PROSPECTUS SUPPLEMENT
JUNE 13, 2002
(TO PROSPECTUS DATED MAY 20, 2002)
$100,000,000
Chelsea logo
CPG PARTNERS, L.P.
6.875% Notes due June 15, 2012
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CPG Partners, L.P. (the operating partnership through which Chelsea Property
Group, Inc. conducts its operations) will pay interest on the notes on June 15
and December 15 of each year. The first interest payment will be made on
December 15, 2002. The notes will be issued only in denominations of $1,000 and
integral multiples of $1,000.
We have the option to redeem all or a portion of the notes at any time at a
price based on the present value on the redemption date, using a discount rate
based on a U.S. Treasury security having a remaining life to maturity comparable
to the notes, of the then remaining scheduled payments of principal and interest
on the notes to be redeemed, plus 25 basis points, plus accrued interest. The
redemption price will in no event be less than 100% of the principal amount of
the notes to be redeemed.
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INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 5 OF THE ACCOMPANYING PROSPECTUS.
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus supplement. Any representation to the contrary is a
criminal offense.
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PER NOTE TOTAL
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Public offering price (1)................................... 99.815% $99,815,000
Underwriting discount....................................... 0.650% $ 650,000
Proceeds to Chelsea (before expenses)....................... 99.165% $99,165,000
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(1) Plus accrued interest, if settlement occurs after June 18, 2002.
The notes are expected to be ready for delivery in book-entry only form
through The Depository Trust Company, on or about June 18, 2002.
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SOLE BOOK-RUNNING MANAGER
Banc of America Securities LLC
Merrill Lynch & Co.
Commerzbank Securities Wachovia Securities
TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
Forward-Looking Statements.................................. S-2
Summary..................................................... S-3
The Company and the Partnership............................. S-4
Use of Proceeds............................................. S-4
Capitalization.............................................. S-5
Selected Consolidated Financial Data........................ S-6
Description of the Notes.................................... S-9
Certain United States Federal Income Tax Considerations..... S-15
Underwriting................................................ S-18
Legal Matters............................................... S-19
PROSPECTUS
About this Prospectus....................................... 2
Incorporation of Certain Documents by Reference............. 2
The Company and the Operating Partnership................... 4
Risk Factors................................................ 5
Use of Proceeds............................................. 9
Ratios of Earnings to Fixed Charges and Earnings to Combined
Fixed
Charges and Preferred Stock Dividends..................... 10
Description of Debt Securities.............................. 11
Description of Preferred Stock.............................. 24
Description of Depositary Shares............................ 30
Description of Common Stock................................. 34
Plan of Distribution........................................ 35
Legal Matters............................................... 35
Experts..................................................... 35
Where You Can Find More Information......................... 36
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You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not, and the underwriters have not, authorized any other person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference is accurate only as of
their respective dates. Our business, financial condition, results of operations
and prospects may have changed since those dates.
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus (and the
documents that are incorporated by reference) contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 that are subject to risks and uncertainties. You are cautioned not to
place undue reliance on such statements which only speak as of the date hereof.
Forward-looking statements include information concerning possible or assumed
future results of our operations, including any forecasts, projections and plans
and objectives for future operations. You can identify forward-looking
statements by the use of forward-looking expressions such as "may," "will,"
"should," "expect," "anticipate," "estimate" or "continue" or any negative or
other variations on such expressions. Many factors could affect our actual
financial results and could cause actual results to differ materially from those
in the forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this prospectus supplement and the accompanying
prospectus (and the documents that are incorporated by reference) might not
occur.
S-2
SUMMARY
THE FOLLOWING SUMMARY CONTAINS BASIC INFORMATION ABOUT THIS OFFERING. IT
LIKELY DOES NOT CONTAIN ALL THE INFORMATION THAT IS IMPORTANT TO YOU. FOR A MORE
COMPLETE UNDERSTANDING OF THIS OFFERING, WE ENCOURAGE YOU TO READ THIS ENTIRE
PROSPECTUS SUPPLEMENT AS WELL AS THE ACCOMPANYING PROSPECTUS AND ANY OTHER
DOCUMENTS WE HAVE REFERRED YOU TO.
THE OFFERING
Securities Offered............ $100,000,000 aggregate principal amount of 6.875% notes due
June 15, 2012.
Maturity...................... June 15, 2012.
Interest Payment Dates........ June 15 and December 15, beginning on December 15, 2002.
Optional Redemption........... We have the option to redeem the notes, in whole or in part,
at any time, at the redemption prices described in the
section "Description of the Notes" under the heading
"Optional Redemption."
Ranking....................... The notes are unsecured and unsubordinated obligations and
will rank on a parity with any existing and future unsecured
and unsubordinated indebtedness we incur.
Use of Proceeds............... We will use the net proceeds from the offering
(approximately $99.0 million) to repay a $59.4 million
construction facility that was to mature in February 2002
and which was extended to August 2002, to repay
approximately $29.7 million of outstanding principal on a
construction loan due in February 2003 and the remainder
(approximately $9.9 million) to pay down a portion of our
senior credit facility and for general corporate purposes.
Limitations on
Incurrence of Debt.......... The indenture with respect to the notes contains various
covenants limiting our ability to incur additional debt.
S-3
THE COMPANY AND THE PARTNERSHIP
OVERVIEW
CPG Partners, L.P., a Delaware limited partnership (the "Operating
Partnership" or "OP"), is 85.6% owned and managed by its sole general partner,
Chelsea Property Group, Inc. (the "Company"), a self-administered and
self-managed real estate investment trust, or REIT. The OP specializes in
owning, developing, redeveloping, leasing, marketing and managing upscale and
fashion-oriented manufacturers' outlet centers (the "Premium Portfolio"). On
September 25, 2001 as part of a transaction with Konover Property Trust, Inc.
and affiliates, the OP acquired 32 retail centers, 30 of which constitute other
retail centers containing 4.3 million square feet of gross leasable area, or
GLA. As of December 31, 2001, the OP wholly or partially owned 57 centers in 29
states and Japan containing approximately 12.6 million square feet of GLA
represented by more than 700 tenants in approximately 2,900 stores. The OP's
Premium Portfolio includes 27 properties containing 8.3 million square feet of
GLA. These centers generally are located near metropolitan areas including New
York City, Los Angeles, Boston, Washington, D.C., San Francisco, Sacramento,
Cleveland, Atlanta, Dallas, Portland (Oregon), Tokyo and Osaka, Japan, which
have a population of at least one million people within a 30-mile radius, with
average annual household income of greater than $50,000. Some Premium Portfolio
centers also are located within 20 miles of major tourist destinations including
Palm Springs, the Napa Valley, Orlando and Honolulu. During 2001, the OP's
Premium Portfolio generated weighted average tenant sales of $379 per square
foot, defined as total sales reported by tenants divided by their gross leasable
area weighted by months in operation.
On April 1, 2002, the OP acquired the other 50% ownership interest in
Orlando Premium Outlets from Simon Property Group, Inc., or Simon, for
$46.6 million in cash and assumed Simon's $29.7 million pro-rata share of the
existing secured construction facility and Simon's pro-rata guarantee related to
this loan. After the acquisition, the OP wholly owns the 430,000 square foot
center located in Orlando, Florida. Also on April 1, 2002, the OP acquired a
305,000 square foot center located in Edinburgh, Indiana for $27.0 million in
cash.
Unless the context otherwise requires, "Chelsea" refers to CPG Partners,
L.P. and "we," "us" and "our" refer to both CPG Partners, L.P. and Chelsea
Property Group, Inc.
Effective January 1, 2001, Chelsea GCA Realty Partnership, L.P. changed its
name to CPG Partners, L.P. and Chelsea GCA Realty, Inc. changed its name to
Chelsea Property Group, Inc. Chelsea is organized under the laws of the state of
Delaware. Our principal executive office is located at 103 Eisenhower Parkway,
Roseland, New Jersey 07068, telephone (973) 228-6111.
USE OF PROCEEDS
The net proceeds to us from the offering are estimated to be approximately
$99.0 million. We intend to use the net proceeds of the offering to repay a
$59.4 million construction facility on the Orlando Premium Outlets that was to
mature in February 2002 and which was extended to August 2002. The loan bears
interest equal to the London Interbank Offered Rate, or LIBOR, plus 1.30% (3.24%
at March 31, 2002) and as of March 31, 2002 was 20% guaranteed by the OP.
Approximately $29.7 million will be used to repay existing indebtedness
presently outstanding under a $40.0 million construction loan entered into in
February 2000 by Chelsea Allen Development L.P., or Chelsea Allen, a wholly
owned subsidiary of the OP, to fund the Allen Premium Outlets project. The loan
matures on February 18, 2003 and bears interest equal to LIBOR plus 1.375%
(3.29% at March 31, 2002) and is guaranteed by the Company and the OP. The
remaining proceeds (approximately $9.9 million) will be used to pay down a
portion of our senior credit facility and for general corporate purposes,
including the development or acquisition of additional properties and the
expansion of our existing properties.
S-4
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2002 and
as adjusted to give effect to the offering and the anticipated use of the
proceeds from the offering as described under "Use of Proceeds."
MARCH 31, 2002
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HISTORICAL AS ADJUSTED
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(IN THOUSANDS)
DEBT:
Senior Credit Facilities.................................. $ 5,035 $ 74,035(1)(2)
8.375% Notes due 2005..................................... 49,900 49,900
7.25% Notes due 2007...................................... 124,817 124,817
8.625% Notes due 2009..................................... 49,925 49,925
Secured debt.............................................. 169,870 140,179(3)(4)
8.25% Notes due 2011...................................... 148,707 148,707
6.875% Notes due 2012..................................... -- 100,000
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Total debt.............................................. $ 548,254 $ 687,563
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PARTNERS' CAPITAL:
Preferred partnership units outstanding, 1,300,000 at
March 31, 2002 and as adjusted.......................... $ 63,315 $ 63,315
General partner units outstanding, 18,874,000 at
March 31, 2002 and as adjusted.......................... 355,405 355,405
Limited partner units outstanding, 3,357,000 at March 31,
2002 and as adjusted.................................... 52,266 52,266
Accumulated other comprehensive loss...................... (2,780) (2,780)
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Total partners' capital................................. $ 468,206 $ 468,206
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Total capitalization.................................. $1,016,460 $1,155,769
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(1) Represents a term loan due March 31, 2004.
(2) Subsequent to March 31, 2002 we borrowed $78 million under our senior credit
facility that was principally used to acquire the other 50% interest in
Orlando Premium Outlets from Simon and the Edinburgh, Indiana center on
April 1, 2002. A portion of the net proceeds from the offering will be used
to repay some of these borrowings.
(3) Prior to April 1, 2002, our 50% pro-rata share of the Orlando secured
construction facility of $29.7 million was not reported on our balance sheet
in accordance with generally accepted accounting principles, or GAAP. On
April 1, 2002, we acquired Simon's 50% interest in Orlando Premium Outlets
and assumed Simon's $29.7 million pro-rata share of the Orlando secured
construction facility. From the proceeds of this offering, we will pay off
the total secured construction facility of $59.4 million.
(4) Reflects the payoff of Chelsea Allen's secured construction facility of
$29.7 million due February 2003.
S-5
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with our financial statements included in our periodic reports filed
under the Securities Exchange Act of 1934, which are incorporated by reference
into this prospectus supplement and the accompanying prospectus.
The financial data as of and for the three months ended March 31, 2002 and
2001 has been derived from the unaudited condensed consolidated financial
statements. In our opinion, the financial data for the three months ended
March 31, 2002 and 2001 includes all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position and
results of operations for the periods presented.
Historical operating results, including net income, may not be comparable to
future operating results. In addition, we believe that the book value of our
properties, which reflects historical costs of such real estate assets less
accumulated depreciation, is not indicative of the fair value of the properties.
S-6
CPG PARTNERS, L.P.
(IN THOUSANDS, EXCEPT PER UNIT AND NUMBER OF CENTERS)
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
---------- -------- ---------- -------- -------- -------- --------
(UNAUDITED)
OPERATING DATA:
Rental revenue....................... $ 41,582 $ 31,522 $ 145,278 $125,824 $114,485 $ 99,976 $ 81,531
Total revenues....................... 56,681 44,824 206,855 179,903 162,618 139,315 113,417
Loss on writedown of assets.......... -- -- -- -- 694 15,713 --
Total expenses....................... 41,505 34,156 150,640 123,876 114,676 98,166 78,262
Income from unconsolidated
investments........................ 3,770 3,270 15,642 6,723 308 -- --
Loss from Chelsea Interactive........ (2,700) (1,198) (5,337) (2,364) -- -- --
Income before minority interest and
extraordinary item................. 16,246 12,740 66,520 60,386 47,556 25,436 35,155
Minority interest.................... -- -- -- -- -- -- (127)
Income before extraordinary item..... 16,246 12,740 66,520 60,386 47,556 25,436 35,028
Extraordinary item--loss on
retirement of debt................. -- -- -- -- -- (345) (252)
Net income........................... 16,246 12,740 66,520 60.386 47,556 25,091 34,776
Preferred distribution............... (2,366) (2,509) (10,036) (10,036) (6,137) (4,188) (907)
Net income available to common
unitholders........................ $ 13,880 $ 10,231 $ 56,484 $ 50,350 $ 41,419 $ 20,903 $ 33,869
OWNERSHIP INTEREST:
General partner...................... 18,786 16,057 16,839 15,940 15,742 15,440 14,605
Limited partners..................... 3,150 3,257 3,179 3,356 3,389 3,431 3,435
---------- -------- ---------- -------- -------- -------- --------
Weighted average units outstanding... 21,936 19,314 20,018 19,296 19,131 18,871 18,040
BALANCE SHEET DATA:
Rental properties before accumulated
depreciation....................... $1,131,669 $913,888 $1,127,906 $908,344 $848,813 $792,726 $708,933
Total assets......................... 1,081,073 915,990 1,099,308 901,314 806,055 773,352 688,029
Total liabilities.................... 612,867 549,324 624,246 528,752 426,198 450,410 342,106
Partners' capital.................... 468,206 366,666 475,062 372,562 379,857 322,942 345,923
Distributions declared per common
unit............................... $ 0.81 $ 0.78 $ 3.12 $ 3.00 $ 2.88 $ 2.76 $ 2.58
OTHER DATA:
Funds from operations available to
common unitholders (1)............. $ 27,912 $ 22,862 $ 108,862 $ 93,556 $ 79,980 $ 67,994 $ 57,417
Cash flows from:
Operating activities............... $ 11,894 $ 18,454 $ 121,723 $106,658 $ 87,502 $ 78,731 $ 56,594
Investing activities............... (8,060) (5,989) (112,551) (121,479) (77,490) (119,807) (199,250)
Financing activities............... (8,872) 17,315 (2,604) 23,995 (10,781) 36,169 143,308
GLA at end of period................. 12,639 8,193 12,574 8,159 5,216 4,876 4,308
Weighted average GLA (2)............. 12,589 8,165 9,349 5,703 4,995 4,614 3,935
Centers in operation at end of the
period............................. 57 27 57 27 19 19 20
Ratio of earnings to fixed charges
(3)................................ 2.6x 2.5x 2.6x 2.6x 2.5x 2.3x 2.4x
Ratio of earnings to fixed charges
and preferred stock dividends
(3)................................ 2.4x 2.2x 2.3x 2.3x 2.2x 2.0x 2.3x
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NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA:
(1) We believe that funds from operations, or FFO, is helpful to investors as a
measure of our performance because, along with cash flow from operating
activities, financing activities and investing activities, it provides
investors with an indication of our ability to incur and service debt,
S-7
to make capital expenditures and to fund other cash needs. We compute FFO in
accordance with the current standards established by the National
Association of Real Estate Investment Trusts, or NAREIT, which may not be
comparable to FFO reported by other REITs (or their operating partnerships)
that do not define the term in accordance with the current NAREIT definition
or that interpret the current NAREIT definition differently than we do. FFO
does not represent cash generated from operating activities in accordance
with GAAP and should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of our performance or
to cash flow from operating activities (determined in accordance with GAAP)
as a measure of our liquidity, nor is it indicative of funds available to
fund our cash needs, including our ability to make cash distributions. See
Management's Discussion and Analysis in our annual report on Form 10-K for
the year ended December 31, 2001 for a definition of FFO.
(2) GLA weighted by months in operation.
(3) For purposes of computing the ratios, earnings consist of income from
continuing operations after depreciation and before minority interest and
fixed charges, exclusive of interest capitalized and amortization of loan
costs capitalized. Fixed charges consist of interest expense, including
interest costs capitalized, the portion of rent expense representative of
interest and total amortization of expensed and capitalized debt issuance
costs. Preferred stock includes dividends paid on the preferred stock.
S-8
DESCRIPTION OF THE NOTES
We will issue the notes under an indenture, dated as of January 23, 1996,
among CPG Partners, L.P., Chelsea Property Group, Inc. and State Street Bank and
Trust Company, as trustee. When we refer to the indenture, we include all
supplements to the indenture. The terms of the notes include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939. We have filed a copy of the indenture as an exhibit to
the registration statement.
The following summary sets forth the material terms and provisions of the
notes and the indenture governing the notes. Capitalized terms not otherwise
defined in this section have the meanings given to them in the notes and in the
indenture. The following description of the specific terms of the offered notes
supplements, and, to the extent inconsistent, replaces, the description of the
general terms and provisions of the debt securities set forth in the
accompanying prospectus.
GENERAL
The notes will be:
- unsecured general obligations of Chelsea;
- unsubordinated debt of Chelsea and will rank on a parity with all existing
and future unsecured and unsubordinated debt;
- effectively subordinated to the prior claims of creditors under any
secured debt we incur in the future; and
- issued in book-entry form only.
We may from time to time, without the consent of existing holders, create
and issue further notes having the same terms and conditions as the notes being
offered hereby in all respects, except for issue date, issue price and, if
applicable, the first interest payment on the notes. Additional notes issued in
this manner will be consolidated with and will form a single series with the
previously outstanding notes of like tenor.
Except as described under "--Merger, Consolidation or Sale" and "--Certain
Covenants" below and under "Description of Debt Securities--Merger,
Consolidation or Sale" and "--Certain Covenants" in the accompanying prospectus,
the indenture does not contain any other provisions that would afford holders of
the notes protection in the event of:
- a highly leveraged or similar transaction involving us or any affiliate of
us;
- a change of control; or
- a reorganization, restructuring, merger or similar transaction involving
us that may adversely affect the holders of the notes.
Subject to limitations set forth under "--Merger, Consolidation or Sale" and
"--Certain Covenants" below or under "Description of Debt Securities--Merger,
Consolidation or Sale" and "--Certain Covenants" in the accompanying prospectus,
we may enter into transactions such as the sale of all or substantially all of
our assets or a merger or consolidation that would increase the amount of our
debt or substantially reduce or eliminate our assets, which may have an adverse
effect on our ability to service our debt, including the notes. Chelsea and its
management have no present intention of engaging in a highly leveraged or
similar transaction.
The notes are not subject to repayment at the option of the holders thereof.
In addition, the notes will not be entitled to the benefit of any sinking fund.
The notes will not be guaranteed by Chelsea Property Group, Inc.
S-9
PRINCIPAL, MATURITY AND INTEREST
We will issue up to $100,000,000 aggregate principal amount of notes. We
will issue the notes in denominations of $1,000 and integral multiples of
$1,000. The notes will mature on June 15, 2012, but are subject to redemption at
our option (as described below).
Interest on the notes will accrue at the rate of 6.875% per year and will be
payable semi-annually in arrears on June 15 and December 15, commencing on
December 15, 2002. We will make each interest payment to the holders of record
of these notes on the immediately preceding June 1 and December 1.
Interest on the notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
OPTIONAL REDEMPTION
We may at any time redeem the notes, in whole or in part, at a redemption
price equal to (1) the principal amount thereof, plus accrued and unpaid
interest to the redemption date and (2) the Make-Whole Amount (as defined
below), if any.
If notice has been given as provided in the indenture and funds for the
redemption of any notes called for redemption have been irrevocably set aside on
the redemption date referred to in the notice, such notes will cease to bear
interest on the date fixed for redemption. Thereafter, the only right of the
holders of such notes will be to receive payment of the redemption price.
We will give notice of any optional redemption to holders, at their
registered addresses, at least 30 and not more than 60 days before the date
fixed for redemption. The notice of redemption will specify, among other things,
the redemption price and the principal amount of the notes to be redeemed. If
less than all of the notes are to be redeemed, the trustee shall select which
notes are to be redeemed in a manner it deems fair and appropriate.
As used above:
"MAKE-WHOLE AMOUNT" means the excess of (1) the aggregate present value
on the redemption date of the principal being redeemed and the amount of any
interest (exclusive of interest accrued to the date of redemption) that
would have been payable if such redemption had not been made, over (2) the
aggregate principal amount of the notes being redeemed. The present value
shall be determined by discounting, on a semi-annual basis, the principal
and interest at the applicable Reinvestment Rate (determined on the third
business day preceding the date such notice of redemption is given) from the
respective dates on which such principal and interest would have been
payable if such redemption had not been made.
"REINVESTMENT RATE" means 0.25% plus the yield on treasury securities at
a constant maturity under the heading "Week Ending" published in the most
recent Statistical Release under the caption "Treasury Constant Maturities"
for the maturity (rounded to the nearest month) corresponding to the
remaining life to maturity, as of the payment date of the principal being
redeemed. If no maturity exactly corresponds to such maturity, yields for
the two published maturities most closely corresponding to such maturity
shall be calculated pursuant to the immediately preceding sentence and the
Reinvestment Rate shall be interpolated or extrapolated from such yields on
a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purpose of calculating the Reinvestment Rate, the
most recent Statistical Release published prior to the date of determination
of the Make-Whole Amount shall be used.
"STATISTICAL RELEASE" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields
S-10
on actively traded United States government securities adjusted to constant
maturities, or, if such statistical release is not published at the time of
any determination of the Make-Whole Amount, then such other reasonably
comparable index which shall be designated by us.
MERGER, CONSOLIDATION OR SALE
In addition to the restrictions on merger, consolidation or sale described
in the accompanying prospectus (see "Description of Debt Securities--Merger,
Consolidation or Sale"), we will not consolidate with or merge with or into any
person or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of our assets to any other person unless after giving pro
forma effect to the consolidation, merger, sale, conveyance, transfer, lease or
other disposition, we or a successor entity could incur at least $1.00 of Debt
(other than intercompany Debt) in accordance with the indenture covenants
limiting the incurrence of Debt.
CERTAIN COVENANTS
LIMITATION ON INCURRENCE OF DEBT. In addition to the limitations on
incurrence of Debt contained in the accompanying prospectus (see "Description of
Debt Securities--Certain Covenants--Limitations on Incurrence of Debt"), we will
not allow any Restricted Subsidiary to incur any Debt other than intercompany
Debt.
MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. We are required to maintain Total
Unencumbered Assets of not less than 150% of the aggregate outstanding principal
amount of outstanding Unsecured Debt.
As used in this section:
"RESTRICTED SUBSIDIARY" means any Subsidiary, unless it is designated as an
Unrestricted Subsidiary.
"TOTAL UNENCUMBERED ASSETS" means the sum of (1) those Undepreciated Real
Estate Assets which have not been pledged, mortgaged or otherwise encumbered by
the owner thereof to secure Debt and (2) all other assets of ours and our
Subsidiaries determined in accordance with generally accepted accounting
principles (but excluding intangibles and accounts receivable) which have not
been pledged, mortgaged or otherwise encumbered by the owner thereof to secure
Debt.
"UNDEPRECIATED REAL ESTATE ASSETS" as of any date means the cost (original
cost plus capital improvements) of ours and our Subsidiaries' real estate assets
on such date, before depreciation and amortization, determined on a consolidated
basis in accordance with generally accepted accounting principles.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated as such by
our board of directors and any Subsidiary of an Unrestricted Subsidiary. Our
board of directors may designate any Subsidiary to be an Unrestricted Subsidiary
so long as (1) neither we nor any other Subsidiary is directly or indirectly
liable for any Debt of the Subsidiary, (2) no default on any Debt of the
Subsidiary would permit any holder of any of our Debt or the Debt of any other
Subsidiary to declare a default on the Debt or cause payment of the Debt to be
accelerated or payable prior to its maturity, (3) neither we nor any other
Subsidiary has a contract, agreement, arrangement, understanding or obligation
of any kind, whether written or oral, with the Subsidiary other than those that
might be obtained at the time from persons who are not our affiliates and
(4) neither we nor any other Subsidiary has any obligation to subscribe for
additional equity in the Subsidiary or to maintain or preserve the Subsidiary's
financial condition or to cause the Subsidiary to achieve certain levels of
operating results. Our board of directors will file with the trustee under the
indenture a copy of the board resolution approving the designation of a
Subsidiary as an Unrestricted Subsidiary. Our board of directors may designate
an Unrestricted Subsidiary as a Restricted Subsidiary if immediately after the
designation there would be
S-11
no event of default under the indenture and we could incur at least $1.00 of
Debt (other than intercompany Debt) in accordance with the indenture covenants
limiting the incurrence of Debt.
"UNSECURED DEBT" means Debt which is not secured by any mortgage, lien,
charge, pledge, encumbrance or security interest of any kind upon any of our
properties or properties of any Subsidiary.
Reference is made to the section entitled "Description of Debt
Securities--Certain Covenants" in the accompanying prospectus for a description
of additional covenants applicable to the notes. Compliance with the covenants
described herein and such additional covenants with respect to the notes
generally may not be waived by the Board of Directors of Chelsea Property
Group, Inc., as our general partner, or by the trustee unless the holders of at
least a majority in principal amount of all outstanding notes consent to such
waiver; PROVIDED, HOWEVER, that the defeasance and covenant defeasance
provisions of the indenture described under "Description of Debt
Securities--Discharge, Defeasance and Covenant Defeasance" in the accompanying
prospectus will apply to the notes, including with respect to the covenants
described in this prospectus supplement.
GLOBAL SECURITIES
The notes will be evidenced by one or more global securities, which will be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York, or DTC, and registered in the name of Cede & Co., as DTC's nominee.
Holders may hold their interests in any of the global securities directly
through DTC, or indirectly through organizations which are participants in DTC.
Transfers between participants will be effected in the ordinary way in
accordance with DTC rules and will be settled in immediately available funds.
Holders who are not DTC participants may beneficially own interests in a
global security held by DTC only through participants, including some banks,
brokers, dealers, trust companies and other parties that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly, and have indirect access to the DTC system. So long as Cede & Co.,
as the nominee of DTC, is the registered owner of any global security, Cede &
Co. for all purposes will be considered the sole holder of such global security.
Except as provided below, owners of beneficial interests in a global security
will not be entitled to have certificates registered in their names, will not
receive or be entitled to receive physical delivery of certificates in
definitive form, and will not be considered the holders thereof.
Neither we nor the trustee, nor any registrar or paying agent, will have any
responsibility for the performance by DTC or their participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations. DTC has advised us that it will take any action
permitted to be taken by a holder of notes only at the direction of one or more
participants whose accounts are credited with DTC interests in a global
security.
DTC has advised us as follows:
- DTC is a limited purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code
and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act;
- DTC holds securities for its participants and to facilitate the clearance
and settlement of securities transactions, such as transfers and pledges,
among participants in deposited securities through electronic book-entry
changes to accounts of its participants, thereby eliminating the
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need for physical movement of securities certificates. Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and other organizations;
- some of such participants, or their representatives, together with other
entities, own DTC; and
- the rules applicable to DTC and its participants are on file with the
Securities and Exchange Commission.
Purchases of notes under the DTC system must be made by or through
participants, which will receive a credit for the notes on DTC's records. The
ownership interest of each actual purchaser of each note is in turn to be
recorded on the participants' and indirect participants' records. Purchasers
will not receive written confirmation from DTC of their purchase, but purchasers
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
participant or indirect participant through which the purchasers entered into
the transaction. Transfers of ownership interests in the notes are to be
accomplished by entries made on the books of participants and indirect
participants acting on behalf of actual purchasers. Purchasers of notes will not
receive certificates representing their ownership interests, except if the use
of the book-entry system for the notes is discontinued.
The deposit of notes with DTC and their registration in the name of Cede &
Co. effect no change in beneficial ownership. DTC has no knowledge of the actual
beneficial owners of the notes. DTC's records reflect only the identity of the
participants to whose accounts such notes are credited, which may or may not be
the beneficial owners. The participants will remain responsible for keeping
account of their holdings on behalf of their customers.
The laws of some jurisdictions require that some purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global security.
Redemption notices shall be sent to Cede & Co. If less than all of the
principal amount of the global securities of the same series is being redeemed,
DTC's practice is to determine by lot the amount of the interest of each
participant therein to be redeemed.
Conveyance of notices and other communications by DTC to participants, by
participants to indirect participants and by participants and indirect
participants to beneficial owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements that may be in effect from
time to time.
Principal, Make-Whole Amount and interest payments on the notes will be made
to Cede & Co. by wire transfer of immediately available funds. DTC's practice is
to credit participants' accounts on the payable date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe that
it will not receive payment on the payment date. Payments by participants to
beneficial owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such participant and not of DTC or us, subject to any statutory or regulation
requirements as may be in effect from time to time. Payments of principal,
Make-Whole Amount and interest to Cede & Co. is our responsibility, disbursement
of such payments to participants is the responsibility of DTC, and disbursement
of such payments to the beneficial owners of the notes is the responsibility of
participants and indirect participants. Neither we nor the trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the global
securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
DTC may discontinue providing its services as securities depository with
respect to the notes at any time by giving us reasonable notice. Under such
circumstances, in the event that a successor securities
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depository is not obtained, certificates for the relevant notes will be printed
and delivered in exchange for interests in such global security. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for relevant notes in authorized denominations registered in such
names as DTC shall direct. It is expected that such instruction will be based
upon directions received by DTC from its participants with respect to ownership
of beneficial interests in such global security.
We may decide to discontinue use of the system of book-entry transfers
through DTC, or a successor securities depository. In that event, certificates
representing the notes will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but we do not
take responsibility for the accuracy thereof.
INFORMATION REGARDING THE TRUSTEE
The trustee under the indenture is State Street Bank and Trust Company. The
trustee is the trustee with respect to our publicly issued debt securities.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (which change may apply retroactively) or possible differing
interpretations. The following discussion deals only with notes held as capital
assets and does not purport to deal with persons in special tax situations, such
as financial institutions, banks, insurance companies, regulated investment
companies, dealers in securities or currencies, tax-exempt entities, persons
holding notes in a tax-deferred or tax-advantaged account, persons holding notes
as a hedge or as a position in a "straddle" or as part of a "conversion
transaction" for tax purposes, persons who are required to mark-to-market for
tax purposes, persons receiving payments from the offices of any broker not
located in the United States, or persons whose functional currency is not the
United States dollar. It also does not deal with holders other than original
purchasers (except where otherwise specifically noted) who purchased notes at
their initial issue price. Persons considering the purchase of the notes should
consult their own tax advisors concerning the application of United States
Federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the notes arising
under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a note
that is for United States Federal income tax purposes (a) a citizen or resident
of the United States, (b) a corporation or partnership (including an entity
treated as a corporation or a partnership for U.S. Federal income tax purposes)
created or organized in or under the laws of the United States or any state
thereof or the District of Columbia (except in the case of a partnership as
otherwise provided by Treasury Regulations), (c) an estate the income of which
is subject to United States Federal income taxation regardless of its source,
(d) a trust if a court within the United States is able to exercise primary
supervision of the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust or
(e) any other person whose income or gain in respect of a note is effectively
connected with the conduct of a United States trade or business. Notwithstanding
the preceding sentence, to the extent provided in regulations, certain trusts in
existence on August 20, 1996 and treated as United States persons on August 19,
1996 that elect to continue to be so treated also shall be considered United
States persons. As used herein, the term "non-U.S. Holder" means a beneficial
owner of a note that is not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST. Under general principles of current United States
Federal income tax law, payments of interest in respect of a note generally will
be taxable to a U.S. Holder as ordinary interest income at the time such
payments are accrued or are received (in accordance with the U.S. Holder's
regular method of tax accounting).
DISPOSITION OF A NOTE. Under general principles of current United States
Federal income tax law, upon the sale, exchange or retirement of a note, a U.S.
Holder generally would recognize taxable gain or loss in an amount equal to the
difference, if any, between the amount realized upon the sale, exchange or
retirement (other than amounts representing accrued and unpaid interest) and
such U.S. Holder's adjusted tax basis in its note. A U.S. Holder's adjusted tax
basis in a note generally would equal such U.S. Holder's initial investment in
such note. Any gain or loss recognized by a U.S. Holder upon the sale, exchange
or retirement of a note generally would be long-term capital gain or loss if, as
of the date of disposition, the U.S. Holder had held the note for more than one
year. The maximum rate on long-term capital gain recognized by an individual
taxpayer with respect to property such as the notes is 20% (and could be lower
for gains realized by certain individual taxpayers who meet specified
conditions). A U.S. Holder's receipt of any Make-Whole Amount should be treated
as gain. The ability of U.S. Holders to offset capital losses against ordinary
income is limited.
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NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium, if any, or interest on a note, if (a) such
non-U.S. Holder does not hold a direct or indirect 10% or greater capital or
profits interest in Chelsea, (b) such non-U.S. Holder is not a controlled
foreign corporation related to Chelsea, (c) such non-U.S. Holder is not a bank
extending credit pursuant to a loan agreement in the ordinary course of its
trade or business and (d) the last United States payor (or a non-U.S. payor who
is a qualified intermediary, U.S. branch of a foreign person or withholding
foreign partnership) in the chain of payment (the "Withholding Agent") has
received either (1) if the non-U.S. Holder is the beneficial owner of the note,
a properly completed and signed Internal Revenue Service Form W-8BEN, or
substantially similar form, from such non-U.S. Holder certifying under penalties
of perjury that such holder is not a U.S. Holder and disclosing the holder's
name and address, or (2) if the non-U.S. Holder is not the beneficial owner of
the note, a properly completed and signed Internal Revenue Service Form W-8IMY,
or substantially similar form, from such non-U.S. Holder. In certain cases, the
Internal Revenue Service Form W-8IMY must be accompanied by a copy of an
Internal Revenue Service Form W-8BEN or the substitute form that is provided by
the beneficial owner to the non-U.S. Holder. Generally, the Internal Revenue
Service Form W-8IMY remains valid until a change in circumstances makes any
information on the form incorrect. However, the Internal Revenue Service
Form W-8BEN is generally effective for the remainder of the year of signature
plus three full calendar years unless a change in circumstances makes any
information on the form incorrect. Notwithstanding the preceding sentence, an
Internal Revenue Service Form W-8BEN with a U.S. taxpayer identification number
will remain effective until a change in circumstances makes any information on
the form incorrect, provided that the withholding agent reports at least
annually to the beneficial owner on Internal Revenue Service Form 1042-S. The
beneficial owner must inform the withholding agent within 30 days of such change
and furnish a new Internal Revenue Service Form W-8BEN. Interest received by a
non-U.S. Holder which does not qualify for exemption from taxation will be
subject to United States Federal income tax and withholding tax at a rate of 30%
unless reduced or eliminated by an applicable tax treaty.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
note, provided (i) the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder and (ii) in the
case of an individual, the non-U.S. Holder is not present in the United States
for 183 days or more during the taxable year in which the retirement or
disposition occurs. Certain other exceptions may be applicable, and a non-U.S.
Holder should consult its tax advisor in this regard.
A foreign corporation whose income or gain in respect of a note is
effectively connected with the conduct of a United States trade or business, in
addition to being subject to regular U.S. income tax, may be subject to a branch
profits tax equal to 30% of its "effectively connected earnings and profits"
within the meaning of the Internal Revenue Code for the taxable year, as
adjusted for certain items, unless it qualifies for a lower rate under an
applicable tax treaty (as modified by the branch profits tax rules).
BACKUP WITHHOLDING--U.S. HOLDERS AND NON-U.S. HOLDERS
Backup withholding of United States Federal income tax may apply to
principal and interest payments made in respect of the notes to registered
owners who are not "exempt recipients" and who fail to provide certain
identifying information (such as the registered owner's taxpayer identification
number) in the required manner. Generally, individuals are not exempt
recipients, whereas corporations generally are exempt recipients. Payments made
in respect of the notes to a U.S. Holder must be reported to the Internal
Revenue Service, unless the U.S. Holder is an exempt recipient or establishes an
exemption. Compliance with the identification procedures described in the
preceding section would establish an exemption from backup withholding and
reporting for those non-U.S. Holders who are not
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exempt recipients, provided that the payor does not have actual knowledge that
the holder is a U.S. Holder. Under current United States Federal income tax law,
backup withholding will be imposed at a rate of 30% for the calendar years
ending December 31, 2002 and December 31, 2003, will be reduced to 29% for the
2004 and 2005 calendar years, will be further reduced to 28% for the calendar
years 2006 through 2010 and increased to 31% for the calendar year 2011 and
thereafter.
In addition, upon the sale of a note to (or through) the United States
office of any broker, the broker must withhold (at the rates described in the
previous paragraph) from the proceeds of sale, unless either (a) the broker
determines that the seller is a corporation or other exempt recipient or
(b) the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder and the payor does not have actual knowledge that the holder is a U.S.
Holder. Such a sale, as well as a sale by a non-U.S. Holder to (or through) the
foreign office of certain foreign brokers, also must be reported by the broker
to the IRS, unless either (1) the broker determines that the seller is an exempt
recipient or (2) in the case of a seller that is a non-U.S. Holder, the seller
certifies its non-U.S. status and the payor does not have actual knowledge that
the holder is a U.S. Holder. Certification of the registered owner's non-U.S.
status would be made normally on an Internal Revenue Service Form W-8BEN under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the Internal Revenue Service.
S-17
UNDERWRITING
We and the underwriters for the offering named below have entered into an
underwriting agreement and a pricing agreement with respect to the notes.
Subject to certain conditions, each underwriter has severally agreed to purchase
the principal amount of notes indicated in the following table.
UNDERWRITERS PRINCIPAL AMOUNT OF NOTES
- ------------ -------------------------
Banc of America Securities LLC.............................. $ 80,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................... 10,000,000
Commerzbank Capital Markets Corp............................ 5,000,000
First Union Securities, Inc................................. 5,000,000
------------
Total..................................................... $100,000,000
Notes sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover page of this prospectus
supplement. Any notes sold by the underwriters to securities dealers may be sold
at a discount from the initial public offering price of up to 0.40% of the
principal amount of notes. Any such securities dealers may resell any notes
purchased from the underwriters to certain other brokers or dealers at a
discount from the initial public offering price of up to 0.25% of the principal
amount of notes. If all the notes are not sold at the initial public offering
price, the underwriters may change the offering price and the other selling
terms.
The notes are a new issue of securities with no established trading market.
We have been advised by the underwriters that the underwriters intend to make a
market in the notes, but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the notes.
In connection with the offering, the underwriters may purchase and sell
notes in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
notes than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the notes while the
offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the underwriters have repurchased notes sold by or for
the account of such underwriter in stabilizing or short covering transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the notes. As a result, the price of the notes may be
higher than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the underwriters at any
time. These transactions may be effected in the over-the-counter market or
otherwise.
We estimate that our share of the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $165,000.
We have agreed to indemnify the underwriters against certain liabilities,
including civil liabilities under the Securities Act of 1933.
In the ordinary course of business, some of the underwriters and their
affiliates have provided, and may in the future provide, investment banking,
financial advisory and other services to us for which they have received, and
may in the future receive, customary fees. Affiliates of Banc of America
Securities LLC, Commerzbank Capital Markets Corp. and First Union Securities,
Inc. are lead and/or
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administrative agents and lenders under our senior credit facility and our
Orlando Premium Outlets and Chelsea Allen secured construction facilities and
will receive a portion of the proceeds of this offering in repayment of amounts
outstanding under our senior credit facility and our Orlando and Chelsea Allen
secured construction facilities. Because more than 10% of the net proceeds of
this offering will be used to repay amounts outstanding under our senior credit
facility and the Orlando and Chelsea Allen secured construction facilities, this
offering will be made pursuant to the requirements of Rule 2710(c)(8) of the
Conduct Rules of the National Association of Securities Dealers, Inc.
First Union Securities, Inc. ("FUSI"), a subsidiary of Wachovia Corporation,
conducts its investment banking, institutional and capital markets businesses
under the trade name of Wachovia Securities. Any references to "Wachovia
Securities" in this prospectus supplement, however, do not include Wachovia
Securities, Inc., a separate broker-dealer subsidiary of Wachovia Corporation
and sister affiliate of FUSI which may or may not be participating as a separate
selling dealer in the distribution of the notes.
LEGAL MATTERS
The validity of the notes will be passed upon for us by Stroock & Stroock &
Lavan LLP, New York, New York and for the underwriters by Sidley Austin Brown &
Wood LLP, New York, New York.
S-19
PROSPECTUS
$634,930,000
CHELSEA PROPERTY GROUP, INC.
COMMON STOCK, PREFERRED STOCK AND DEPOSITARY SHARES
CPG PARTNERS, L.P.
DEBT SECURITIES
------------
Chelsea may offer and issue from time to time up to $184,930,000 of:
- shares of common stock,
- shares of preferred stock,
- shares of preferred stock represented by depositary shares.
Chelsea's common stock is traded on the New York Stock Exchange under the
symbol CPG.
Chelsea Property Group's operating partnership, CPG Partners, L.P., may
offer and issue from time to time in one or more series unsecured nonconvertible
debt securities with an aggregate public offering price of up to $450,000,000.
If any debt securities are rated below investment grade at the time of issuance,
they will be fully and unconditionally guaranteed by Chelsea.
The securities to be offered by us will be in amounts, at prices and on
terms to be determined at the time of offering.
When we sell a particular series of securities, we will prepare a prospectus
supplement describing the offering and the terms of that series of securities.
Such terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the securities, in each case as may be appropriate
to preserve our status as a real estate investment trust for federal income tax
purposes.
Where necessary, the applicable prospectus supplement will contain
information about certain United States Federal income tax considerations
relating to, and any listing on a securities exchange of, the securities covered
by such prospectus supplement.
SEE "RISK FACTORS" BEGINNING AT PAGE 5 OF THIS PROSPECTUS FOR A DESCRIPTION
OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER PRIOR TO PURCHASING THE SECURITIES.
We may offer the securities directly or through agents or to or through
underwriters or dealers. If any agents or underwriters are involved in the sale
of the securities their names, and any applicable purchase price, fee,
commission or discount arrangement between or among them, will be set forth, or
will be calculable from the information set forth, in an accompanying prospectus
supplement. We can sell the securities through agents, underwriters or dealers
only with delivery of a prospectus supplement describing the method and terms of
the offering of such securities. See "Plan of Distribution."
----------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The date of this Prospectus is May 20, 2002.
----------------
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration or continuous
offering process. We may from time to time sell any combination of the
securities offered in this prospectus in one or more offerings up to a total
dollar amount of $634,930,000.
This prospectus provides you with a general description of the securities we
may offer. Each time we sell securities we will provide you with a prospectus
supplement containing specific information about the terms of the securities
being offered. The prospectus supplement which contains specific information
about the terms of the securities being offered may also include a discussion of
certain U.S. Federal income tax consequences and any risk factors or other
special considerations applicable to those securities. The prospectus supplement
may also add, update or change information in this prospectus. If there is any
inconsistency between the information in the prospectus and the prospectus
supplement, you should rely on the information in the prospectus supplement. You
should read both this prospectus and any prospectus supplement together with
additional information described under the heading "Where You Can Find More
Information" beginning on page 36 of this prospectus.
Unless otherwise indicated or unless the context otherwise requires, all
references in this prospectus to Chelsea refers to Chelsea Property
Group, Inc., all references to the Operating Partnership refers to CPG Partners,
L.P. and all references to "we," "us," or similar references mean both Chelsea
Property Group, Inc. and the Operating Partnership.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and the information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until we sell all of the securities:
1. Chelsea's Annual Report on Form 10-K for the year ended December 31,
2001, SEC File Number: 001-12328.
2. The Operating Partnership's Annual Report on Form 10-K for the year
ended December 31, 2001, SEC File Number: 033-98136-01.
3. Chelsea's Quarterly Report on Form 10-Q for the quarter ended March 31,
2002, SEC File Number: 001-12328.
4. The Operating Partnership's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002, SEC File Number: 033-98136-01.
5. The description of Chelsea's common stock which is contained in Item 1
of our registration statement on Form 8-A, as amended, filed
September 8, 1993 pursuant to Section 12 of the Exchange Act, SEC File
Number: 001-12328.
6. The information contained in the section "Policies With Respect to
Certain Activities" contained in the Registration Statement on Form S-11
filed on August 25, 1993, as amended, SEC File Number: 33-67870.
2
You may request a copy of these filings, at no cost, by writing or
telephoning us at our principal executive offices at the following address:
Investor Relations
Chelsea Property Group, Inc.
103 Eisenhower Parkway
Roseland, New Jersey 07068
Telephone: (973) 228-6111
http://www.cpgi.com
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. Do not
assume that the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front of these documents.
3
THE COMPANY AND THE OPERATING PARTNERSHIP
GENERAL
The Operating Partnership is 85.6% owned and managed by its sole general
partner, Chelsea, a self-administered and self-managed real estate investment
trust that specializes in owning, developing, redeveloping, leasing, marketing
and managing upscale and fashion-oriented manufacturers' outlet centers known as
premium properties. On September 25, 2001, as part of a transaction with Konover
Property Trust Inc. and affiliates, we acquired 32 retail centers, one of which
is a premium property, containing 4.3 million square feet of gross leasable
area, or GLA. As of December 31, 2001, we wholly or partially owned 57 centers
in 29 states and Japan containing approximately 12.6 million square feet of GLA
represented by more than 700 tenants in approximately 2,900 stores. Our premium
properties include 27 properties containing 8.3 million square feet of GLA.
These centers generally are located near metropolitan areas including New York
City, Los Angeles, Boston, Washington, D.C., San Francisco, Sacramento,
Cleveland, Atlanta, Dallas, Portland (Oregon), Tokyo and Osaka, Japan, which
have a population of at least one million people within a 30-mile radius, with
average annual household income of greater than $50,000. Some premium properties
are also located within 20 miles of major tourist destinations including Palm
Springs, the Napa Valley, Orlando, and Honolulu. During 2001, our premium
properties generated weighted average tenant sales of $379 per square foot,
defined as total sales reported by tenants divided by their gross leasable area
weighted by months in operation.
Chelsea is organized under the laws of the state of Maryland. The Operating
Partnership is a Delaware limited partnership. Our principal executive office is
located at 103 Eisenhower Parkway, Roseland, New Jersey 07068, telephone
(973) 228-6111.
RECENT DEVELOPMENTS
In March 2002, we completed two unrelated acquisitions of interests in
outlet centers having a combined purchase price of $103.3 million.
We acquired the 50% interest in Orlando Premium Outlets owned by Simon
Property Group, a 430,000 square-foot center located between Disney World and
Sea World developed jointly by us and Simon in 2000. The purchase price was
$76.3 million, which was paid $46.6 million in cash, with the balance
represented by the assumption of Simon's share of existing mortgage indebtedness
on the property. The remaining 50% interest in this center is already owned by
us.
We acquired from Prime Retail, Inc. for $27 million of cash Prime Outlets at
Edinburgh, a 305,000 square-foot outlet center located in Edinburgh, Indiana, 40
miles south of Indianapolis. This center is currently 98% leased to tenants,
including Eddie Bauer, GAP, Nautica, Nike and Tommy Hilfiger.
4
RISK FACTORS
Your investment in the securities involves risks. In consultation with your
own financial and legal advisors, you should carefully consider, among other
factors, the matters described below before deciding whether an investment in
the securities is suitable for you.
WE COULD INCUR ADDITIONAL DEBT, WHICH COULD ADVERSELY AFFECT THE FUNDS WE
RECEIVE FROM OPERATIONS
Our organizational documents do not contain any limitation on the amount or
percentage of indebtedness that we can incur. The Indenture, however, will
contain limits on our ability to incur indebtedness. Our board of directors
could alter current debt-to-market capitalization and coverage ratios at its
discretion. At December 31, 2001, our debt-to-market capitalization was
approximately 31%, while our interest coverage ratio was approximately 4.3
times. Debt-to-market capitalization is the ratio of our total outstanding debt
to the market value of our outstanding common stock including conversion of
operating partnership units to common stock plus the liquidation preference
value of outstanding preferred stock and units and total debt outstanding as of
December 31, 2001. Interest coverage is the ratio of operating income before
interest expense and depreciation expense to interest expense for the twelve
months ended December 31, 2001. If our policy limiting borrowing were changed,
we could become more highly leveraged. This could result in an increase in debt
service that could adversely affect the funds we receive from operations. An
increase in debt service could also affect our ability to make expected
distributions to stockholders and result in an increased risk of default on our
obligations.
LOSS OF ONE OF OUR PRIME REVENUE GENERATING CENTERS OR REGIONAL ECONOMIC
DOWNTURNS COULD ADVERSELY IMPACT OUR REVENUES
Approximately 21% and 23% of our revenues for the years ended December 31,
2001 and 2000 were derived from Woodbury Common Premium Outlets located in New
York. The loss of this center or a material decrease in the revenues received
from this center could have a material adverse effect on us. In addition,
approximately 28% of our revenues for the years ended December 31, 2001 and 2000
were derived from our centers in California. The loss of Woodbury Common Premium
Outlets or the effects of an economic downturn in New York or California could
cause our revenues to decrease significantly.
CHELSEA'S GUARANTEES ARE EFFECTIVELY SUBORDINATED TO THE EXISTING AND FUTURE
LIABILITIES OF THE OPERATING PARTNERSHIP
The Operating Partnership conducts Chelsea's operations. Chelsea's only
asset is its interest in the Operating Partnership. As a result, Chelsea depends
upon the receipt of distributions or other payments from the Operating
Partnership to meet its financial obligations, including obligations under any
Guarantees. Any Guarantees will be effectively subordinated to existing and
future liabilities of the Operating Partnership. At December 31, 2001, the
Operating Partnership had approximately $700 million of indebtedness outstanding
including the Operating Partnership's share of the joint venture construction
activities and guarantees of other affiliates' debt, all but $295 million of
which was unsecured. The guarantees totaled approximately $48.4 million at
December 31, 2001. The Operating Partnership is a party to a $160 million
unsecured credit facility which contains financial and operational covenants and
other restrictions with which we must comply. These include the following:
- the value of our unencumbered property must be at least 175% of the amount
of our outstanding unsecured debt
- the maintenance of a net worth of at least $348 million
- our total liabilities may not exceed 55% of the value of our assets
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- our secured debt may not exceed 30% of the value of our assets
- our occupancy rate must not be less than 90%
In addition, there are limits on:
- the amount of indebtedness we can incur
- our guarantees of debt of others
- distributions in excess of our funds from operations
- our no longer being an owner, operator or developer of retail properties
Although the Operating Partnership presently is in compliance with the
credit facility, we cannot assure you that it will continue to be in compliance
and that it will be able to continue to make distributions to Chelsea.
THE INDENTURE DOES NOT PROTECT INVESTORS WITH RESPECT TO TRANSACTIONS IN WHICH
WE MAY PARTICIPATE
The Indenture does not afford you protection in the event of the following
- a highly leveraged or similar transaction involving us, our management, or
any of our affiliates,
- a change of control, or
- certain reorganizations, restructurings, mergers or similar transactions
involving us.
OWNERSHIP LIMITATIONS AND MARYLAND LAW MAY PRECLUDE THE ATTEMPTS OF THIRD
PARTIES TO ACQUIRE CONTROL OF CHELSEA, EVEN THOUGH SUCH ACQUISITIONS MAY BE
BENEFICIAL TO CERTAIN STOCKHOLDERS
In order to qualify as a REIT, not more than 50% in value of our stock may
be owned by five or fewer individuals. In order to maintain our status as a
REIT, Chelsea's Articles of Incorporation prohibit ownership of more than 7% of
our outstanding common stock by any person. Such restriction will likely
preclude a third party's attempt to acquire control of us without the consent of
our Board of Directors. This would be the case even if a change in control were
in the interest of stockholders.
Maryland law contains restrictions on third party attempts to acquire
control of us, including the following:
- prohibits us from engaging in a merger or business combination with a 10%
or greater stockholder, unless our board approves the transaction in
advance
- eliminates the voting rights of persons who acquire 20% or more of our
stock unless approved by holders of at least two-thirds of our voting
rights
- requires approval by holders of at least two-thirds of our voting rights
for mergers or business combinations
THE REQUIRED CONSENT OF THE OPERATING PARTNERSHIP FOR MERGERS OR OTHER
SIGNIFICANT CORPORATE ACTION MAY PRECLUDE A CHANGE IN CONTROL
So long as the limited partners own 10% of the capital of the Operating
Partnership, the Operating Partnership may merge, consolidate or engage in any
combination with another person or sell all or substantially all of its assets
only if approved by the holders of a majority of the limited partnership units.
The limited partners currently own 14.4% of the capital of the Operating
Partnership.
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OUR STAGGERED BOARD OF DIRECTORS COULD DISCOURAGE A THIRD PARTY FROM MAKING A
TENDER OFFER OR OTHERWISE ATTEMPTING TO OBTAIN CONTROL OF US
Chelsea's articles of incorporation and by-laws require that Chelsea's Board
of Directors be comprised of three classes of directors. The terms of the three
classes of directors will expire in 2002, 2003 and 2004. Directors for each
class will be chosen for a three-year term. As the directors only can be removed
for cause, the staggered terms for directors may affect the stockholders'
ability to effect a change in our control even if a change in control were in
the stockholders' interest.
THE ISSUANCE OF OUR PREFERRED STOCK COULD ADVERSELY AFFECT THE RIGHTS OF HOLDERS
OF OUR COMMON STOCK AND DISCOURAGE TRANSACTIONS WHICH MIGHT OTHERWISE BE IN OUR
BEST INTERESTS
The issuance of preferred stock could adversely affect the voting power,
dividend rights and other rights of holders of common stock. When issuing
preferred stock, the Board could act in a manner that would discourage an
acquisition attempt or other transaction that some, or a majority, of the
stockholders might believe to be in our best interests or in which stockholders
might receive a premium for their shares over the then prevailing market price.
IF WE FAIL TO DISTRIBUTE TO STOCKHOLDERS 90% OF OUR NET TAXABLE INCOME, WE WILL
NO LONGER QUALIFY AS A REIT
To obtain the favorable tax treatment associated with REITs, each year
Chelsea is required to distribute to its stockholders at least 90% of its net
taxable income. Chelsea's ability to make such distributions depends upon the
receipt of distributions or other payments from the Operating Partnership.
IF WE FAIL TO CONTINUE TO QUALIFY AS A REIT, WE WOULD SUFFER ADVERSE TAX
CONSEQUENCES
We intend to operate in such a manner so as to qualify as a REIT under the
Internal Revenue Code. If we were to fail to qualify as a REIT, we would not be
allowed a deduction for distributions to stockholders in computing taxable
income. We also would be subject to federal income tax, including any applicable
alternative minimum tax, on our taxable income at regular corporate rates. In
any year in which we would not qualify as a REIT, the additional taxes imposed
upon us would significantly reduce the cash flow available for distribution to
stockholders. Additionally, unless we are entitled to relief under certain
statutory provisions, we would be unable to qualify as a REIT for four taxable
years following the year during which qualification was lost.
COMPETITION FROM OTHER MANUFACTURERS' OUTLET CENTERS MAY MAKE ACQUISITION OF
PROPERTY AND TENANTS DIFFICULT
Numerous developers and real estate companies are engaged in the development
or ownership of manufacturers' outlet centers and other commercial properties
and compete with us in seeking tenants for outlet centers. There are two public
companies, Prime Retail, Inc. and Tanger Factory Outlet Centers, Inc., who
compete with us, in addition to many privately-owned companies. According to
published sources, as of December 31, 2001, the manufacturer's outlet industry
contained approximately 55.3 million square feet of gross leaseable area. The
three publicly traded outlet companies, including us, owned or operated
approximately 55% of the industry's gross leaseable area. This creates
competition for the acquisition of prime properties and for tenants who will
lease space in the manufacturers' outlet centers that are owned or operated by
our competitors or by us.
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THE ECONOMIC PERFORMANCE AND VALUE OF CENTERS IS DEPENDENT ON MANY FACTORS, SOME
OF WHICH ARE BEYOND OUR CONTROL
Real property investments are subject to varying degrees of risk. Many
factors can affect the economic performance and values of real estate. The
factors which are not within our control include:
- changes in the economic climate, which could cause customers to spend less
money
- local conditions such as an oversupply of space or a reduction in demand
for real estate in the area, which could cause us to reduce the rents we
charge our tenants
- competition from other available space, which could reduce the rents we
charge to tenants
The factors which are within our control include:
- attractiveness of properties to tenants which would induce tenants to
lease our space and the rents they are willing to pay
- increased operating costs, which could adversely affect our results of
operations.
IF WE ARE UNABLE TO PURSUE CERTAIN DEVELOPMENT ACTIVITIES, OUR FUTURE RESULTS OF
OPERATIONS COULD BE ADVERSELY AFFECTED
We intend to pursue manufacturers' outlet center development projects,
including the expansion of existing centers. These projects generally require
capital expenditures and various forms of government and other approvals. As of
December 31, 2001, we expect to complete approximately 127,000 square feet of
gross leaseable area over the next twelve months consisting of additional phases
of three existing centers (57,000 square feet) and Rinku Premium Outlets,
outside Osaka, Japan (70,000 square feet). The balance of our financial
commitment is approximately $11 million and is fully financed through internally
generated funds, specific secured financing or through our credit facility. We
will seek to obtain permanent financing once the projects are completed and
income has been stabilized, but there can be no assurances that we will be
successful in obtaining permanent financing. If we are unable to pursue these
activities, our results of operations could be adversely affected.
THE INABILITY OF A SIGNIFICANT NUMBER OF OUR TENANTS TO MEET THEIR OBLIGATIONS
TO US WOULD ADVERSELY IMPACT OUR INCOME AND AVAILABLE FUNDS
Since substantially all of our income is derived from rental income from
real property, our income and funds for distribution would be adversely affected
if a significant number of our tenants could not meet their obligations to us or
if we could not lease a significant amount of space in our properties on
favorable lease terms. In addition, we cannot assure you that any tenant whose
lease expires in the future will renew their lease or that we will be able to
re-lease space on advantageous terms.
CERTAIN ENVIRONMENTAL RISKS MAY CAUSE US TO BE LIABLE FOR COSTS ASSOCIATED WITH
HAZARDOUS OR TOXIC SUBSTANCES
Under various federal, state and local laws, ordinances and regulations, we
may be considered an owner or operator of real property or may have arranged for
the disposal or treatment of hazardous or toxic substances. As such, we may
become liable for the costs of removal or remediation of certain hazardous
substances released on or in our property or disposed of by us. We could become
liable for other potential costs, including governmental fines and injuries to
persons and property, that could relate to hazardous or toxic substances. Such
liability may be imposed whether or not we knew of, or were responsible for, the
presence of such hazardous or toxic substances.
8
USE OF PROCEEDS
The net proceeds from the sale of the securities will be used for general
corporate purposes, which may include the repayment of existing indebtedness,
the development or acquisition of additional properties as suitable
opportunities arise and the renovation, expansion and improvement of our
existing properties. Any proceeds from the sale of common stock, preferred stock
or depositary shares must be invested in the Operating Partnership. The
Operating Partnership will use such proceeds for the above-described purposes.
The applicable prospectus supplement will contain further details on the use of
net proceeds.
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RATIOS OF EARNINGS TO FIXED
CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following table sets forth our ratio of earnings to fixed charges for
the periods shown:
YEAR ENDED DECEMBER 31,
- -----------------------------------------------------------------
2001 2000 1999 1998 1997
- --------------------- -------- -------- -------- --------
2.6x 2.6x 2.5x 2.3x 2.4x
The following table sets forth our ratio of earnings to combined fixed
charges and preferred stock dividends for the periods shown:
YEAR ENDED DECEMBER 31,
- -----------------------------------------------------------------
2001 2000 1999 1998 1997
- --------------------- -------- -------- -------- --------
2.3x 2.3x 2.2x 2.0x 2.3x
For purposes of computing the ratios, earnings consist of income from
continuing operations after depreciation and before minority interest and fixed
charges, exclusive of interest capitalized and amortization of loan costs
capitalized. Fixed charges consist of interest expense, including interest costs
capitalized, the portion of rent expense representative of interest and total
amortization of expensed and capitalized debt issuance costs. Preferred stock
includes dividends paid thereon.
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DESCRIPTION OF DEBT SECURITIES
The debt securities will be issued under an Indenture among us and State
Street Bank and Trust Company, as trustee. The Indenture is an exhibit to the
Registration Statement and is incorporated herein by reference. You can inspect
the Indenture at the corporate trust office of the Trustee at 2 Avenue de
Lafayette, Boston, Massachusetts or as described under "Where You Can Find More
Information."
This section, along with the description in the applicable prospectus
supplement, is a summary of the material provisions of the Indenture and is not
complete. It does not restate the Indenture in its entirety. This section, along
with the description in the applicable prospectus supplement, are qualified in
their entirety by the provisions of the Indenture. We urge you to read the
Indenture because it, and not these descriptions, defines your rights as a
holder of the debt securities. Whenever defined terms are used, but not defined
in this prospectus, the terms have the meanings given them in the Indenture.
GENERAL
The debt securities will be direct, unsecured obligations of the Operating
Partnership and will rank equally with all other unsecured and unsubordinated
indebtedness of the Operating Partnership. At December 31, 2001, the total
outstanding debt of the Operating Partnership was approximately $700 million
including the Operating Partnership's share of the joint venture construction
activities and guarantees of other affiliates' debt, all but $295 million of
which was unsecured debt. The guarantees totaled approximately $48.4 million at
December 31, 2001, Guarantees totaling approximately $11.8 million at
December 31, 2001 contain provisions which reduce the Operating Partnership's
obligation as certain conditions including cash flow coverages are achieved. The
Indenture permits:
(a) the debt securities to be issued without limit as to aggregate principal
amount;
(b) the debt securities to be issued in one or more series and at various
times;
(c) a series to be reopened, without the consent of the holders of the debt
securities of such series, for issuances of additional debt securities of
the series.
If any debt securities issued by the Operating Partnership are rated below
investment grade at the time of issuance, such debt securities will be fully and
unconditionally guaranteed by Chelsea as to payment of principal, premium, if
any, and interest.
There may be more than one trustee with respect to one or more series of
debt securities. Any trustee under the Indenture may resign or be removed with
respect to one or more series of debt securities. If a trustee is removed or
resigns from a series, a successor trustee may be appointed to act with respect
to the series. If two or more persons are acting as trustee with respect to
different series of debt securities, each trustee will be a trustee of a trust
separate and apart from the trust administered by any other trustee. Except as
otherwise indicated, any action described in this prospectus to be taken by a
trustee may be taken by each trustee with respect to the one or more series of
debt securities for which it is trustee under the Indenture.
Each prospectus supplement and any applicable pricing supplement will
describe the terms of any debt securities we issue. The terms may include:
(1) the title of the debt securities;
(2) the aggregate principal amount of the debt securities and any limit on
the aggregate principal amount;
(3) the percentage of the principal amount at which the debt securities will
be issued and, if other than the principal amount of the debt securities,
the portion of the principal amount of the debt securities payable upon
acceleration of their maturity;
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(4) the date or dates on which the principal of the debt securities will be
payable;
(5) the rate or rates, which may be fixed or variable, at which the debt
securities will bear interest, if any;
(6) the date or dates from which any interest will accrue, the interest
payment dates, the record dates for the interest payment dates, the
person to whom the interest will be payable, and how interest will be
calculated if other than that of a 360-day year of twelve 30-day months;
(7) the place or places where payments may be made on the debt securities
and the place or places where the debt securities may be presented for
registration of transfer or exchange and where notices or demands to or
upon the Operating Partnership in respect of the debt securities and the
Indenture may be served;
(8) if applicable, the period or periods within which, the price or prices
at which and the terms and conditions upon which the debt securities may
be redeemed at the option of the Operating Partnership;
(9) the obligation, if any, of the Operating Partnership to redeem, repay or
purchase the debt securities pursuant to any sinking fund or analogous
provision or at the option of a holder of the debt securities, and the
periods, prices, terms and conditions of such redemption or purchase;
(10) if other than U.S. dollars, the currency or currencies of principal and
any premium and interest payments on the debt securities;
(11) any index, formula or other method used to determine the amount of
principal, premium and interest payments on the debt securities and the
manner in which such amounts shall be determined;
(12) the events of default or covenants of the debt securities, to the
extent different from or in addition to those described herein;
(13) whether the debt securities will be issued in certificated and/or
book-entry form;
(14) whether the debt securities will be in registered or bearer form and,
if in registered form, the denominations thereof if other than $1,000 and
any integral multiple thereof and, if in bearer form, the denominations
thereof if other than $5,000 and terms and conditions relating thereto;
(15) with respect to any series of debt securities rated below investment
grade at the time of issuance, the Guarantees;
(16) if the Indenture's defeasance and covenant defeasance provisions are to
be inapplicable or any modification of such provisions;
(17) if the debt securities are to be issued upon the exercise of debt
warrants, the time, manner and place for the debt securities to be
authenticated and delivered;
(18) whether and under what circumstances the Operating Partnership will pay
additional amounts on the debt securities in respect of any tax,
assessment or governmental charge and, if so, whether the Operating
Partnership will have the option to redeem the debt securities instead of
making such payment;
(19) with respect to any debt securities that provide for optional
redemption or prepayment upon the occurrence of certain events, such as a
change of control of the Operating Partnership:
(a) the possible effects of such provisions on the market price of our
securities;
12
(b) the possible effects of such provisions in deterring certain mergers,
tender offers or other takeover attempts;
(c) the intention of the Operating Partnership to comply with the
requirements of Rule 14e-1 under the Exchange Act and any other
applicable securities laws in connection with such provisions;
(d) whether the occurrence of the specified events may give rise to
cross-defaults on other indebtedness that would effectively
subordinate the payment on such debt securities; and
(e) if there is any limit on the Operating Partnership's financial or
legal ability to repurchase the debt securities upon the occurrence
of a specified event and the impact under the Indenture of such a
failure, including whether and under what circumstances such a
failure may constitute an Event of Default;
(20) if other than the Trustee, the identity of each security registrar
and/or paying agent; and
(21) any other terms of the debt securities.
The Operating Partnership may issue debt securities that provide for less
than their entire principal amount to be payable upon the declaration of
acceleration of their maturities. If material or applicable, the applicable
prospectus supplement will describe any special U.S. Federal income tax,
accounting and other considerations applicable to these types of debt
securities.
We may enter into certain transactions, such as the sale of all or
substantially all of our assets or the merger or consolidation of us, that would
increase the amount of indebtedness or substantially reduce or eliminate the
Operating Partnership's assets. These types of transactions might adversely
affect the Operating Partnership's ability to service the debt securities.
Although the indenture does not presently contain any provisions that would
limit our ability to incur indebtedness, it is expected that upon the issuance
of debt securities limitations on indebtedness will be contained in a supplement
to the indenture which will be described in the applicable prospectus
supplement. The indenture does not afford holders protection in the event of
- a highly leveraged or similar transaction involving us
- a change of control
- a reorganization, restructuring, merger or similar transaction involving
us that may adversely affect holders of debt securities.
In addition, restrictions on ownership and transfers of our common stock and
preferred stock, which are designed to preserve our status as a REIT, could
prevent or hinder a change of control. You should review the applicable
prospectus supplement for information about any deletions from, modifications of
or additions to the events of default or the covenants that are described below.
Except as otherwise described in the applicable prospectus supplement,
Chelsea's Board of Directors or the Trustee can waive, with respect to a series
of debt securities, compliance with certain covenants, only if the holders of a
majority in principal amount of all outstanding debt securities of such series
consent to the waiver. These covenants may also be modified to the extent that
the defeasance and covenant defeasance provisions of the Indenture apply to such
series of debt securities.
GUARANTEES
Chelsea will fully, unconditionally and irrevocably guarantee the due and
punctual payment of principal of, premium, if any, and interest on any debt
securities rated below investment grade at the time of issuance by the Operating
Partnership, and the due and punctual payment of any sinking fund payments
thereon, when such payments become due and payable.
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DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless the applicable prospectus supplement states otherwise, the Operating
Partnership can issue any registered debt securities, other than registered
securities issued in global form, in denominations of $1,000 and any integral
multiple of $1,000. The Operating Partnership can issue debt securities that are
bearer securities, other than bearer securities issued in global form, in
denominations of $5,000. Debt securities issued in global form may be of any
denomination.
Unless the applicable prospectus supplement states otherwise, the principal
of and premium, if any, and interest on any series of debt securities will be
payable at the corporate trust office of the Trustee, initially located at 2
Avenue de Lafayette, Boston, Massachusetts. At the Operating Partnership's
option, payment of interest can be made by check mailed to the address of the
person entitled to the interest. Payment can also be made by wire transfer of
funds to such person at an account maintained within the United States.
Any interest not punctually paid or duly provided for on any interest
payment date with respect to a debt security will cease to be payable to the
holder on the applicable record date. The interest may then either be paid to
the person in whose name such debt security is registered at the close of
business on a special record date for the payment of the defaulted interest
fixed by the Trustee, or may be paid at any time in any other lawful manner, as
more completely described in the Indenture.
Debt securities of any series, subject to limits on debt securities issued
in book-entry form, will be exchangeable for other debt securities of the same
series and of equal aggregate principal and type in any authorized
denominations. The holder of the debt securities can exchange the debt
securities upon surrender of such debt securities at the corporate trust office
of the Trustee.
In addition, subject to certain limitations imposed upon debt securities
issued in book-entry form, debt securities may be presented for registration of
transfer at the corporate trust office of the Trustee. Every debt security
presented for registration of transfer will be duly endorsed or accompanied by a
written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any debt securities. The Trustee or the
Operating Partnership may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection with any registration of
transfer or exchange. At any time we may change transfer agents or approve a
change in the location through which any transfer agent acts, except that we
will be required to maintain a transfer agent in each place of payment for each
series of debt securities. At any time, we may designate additional transfer
agents for any series of debt securities.
The Operating Partnership or the Trustee will not be required:
(a) to issue, exchange or register the transfer of any debt security of any
series to be redeemed for a period of 15 days after the selection of the
debt securities to be redeemed; or
(b) to exchange or register the transfer of any debt security that was
selected, called or is being called for redemption, except for the
unredeemed portion of any debt security being redeemed in part; or
(c) to exchange any bearer security so selected for redemption except that
such a bearer security may be exchanged for a registered debt security of
that series and like tenor, PROVIDED that such registered debt security
shall be simultaneously surrendered for redemption; or
(d) to issue, exchange or register the transfer of any debt security which
has been surrendered for repayment at the option of the holder, except
the portion, if any, of such debt security not to be so repaid.
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MERGER, CONSOLIDATION OR SALE
We may consolidate with, or sell, lease or convey all or substantially all
of our assets to, or merge with or into, any other entity, provided that:
(a) we shall be the continuing entity, or any other successor entity shall
expressly assume payment of the principal of, premium, if any, and
interest on all the debt securities and the due and punctual performance
and observance of all of the covenants and conditions contained in the
Indenture;
(b) immediately after giving effect to such transaction, no Event of Default
under the Indenture, and no event which, after notice or the lapse of
time, or both, would become such an Event of Default, shall have occurred
and be continuing; and
(c) an officer's certificate and legal opinion covering such conditions
shall be delivered to the Trustee.
CERTAIN COVENANTS
LIMITATIONS ON INCURRENCE OF DEBT. The Operating Partnership will not, and
will not permit any subsidiary, to:
(a) incur any debt, other than intercompany debt that is subordinate in
right of payment to the debt securities, if the incurrence of such
additional debt would cause the aggregate principal amount of all
outstanding debt of the Operating Partnership and its subsidiaries on a
consolidated basis to be greater than 60% of the sum of (i) the Operating
Partnership's total assets as of the end of the calendar quarter prior to
the incurrence of such additional debt and (ii) the increase in total
assets from the end of such quarter including, without limitation, any
increase in total assets resulting from the incurrence of such additional
debt.
(b) incur any debt secured by any mortgage, lien, charge, pledge,
encumbrance or security interest of any kind upon any of the property of
the Operating Partnership or any subsidiary, whether owned at, or
acquired after the date of the Indenture, if the incurrence of such
secured debt would cause the aggregate principal amount of all
outstanding secured debt of the Operating Partnership and its
subsidiaries on a consolidated basis to exceed 40% of the Operating
Partnership's adjusted total assets.
(c) incur any debt if the ratio of consolidated income available for debt
service to the annual service charge for the four consecutive fiscal
quarters most recently ended prior to the date on which such additional
debt is to be incurred shall have been less than 2.0 to 1, on a pro forma
basis after giving effect to the incurrence of such debt and to the
application of the proceeds from such debt, and calculated on the
assumption that:
(1) such debt and any other debt incurred by the Operating Partnership or
its subsidiaries since the first day of the four-quarter period and
the application of the proceeds from such debt, including to
refinance other debt, had occurred at the beginning of the
four-quarter period,
(2) the repayment or retirement of any other debt by the Operating
Partnership or its Subsidiaries since the first day of the
four-quarter period had been incurred, repaid or retired at the
beginning of the four-quarter period except that, in making such
computation, the amount of debt under any revolving credit facility
shall be computed based upon the average daily balance of such debt
during such period,
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(3) the income earned on any increase in adjusted total assets since the
end of the four-quarter period had been earned, on an annualized
basis, during the four-quarter period, and
(4) in the case of any acquisition or disposition by the Operating
Partnership or any subsidiary of any asset or group of assets since
the first day of the four-quarter period, including, without
limitation, by merger, stock purchase or sale, or asset purchase or
sale, such acquisition or disposition or any related repayment of
debt had occurred as of the first day of such period with the
appropriate adjustments with respect to the acquisition or
disposition being included in such pro forma calculation.
Debt is "incurred" by the Operating Partnership and its subsidiaries on a
consolidated basis whenever the Operating Partnership and its subsidiaries on a
consolidated basis shall create, assume, guarantee or otherwise become liable
for the debt.
LIMITATIONS ON DISTRIBUTIONS. Other than distributions payable in the
Operating Partnership's equity securities for the purpose of acquiring interests
in real property or otherwise, the Operating Partnership will make any
distribution only (a) if such distribution will not cause or continue a default
under the Indenture or event of default under any mortgage, indenture or
instrument under which there may be issued, or by which there may be secured or
evidenced, any of our debt and (b) the aggregate sum of all distributions made
after the date of the Indenture shall not exceed the sum of (x) 95% of the
aggregate cumulative funds from operations of the Operating Partnership accrued
on a cumulative basis from the date of the Indenture until the end of the last
fiscal quarter prior to the contemplated payment, and (y) the aggregate net cash
proceeds received by the Operating Partnership after the date of the Indenture
from the issuance and sale of our capital stock. If the aggregate principal
amount of all of our outstanding debt on a consolidated basis is less than 60%
of adjusted total assets, then the foregoing limitation will not apply to any
distribution or other action which is necessary to maintain our REIT status.
Notwithstanding the foregoing, the Operating Partnership can pay any
distribution within 30 days of the declaration of the distribution if, at the
date of declaration, the distribution would have complied with the provisions
listed above.
EXISTENCE. Except as expressly permitted, we must preserve and keep in full
force and effect our existence, rights and franchises; PROVIDED, HOWEVER, that
we are not required to preserve any right or franchise if we determine that such
preservation is no longer desirable in the conduct of our businesses and that
its loss is not materially disadvantageous to the holders of the debt
securities.
MAINTENANCE OF PROPERTIES. The Operating Partnership must maintain and keep
in good condition, repair and working order its material properties used or
useful in the conduct of its or any subsidiary's business. The Operating
Partnership will keep its material properties supplied with all necessary
equipment. The Operating Partnership will make all necessary repairs, renewals,
replacements, betterments and improvements to its material properties that, in
the Operating Partnership's judgment, are necessary for the business carried on
in connection with the material properties to be properly and advantageously
conducted at all times. The Operating Partnership and its subsidiaries will not
be prevented from selling or otherwise disposing for value their respective
properties in the ordinary course of business.
INSURANCE. The Operating Partnership must, and must cause each of its
subsidiaries to, keep all of its insurable properties insured against loss or
damage equal to their then full insurable value with financially sound and
reputable insurance companies.
PAYMENT OF TAXES AND OTHER CLAIMS. Before they become delinquent, we must
pay or discharge:
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(a) all taxes, assessments and governmental charges levied or imposed on us
or any subsidiary or upon our income, profits or property or that of any
subsidiary, and
(b) all lawful claims for labor, materials and supplies that, if unpaid,
might by law become a lien upon our property.
We are not required to pay or discharge any tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings.
PROVISION OF FINANCIAL INFORMATION. The Operating Partnership will provide
the holders of debt securities with copies of its annual reports and quarterly
reports. Whether or not the Operating Partnership is subject to Section 13 or
15(d) of the Exchange Act and for so long as any debt securities are
outstanding, the Operating Partnership will, to the extent permitted under the
Exchange Act, be required to file with the SEC the annual reports, quarterly
reports and other documents which the Operating Partnership would have been
required to file with the SEC pursuant to such Section 13 or 15(d) if the
Operating Partnership were so subject. The Operating Partnership will
(a) transmit by mail to all holders of debt securities without cost to such
holders, copies of the annual reports and quarterly reports which the Operating
Partnership would have been required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act if the Operating Partnership were
subject to such Sections and (b) file with the Trustee copies of the annual
reports, quarterly reports and other documents which the Operating Partnership
would have been required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act if the Operating Partnership were subject to such Sections. If
the Operating Partnership cannot file such documents with the SEC under the
Exchange Act, the Operating Partnership will, upon written request and payment
of duplication and delivery costs, supply copies of such documents to any
prospective holder of debt securities.
ADDITIONAL COVENANTS. Any additional or different covenants with respect to
any series of debt securities will be set forth in the prospectus supplement
relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The following events are "Events of Default" with respect to any series of
debt securities issued under the Indenture:
(a) failure to pay interest on any debt securities of a series within
30 days after the interest becomes due;
(b) failure to pay the principal or premium when due on any debt securities
of a series;
(c) failure to make any sinking fund payment as required for any debt
security of a series;
(d) default in the performance of any other of our covenants contained in
the Indenture applicable to the series of debt securities in question, if
such default has continued for 60 days after written notice as provided
in the Indenture;
(e) failure to pay an aggregate principal amount exceeding $5,000,000 of any
evidence of recourse indebtedness or any mortgage, indenture or other
instrument under which such indebtedness is issued or by which such
indebtedness is secured, if:
(x) the default occurred after the expiration of any applicable grace
period; and
(y) the default resulted in the acceleration of the maturity of such
indebtedness; and
(z) such indebtedness is not discharged or such acceleration is not
rescinded or annulled.
(f) certain events involving any bankruptcy, insolvency or reorganization of
us or any significant subsidiary as defined in Regulation S-X of the
Securities Act; and
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(g) any other Event of Default provided with respect to a particular series
of debt securities.
If an Event of Default occurs and is continuing, then the Trustee or the
holders of 25% in principal amount of the outstanding debt securities of that
series may declare the principal amount or, if the debt securities of that
series are Original Issue Discount Securities or Indexed Securities, a specified
portion of the principal amount of all of the debt securities of that series to
be due and payable immediately. The holders of a majority in principal amount of
the debt securities then outstanding or of such series affected may revoke and
cancel such declaration and its consequences if:
(a) we have deposited with the Trustee all required payments of the
principal of, premium if any, and interest on the debt securities then
outstanding or of such series affected, plus certain fees, expenses,
disbursements and advances of the Trustee; and
(b) all Events of Default, other than the non-payment of accelerated
principal of, or specified portion thereof, or premium or interest on the
debt securities of such series or of all outstanding debt securities have
been cured or waived as provided in the Indenture.
Holders of a majority in principal amount of the outstanding debt securities
of any series or of all debt securities then outstanding under the Indenture may
waive any past default with respect to such series and its consequences, except
a default:
(a) in the payment of the principal of, premium, or interest on any debt
security of such series; or
(b) in respect of a covenant or provision contained in the Indenture that
cannot be modified or amended without the consent of the holder of each
outstanding debt security affected thereby.
Unless the default has been cured or waived, the Trustee will notify the
holders of debt securities within 90 days of such default under the Indenture;
PROVIDED, HOWEVER, that the Trustee may withhold notice to the holders of any
series of debt securities of any default with respect to such series if
specified responsible officers of the Trustee consider such withholding to be in
the interest of such holders. The Trustee may not withhold notice of a default
in the payment of the principal, premium, or interest on any debt security or of
a default in the payment of any sinking fund installment relative to any debt
security.
If the Trustee fails to act for 60 days after it has received both a written
request to institute proceedings in respect of an Event of Default from the
holders of 25% in principal amount of the outstanding debt securities of the
affected series and an offer of reasonable indemnity, the holders of debt
securities of any series then can institute any proceedings with respect to the
Indenture or for any remedy under the Indenture. This provision will not prevent
any holder of debt securities from instituting suit for the enforcement of
payment of the principal of, premium, if any, and interest on such debt
securities when due.
If holders of any series of debt securities then outstanding have offered to
the Trustee reasonable security or indemnity, the Trustee must exercise any of
its rights or powers under the Indenture at the request or direction of such
holders. The holders of a majority in principal amount of the outstanding debt
securities of any series, or the holders of all debt securities then outstanding
under the Indenture, as the case may be, shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or of exercising any trust or power conferred upon the Trustee. The
Trustee may refuse to follow any direction which is in conflict with any law or
the Indenture, or which may be unduly prejudicial to the holders of debt
securities of such series not joining in the proceeding.
Within 120 days after the close of each fiscal year, we must deliver to the
Trustee a certificate, signed by an officer, stating whether or not such officer
has knowledge of any default under the Indenture and, if so, specifying each
such default and the nature and status thereof.
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MODIFICATION OF THE INDENTURE
The Indenture may be modified and amended with the consent of the holders of
a majority in principal amount of all outstanding debt securities or series of
outstanding debt securities which are affected by such modification or
amendment. Only with the consent of each holder of any debt security affected,
may an amendment or modification to the Indenture:
(a) change the stated maturity of the principal of, premium, if any, or any
installment of interest on, the debt security;
(b) reduce the principal amount of, or the rate or amount of interest on, or
any premium payable upon redemption of, the debt security;
(c) reduce the amount of principal of an original issue discount security
that would be due and payable upon declaration of acceleration of the
maturity thereof or would be provable in bankruptcy, or adversely affect
any right of repayment of the holder of such debt security;
(d) change the place of payment, or currency for payment of principal of,
premium, if any, or interest on the debt security;
(e) impair the right to institute suit for the enforcement of any payment on
or with respect to the debt security;
(f) reduce the percentage of outstanding debt securities of any series
necessary to modify or amend the Indenture, to waive compliance with
certain provisions of the Indenture or certain defaults and consequences
under the Indenture or to reduce the quorum or voting requirements set
forth in the Indenture;
(g) modify or affect in any manner adverse to the holders the terms and
conditions of our obligations in respect of the payment of principal,
premium, if any, and interest on any Guaranteed Securities;
(h) modify any of the foregoing provisions or any of the provisions relating
to the waiver of certain past defaults or certain covenants, except to
increase the required percentage to effect such action or to provide that
certain other provisions may not be modified or waived without the
consent of the holder of the debt security.
Holders of a majority in principal amount of a series of outstanding debt
securities may waive our compliance with certain covenants relating to any
series of debt securities in the Indenture.
We and the Trustee may modify or amend the Indenture without the consent of
any holder of debt securities for any of the following purposes:
(a) to evidence the succession of another person to the Operating
Partnership as obligor;
(b) to evidence our successor as the guarantor under the Indenture;
(c) to add to the covenants for the benefit of the holders of all or any
series of debt securities;
(d) to surrender any right or power conferred upon us in the Indenture;
(e) to add Events of Default for the benefit of the holders of all or any
series of debt securities;
(f) to add or change any provisions of the Indenture to facilitate the
issuance of, or to liberalize certain terms of, debt securities in bearer
form, or to permit or facilitate the issuance of debt securities in
uncertificated form, PROVIDED that such action shall not materially and
adversely affect the interests of the holders of the debt securities of
any series;
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(g) to amend or supplement any provisions of the Indenture, PROVIDED that no
such amendment or supplement shall materially adversely affect the
interests of the holders of any debt securities then outstanding;
(h) to secure the debt securities;
(i) to establish the form or terms of debt securities of any series;
(j) to provide for a successor Trustee's acceptance of appointment or
facilitate the administration of the trusts under the Indenture by more
than one trustee;
(k) to cure any ambiguity, defect or inconsistency in the Indenture,
PROVIDED that such action shall not materially and adversely affect the
interests of holders of debt securities of any series;
(l) to supplement any of the provisions of the Indenture to the extent
necessary to permit or facilitate defeasance and discharge of any series
of such debt securities, PROVIDED that such action shall not materially
adversely affect the interests of the holders of the debt securities of
any series.
With respect to guaranteed securities, we or our subsidiaries may, without
the consent of any holder of debt securities, directly assume the payment of the
principal of and/or any premium and interest on all the guaranteed securities.
We or our subsidiaries may assume the performance of every covenant of the
Indenture required to be performed or observed by the Operating Partnership.
Upon assumption, we or our subsidiaries will succeed to, and be substituted for
and may exercise every right and power of, the Operating Partnership under the
Indenture. The Operating Partnership shall be released from all obligations and
covenants with respect to the Guaranteed Securities. We can enter into such
assumption only if we have delivered to the Trustee (a) an officers' certificate
and an opinion of counsel, stating, among other things, that the Guarantee and
all other of our covenants in the Indenture remain in full force and effect and
(b) an opinion of independent counsel that the holders of guaranteed securities
shall have no United States Federal tax consequences as a result of such
assumption, and that, if listed on the New York Stock Exchange, that such listed
debt securities shall not be delisted as a result of such assumption.
HOW A MAJORITY IS DETERMINED
To determine whether the holders of the requisite principal amount of
outstanding debt securities of a series have given any request, demand,
authorization, direction, notice, consent or waiver under the Indenture or
whether a quorum is present at a meeting of holders of debt securities,
(a) the principal amount of an original issue discount security that shall
be deemed to be outstanding shall be the amount of the principal that
would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity of the original issue
discount security,
(b) the principal amount of a debt security denominated in a foreign
currency that shall be deemed outstanding shall be the U.S. dollar
equivalent, determined on the issue date for such debt security, of the
principal amount or, in the case of an original issue discount security,
the U.S. dollar equivalent on the issue date of such debt security of the
amount determined as provided in (a) above,
(c) the principal amount of an indexed security that shall be deemed
outstanding shall be the principal face amount of such Indexed Security
at original issuance, unless the Indenture otherwise provides; and
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(d) debt securities owned by the Operating Partnership or any other obligor
upon the debt securities or any affiliate of the Operating Partnership or
of such other obligor shall be disregarded.
MEETINGS OF THE HOLDERS OF DEBT SECURITIES
The Trustee can call a meeting of the holders of debt securities of any
series at any time. Upon request and notice, we, in respect of a series of
guaranteed securities, or the holders of 10% in principal amount of the
outstanding debt securities of such series can call a meeting. Except for any
consent that must be given by the holder of each debt security affected by
certain modifications and amendments of the Indenture, any resolution presented
at a meeting or adjourned meeting duly reconvened at which a quorum is present
will be permitted to be adopted by the affirmative vote of the holders of a
majority in principal amount of the outstanding debt securities of that series;
PROVIDED, HOWEVER, that, except as referred to above, any resolution that may be
made, given or taken by the holders of a specified percentage, which is less
than a majority, in principal amount of the outstanding debt securities of a
series may be adopted at a meeting or adjourned meeting duly reconvened at which
a quorum is present by the affirmative vote of the holders of such specified
percentage. Any resolution passed or decision taken at any meeting of holders of
debt securities of any series duly held in accordance with the Indenture will be
binding on all holders of debt securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount of the
outstanding debt securities of a series; PROVIDED, HOWEVER, that if any action
is to be taken at such meeting with respect to a consent or waiver which may be
given by the holders of a specified percentage in principal amount of the
outstanding debt securities of a series, the persons holding or representing
such specified percentage will constitute a quorum.
Notwithstanding the foregoing provisions, if the Indenture expressly
provides that any action to be taken at a meeting of holders of debt securities
of any series may be taken by the holders of a specified percentage which is
less than a majority in principal amount of the outstanding debt securities of a
series, then such action may be taken at a meeting at which a quorum is present
by the affirmative vote of holders of such specified percentage in principal
amount of the outstanding debt securities of such series.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Operating Partnership may discharge certain obligations to holders of
any series of debt securities that have not already been delivered to the
Trustee for cancellation and that either have become due and payable or will
become due and payable within one year, or will be scheduled for redemption
within one year, by irrevocably depositing with the Trustee, in trust, funds in
such currency or currencies, currency unit or units or composite currency or
currencies in which such debt securities are payable in an amount sufficient to
pay the entire indebtedness on such debt securities in respect of principal,
premium, if any, and interest to the date of such deposit, if such debt
securities have become due and payable, or to the stated maturity or redemption
date, as the case may be.
Unless the Indenture's defeasance provisions are made inapplicable to the
debt securities of or within any series, the Operating Partnership may elect
either (a) to defease and discharge itself and Chelsea, if such debt securities
are guaranteed securities, from any and all obligations with respect to such
debt securities or (b) to release itself and Chelsea, if such debt securities
are guaranteed securities, from obligations with respect to such debt securities
under the Indenture and, if provided under certain sections of the Indenture,
our obligations with respect to any other covenant. Any omission to comply with
such obligations shall not constitute a default or an Event of Default with
respect to such debt securities, a covenant defeasance, in either case upon the
irrevocable deposit by the Operating Partnership or Chelsea, if the debt
securities are guaranteed securities, with the Trustee,
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in trust, of funds, which may include government obligations which through the
scheduled payment of principal and interest, will provide money in an amount
sufficient to pay the principal of, and premium, if any, and interest on such
debt securities, and any mandatory sinking fund or analogous payments, when due.
Chelsea, if such debt securities are guaranteed securities, and the Operating
Partnership will be required to pay additional amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on the debt securities. We will retain the obligations to
register the transfer or exchange of such debt securities, to replace temporary
or mutilated, destroyed, lost or stolen debt securities, to maintain an office
or agency in respect of such debt securities and to hold moneys for payment in
trust.
The Operating Partnership can establish such a trust if, among other things,
we have delivered to the Trustee an opinion of counsel stating that:
(a) the holders of such debt securities will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of such defeasance
or covenant defeasance, and
(b) will be subject to U.S. federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred.
The opinion of counsel, in the case of defeasance, must refer to and be
based upon a ruling of the Internal Revenue Service or a change in applicable
United States federal income tax law occurring after the date of the Indenture.
Unless the prospectus supplement otherwise provides, if, after the Operating
Partnership has effected defeasance or covenant defeasance with respect to debt
securities of any series, (a) the holder of a debt security of such series is
entitled to and elects to receive payment in a currency, currency unit or
composite currency other than that in which such deposit has been made in
respect of such debt security, or (b) a Conversion Event (as defined below)
occurs in respect of the currency, currency unit or composite currency in which
such deposit has been made, the indebtedness represented by such debt security
will be fully discharged and satisfied through the payment of the principal of
and premium, if any, and interest on such debt security as they become due out
of the proceeds yielded by converting the amount deposited in respect of such
debt security into the currency, currency unit or composite currency in which
such debt security becomes payable as a result of such election or such
Conversion Event. The conversion will be based on the applicable market exchange
rate.
"Conversion Event" means the cessation of use of (a) a currency, currency
unit or composite currency both by the government of the country which issued
such currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community, (b) the
ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Community or
(c) any currency unit or composite currency other than the ECU for the purposes
for which it was established. Unless otherwise provided in the applicable
prospectus supplement, all payments of principal of, premium, if any, and
interest on any debt security that is payable in a foreign currency that ceases
to be used by its government of issuance shall be made in U.S. dollars.
In the event the Operating Partnership effects covenant defeasance with
respect to any debt securities and such debt securities are declared due and
payable because of the occurrence of any Event of Default other than the Event
of Default described in clause (d) under "Event of Default, Notice and Waiver"
with respect to sections no longer applicable to such debt securities or
described in clause (g) under "Events of Default, Notice and Waiver" with
respect to any other covenant as to which there has been covenant defeasance,
and the funds we deposited with the Trustee are insufficient to pay the amount
declared due, Chelsea, if such debt securities are guaranteed securities, and
the
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Operating Partnership will remain liable to make payment of such amounts due at
the time of acceleration.
The applicable prospectus supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the debt
securities of or within a particular series.
NO CONVERSION RIGHTS
The debt securities will not be convertible into or exchangeable for any of
our capital stock or equity interest in the Operating Partnership.
GLOBAL SECURITIES
The Operating Partnership may issue the debt securities of a series in whole
or in part in the form of one or more global securities. The global securities
will be deposited with, or on behalf of, a depositary identified in the
applicable prospectus supplement relating to such series. Global securities may
be issued in either registered or bearer form and in either temporary or
permanent form. The applicable prospectus supplement will describe the specific
terms of the depositary arrangement with respect to a series of debt securities.
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DESCRIPTION OF PREFERRED STOCK
GENERAL
Chelsea is authorized to issue 5,000,000 shares of preferred stock, $.01 par
value per share. At December 31, 2001, 1,000,000 shares of 8 3/8% Series A
Cumulative Redeemable Preferred Stock were issued and outstanding.
The statements below describing the preferred stock are in all respects
subject to and qualified by reference to the applicable provisions of our
Articles of Incorporation and Bylaws and any applicable articles supplementary
to the Articles of Incorporation designating terms of a series of preferred
stock.
The issuance of preferred stock could adversely affect the voting power,
dividend rights and other rights of holders of common stock. Issuance of
preferred stock could impede, delay, prevent or facilitate a merger, tender
offer or change in our control. Although the Board of Directors is required to
make a determination as to the best interests of our stockholders when issuing
preferred stock, the Board could act in a manner that would discourage an
acquisition attempt or other transaction that some, or a majority, of the
stockholders might believe to be in our best interests or in which stockholders
might receive a premium for their shares over the then prevailing market price.
Management believes that the availability of preferred stock will provide us
with increased flexibility in structuring possible future financing and
acquisitions and in meeting other needs that might arise.
TERMS
Subject to the limitations prescribed by the Articles of Incorporation, the
Board of Directors can fix the number of shares constituting each series of
preferred stock and the designations and powers, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions thereof, including such provisions as may be desired concerning
voting, redemption, dividends, dissolution or the distribution of assets,
conversion or exchange, and such other subjects or matters as may be fixed by
resolution of the Board of Directors. When issued, the preferred stock will be
fully paid and nonassessable by us. The preferred stock will have no preemptive
rights.
Reference is made to the prospectus supplement relating to the preferred
stock offered thereby for specific terms, including:
(1) the title and stated value of the preferred stock;
(2) the number of shares of the preferred stock offered, the liquidation
preference per share and the offering price of the preferred stock;
(3) the dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to the preferred stock;
(4) the date from which dividends on the preferred stock shall accumulate,
if applicable;
(5) the procedures for any auction and remarketing, if any, for the
preferred stock;
(6) the provision for a sinking fund, if any, for the preferred stock;
(7) the provision for redemption, if applicable, of the preferred stock;
(8) any listing of the preferred stock on any securities exchange;
(9) the terms and conditions, if applicable, upon which the preferred stock
will be convertible into our common stock, including the conversion
price, or the manner of calculation thereof;
(10) whether interests in the preferred stock will be represented by
depositary shares;
(11) any other specific terms, preferences, rights, limitations or
restrictions of the preferred stock;
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(12) a discussion of federal income tax considerations applicable to the
preferred stock;
(13) the relative ranking and preferences of the preferred stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
our affairs;
(14) any limitations on issuance of any series of preferred stock ranking
senior to or on a parity with the series of preferred stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
our affairs; and
(15) any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve our status as a
REIT.
RANK
Unless otherwise specified in the prospectus supplement, the preferred stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or our winding up, rank:
(a) senior to all classes or series of our common stock;
(b) senior to all equity securities ranking junior to the preferred stock;
(c) equal with all equity securities issued by us, if the terms of such
securities specifically provide for equal treatment;
(d) junior to all equity securities the terms of which specifically provide
that the equity securities rank senior to the preferred stock.
The term "equity securities" excludes convertible debt securities.
DIVIDENDS
Holders of the preferred stock of each series will be entitled to receive,
when and if declared by our Board of Directors, out of assets legally available
for payment, cash dividends at rates and on dates set forth in the applicable
prospectus supplement. Each such dividend will be payable to holders of record
as they appear on our share transfer books on the applicable record dates. Our
Board of Directors will fix the record dates for dividend payments.
As provided in the applicable prospectus supplement, dividends on any series
of the preferred stock may be cumulative or non-cumulative. Cumulative dividends
will be cumulative from and after the date set forth in the applicable
prospectus supplement. If our Board of Directors fails to declare a dividend
payable on a dividend payment date on any series of the preferred stock for
which dividends are non-cumulative, then the holders of such series of the
preferred stock will have no right to receive a dividend for the dividend period
ending on such dividend payment date. We will have no obligation to pay the
dividend accrued for such dividend period, whether or not dividends on such
series are declared payable on any future dividend payment date.
If preferred stock of any series is outstanding, our Board of Directors will
not declare, pay or set apart for payment dividends on any of our capital stock
of any other series ranking, as to dividends, equally with or junior to the
preferred stock outstanding for any period unless:
(a) for preferred stock with cumulative dividends, we have declared and
paid, or declared and set apart a sum sufficient to pay, full cumulative
dividends on the preferred stock through the then current dividend
period; and
(b) for preferred stock lacking a cumulative dividend, we have declared and
paid or declared and set aside a sum sufficient to pay full dividends for
the then current dividend period;
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When dividends are not paid in full, or when a sum sufficient for such full
payment is not set apart, upon preferred stock of any series and the shares of
any other series of preferred stock ranking equally as to dividends with the
preferred stock of such series, all dividends declared upon preferred stock of
such series and any other series of preferred stock ranking equally as to
dividends with such preferred stock shall be declared pro rata so that the
amount of dividends declared per share of preferred stock of such series and
such other series of preferred stock shall in all cases bear to each other the
same ratio that accrued dividends per share on the preferred stock of such
series, which shall not include any accumulation of unpaid dividends for prior
dividend periods if such preferred stock lacks a cumulative dividend, and such
other series of preferred stock bear to each other. No interest, or sum of money
instead of interest, shall be payable for any dividend payment or payments on
preferred stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless we have
paid dividends through the then current dividend period, including dividend
payments in arrears if dividends are cumulative, for such series of preferred
stock or unless our Board of Directors has declared such dividends and has set
aside a sum sufficient for such payment, our Board of Directors shall not
declare dividends, other than in shares of common stock or other capital shares
ranking junior to the preferred stock of such series as to dividends and upon
liquidation, or pay or set aside for payment or declare or make any other
distribution upon the common stock, or any other of our capital shares ranking
junior to or equally with the preferred stock of such series as to dividends or
upon liquidation. Additionally, we shall not redeem, purchase or otherwise
acquire for any consideration, or any moneys to be paid or made available for a
sinking fund for the redemption of any such shares, any shares of common stock,
or any other of our capital shares ranking junior to or equally with the
preferred stock of such series as to dividends or upon liquidation.
Notwithstanding the foregoing, we may convert such shares into or exchange such
shares for other of our capital shares ranking junior to the preferred stock of
such series as to dividends and upon liquidation.
REDEMPTION
If the applicable prospectus supplement so provides, the preferred stock
will be subject to mandatory redemption or redemption at our option, as a whole
or in part, in each case upon the terms, at the times and at the redemption
prices set forth in such prospectus supplement.
The prospectus supplement applicable to a series of preferred stock that is
subject to mandatory redemption will specify:
(a) the number of shares of such preferred stock that shall be redeemed by
us in each year,
(b) the year such redemption will commence,
(c) the redemption price per share, together with an amount equal to all
accrued and unpaid dividends thereon to the date of redemption,
(d) whether the redemption price is payable in cash or property.
If the redemption price for preferred stock of any series is payable only
from the net proceeds of the issuance of our capital shares, the terms of such
preferred stock may provide that, if we have not issued capital shares or to the
extent the net proceeds from any issuance are insufficient to pay in full the
aggregate redemption price then due, such preferred stock shall automatically be
converted into our capital shares pursuant to conversion provisions specified in
the applicable prospectus supplement.
We can not redeem, purchase or otherwise acquire shares of a series of
preferred stock unless:
(a) for preferred stock with cumulative dividends, we have declared and
paid, or declared and set apart a sum sufficient to pay, full cumulative
dividends on the preferred stock through the then current dividend
period; and
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(b) for preferred stock lacking a cumulative dividend, we have declared and
paid or declared and set aside a sum sufficient to pay full dividends for
the then current dividend period;
The foregoing shall not prevent the purchase or acquisition of preferred
stock of such series to preserve our REIT status or pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding preferred
stock of such series.
If fewer than all of the outstanding shares of preferred stock of any series
are to be redeemed, we will determine the number of shares to be redeemed. We
may redeem the shares on a pro rata basis from the holders of record of such
shares in proportion to the number of such shares held or for which redemption
is requested by such holder with adjustments to avoid redemption of fractional
shares, or by lot.
We will mail notice of redemption 30 to 60 days prior to the redemption date
to each holder of record of preferred stock of any series to be redeemed at the
address shown on our share transfer books. Each notice shall state:
(a) the redemption date;
(b) the number of shares and series of the preferred stock to be redeemed;
(c) the redemption price;
(d) the place or places where certificates for such preferred stock are to
be surrendered for payment of the redemption price;
(e) that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and
(f) the date upon which the holder's conversion rights, if any, as to such
shares shall terminate.
If we are to redeem fewer than all the shares of preferred stock of any
series, the notice we mail to each holder of preferred stock shall specify the
number of shares of preferred stock to be redeemed from each holder. If we have
given notice of redemption of any preferred stock and if we have set aside, in
trust for the benefit of the holders of any preferred stock called for
redemption, the funds necessary for such redemption, then from and after the
redemption date dividends will cease to accrue on the preferred stock to be
redeemed. Additionally all rights of the holders of the redeemable shares will
terminate, except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
our affairs, then the holders of each series of preferred stock shall be
entitled to receive out of our assets legally available for distribution to
shareholders liquidating distributions in the amount of the liquidation
preference per share, plus an amount equal to all dividends accrued and unpaid
on such series of preferred stock. Such preferred shareholders will receive
these distributions before any distribution or payment shall be made to the
holders of any common stock or any other class or series of our capital shares
ranking junior to the preferred stock in the distribution of assets upon our
liquidation, dissolution or winding up. After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of preferred
stock will have no right or claim to any of our remaining assets. If our
available assets are insufficient to pay the amount of the liquidating
distributions on all outstanding preferred stock and the corresponding amounts
payable on all shares of other classes or series of our capital shares ranking
equally with the preferred stock in the distribution of assets, then the holders
of the preferred stock and all other such classes or series of capital shares
shall share on a pro rata basis in any such distribution of assets in proportion
to the full liquidating distributions to which they would otherwise be entitled.
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If liquidating distributions have been made in full to all holders of
preferred stock, our remaining assets will be distributed among the holders of
any other classes or series of capital shares ranking junior to the preferred
stock upon liquidation, dissolution or winding up, according to their rights and
preferences and in each case according to their number of shares. For such
purposes, our consolidation or merger with or into any other corporation, trust
or entity, or the sale, lease or conveyance of all or substantially all of our
property or business, shall not be deemed to constitute our liquidation,
dissolution or winding up.
VOTING RIGHTS
Holders of the preferred stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable prospectus supplement.
Whenever dividends on any shares of preferred stock are in arrears for six
or more consecutive quarterly periods, the holders of such shares of preferred
stock, voting separately as a class with all other series of preferred stock
upon which like voting rights have been conferred and are exercisable, will be
entitled to vote for the election of two additional directors at a special
meeting called by the holders of record of ten percent (10%) of any series of
preferred stock so in arrears or at the next annual meeting of stockholders, and
at each subsequent annual meeting until (a) if such series of preferred stock
has a cumulative dividend, we have paid or our Board of Directors has declared
and set aside a sum sufficient for payment of all dividends accumulated on such
shares of preferred stock for the past dividend periods and the then current
dividend period or (b) if such series of preferred stock lacks a cumulative
dividend, we have fully paid or our Board of Directors has declared and set
aside a sum sufficient for payment of four consecutive quarterly dividends. In
such case, two directors will be added to our Board of Directors.
Unless provided otherwise for any series of preferred stock, so long as any
shares of preferred stock remain outstanding, we will not, without the
affirmative vote or consent of the holders of at least two-thirds of the shares
of each series of preferred stock outstanding at the time, given in person or by
proxy, either in writing or at a meeting with such series voting separately as a
class, (a) authorize or create, or increase the authorized or issued amount of,
any class or series of capital stock ranking prior to such preferred stock with
respect to payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up or reclassify any of our authorized capital stock into
such shares, or create, authorize or issue any obligation or security
convertible into or evidencing the right to purchase any such shares; or
(b) amend, alter or repeal the provisions of our Articles of Incorporation or
the designating amendment for such series of preferred stock, whether by merger,
consolidation or otherwise, so as to materially and adversely affect any right,
preference, privilege or voting power of such series of preferred stock or the
holders thereof. With respect to the occurrence of any of the events set forth
in (b) above so long as the preferred stock remains outstanding with the terms
thereof materially unchanged, the occurrence of any such Event shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting power of holders of preferred stock. Additionally, any increase in the
amount of the authorized preferred stock or the creation or issuance of any
other series of preferred stock, or any increase in the amount of authorized
shares of such series or any other series of preferred stock, in each case
ranking on a parity with or junior to the preferred stock of such series with
respect to payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up, shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of preferred stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
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CONVERSION RIGHTS
The applicable prospectus supplement will set forth the terms and
conditions, if any, upon which any series of preferred stock is convertible into
shares of common stock. Such terms will include the number of shares of common
stock into which the shares of preferred stock are convertible, the conversion
price, or manner of calculation thereof, the conversion period, provisions as to
whether conversion will be at the option of the holders of the preferred stock
or us, the events requiring an adjustment of the conversion price and provisions
affecting conversion in the event of the redemption of such series of preferred
stock.
SHAREHOLDER LIABILITY
Maryland law provides that no shareholder, including holders of preferred
stock, shall be personally liable for our acts and obligations and that our
funds and property shall be the only recourse for such acts or obligations.
RESTRICTIONS ON OWNERSHIP
To qualify as a REIT under the Internal Revenue Code, not more than 50% in
value of our outstanding capital shares may be owned, directly or indirectly, by
five or fewer individuals as defined in the Code to include certain entities,
during the last half of a taxable year. Therefore, the designating amendment for
each series of preferred stock may contain provisions restricting the ownership
and transfer of the preferred stock. The applicable prospectus supplement will
specify any additional ownership limitation relating to a series of preferred
stock.
REGISTRAR AND TRANSFER AGENT
The applicable prospectus supplement will set forth the Registrar and
Transfer Agent for the preferred stock.
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DESCRIPTION OF DEPOSITARY SHARES
GENERAL
We may issue receipts for depositary shares, each of which will represent a
fractional interest of a share of a particular series of preferred stock, as
specified in the applicable prospectus supplement. Shares of preferred stock of
each series represented by the depositary shares will be deposited under a
separate deposit agreement between us, the depositary named therein and the
holders of the depositary receipts. Subject to the terms of the deposit
agreement, each depositary receipt owner will be entitled, in proportion to the
fractional interest of a share of a particular series of preferred stock
represented by the depositary shares evidenced by such depositary receipt, to
all the rights and preferences of the preferred stock represented thereby.
Depositary receipts issued pursuant to the applicable deposit agreement will
evidence the depositary shares. Immediately following our issuance and delivery
of the preferred stock to the depositary, we will cause the depositary to issue,
on our behalf, the depositary receipts. Upon request, we will provide you with
copies of the applicable form of deposit agreement and depositary receipt.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash dividends or other cash
distributions received in respect of the preferred stock to the record holders
of depositary receipts evidencing the related depositary shares in proportion to
the number of depositary receipts owned by the holders.
If there is a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary receipts
entitled thereto. If the depositary determines that it is not feasible to make
such distribution, the depositary may, with our approval, sell the property and
distribute the net proceeds from such sale to the holders.
WITHDRAWAL OF STOCK
Upon surrender of the depositary receipts at the corporate trust office of
the depositary, unless the related depositary shares have previously been called
for redemption, the holders thereof will be entitled to delivery, to or upon
such holders' order, of the number of whole or fractional shares of the
preferred stock and any money or other property represented by the depositary
shares evidenced by the depositary receipts. Holders of depositary receipts will
be entitled to receive whole or fractional shares of the related preferred stock
on the basis of the proportion of preferred stock represented by each depositary
share as specified in the applicable prospectus supplement. Thereafter, holders
of such shares of preferred stock will not be entitled to receive depositary
shares for the preferred stock. If the depositary receipts delivered by the
holder evidence a number of depositary shares in excess of the number of
depositary shares representing the number of shares of preferred stock to be
withdrawn, the depositary will deliver to the holder a new depositary receipt
evidencing the excess number of depositary shares.
REDEMPTION OF DEPOSITARY SHARES
Provided we shall have paid in full to the depositary the redemption price
of the preferred stock to be redeemed plus an amount equal to any accrued and
unpaid dividends thereon to the redemption date, whenever we redeem shares of
preferred stock held by the depositary, the depositary will redeem as of the
same redemption date the number of depositary shares representing shares of the
preferred stock so redeemed. The redemption price per depositary share will be
equal to the redemption price and any other amounts per share payable with
respect to the preferred stock. If fewer than all the depositary shares are to
be redeemed, the depositary shares to be redeemed will be selected as nearly
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as may be practicable without creating fractional depositary shares, pro rata,
or by any other equitable method we determine.
From and after the date fixed for redemption, all dividends in respect of
the shares of preferred stock so called for redemption will cease to accrue, the
depositary shares called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the depositary receipts evidencing
the depositary shares so called for redemption will cease, except the right to
receive any moneys payable upon such redemption and any money or other property
to which the holders of such depositary receipts were entitled to receive upon
such redemption upon surrender to the depositary of the depositary receipts
representing the depositary shares.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the preferred
stock are entitled to vote, the depositary will mail the information contained
in such notice of meeting to the record holders of the depositary receipts
evidencing the depositary shares that represent such preferred stock. Each
record holder of depositary receipts evidencing depositary shares on the record
date, which will be the same date as the record date for the preferred stock,
will be entitled to instruct the depositary as to the exercise of the voting
rights pertaining to the amount of preferred stock represented by such holder's
depositary shares. The depositary will vote the amount of preferred stock
represented by such depositary shares in accordance with such instructions, and
we will agree to take all reasonable action that may be deemed necessary by the
depositary in order to enable the depositary to do so. If the depositary does
not receive specific instructions from the holders of depositary receipts
evidencing such depositary shares, it will abstain from voting the amount of
preferred stock represented by such depositary shares. The depositary shall not
be responsible for any failure to carry out any instruction to vote, or for the
manner or effect of any such vote made, as long as any such action or non-action
is in good faith and does not result from the depositary's negligence or willful
misconduct.
LIQUIDATION PREFERENCE
Upon our liquidation, dissolution or winding up, whether voluntary or
involuntary, the holders of each depositary receipt will be entitled to the
fraction of the liquidation preference accorded each share of preferred stock
represented by the depositary share evidenced by such depositary receipt, as set
forth in the applicable prospectus supplement.
CONVERSION OF PREFERRED STOCK
Except in connection with certain conversions in connection with the
preservation of our REIT status, the depositary shares are not convertible into
our common stock or any other of our securities or property. Nevertheless, if
the applicable prospectus supplement so specifies, the holders of the depositary
receipts may surrender their depositary receipts to the depositary with written
instructions to the depositary to instruct us to cause conversion of the
preferred stock represented by the depositary shares evidenced by such
depositary receipts into whole shares of common stock, other shares of our
preferred stock or other shares of our capital stock, and we have agreed that
upon receipt of such instructions and any amounts payable in respect thereof, we
will cause the conversion of the depositary shares utilizing the same procedures
as those provided for delivery of preferred stock to effect such conversion. If
the depositary shares evidenced by a depositary receipt are to be converted in
part only, the depositary will issue a new depositary receipt for any depositary
shares not to be converted. No fractional shares of common stock will be issued
upon conversion, and if such conversion will result in a fractional share being
issued, we will pay an amount in cash equal to the value of the fractional
interest based upon the closing price of the common stock on the last business
day prior to the conversion.
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AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
By agreement, we and the depositary at any time can amend the form of
depositary receipt and any provision of the deposit agreement. However, any
amendment that materially and adversely alters the rights of the holders of
depositary receipts or that would be materially and adversely inconsistent with
the rights granted to holders of the related preferred stock will be effective
only if the existing holders of at least two-thirds of the depositary shares
have approved the amendment. No amendment shall impair the right, subject to
certain exceptions in the deposit agreement, of any holder of depositary
receipts to surrender any depositary receipt with instructions to deliver to the
holder the related preferred stock and all money and other property, if any,
represented thereby, except in order to comply with law. Every holder of an
outstanding depositary receipt at the time an amendment becomes effective shall
be deemed, by continuing to hold the depositary receipt, to consent and agree to
the amendment and to be bound by the deposit agreement as amended thereby.
Upon 30 days' prior written notice to the depositary, we may terminate the
deposit agreement if (a) such termination is necessary to preserve our status as
a REIT or (b) a majority of each series of preferred stock affected by such
termination consents to such termination. Upon the termination of the deposit
agreement, the depositary shall deliver or make available to each holder of
depositary receipts, upon surrender of the depositary receipts held by such
holder, such number of whole or fractional shares of preferred stock as are
represented by the depositary shares evidenced by the depositary receipts
together with any other property held by the depositary with respect to the
depositary receipt. If the deposit agreement is terminated to preserve our
status as a REIT, then we will use our best efforts to list the preferred stock
issued upon surrender of the related depositary shares on a national securities
exchange.
The deposit agreement will automatically terminate if (a) all outstanding
depositary shares shall have been redeemed, (b) there shall have been a final
distribution in respect of the related preferred stock in connection with our
liquidation, dissolution or winding up and such distribution shall have been
distributed to the holders of depositary receipts evidencing the depositary
shares representing such preferred stock or (c) each share of the related
preferred stock shall have been converted into our capital stock not so
represented by depositary shares.
CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the deposit agreement. In addition, we will pay the
fees and expenses of the depositary in connection with the performance of its
duties under the deposit agreement. However, holders of depositary receipts will
pay certain other transfer and other taxes and governmental charges. The holders
will also pay the fees and expenses of the depositary for any duties, outside of
those expressly provided for in the deposit agreement, the holders request to be
performed.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering to us notice of its
election to do so. We may at any time remove the depositary, any such
resignation or removal will take effect upon the appointment of a successor
depositary. A successor depositary must be appointed within 60 days after
delivery of the notice of resignation or removal and must be a bank or trust
company having its principal office in the United States and having a combined
capital and surplus of $50,000,000 or more.
MISCELLANEOUS
The depositary will forward to holders of depositary receipts any reports
and communications from us which are received by the depositary with respect to
the related Preferred Stock.
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We and the depositary will not be liable if either of us is prevented from
or delayed in, by law or any circumstances beyond its control, performing its
obligations under the deposit agreement. Our obligations and the depositary's
obligations under the deposit agreement will be limited to performing the duties
thereunder in good faith and without negligence, in the case of any action or
inaction in the voting of preferred stock represented by the depositary shares,
gross negligence or willful misconduct. If satisfactory indemnity is furnished,
we and the depositary will be obligated to prosecute or defend any legal
proceeding in respect of any depositary receipts, depositary shares or shares of
preferred stock represented thereby. We and the depositary may rely on written
advice of counsel or accountants, or information provided by persons presenting
shares of preferred stock represented by depository receipts for deposit,
holders of depositary receipts or other persons believed in good faith to be
competent to give such information, and on documents believed in good faith to
be genuine and signed by a proper party.
In the event the depositary shall receive conflicting claims, requests or
instructions from any holders of depositary receipts, on the one hand, and us,
on the other hand, the depositary shall be entitled to act on our claims,
requests or instructions.
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DESCRIPTION OF COMMON STOCK
GENERAL
Chelsea's authorized capital stock includes 50 million shares of common
stock, $.01 par value per share. For each outstanding share of common stock
held, the holder is entitled to one vote on all matters presented to
stockholders for a vote. Cumulative voting is not permitted. Holders of the
common stock do not have preemptive rights. At February 27, 2002, there were
18,780,579 shares of common stock outstanding.
All shares of common stock issued and sold will be duly authorized, fully
paid, and non-assessable. Distributions may be paid to the holders of common
stock if and when declared by our Board of Directors. Dividends will be paid out
of funds legally available for dividend payment. We have paid quarterly
dividends, beginning with a dividend for the portion of the quarter from the
closing of our initial public offering in November 1993.
Under Maryland law, stockholders are generally not liable for our debts or
obligations. If we are liquidated, subject to the right of any holders of
preferred stock to receive preferential distributions, each outstanding share of
common stock will be entitled to participate pro rata in the assets remaining
after payment of, or adequate provision for, all of our known debts and
liabilities.
CERTAIN PROVISIONS OF OUR ARTICLES OF INCORPORATION
Our Board of Directors is divided into three classes of directors, with each
class constituting approximately one-third of the total number of directors. The
classes serve staggered terms. At each annual meeting of stockholders, the class
of directors to be elected at such meeting will be elected for a three-year term
and the directors in the other two classes will continue in office. We believe
that classified directors will help to assure the continuity and stability of
the Board of Directors and our business strategies and policies. The use of a
staggered board may make a change in our control and/or the removal of incumbent
management more difficult.
RESTRICTIONS ON OWNERSHIP
In order to qualify as a REIT under the Code, not more than 50% in value of
our outstanding common stock may be owned, directly or indirectly, by five or
fewer individuals, as defined in the Code, during the last half of a taxable
year and the common stock must be beneficially owned by 100 or more persons
during 335 days of a taxable year of 12 months, or during a proportionate part
of a shorter taxable year. To satisfy the above ownership requirements and
certain other requirements for qualification as a REIT, our Board of Directors
has adopted, and the stockholders approved, a provision in the Articles of
Incorporation restricting the ownership or acquisition of shares of common
stock.
REGISTRAR AND TRANSFER AGENT
EquiServe, Boston, Massachusetts is the Registrar and Transfer Agent for the
common stock.
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PLAN OF DISTRIBUTION
We may sell the securities to one or more underwriters for public offering
and sale by them or may sell the securities to investors directly or through
agents. We will name, in the applicable prospectus supplement, any such
underwriter or agent involved in the offer and sale of the securities.
Underwriters may offer and sell the securities at a fixed price or prices,
which may be changed, at prices related to the prevailing market prices at the
time of sale or at negotiated prices. We may, from time to time, authorize
underwriters acting as our agents to offer and sell the securities upon the
terms and conditions as are set forth in the applicable prospectus supplement.
In connection with the sale of securities, underwriters may be deemed to have
received compensation from us in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of securities for
whom they may act as agent. Underwriters may sell securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agent.
We will set forth in the applicable prospectus supplement any underwriting
compensation either of us pays to underwriters or agents in connection with the
offering of securities, and any discounts, concessions or commissions allowed by
underwriters to participating dealers. Underwriters, dealers and agents
participating in the distribution of the securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the securities may be deemed to be underwriting
discounts and commissions, under the Securities Act. Underwriters, dealers and
agents may be entitled, under agreements entered into with us, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act.
If the applicable prospectus supplement so indicates, we will authorize
dealers acting as our agents to solicit offers by certain institutions to
purchase Securities from them at the public offering price set forth in such
prospectus supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on the date or dates stated in such
prospectus supplement. Each Contract will be for an amount not less than, and
the aggregate principal amount of securities sold pursuant to Contracts shall be
equal to, the respective amounts stated in the applicable prospectus supplement.
Institutions with whom Contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions but
will in all cases be subject to our approval. Contracts will not be subject to
any conditions except (a) the purchase by an institution of the securities
covered by its Contracts shall not at the time of delivery be prohibited under
the laws of any jurisdiction in the United States to which such institution is
subject, and (b) if the securities are being sold to underwriters, we shall have
sold to such underwriters the total principal amount of the securities less the
principal amount thereof covered by Contracts.
In the ordinary course of business, certain of the underwriters and their
affiliates may be customers of, engage in transactions with and perform services
for us.
LEGAL MATTERS
Stroock & Stroock & Lavan LLP of New York, New York will pass upon the
validity of the issuance of the securities offered hereby for us.
EXPERTS
The consolidated financial statements of Chelsea Property Group, Inc. and
CPG Partners, L.P. (the "Companies") appearing in the Companies' Annual Reports
(Form 10-K) for the year ended December 31, 2001, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon included
therein and incorporated herein by reference. Such consolidated
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financial statements are incorporated herein by reference in reliance upon such
reports given on the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. You
may inspect and copy any document that we file at the public reference rooms
maintained by the SEC in Washington, D.C., New York, New York and Chicago,
Illinois. Any documents we file may also be available at the SEC's site on the
World Wide Web located at http://www.sec.gov. For a fee you can obtain the
documents by mail from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549.
We have filed with the SEC a Registration Statement on Form S-3 under the
Securities Act of 1933. This prospectus does not contain all of the information
set forth in the registration statement.
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$100,000,000
Chelsea logo
CPG Partners, L.P.
6.875% Notes due June 15, 2012
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PROSPECTUS SUPPLEMENT
JUNE 13, 2002
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SOLE BOOK-RUNNING MANAGER
Banc of America Securities LLC
Merrill Lynch & Co.
Commerzbank Securities Wachovia Securities
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