing our REIT Taxable Income on the other
hand. Further, it is possible that from time to time, we may be allocated a
share of net capital gain attributable to any depreciated property we sell that
exceeds our allocable share of cash attributable to that sale. To avoid any
problem with the 90% distribution requirement, we will closely monitor the
relationship between our REIT Taxable Income and cash flow and, if necessary,
will borrow funds in order to satisfy the distribution requirement (See "Risk
Factors").
If it is "determined" that we failed to meet the 90% distribution
requirement as a result of an "adjustment" to our tax return by the IRS, we may
retroactively cure the failure by paying a "deficiency dividend" (plus
applicable penalties and interest) within a specified period.
FAILURE TO QUALIFY
If we fail to qualify for taxation as a REIT in any taxable year and the
relief provisions do not apply, we will be subject to tax (including any
applicable alternative minimum tax) on our taxable income at regular corporate
rates. Distributions to shareholders in any year in which we fail to qualify
will not be deductible by us, nor will they be required to be made. In such
event, to the extent of our current and accumulated earnings and profits, all
distributions to shareholders will be taxable as ordinary income, and, subject
to certain limitations in the Code, corporate shareholders may be eligible for
the dividends-received deduction. In addition, individual shareholders would be
taxable on such dividends at a current tax rate of 15%. Unless entitled to
relief under specific statutory provisions, we (and any successor of us) will
also be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is not possible to
state whether we would be entitled to such statutory relief.
RECENT TAX LEGISLATION
On May 28, 2003, the President signed into law the Jobs and Growth Tax
Relief Reconciliation Act of 2003, which reduces the maximum tax rate for both
dividends and long-term capital gains to 15% for most non-corporate taxpayers.
Because we generally are not subject to U.S. federal income tax on the portion
of our REIT Taxable Income or capital gains distributed to our shareholders, our
dividends generally are not eligible for the reduced rate and will continue to
be taxed at the higher tax rates applicable to ordinary income. However, the new
15% rate does apply to (i) long-term capital gains, if any, recognized on the
disposition of our shares; (ii) our dividends designated as long-term capital
gain dividends (except to the extent attributable to (a) real estate
depreciation, in which case such distributions continue to be subject to tax at
a 25% rate), and (b) collectibles and certain small business stock, in which
case such distributions continue to be subject to tax at a 28% rate); (iii) our
dividends to the extent attributable to dividends received by us from any non-
REIT corporations, such as taxable REIT subsidiaries, if applicable; and (iv)
our dividends to the extent attributable to income upon which we have paid
corporate income tax (for example, if we distribute taxable income that we
retained and paid tax on in the prior year).
The dividend and capital gains rate reductions provided in the Jobs and
Growth Tax Relief Reconciliation Act of 2003 generally are effective for taxable
years ending on or after May 6, 2003, except that the reductions do not apply to
taxable years beginning after December 31, 2008. Absent future legislation, the
maximum tax rate on long-term capital gains will return to 20% for taxable years
beginning in 2009, and the maximum tax rate on dividends paid to individuals
will increase to 35% in 2009 and 39.6% in 2011.
TAXATION OF SHAREHOLDERS
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS
As used herein, the term "U.S. Shareholder" means a holder of shares who
(for U.S. federal income tax purposes) (i) is a citizen or resident of the
United States, (ii) is a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof (except, in the case of a partnership, the Treasury provides otherwise
by regulations), (iii) is an estate the income of which is subject to U.S.
federal income taxation regardless of its source, or (iv) is a trust whose
administration is subject to the primary supervision of a U.S. court and which
has one or more U.S. persons who have the
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authority to control all substantial decisions of the trust, or has a valid
election in effect under applicable U.S. Treasury regulations to be treated as a
U.S. person.
As long as EPR qualifies as a REIT, distributions made out of our current
or accumulated earnings and profits (and not designated as capital gain
dividends) will generally constitute dividends taxable to our taxable corporate
U.S. Shareholders as ordinary income taxed at a maximum rate of 35% and such
U.S. Shareholders will not be eligible for the dividends received deduction
otherwise available with respect to dividends received by corporate U.S.
Shareholders. It is not likely that a significant amount of our dividends paid
to individual U.S. Shareholders will constitute "qualified dividend income"
eligible for the current reduced tax rate of 15%. Dividends received from a REIT
generally are treated as "qualified dividend income" eligible for the reduced
tax rate to the extent that the REIT has received "qualified dividend income"
from other non-REIT corporations, such as taxable REIT subsidiaries. In
addition, if a REIT pays U.S. federal income tax on its undistributed net
taxable income or on certain gains from the disposition of assets acquired from
C corporations, the excess of the income subject to tax over the taxes paid will
be treated as "qualified dividend income" in the subsequent taxable year.
Distributions made by EPR that are properly designated as capital gain
dividends will be taxable to U.S. Shareholders as gains (to the extent they do
not exceed our actual net capital gain for the taxable year) from the sale or
disposition of a capital asset. Depending on the period of time EPR held the
assets which produced the gains, and on certain designations, if any, which may
be made by EPR, such gains may be taxable to noncorporate U.S. Shareholders at a
15% or 25% rate, without regard to the period for which the U.S. Shareholder has
held the shares. U.S. Shareholders that are corporations may, however, be
required to treat up to 20% of certain capital gain dividends as ordinary
income. To the extent EPR makes distributions (not designated as capital gain
dividends) in excess of our current and accumulated earnings and profits, such
distributions will be treated first as a tax-free return of capital to each U.S.
Shareholder, reducing the adjusted basis which such U.S. Shareholder has in his
shares for tax purposes by the amount of such distribution (but not below zero),
with distributions in excess of a U.S. Shareholder's adjusted basis in his
shares taxable as capital gain, (provided that the shares have been held as a
capital asset) and will be taxable as long-term capital gain if the shares have
been held for more than one year. Dividends declared by EPR in October, November
or December of any year and payable to a shareholder of record on a specified
date in any such month shall be treated as both paid by EPR and received by the
shareholder on December 31st of that year; provided the dividend is actually
paid by EPR on or before January 31st of the following calendar year.
Shareholders may not include in their own income tax returns any net operating
losses or capital losses of EPR.
Distributions made by EPR and gain arising from the sale or exchange by a
U.S. Shareholder of shares will not be treated as passive activity income, and,
as a result, U.S. Shareholders generally will not be able to apply any "passive
losses" against such income or gain. Distributions made by EPR (to the extent
they do not constitute a return of capital) generally will be treated as
investment income for purposes of computing the investment interest limitation.
Gain arising from the sale or other disposition of shares and certain qualifying
dividends (or distributions treated as such), will not be treated as investment
income under certain circumstances.
Upon any sale or other disposition of shares, a U.S. Shareholder will
recognize gain or loss for U.S. federal income tax purposes in an amount equal
to the difference between (i) the amount of cash and the fair market value of
any property received on such sale or other disposition, and (ii) the holder's
adjusted basis in the shares for tax purposes. Such gain or loss will be capital
gain or loss if the shares have been held by the U.S. Shareholder as a capital
asset and, with respect to a non-corporate U.S. Shareholder, will be long-term
gain or loss if the shares have been held for more than one year at the time of
disposition. In general, any loss recognized by a U.S. Shareholder upon the sale
or other disposition of shares that have been held for six months or less (after
applying certain holding period rules) will be treated as a long-term capital
loss, to the extent of capital gain dividends received by such U.S. Shareholder
from EPR which were required to be treated as long-term capital gains.
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BACKUP WITHHOLDING
EPR will report to our domestic shareholders and to the IRS the amount of
dividends paid during each calendar year, and the amount of tax withheld, if any
from those dividends. Under the backup withholding rules, a shareholder may be
subject to backup withholding at the rate equal to the fourth lowest rate of tax
under Section 1(c) of the Code (which is currently 28%) with respect to
dividends paid and redemption proceeds unless the shareholder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or (b) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding rules.
Notwithstanding the foregoing, EPR will institute backup withholding with
respect to a shareholder when instructed to do so by the IRS. A shareholder that
does not provide EPR with his correct taxpayer identification number may also be
subject to penalties imposed by the IRS. Any amount paid as backup withholding
will be creditable against the shareholder's U.S. federal income tax liability.
TAXATION OF TAX-EXEMPT SHAREHOLDERS
The IRS has issued a revenue ruling in which it held that amounts
distributed by a REIT to a tax-exempt employees' pension trust do not constitute
unrelated business taxable income ("UBTI"). Revenue rulings, however, are
interpretive in nature and are subject to revocation or modification by the IRS.
Based upon the ruling and the analysis therein, distributions by EPR to a
shareholder that is a tax-exempt entity should not constitute UBTI, provided the
tax exempt entity has not financed the acquisition of its shares with
"acquisition indebtedness" within the meaning of the Code, and that the shares
are not otherwise used in an unrelated trade or business of the tax-exempt
entity. In addition, REITs generally treat the beneficiaries of qualified
pension trusts as the beneficial owners of REIT shares owned by such pension
trusts for purposes of determining if more than 50% of the REIT's shares are
owned by five or fewer individuals. However, if a pension trust owns more than
10% of the REIT's shares (by value), it can be subject to UBTI on all or a
portion of REIT dividends made to it, if the REIT is treated as a "pension-held
REIT." A pension-held REIT is any REIT if more than 25% (by value) of its shares
are owned by at least one pension trust, or one or more pension trusts, each of
whom owns more than 10% (by value) of such shares, and in the aggregate, such
pension trusts own more than 50% (by value) of its shares. EPR does not expect
to be treated as a "pension-held REIT." However, because our common shares are
publicly traded, no assurance can be given in this regard.
For social clubs, voluntary employee benefit associations, supplemental
unemployment benefit trusts and qualified group legal services plans exempt from
U.S. federal income tax under Section 501(c)(7), (9), (17) and (20) of the Code,
respectively, income from an investment in EPR will constitute UBTI. However,
income from an investment in EPR will not constitute UBTI for voluntary employee
benefit associations, supplemental unemployment trusts and qualified group legal
services plans if the organization is able to deduct amounts "set aside" or
placed in reserve for certain purposes so as to offset the UBTI generated by its
investment in EPR. Such prospective shareholders should consult with their own
tax advisors concerning these "set aside" and reserve requirements.
TAXATION OF NON-U.S. SHAREHOLDERS
The rules governing U.S. federal income taxation of the ownership and
disposition of shares by persons who are not U.S. Shareholders ("Non-U.S.
Shareholders") are complex and no attempt is made in this prospectus to provide
more than a summary of these rules. Prospective Non-U.S. Shareholders should
consult with their own tax advisors to determine the impact of federal, state,
local and any foreign income tax laws with regard to an investment in EPR,
including any reporting requirements.
Distributions that are not attributable to gain from sales or exchanges by
EPR of "United States real property interests" ("USRPIs"), as defined in the
Code, and not designated by EPR as capital gain dividends will be treated as
dividends of ordinary income to the extent they are made out of current or
accumulated earnings and profits of EPR. Unless such distributions are
effectively connected with the Non-U.S. Shareholder's conduct of a U.S. trade or
business (or, if an income tax treaty applies, are
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attributable to a U.S. permanent establishment of the Non-U.S. Shareholder), the
gross amount of the distributions will ordinarily be subject to U.S. withholding
tax at a 30% or lower treaty rate, if applicable. In general, Non-U.S.
Shareholders will not be considered engaged in a U.S. trade or business (or, in
the case of an income tax treaty, as having a U.S. permanent establishment)
solely by reason of their ownership of shares. If income on shares is treated as
effectively connected with the Non-U.S. Shareholder's conduct of a U.S. trade or
business (or, if an income tax treaty applies, is attributable to a U.S.
permanent establishment of the Non-U.S. Shareholder), the Non-U.S. Shareholder
generally will be subject to tax in the same manner as U.S. Shareholders are
taxed with respect to such distributions (and may also be subject to the 30%
branch profits tax in the case of a shareholder that is a foreign corporation).
EPR expects to withhold U.S. income tax at the rate of 30% on the gross amount
of any distributions of ordinary income made to a Non-U.S. Shareholder unless
the Non-U.S. Shareholder provides us with a (i) properly executed IRS Form W-8
BEN claiming an exemption from or reduction in the rate of withholding under the
benefit of a tax treaty, or (ii) IRS Form W-8 ECI claiming that the distribution
is not subject to withholding tax because it is effectively connected with the
Non-U.S. Shareholder's conduct of a U.S. trade or business (or, if an income tax
treaty applies, is attributable to a U.S. permanent establishment of the
Non-U.S. Shareholder).
Unless the shares constitute USRPIs, distributions in excess of current and
accumulated earnings and profits of EPR will not be taxable to a shareholder to
the extent such distributions do not exceed the adjusted basis of the
shareholder's shares but rather will reduce the adjusted basis of the shares. To
the extent such distributions exceed the adjusted basis of a Non-U.S.
Shareholder's shares, such distributions will give rise to tax liability if the
Non-U.S. Shareholder would otherwise be subject to tax on any gain from the sale
or disposition of his shares, as described below. If it cannot be determined at
the time a distribution is made whether or not the distribution will be in
excess of current and accumulated earnings and profits, the distributions will
be subject to withholding at the same rate as dividends. If, however, shares are
treated as USRPIs, then unless otherwise treated as a dividend for withholding
tax purposes as described below, any distributions in excess of current or
accumulated earnings and profits will generally be subject to 10% withholding
and, to the extent such distributions also exceed the adjusted basis of a
Non-U.S. Shareholder's shares, they will also give rise to gain from the sale or
exchange of the shares, the tax treatment of which is described below.
Distributions that are designated by EPR at the time of distribution as
capital gain dividends (other than those arising from the disposition of a
USRPI) generally will not be subject to taxation, unless (i) investment in the
shares is effectively connected with the Non-U.S. Shareholder's U.S. trade or
business (or, if an income tax treaty applies, it is attributable to a U.S.
permanent establishment of the Non-U.S. Shareholder), in which case the Non-U.S.
Shareholder will be subject to the same treatment as U.S. Shareholders with
respect to such gain (except that a Shareholder that is a foreign corporation
may also be subject to the 30% branch profits tax), or (ii) the Non-U.S.
Shareholder is a non-resident alien individual who was present in the U.S. for
183 days or more during the taxable year and either has a "tax home" in the U.S.
or sold his shares under circumstances in which the sale was attributable to a
U.S. office, in which case the non-resident alien individual will be subject to
a 30% tax on the individual's capital gains.
For each year in which EPR qualifies as a REIT, distributions that are
attributable to gain from sales or exchanges by EPR of USRPIs ("USRPI Capital
Gains"), such as properties beneficially owned by EPR, will be taxed to a
Non-U.S. Shareholder under the provisions of the Foreign Investment in Real
Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA, such distributions are taxed
to a Non-U.S. Shareholder as gain effectively connected with a U.S. trade or
business regardless of whether such dividends are designated as capital gain
dividends. Non-U.S. Shareholders would thus be taxed at the normal capital gain
rates applicable to U.S. Shareholders (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals) on such distributions. Also, distributions of USRPI Capital Gains
may be subject to a 30% branch profits tax in the hands of a foreign corporate
shareholder not entitled to treaty exemption or rate reduction. EPR is required
by applicable Treasury Regulations to withhold a portion of any distribution
consisting of USRPI Capital Gains at a current rate of 35%. This amount may be
creditable against the Non-U.S. Shareholder's FIRPTA tax liability.
24
Gain recognized by a Non-U.S. Shareholder upon a sale of shares will
generally not be taxed under FIRPTA if the shares do not constitute a USRPI.
Shares will not be considered a USRPI if EPR is a "domestically controlled
REIT," or if the shares are part of a class that is regularly traded on an
established securities market and the holder owned 5% or less of the class sold
during a specified testing period. A "domestically controlled REIT" is defined
generally as a real estate investment trust in which at all times during a
specified testing period less than 50% in value of the shares was held directly
or indirectly by foreign persons. EPR believes that it is a "domestically
controlled REIT," and therefore the sale of shares will not be subject to
taxation under FIRPTA. If the gain on the sale of shares were to be subject to
taxation under FIRPTA, the Non-U.S. Shareholder would be subject to the same
treatment as U.S. Shareholders with respect to such gain (subject to applicable
alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals), and the purchaser of the shares may be required
to withhold 10% of the purchase price and remit such amount to the IRS. However,
since our common shares and Series A Preferred Shares are publicly traded, no
assurance can be given in this regard.
Gain not subject to FIRPTA will be taxable to a Non-U.S. Shareholder if (i)
investment in the shares is effectively connected with a U.S. trade or business
of the Non-U.S. Shareholder (or, if an income tax treaty applies, is
attributable to a U.S. permanent establishment of the Non-U.S. Shareholder), in
which case the Non-U.S. Shareholder will be subject to the same treatment as
U.S. Shareholders with respect to such gain, or (ii) the Non-U.S. Shareholder is
a nonresident alien individual who was present in the U.S. for 183 days or more
during the taxable year and has a "tax home" in the U.S., in which case the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gains. If the gain on the sale of shares were to be subject to taxation
under FIRPTA, the Non-U.S. Shareholder would be subject to the same treatment as
U.S. Shareholders with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals).
If the proceeds of a disposition of shares are paid by or through a U.S.
office of a broker, the payment is subject to information reporting and backup
withholding unless the disposing Non-U.S. Shareholder certifies as to his name,
address and non-U.S. status or otherwise establishes an exemption. Generally,
U.S. information reporting and backup withholding will not apply to a payment of
disposition proceeds if the payment is made outside the U.S. through a non-U.S.
office of a non-U.S. broker. U.S. information reporting requirements (but not
backup withholding) will apply, however, to a payment of disposition proceeds
outside the U.S. if (i) the payment is made through an office outside the U.S.
of a broker that is either (a) a U.S. person, (b) a foreign person that derives
50% or more of its gross income for certain periods from the conduct of a trade
or business in the U.S., (c) a "controlled foreign corporation" for U.S. federal
income tax purposes, or (d) a foreign partnership more than 50% of the capital
or profits of which is owned by one or more U.S. persons or which engages in a
U.S. trade or business, and (ii) the broker fails to obtain documentary evidence
that the shareholder is a Non-U.S. Shareholder and that certain conditions are
met or that the Non-U.S. Shareholder otherwise is entitled to an exemption.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING TAX CONSEQUENCES
Prospective investors should recognize that the present U.S. federal income
tax treatment of an investment in EPR may be modified by legislative, judicial
or administrative action at any time, and that any such action may affect
investments and commitments previously made. The rules dealing with U.S. federal
income taxation are constantly under review by persons involved in the
legislative process and by the IRS and the U.S. Treasury Department, resulting
in revisions or regulations and revised interpretations of established concepts
as well as statutory changes. Revisions in U.S. federal tax laws and
interpretations thereof could adversely affect the tax consequences of an
investment in EPR.
STATE TAX CONSEQUENCES AND WITHHOLDING
EPR and its shareholders may be subject to state or local taxation in
various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of EPR and its
shareholders may not conform to the U.S. federal income tax consequences
discussed above. Several states in which EPR may own properties treat REITs as
ordinary corporations. EPR does not believe, however, that
25
shareholders will be required to file state tax returns, other than in their
respective states of residence, as a result of the ownership of shares. However,
prospective shareholders should consult their own tax advisors regarding the
effect of state and local tax laws on an investment in EPR.
YOU ARE ADVISED TO CONSULT WITH YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC
TAX CONSEQUENCES TO YOU OF THE OWNERSHIP AND SALE OF SHARES IN AN ENTITY
ELECTING TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL,
STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP,
SALE, AND ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
DESCRIPTION OF COMMON SHARES
This summary of our common shares is not meant to be complete and is
qualified in its entirety by reference to our Amended and Restated Declaration
of Trust and Amended Bylaws, copies of which have been filed with the SEC and
are incorporated by reference herein.
GENERAL
Our Declaration of Trust authorizes us to issue up to 50,000,000 common
shares and up to 5,000,000 preferred shares. As permitted by Maryland law, our
Declaration of Trust permits the Board of Trustees, without shareholder
approval, to amend the Declaration of Trust from time to time to increase or
decrease the aggregate number of shares or the number of shares of any class
that we have authority to issue. Under Maryland law, a shareholder is not
personally liable for the obligations of a REIT solely as a result of his or her
status as a shareholder.
As of February 1, 2004, a total of 19,661,496 common shares (excluding
treasury shares) and 2,300,000 Series A Preferred Shares were outstanding.
The transfer agent and registrar for our shares is UMB Bank, n.a.
COMMON SHARES
Holders of our common shares have the following rights:
- Dividends -- Common shareholders have the right to receive dividends when
and as declared by the Board of Trustees
- Voting Rights -- Common shareholders have the right to vote their shares.
Each common share has one vote on all matters submitted for shareholder
approval, including the election of trustees. We do not have cumulative
voting in the election of trustees, which means the holders of a majority
of our outstanding common shares can elect all of the trustees nominated
for election and the holders of the remaining common shares will not be
able to elect any trustees.
Liquidation Rights -- If we liquidate, holders of common shares are
entitled to receive all remaining assets available for distribution to common
shareholders after satisfaction of our liabilities and the preferential rights
of any preferred shares.
Other Features -- Our outstanding common shares are fully paid and
nonassessable. Common shareholders do not have any preemptive, conversion or
redemption rights.
26
SELLING SHAREHOLDERS
We have registered for resale a total of 747,243 common shares covered by
this prospectus on behalf of the selling shareholders.
Based upon information provided to us by the selling shareholders, the
following table lists the names of the selling shareholders, the number of
common shares owned prior to this offering and the percentage of our outstanding
common shares those shares represented before this offering, the number of
shares registered by this prospectus and the number of common shares that will
be owned by each selling shareholder after the sale of the shares and the
percentage of our outstanding common shares to be owned on completion of this
offering, assuming all of the shares offered hereby are sold. We do not know how
long the selling shareholders will hold the shares before selling them or if
they will sell them, and we currently have no agreements, arrangements or
understandings with the selling shareholders regarding the sale of any of the
shares (other than the Registration Rights Agreement).
SHARES BENEFICIALLY
OWNED AFTER
COMPLETION OF THE
SHARES BENEFICIALLY MAXIMUM OFFERING (ASSUMING
OWNED PRIOR TO THE NUMBER OF ALL SHARES OFFERED
OFFERING SHARES HEREBY ARE SOLD)
-------------------- BEING --------------------
NAME NUMBER PERCENT(1) OFFERED NUMBER PERCENT
---- ------- ---------- --------- -------- ---------
Whitby Centrum Limited
Partnership(2)...................... 167,370 * 167,370 0 0%
Oakville Centrum Limited
Partnership(2)...................... 172,272 * 172,272 0 0%
Kanata Centrum Limited
Partnership(2)...................... 266,796 1.36% 266,796 0 0%
Courtney Square Limited
Partnership(2)...................... 140,805 * 140,805 0 0%
---------------
* Less than one percent.
(1) Based on 19,661,496 common shares outstanding (excluding treasury shares) as
of February 1, 2004.
(2) Except as otherwise set forth below, Mr. David V. Johnston of PenEquity
Management Corporation has the power to direct the disposition of the common
shares held by the beneficial owners listed above.
The limited partnerships listed in the table immediately above (the
"Vendors") are the sellers of the Canada Properties described elsewhere in this
prospectus, and received the shares in connection with such sales. As of the
date of this prospectus, the shares are held of record by a nominee for the
Vendors, 2041197 Ontario Ltd. (the "Nominee Holder").
27
The Vendors have advised us that the limited partnership agreements of one
or more of the Vendors may be modified to permit their respective limited or
general partners (the "Vendor Partners") to direct the Vendors as to the timing
and/or method of sale by or for the Vendors of a number of the common shares
corresponding to their beneficial interest, under the terms of such limited
partnership agreements, in the proceeds of any disposition of the common shares.
In such event, any sales of the common shares so directed by any particular
Vendor Partner would be for the account of such Vendor Partner. Based upon
information provided to us by the Vendors, the following table lists the names
of the Vendor Partners and (assuming that the limited partnership agreements of
the Vendors are so modified to grant such powers to their respective Vendor
Partners and treating such action as if it constituted a distribution of the
common shares to the Vendor Partners) the number of common shares owned by each
Vendor Partner prior to this offering and the percentage of our outstanding
common shares those shares represented before this offering, the number of
common shares registered by this prospectus and the number of common shares that
will be owned by each Vendor Partner after the sale of the shares and the
percentage of our outstanding common shares to be owned on completion of this
offering, assuming all of the common shares offered hereby are sold.
SHARES BENEFICIALLY
OWNED AFTER
COMPLETION OF THE
SHARES BENEFICIALLY MAXIMUM OFFERING (ASSUMING
OWNED PRIOR TO THE NUMBER OF ALL SHARES OFFERED
OFFERING SHARES HEREBY ARE SOLD)
-------------------- BEING --------------------
NAME NUMBER PERCENT(1) OFFERED NUMBER PERCENT
---- ------- ---------- ------------ -------- ---------
Whitby Centrum Limited Partnership:
Boblaic Properties (29) Corp.(2).......... 167,369 * 167,369 0 0%
Penex Whitby Ltd.(2)...................... 1 * 1 0 0%
Oakville Centrum Limited Partnership:
Boblaic Properties (30) Corp.(2).......... 145,694 * 145,694 0 0%
Penex Winston Ltd.(2)..................... 26,578 * 26,578 0 0%
Kanata Centrum Limited Partnership:
Boblaic Properties (17) Corp.(2).......... 100,048 * 100,048 0 0%
1063749 Ontario Ltd.(2)................... 100,048 * 100,048 0 0%
Penex Kanata Ltd.(2)...................... 66,700 * 66,700 0 0%
Courtney Square Limited Partnership:
Boblaic Properties (10) Corp.(2).......... 58,786 * 58,786 0 0%
I.F. Propco (Ont.) Ltd.(2)................ 39,763 * 39,763 0 0%
U.A. Local 527(1) Corporation(2).......... 11,405 * 11,405 0 0%
792523 Ontario Limited(2)................. 7,435 * 7,435 0 0%
U.A. Local 628(1) Corporation(2).......... 6,322 * 6,322 0 0%
I.B.E.W. 804(1) Corporation(2)............ 3,717 * 3,717 0 0%
U.A. 463 (P) Corporation(2)............... 3,717 * 3,717 0 0%
U.A. 463 (H&W) Corporation(2)............. 3,717 * 3,717 0 0%
U.A. 463 (Union) Corporation(2)........... 3,717 * 3,717 0 0%
PenEquity Management Corporation(2)....... 2,225 * 2,225 0 0%
Courtney Square Ltd.(2)................... 1 * 1 0 0%
---------------
* Less than one percent.
(1) Based on 19,661,496 common shares outstanding (excluding treasury shares) as
of February 1, 2004.
(2) All of the Vendor Partners (other than Penex Whitby Ltd., Penex Winston
Ltd., Penex Kanata Ltd., PenEquity Management Corporation and Courtney
Square Ltd.) are wholly-owned subsidiaries of pension funds, and the power
to direct the disposition of the common shares listed in the table above for
such Vendor Partners ultimately would reside in the respective boards of
trustees (or analogous governing bodies) of such pension funds. Penex Whitby
Ltd., Penex Winston Ltd., Penex Kanata Ltd. and Courtney Square Ltd. are
each controlled by PenEquity Management Corporation, and David V.
28
Johnston would have the power to direct the disposition of the common shares
listed in this table above for Penex Whitby Ltd., Penex Winston Ltd., Penex
Kanata Ltd., Courtney Square Ltd. or PenEquity Management Corporation.
References herein to the "selling shareholders" shall include, as
appropriate to the context (and in addition to the Vendors), the Nominee Holder
and the Vendor Partners. References herein to the "selling shareholders" also
includes pledgees, donees, transferees or other successors in interest selling
shares that they acquired after the date of this prospectus from any other
selling shareholder as a pledge, gift or other non-sale related transfer.
PLAN OF DISTRIBUTION
The shares have been registered to permit the resale of such shares by the
selling shareholders from time to time after the date of this prospectus. We
will not receive any of the proceeds from the sale of shares by the selling
shareholders. We will bear the fees and expenses incurred in connection with our
obligation to register the shares. These fees and expenses include registration
and filing fees, printing expenses and fees and disbursements of our counsel and
independent accountants. The selling shareholders will be solely responsible for
all fees and expenses of any counsel retained by them and all underwriting
discounts and commissions and agents' commissions, if any.
One or more of the selling shareholders may, from time to time, sell all or
part of the shares, on terms determined at the time such shares are offered for
sale, to or through underwriters, directly to other purchasers or
broker-dealers, or through broker-dealers or other persons acting as agents, or
through a combination of such methods. The distribution of the shares may be
effected from time to time in one or more transactions at a fixed price or
prices (which may be changed), at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices. To
the extent required, the specific number of common shares to be sold, the names
of the selling shareholders, purchase price, public offering price, the terms
upon which such securities may be issued, the names of any participating
broker-dealer, agent or underwriter, any applicable commission or discount, and
other facts material to the transaction, with respect to a particular offering
will be set forth in an accompanying prospectus supplement.
Any underwritten offering may be on a "best efforts" or a "firm commitment"
basis. Underwriters may receive compensation from one or more of the selling
shareholders or from the purchasers of shares for whom they act as agents, in
the form of discounts, concessions or commissions. Underwriters may sell shares
to or through agents or dealers, and such agents and dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters or commissions from the purchaser for whom they may act as agents.
In connection with any sale by the selling shareholders to or through
broker-dealers or other persons acting as agents, any such broker-dealer or
other agent may act as agent for one or more of the selling shareholders or may
purchase from one or more of the selling shareholders all or a portion of the
shares as principal. Any direct sale to purchasers, and any sale to or through
broker-dealers or other agents, may be effected by a variety of methods,
including:
- block transactions in which a broker-dealer may sell all or a portion of
such shares as agent but may position and resell all or a portion of the
block as principal to facilitate the transaction
- purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account
- a special offering, an exchange distribution or a secondary distribution
in accordance with applicable NYSE or other stock exchange rules
- ordinary brokerage transactions or transactions in which a broker-dealer
solicits purchasers
- sales "at the market" to or through a market maker or into an existing
trading market, on an exchange or otherwise
29
- sales in other ways not involving market makers or established trading
markets, including direct sales to purchasers
- in any combination of the above or by any other legally available means.
Such sales may be made on the NYSE or other exchanges on which the shares
are then traded, in the over-the-counter market, in negotiated transactions,
through put or call options transactions relating to the shares, through short
sales of shares, or otherwise. In effecting sales, broker-dealers engaged by one
or more of the selling shareholders may arrange for other broker-dealers to
participate.
Brokers or dealers, or other agents, may receive compensation in the form
of discounts, concessions or commissions from the selling shareholders and/or
the purchasers of shares for whom such broker-dealers or other agents may act as
agents or to whom they sell as principal, or both (which compensation as to a
particular broker-dealer or other agent might be in excess of customary
commissions), in amounts that may be negotiated immediately prior to any sale.
In connection with the sales of shares, the selling shareholders may enter
into hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares, short and deliver the shares to close out such short
positions, or loan or pledge the shares to broker-dealers that in turn may sell
the shares.
If a material arrangement with any underwriter, broker, dealer or other
agent is entered into for the sale of any shares through a secondary
distribution or a purchase by a broker or dealer, or if other material changes
are made in the plan of distribution of the shares, a prospectus supplement will
be filed, if necessary, under the Securities Act disclosing the material terms
and conditions of such arrangement.
If so indicated in any applicable prospectus supplement, broker-dealers or
other persons acting as agents may be authorized to solicit offers by certain
institutions to purchase shares pursuant to contracts providing for payment and
delivery on a future date. Such contracts may be made with commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions, and other institutions, but in all
cases such institutions must be approved by the selling shareholders. The
obligations of any purchaser under any such contract will not be subject to any
conditions except that (i) the purchase of the shares shall not at any time of
delivery be prohibited under the laws of the jurisdiction to which such
purchaser is subject and (ii) if the shares are also being sold to underwriters,
the selling shareholders shall have sold to such underwriters the shares not
sold for delayed delivery. The underwriters, dealers, broker-dealers and other
persons acting as agents will not have any responsibility in respect of the
validity or performance of such contract.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling shareholders and any underwriter,
broker-dealer or agent regarding the sale of the shares by the selling
shareholders. Selling shareholders may decide to sell only a portion of the
shares offered by them pursuant to this prospectus or may decide not to sell any
shares offered by them pursuant to this prospectus. In addition, any selling
shareholders may transfer, devise or give the shares by other means not
described in this prospectus. Any shares covered by this prospectus that qualify
for sale pursuant to Rule 144 or Rule 144A under the Securities Act may be sold
under Rule 144 or Rule 144A rather than pursuant to this prospectus.
The selling shareholders may from time to time pledge or grant a security
interest in some or all of the shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares from time to time under this prospectus, or under an
amendment to this prospectus under Rule 424(b)(3) or other applicable rule
amending the list of selling shareholders to include the pledgee, transferee or
other successor in interest as a selling shareholder under this prospectus.
The Vendors have covenanted to us that the amount of any public sale (other
than, and disregarding entirely, any Excluded Sale) of shares by them prior to
February 24, 2005, together will all other public sales (other than, and
disregarding entirely, any Excluded Sales) of the shares by them within the
preceding three months, shall not exceed the greater of (i) one percent of our
common shares then outstanding as shown by the most recent report filed by us
under the Exchange Act, (ii) the average weekly reported volume of trading in
our common shares on all "national securities exchanges" and/or reported through
the automated quotation
30
system of a "registered securities association" (the quoted terms to have the
same meanings as under Rule 144 under the Securities Act) during the four
calendar weeks prior to such current public sale or (iii) the average weekly
volume of trading in the common shares reported through the "consolidated
transaction reporting system" (such quoted term to have the same meaning as
under Rule 144 under the Securities Act) during the four-week period specified
in clause (ii). "Excluded Sale" means (x) any negotiated sale of the shares in
which the purchaser expressly agrees, in a written instrument expressly for our
benefit, to abide by the limitations described in this paragraph with respect to
the shares sold in such negotiated sale, or (y) any sale of any of the shares in
any tender, exchange or similar offer.
The selling shareholders and any underwriters, broker-dealers or agents
participating in the distribution of the shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit on the
sale of shares by the selling shareholders and any commissions or other
compensation received by any such underwriters, broker-dealers or agents may be
deemed to be underwriting commissions under the Securities Act. If any selling
shareholder were deemed to be an underwriter, that selling shareholder may be
subject to statutory liabilities, including, but not limited to, those under
Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange
Act.
We have agreed to indemnify the selling shareholders (and certain related
persons) against specified liabilities, including certain potential liabilities
arising under the Securities Act, or to contribute to the payments the selling
shareholders may be required to make in respect thereof. We also have agreed, if
so requested, to provide analogous indemnification and contribution undertakings
with respect to any underwriter, broker, dealer or other agent that participates
in any distribution of the shares. The selling shareholders also may agree to
analogous indemnification and contribution undertakings with respect to any such
underwriter, broker, dealer or other agent. Each Vendor, and the Nominee Holder,
has severally agreed to indemnify us and our trustees, officers and employees
and each person who "controls" us (within the meaning of the Securities Act)
against specified liabilities relating to the written information provided by it
or on its behalf for use in the registration statement of which this prospectus
forms a part, this prospectus or any related prospectuses, supplements or
amendments, or to contribute to the payments we, our trustees, officers,
employees or control persons may be required to make in respect thereof. The
liability of any Vendor or Nominee Holder for indemnification or contribution is
limited to the amount of proceeds (net of expenses and underwriting discounts
and commissions) received by such Vendor or Nominee Holder in the offering
giving rise to such liability.
Compliance with any applicable prospectus delivery requirements of the
Securities Act may include delivery through the facilities of the NYSE pursuant
to Rule 153 under the Securities Act.
The Vendors ultimately are controlled by the same entity, PenEquity
Management Corporation. The Vendors may act independently or in concert in
making decisions with respect to the timing, manner and size of each sale of
shares. As mentioned under "Selling Shareholders" above, the Vendors have
advised us that the limited partnership agreements of one or more of the Vendors
may be modified to permit their respective limited or general partners to direct
the Vendors as to the timing and/or method of sale by or for the Vendors of a
number of the common shares corresponding to their beneficial interest in the
common shares through their respective partnership interests.
The selling shareholders and any other person participating in the
distribution will be subject to the applicable provisions of the Exchange Act
and the rules and regulations under the Exchange Act, including, without
limitation, Regulation M, which may limit the timing of purchases and sales of
any of the shares by a selling shareholder and any other relevant person.
Furthermore, Regulation M may restrict the ability of any person engaged in the
distribution of the shares to engage in market-making activities with respect to
the shares. All of the above may affect the marketability of the shares and the
ability of any person or entity to engage in market-making activities with
respect to the shares.
Under the securities laws of certain states, the shares may be sold in
those states only through registered or licensed brokers or dealers. In
addition, in certain states the shares may not be sold unless the shares have
been registered or qualified for sale in the state or an exemption from
registration or qualification is available
31
and complied with. Each selling shareholder should consult its counsel regarding
the application of state or provincial securities law in connection with sales
of the shares.
LEGAL OPINIONS
Sonnenschein Nath & Rosenthal LLP will issue an opinion about the validity
of the shares and has set forth its opinion regarding EPR's qualification and
taxation as a REIT under the Code under "U.S. Federal Income Tax Consequences."
In addition, the description of EPR's taxation and qualification as a REIT under
the caption "U.S. Federal Income Tax Consequences" is based upon the opinion of
Sonnenschein Nath & Rosenthal LLP set forth therein.
EXPERTS
The consolidated financial statements and schedules of Entertainment
Properties Trust as of and for the years ended December 31, 2003 and 2002 have
been incorporated by reference in this prospectus and in the registration
statement in reliance upon the report of KPMG LLP, independent accountants,
incorporated by reference herein and upon the authority of that firm as experts
in accounting and auditing.
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements for the year ended December 31, 2001 included in our Annual
Report on Form 10-K, as amended, for the year ended December 31, 2003, as set
forth in their report, which is incorporated by reference in this prospectus and
elsewhere in the registration statement. Our financial statements for the year
ended December 31, 2001 are incorporated by reference in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.
The audited historical statement of revenues and certain operating expenses
of New Roc Associates, L.P. for the year ended December 31, 2002 have been
incorporated by reference in this prospectus and in the registration statement
in reliance upon the report of BDO Seidman, LLP, independent accountants,
incorporated by reference herein and upon the authority of that firm as experts
in accounting and auditing.
The audited historical statements of revenues and certain operating
expenses of Courtney Square Limited Partnership, Oakville Centrum Limited
Partnership, Whitby Centrum Limited Partnership and Kanata Centrum Limited
Partnership for the year ended December 31, 2003 have been incorporated by
reference in this prospectus and in the registration statement in reliance upon
the report of BDO Dunwoody LLP, independent accountants, incorporated by
reference herein and upon the authority of that firm as experts in accounting
and auditing.
32
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with this offering are set forth in
the following table:
SEC Registration Fee........................................ $ 3,283
Accounting Fees and Expenses................................ 60,000
Legal Fees and Expenses..................................... 100,000
Printing Expenses........................................... 30,000
Miscellaneous............................................... 50,217
Total....................................................... $243,500
ITEM 15. INDEMNIFICATION OF TRUSTEES AND OFFICERS
Maryland law permits a Maryland real estate investment trust to include in
its declaration of trust a provision limiting the liability of its officers and
trustees to the trust and its shareholders for money damages except for
liability resulting from: (a) actual receipt of an improper benefit or profit in
money, property or services; or (b) active and deliberate dishonesty established
by a final judgment as being material to the cause of action. EPR's Declaration
of Trust contains such a provision which eliminates such liability to the
maximum extent permitted by Maryland law.
EPR's officers and trustees are and will be indemnified under EPR's
Declaration of Trust against certain liabilities. EPR's Declaration of Trust
provides that EPR will, to the maximum extent permitted by Maryland law in
effect from time to time, indemnify: (a) any individual who is a present or
former trustee or officer of EPR; or (b) any individual who, while a trustee or
officer of EPR and at the request of EPR, serves or has served as a director,
officer, shareholder, partner, trustee, employee or agent of any real estate
investment trust, corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprises against any claim or liability, together
with reasonable expenses actually incurred in advance of a final disposition of
a legal proceeding, to which such person may become subject or which such person
may incur by reason of his or her status as such. EPR has the power, with the
approval of EPR's Board of Trustees, to provide such indemnification and
advancement of expenses to a person who served a predecessor of EPR in any of
the capacities described in (a) or (b) above and to any employee or agent of EPR
or its predecessors.
Maryland law permits a Maryland real estate investment trust to indemnify
and advance expenses to its trustees, officers, employees and agents to the same
extent as permitted by the Maryland General Corporation Law ("MGCL") for
directors, officers, employees and agents of a Maryland corporation. The MGCL
requires a corporation (unless its charter provides otherwise, which EPR's
Declaration of Trust does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he or she is made a party by reason of his or her service in that
capacity. The MGCL permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service in
those or other capacities unless it is established that: (a) the act or omission
of the director or officer was material to the matter giving rise to the
proceeding and (i) was committed in bad faith or (ii) was the result of active
and deliberate dishonesty; (b) the director or officer actually received an
improper personal benefit in money, property or services; or (c) in the case of
any criminal proceeding, the director or officer had reasonable cause to believe
that the act or omission was unlawful. However, under the MGCL, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the MGCL permits a
corporation to advance reasonable expenses to a director or officer upon the
corporation's receipt of a written affirmation by the director or officer of his
or her good faith belief that he or she has met the standard of conduct
necessary for indemnification by the corporation and a written
II-1
undertaking by him or her to repay the amount paid or reimbursed by the
corporation if it shall ultimately be determined that the standard of conduct
was not met.
EPR has entered into indemnity agreements with certain of its officers and
trustees which provide for reimbursement of all expenses and liabilities of such
persons arising out of any lawsuit or claim against them arising from their
service in that capacity, except for liabilities and expenses: (a) the payment
of which is judicially determined to be unlawful; (b) relating to claims under
Section 16(b) of the Exchange Act; or (c) relating to judicially determined
criminal violations.
EPR has obtained trustee's and officers' liability insurance for the
purpose of funding any such indemnification.
Under the Registration Rights Agreement, with respect to any written
information furnished to EPR by or on behalf of a Holder (each of the Vendors
and the Nominee Holder is a "Holder"), specifically for use in this registration
statement, any related preliminary prospectus, or any related prospectus or any
supplement or amendment thereto, such Holder has agreed to severally indemnify
and hold harmless EPR and its trustees, officers and each person, if any, who
controls EPR (within the meaning of the Securities Act) against any losses,
claims, damages or liabilities (including legal or other expenses reasonably
incurred by them), joint or several, or actions in respect thereof, to which EPR
or such other person entitled to indemnification thereunder may become subject,
arising out of or based upon any untrue statement or alleged untrue statement of
any material fact contained in such documents, or arising out of or based upon
the omission or alleged omission to state a material fact required to be stated
in such documents or necessary to make the statements not misleading. This
indemnity applies to the extent that the losses, claims, damages, liabilities or
actions arise out of, or are based upon, an untrue statement of, or omission to
state, a material fact in such documents in reliance upon and in conformity with
such written information. The liability of any Holder is limited to the amount
of proceeds (net of expenses and underwriting discounts and commissions)
received by such Holder in the offering giving rise to such liability.
ITEM 16. EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 Amended and Restated Declaration of Trust of the Company,
which is attached as Exhibit 3.2 to the Company's Current
Report on Form 8-K (Commission File No. 1-13561) filed on
June 7, 1999, is hereby incorporated by reference as Exhibit
3.1
3.2 Bylaws of the Company, which are attached as Exhibit 3.3 to
the Company's Current Report on Form 8-K (Commission File
No. 1-13561) filed on June 7, 1999, is hereby incorporated
by reference as Exhibit 3.2
4.1 See Exhibit 3.1
4.2 See Exhibit 3.2
4.3 Form of share certificate for common shares of beneficial
interest of the Company, which is attached as Exhibit 4.5 to
the Company's Registration Statement on Form S-11, as
amended, (Registration No. 333-35281), is hereby
incorporated by reference as Exhibit 4.3
4.4 Registration Rights Agreement between Entertainment
Properties Trust, Whitby Centrum Limited Partnership,
Oakville Centrum Limited Partnership, Kanata Centrum Limited
Partnership, Courtney Square Limited Partnership and 2041197
Ontario Ltd., dated February 24, 2004, which is attached as
Exhibit 10.10 to the Form 8-K/A (Commission File No.
1-13561) filed on March 16, 2004, is hereby incorporated by
reference as Exhibit 4.4
5.1 Opinion of Sonnenschein Nath & Rosenthal LLP
8.1 Tax Opinion of Sonnenschein Nath & Rosenthal LLP (set forth
in the prospectus forming part of this registration
statement)
10.1 Mississauga Entertainment Centrum Agreement dated November
14, 2003 among Courtney Square Ltd., EPR North Trust and
Entertainment Properties Trust, which is attached as Exhibit
10.1 to the Form 8-K (Commission File No. 1-13561) filed
March 15, 2004, is hereby incorporated by reference as
Exhibit 10.1
II-2
EXHIBIT NO. DESCRIPTION
----------- -----------
10.2 Oakville Entertainment Centrum Agreement dated November 14,
2003 among Penex Winston Ltd., EPR North Trust and
Entertainment Properties Trust, which is attached as Exhibit
10.2 to the Form 8-K (Commission File No. 1-13561) filed
March 15, 2004, is hereby incorporated by reference as
Exhibit 10.2
10.3 Whitby Entertainment Centrum Agreement dated November 14,
2003 among Penex Whitby Ltd., EPR North Trust and
Entertainment Properties Trust, which is attached as Exhibit
10.3 to the Form 8-K (Commission File No. 1-13561) filed
March 15, 2004, is hereby incorporated by reference as
Exhibit 10.3
10.4 Kanata Walk Centrum Agreement dated November 14, 2003 among
Penex Kanata Ltd., Penex Main Ltd., EPR North Trust and
Entertainment Properties Trust, which is attached as Exhibit
10.4 to the Form 8-K (Commission File No. 1-13561) filed
March 15, 2004, is hereby incorporated by reference as
Exhibit 10.4
10.5 Amending Agreements among Courtney Square Ltd., EPR North
Trust and Entertainment Properties Trust, which is attached
as Exhibit 10.5 to the Form 8-K (Commission File No.
1-13561) filed March 15, 2004, is hereby incorporated by
reference as Exhibit 10.5
10.6 Amending Agreements among Penex Winston Ltd., EPR North
Trust and Entertainment Properties Trust, which is attached
as Exhibit 10.6 to the Form 8-K (Commission File No.
1-13561) filed March 15, 2004, is hereby incorporated by
reference as Exhibit 10.6
10.7 Amending Agreements among Penex Whitby Ltd., EPR North Trust
and Entertainment Properties Trust, which is attached as
Exhibit 10.7 to the Form 8-K (Commission File No. 1-13561)
filed March 15, 2004, is hereby incorporated by reference as
Exhibit 10.7
10.8 Amending Agreements among Penex Kanata Ltd., Penex Main
Ltd., EPR North Trust and Entertainment Properties Trust,
which is attached as Exhibit 10.8 to the Form 8-K
(Commission File No. 1-13561) filed March 15, 2004, is
hereby incorporated by reference as Exhibit 10.8
10.9 Note Purchase Agreement dated February 24, 2004 between
Entertainment Properties Trust and Courtney Square Limited
Partnership, Whitby Centrum Limited Partnership, Oakville
Centrum Limited Partnership and Kanata Centrum Limited
Partnership, which is attached as Exhibit 10.9 to the Form
8-K (Commission File No. 1-13561) filed March 15, 2004, is
hereby incorporated by reference as Exhibit 10.9
10.10 Registration Rights Agreement between Entertainment
Properties Trust, Whitby Centrum Limited Partnership,
Oakville Centrum Limited Partnership, Kanata Centrum Limited
Partnership, Courtney Square Limited Partnership and 2041197
Ontario Ltd., dated February 24, 2004 (see Exhibit 4.4)
10.11 Form of Agreement of Sale and Purchase between the Company
and American Multi-Cinema, Inc., which is attached as
Exhibit 10.1 to Amendment No. 3, filed on November 13, 1997,
to the Company's Registration Statement on Form S-11
(Registration No. 333-35281), is hereby incorporated by
reference as Exhibit 10.11
10.12 Form of Option Agreement between the Company and American
Multi-Cinema, Inc., which is attached as Exhibit 10.2 to
Amendment No. 3, filed on November 13, 1997, to the
Company's Registration Statement on Form S-11 (Registration
No. 333-35281), is hereby incorporated by reference as
Exhibit 10.12
10.13 Form of Option Agreement between the Company and Clip
Funding, Limited Partnership, which is attached as Exhibit
10.3 to Amendment No. 3, filed on November 13, 1997, to the
Company's Registration Statement on Form S-11 (Registration
No. 333-35281), is hereby incorporated by reference as
Exhibit 10.13
10.14 Form of AMCE Right to Purchase Agreement between the Company
and AMC Entertainment Inc., which is attached as Exhibit
10.4 to Amendment No. 3, filed on November 13, 1997, to the
Company's Registration Statement on Form S-11 (Registration
No. 333-35281), is hereby incorporated by reference as
Exhibit 10.14
10.15 Form of Lease entered into between the Company and American
Multi-Cinema, Inc., which is attached as Exhibit 10.5 to
Amendment No. 3, filed on November 13, 1997, to the
Company's Registration Statement on Form S-11 (Registration
No. 333-35281), is hereby incorporated by reference as
Exhibit 10.15
II-3
EXHIBIT NO. DESCRIPTION
----------- -----------
10.16 Form of Guaranty of Lease entered into between the Company
and AMC Entertainment, Inc., which is attached as Exhibit
10.6 to Amendment No. 3, filed on November 13, 1997, to the
Company's Registration Statement on Form S-11 (Registration
No. 333-35281), is hereby incorporated by reference as
Exhibit 10.16
10.17 Amended and Restated Master Credit Agreement, dated March
29, 2004, among the Company, 30 West Pershing, LLC and Fleet
National Bank, which is attached as Exhibit 10.1 to the
Company's Form 8-K (Commission File No. 1-13561) dated March
29, 2004 and filed on April 5, 2004, is hereby incorporated
by reference as Exhibit 10.17
10.18 Loan Agreement, dated March 30, 2004, among the Company, 30
West Pershing, LLC, RBC Capital Markets, Royal Bank of
Canada and JP Morgan Chase Bank, which is attached as
Exhibit 10.2 to the Company's Form 8-K (Commission File No.
1-13561) dated March 29, 2004 and filed on April 5, 2004, is
hereby incorporated by reference as Exhibit 10.18
10.19 Form of Indemnification Agreement entered into between the
Company and each of its trustees and officers, which is
attached as Exhibit 10.8 to Amendment No. 1, filed October
28, 1997, to the Company's Registration Statement on Form
S-11 (Registration No. 333-35281), is hereby incorporated by
reference as Exhibit 10.19
10.20 1997 Share Incentive Plan, which is attached as Exhibit 10.9
to Amendment No. 2, filed November 5, 1997, to the Company's
Registration Statement on Form S-11 (Registration No.
333-35281), is hereby incorporated by reference as Exhibit
10.20
10.21 Deferred Compensation Plan for Non-Employee Trustees, which
is attached as Exhibit 10.10 to Amendment No. 2, filed
November 5, 1997, to the Company's Registration Statement on
Form S-11 (Registration No. 333-35281), is hereby
incorporated by reference as Exhibit 10.21
10.22 Annual Incentive Program, which is attached as Exhibit 10.11
to Amendment No. 2, filed November 5, 1997, to the Company's
Registration Statement on Form S-11 (Registration No.
333-35281), is hereby incorporated by reference as Exhibit
10.22
10.23 Employment Agreement with David M. Brain, which is attached
as Exhibit 10.12 to Amendment No. 1, filed May 20, 2002, to
the Company's Registration Statement on Form S-3
(Registration No. 333-87242), is hereby incorporated by
reference as Exhibit 10.23
10.24 Employment Agreement, which is attached as Exhibit 10.24 to
the Company's Form 10-K/A for the year ended December 31,
2003 (Commission File No. 1-13561) filed on April 15, 2004,
is hereby incorporated by reference as Exhibit 10.24
10.25 Employment Agreement with Gregory K. Silvers, which is
attached as Exhibit 10.25 to the Company's Form 10-K/A for
the year ended December 31, 2003 (Commission File No.
1-13561) filed on April 15, 2004, is hereby incorporated by
reference as Exhibit 10.25
10.26 Loan Agreement, dated as of June 29, 1998, between EPT
DownREIT II, Inc., as Borrower, and Archon Financial, L.P.,
as Lender, which is attached as Exhibit 10.15 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998 (Commission File No. 1-13561), is hereby
incorporated by reference as Exhibit 10.26
10.27 Mortgage and Security Agreement, Deed of Trust and Security
Agreement and Loan Agreement for secured loans aggregating
$20.2 million to 3 Theatres, Inc., a wholly-owned subsidiary
of EPT DownREIT, Inc., which is attached as Exhibit 10.16 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000 (Commission File No. 1-13561), is
hereby incorporated by reference as Exhibit 10.27
10.28 Mezzanine Loan Agreement, dated February 14, 2001, between
Megaplex Holdings, Inc. and iStar Funding, LLC, which is
attached as Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the year ended December 31, 2000 (Commission
File No. 1-13561), is hereby incorporated by reference as
Exhibit 10.28
10.29 Loan Agreement, dated February 14, 2001, between Megaplex
Nine, Inc. and Bear Stearns Funding, Inc., which is attached
as Exhibit 10.19 to the Company's Annual Report on Form 10-K
for the year ended December 31, 2000 (Commission File No.
1-13561), is hereby incorporated by reference as Exhibit
10.29
II-4
EXHIBIT NO. DESCRIPTION
----------- -----------
10.30 Amended and Restated Credit Agreement, dated May 18, 2001,
between the Company, the subsidiary guarantors party thereto
and iStar Financial Inc., which is attached as Exhibit 10.20
to the Company's Form 10-Q for the quarter ended June 30,
2001 (Commission File No. 1-13561), is hereby incorporated
by reference as Exhibit 10.30
10.31 Second Amended and Restated Credit Agreement, dated as of
October 31, 2001, between the Company and SFT II, Inc.,
which is attached as Exhibit 10.21 to the Company's Annual
Report on Form 10-K for the year ended December 31, 2001
(Commission File No. 1-13561), is hereby incorporated by
reference as Exhibit 10.31
10.32 Limited Partnership Interest Purchase Agreement, dated
October 27, 2003, among EPT New Roc GP, Inc., EPT New Roc,
LLC, LRC Industries, Inc., DKH -- New Roc Associates, L.P.,
LC New Roc Inc. and New Roc Associates, L.P., which is
attached as Exhibit 10.1 to the Form 8-K dated October 27,
2003 and filed November 12, 2003 (Commission File No.
1-13561), is hereby incorporated by reference as Exhibit
10.32
10.33 Second Amended and Restated Agreement of Limited Partnership
of New Roc Associates, L.P., which is attached as Exhibit
10.2 to the Form 8-K dated October 27, 2003 and filed
November 12, 2003 (Commission File No. 1-13561), is hereby
incorporated by reference as Exhibit 10.33
10.34 Loan Agreement, dated February 27, 2003, among Flik, Inc.,
as Borrower, EPT DownREIT, Inc., as Indemnitor, and Secore
Financial Corporation, as Lender, which is attached as
Exhibit 10.21 to the Form 8-K dated February 27, 2003 and
filed March 4, 2003 (Commission File No. 1-13561), is hereby
incorporated by reference as Exhibit 10.34
21 Subsidiaries of the Company is attached hereto as Exhibit
21.
23.1 Consent of KPMG LLP is attached hereto as Exhibit 23.1
23.2 Consent of Ernst & Young LLP is attached hereto as Exhibit
23.2
23.3 Consent of BDO Seidman, LLP is attached hereto as Exhibit
23.3
23.4 Consent of BDO Dunwoody LLP is attached hereto as Exhibit
23.4
ITEM 17. UNDERTAKINGS
EPR undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in the periodic reports filed by EPR
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in this registration
statement.
(2) That, for the purpose of determining any liability under the Act
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-5
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) For purposes of determining any liability under the Act, each
filing of EPR's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(5) For purposes of determining any liability under the Act, any
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(6) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement related to the securities offered
therein, and the offering of such securities at that time shall be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to trustees, officers and controlling persons of EPR pursuant to the
provisions described under Item 15 -- Indemnification of Trustees and Officers
above, or otherwise, EPR has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event a claim for
indemnification against such liabilities (other than payment by EPR of expenses
incurred or paid by a trustee, officer or controlling person in the successful
defense of any action, suit or proceeding) is asserted by such trustee, officer
or controlling person in connection with the securities being registered, EPR
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3/S-11 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Kansas City, Missouri on April 21, 2004.
ENTERTAINMENT PROPERTIES TRUST
By: /s/ DAVID M. BRAIN
------------------------------------
David M. Brain
President and Chief Executive
Officer
SIGNATURES
Know all people by these presents, that each person whose signature appears
below constitutes and appoints David M. Brain and Fred L. Kennon, and each of
them (with full power to each of them to act alone) his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this registration statement, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as either of them might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, or either
of them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ROBERT J. DRUTEN Chairman April 21, 2004
------------------------------------------------
Robert J. Druten
/s/ DAVID M. BRAIN President, Chief Executive Officer April 21, 2004
------------------------------------------------ and Trustee
David M. Brain
/s/ JAMES A. OLSON Trustee April 21, 2004
------------------------------------------------
James A. Olson
/s/ SCOTT H. WARD Trustee April 21, 2004
------------------------------------------------
Scott H. Ward
/s/ MORGAN G. EARNEST II Trustee April 21, 2004
------------------------------------------------
Morgan G. Earnest II
/s/ FRED L. KENNON Vice President, Treasurer April 21, 2004
------------------------------------------------ and Chief Financial Officer
Fred L. Kennon
II-7
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
5.1 Opinion of Sonnenschein Nath & Rosenthal LLP
21 Subsidiaries of the Company
23.1 Consent of KPMG LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of BDO Seidman, LLP
23.4 Consent of BDO Dunwoody LLP