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TABLE OF CONTENTS
Table of Contents
As filed with the Securities and Exchange Commission on November 5, 2019
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
COMMUNITY HEALTHCARE TRUST INCORPORATED
(Exact name of registrant as specified in its charter)
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Maryland
(State or other jurisdiction of
incorporation or organization)
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46-5212033
(I.R.S. Employer
Identification Number)
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3326 Aspen Grove Drive
Suite 150
Franklin, Tennessee 37067
615-771-3052
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Timothy G. Wallace
Community Healthcare Trust Incorporated
3326 Aspen Grove Drive
Suite 150
Franklin, Tennessee 37067
615-771-3052
(Name, address, including zip code, and telephone number, including area code, of agent for service)
With copies to:
Tonya Mitchem Grindon, Esq.
Christopher M. Douse, Esq.
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
Baker Donelson Center
Suite 800
211 Commerce Street
Nashville, Tennessee 37201
615-726-5600
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date hereof.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following
box. o
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of
1933, as amended, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: ý
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and
list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon
filing
with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ý
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional
securities
or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an
emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated o
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Accelerated Filer ý
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Non-accelerated filer o
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Smaller reporting company ý
Emerging growth company ý
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If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ý
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities
to be Registered
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Amount to be
Registered (#)(1)(2)
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Proposed Maximum
Offering Price per
Unit ($)(1)(2)
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Proposed Maximum
Aggregate Offering
Price ($)(1)
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Amount of
Registration Fee($)(3)
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Common Stock
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Preferred Stock
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Depositary Shares
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Rights
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Debt Securities
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Warrants
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Units
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Total
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(1)
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Not
specified as to each class of securities to be registered pursuant to General Instruction II.E of Form S-3 under the Securities Act of 1933, as
amended (the "Securities Act"). There is being registered hereby such indeterminate number or amount, as the case may be, of the securities of each identified class as may from time to time be offered
and sold at indeterminate prices. The securities covered by this registration statement may be sold or otherwise distributed separately, together or as units with other securities covered by this
registration statement.
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(2)
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This
registration statement also covers an indeterminate amount of each identified class of securities as may be issued upon conversion of, or in exchange for, or
upon exercise of, or pursuant to, convertible or exchangeable securities that provide for exercise or conversion into or purchase of such securities of Community Healthcare Trust, Inc. Separate
consideration may or may not be received for securities that are issuable on exercise, conversion or exchange of other securities or that are represented by depositary shares.
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Pursuant
to Rules 456(b) and 457(r) under the Securities Act, the registrant is deferring payment of the registration fee relating to securities that are
registered and available for sale under this registration statement. Registration fees will be paid subsequently in advance or on a pay-as-you-go basis.
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PROSPECTUS
Community Healthcare Trust Incorporated
Common Stock
Preferred Stock
Depositary Shares
Rights
Debt Securities
Warrants
Units
We may from time to time issue, in one or more series or classes, separately or together, and in amounts, at prices and on terms to be set forth
in one or more supplements to this prospectus, the following securities:
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shares of our common stock, par value $0.01 per share, or our common stock;
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shares of preferred stock, par value $0.01 per share, or preferred stock;
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depositary shares;
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rights to purchase common stock, or rights;
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debt securities;
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warrants to purchase common stock, preferred stock, depositary shares or units, or warrants; and/or
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units.
We
refer to our common stock, preferred stock, depositary shares, rights, debt securities, warrants, and units hereunder collectively as the "securities." We may offer the securities
separately or together, in separate series or classes, and in amounts, at prices and on terms described in one or more supplements to this prospectus.
The
prospectus describes some of the general terms that may apply to these securities and the manner in which they may be offered. We will deliver this prospectus together with an
accompanying prospectus supplement setting forth the specific terms of the securities we are offering and the manner in which they will be offered. The accompanying prospectus supplement also will
contain information, where applicable, about certain U.S. federal income tax considerations relating to, and any listing on a securities exchange of, the securities covered by the prospectus
supplement. In addition, the specific terms may include limitations on direct or beneficial ownership and restrictions on transfer of the securities offered by this prospectus, in each case as may be
appropriate to preserve our status as a real estate investment trust for federal income tax purposes.
You
should read this document and any prospectus supplement or amendment carefully before you invest in the securities.
Our
common stock is listed on the New York Stock Exchange under the symbol "CHCT." On November 4, 2019, the closing price for our common stock, as reported on the New York Stock
Exchange, was $48.36 per share. Our principal executive offices are located at 3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee 37067.
We are an "emerging growth company" under the federal securities laws and have reduced public company reporting requirements. Investing in the
securities involves a high degree of risk. You should review carefully the risks and uncertainties described under the heading "Risk Factors" contained in this prospectus beginning on page 5 and any
applicable prospectus supplement, and under similar headings in the other documents that are incorporated by reference into this
prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE, TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The
date of this Prospectus is November 5, 2019.
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ABOUT THIS PROSPECTUS
You should rely only on the information contained in or incorporated by reference into this prospectus, any applicable prospectus supplement or
any applicable free writing prospectus. We have not authorized anyone to provide you with information different from that contained in or incorporated by reference into this prospectus, any applicable
prospectus supplement or any applicable free writing prospectus. You should assume that the information appearing in this prospectus, any applicable prospectus supplement, any applicable free writing
prospectus or the documents incorporated by reference herein or therein is accurate only as of the respective dates of such documents or on the date or dates which are specified in such documents. Our
business, financial condition, liquidity, results of operations and prospects may have changed since those dates.
This
prospectus is part of an "automatic shelf registration" statement on Form S-3 that we filed with the Securities and Exchange Commission, or the "SEC," as a "well-known
seasoned issuer" as defined in Rule 405 under the Securities Act of 1933, as amended, or the "Securities Act," utilizing a "shelf"
registration process. By using this shelf registration process, we may sell any of our securities described in this prospectus, from time to time in one or more offerings.
This
prospectus only provides you with a general description of the securities we may offer and such description is not meant to be a complete description of each security. Each time we
sell securities, we will if required provide a prospectus supplement that will contain specific information about the terms of the offering and the securities being offered. The prospectus supplement
or a free writing prospectus may also add to, update or change information contained in this prospectus. If there is any inconsistency between information in this prospectus and any prospectus
supplement or free writing prospectus, you should rely on the information in the prospectus supplement or free writing prospectus. Before purchasing any securities, you should carefully read both this
prospectus and any supplement or free writing prospectus, together with additional information described under the heading "Where You Can Find More Information" beginning on page 73.
In
this prospectus, unless the context requires otherwise, references in this prospectus to "we," "our," "us," "the Company", and "our company" refer to Community Healthcare Trust
Incorporated, a Maryland corporation, and "Operating Partnership" refers to Community Healthcare OP, LP, a Delaware limited partnership of which we are the general partner.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We make statements in this prospectus and in the documents incorporated by reference herein that are forward-looking statements within the
meaning of the federal securities laws. In particular, statements pertaining to our capital resources, property performance and results of operations contain forward-looking statements. Likewise, our
pro forma financial statements and all of our statements regarding anticipated growth in our funds from operations and anticipated market conditions, demographics and results of operations are
forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "approximately,"
"intends," "plans," "pro forma," "estimates" or "anticipates" or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and
which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
Forward-looking
statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions,
data or methods which may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will
happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking
statements:
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defaults on or non-renewal of leases by our tenants;
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adverse economic or real estate developments, either nationally or in the markets in which our properties are located;
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decreased rental rates or increased vacancy rates;
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difficulties in identifying healthcare properties to acquire and completing acquisitions;
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our ability to make distributions on our common stock;
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our dependence upon key personnel whose continued service is not guaranteed;
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our ability to identify, hire and retain highly qualified personnel in the future;
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the degree and nature of our competition;
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general economic conditions;
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the availability, terms and deployment of debt and equity capital;
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general volatility of the market price of our common stock;
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changes in our business or strategy;
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changes in governmental regulations, tax rates and similar matters;
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new laws or regulations or changes in existing laws and regulations that may adversely affect the healthcare industry;
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trends or developments in the healthcare industry that may adversely affect our tenants;
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competition for acquisition opportunities;
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our failure to successfully develop, integrate and operate acquired properties and operations;
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our ability to operate as a public company;
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changes in accounting principles generally accepted in the United States of America ("GAAP");
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our failure to generate sufficient cash flows to service our outstanding indebtedness;
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fluctuations in interest rates and increased operating costs;
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our increased vulnerability economically due to the concentration of our investments in healthcare properties;
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a substantial portion of our revenue is derived from our largest tenants and thus, the bankruptcy, insolvency or weakened financial position of
any one of them could seriously harm our operating results and financial condition;
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geographic concentrations in Illinois, Ohio, and Texas cause us to be particularly exposed to downturns in these local economies or other
changes in local real estate market conditions;
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lack of or insufficient amounts of insurance;
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other factors affecting the real estate industry generally;
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our failure to maintain our qualification as a real estate investment trust ("REIT") for U.S. federal income tax purposes;
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limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our status as a REIT for U.S. federal
income tax purposes; and
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changes in governmental regulations or interpretations thereof, such as real estate and zoning laws and increases in real property tax rates
and taxation of REITs.
While
forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. You should not place undue reliance on any forward-looking statements that
are based on information currently available to us or the third parties making the forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of
the date of the document containing the applicable statement. You should read this prospectus, the registration statement of which this prospectus is a part, and the exhibits and documents
incorporated by reference herein and therein completely and with the understanding that our actual future results may be materially different from those described in forward-looking statements. We
qualify all of the forward-looking statements in the foregoing documents by these cautionary statements.
You
should assume that information contained in or incorporated by reference into this prospectus is accurate only as of the date on the front cover of this prospectus or the date of the
document incorporated by reference, as applicable. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new
information, data or methods, future events or other changes after the date of this prospectus or the date of the document incorporated by reference, as applicable.
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OUR COMPANY
We are a fully-integrated healthcare real estate company organized as a corporation in the State of Maryland on March 28, 2014. We own
and acquire real estate properties that are leased to hospitals, doctors, healthcare systems or other healthcare service providers in our target submarkets.
As
of September 30, 2019, we had investments of approximately $566.3 million in 111 real estate properties located in 32 states, totaling approximately 2.5 million
square feet in the aggregate. The real estate properties were approximately 89.3% leased at September 30, 2019 with a weighted average remaining lease term of approximately 7.7 years.
We
acquire and own properties that are leased to hospitals, doctors, healthcare systems or other healthcare service providers primarily in our target submarkets. Our strategic focus is
to invest in real estate that is diversified across healthcare provider, geography, facility type and industry segment. We believe that favorable demographic trends, continuing increases in healthcare
spending and the continuing shift in the delivery of healthcare services to community-based outpatient facilities create attractive opportunities for us. We focus on healthcare facilities in our
target submarkets because we believe these properties are essential to healthcare providers in their local markets and can generate more attractive risk-adjusted returns than similar facilities in
urban markets. In addition, we believe our management team's extensive relationships with healthcare providers and owners of healthcare facilities in our target submarkets provide us with the
opportunity to acquire attractive healthcare facilities outside of a competitive bidding process. Furthermore, we believe there is significantly less competition from existing REITs and institutional
buyers for these assets in our target submarkets.
Substantially
all of our revenues are derived from net leases pursuant to which our tenants are generally responsible for substantially all of the property operating expenses relating to
the property, including real estate taxes, utilities, property insurance, routine maintenance and repairs and property management. We believe this net lease structure helps insulate us from increases
in certain property operating expenses and provides more predictable cash flow. The leases for our properties typically include rent escalation provisions designed to provide us with annual growth in
our rental revenues. Through these property investments and corresponding operating income, we seek to generate attractive risk-adjusted returns for our stockholders through a combination of stable
and increasing dividends and potential long-term appreciation in the value of our properties and the value of our common stock.
We
have elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2015. We conduct our business through an UPREIT
structure in which our properties are owned by our Operating Partnership, directly or through limited partnerships, limited liability companies or other subsidiaries. We are the sole general partner
of our Operating Partnership and, as of November 4, 2019, own, directly or indirectly, 100% of the units in our Operating Partnership.
Our
corporate offices are located at 3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee 37067. Our telephone number is 615-771-3052. Our website is www.chct.reit. The
information contained on, or accessible through, our website or any other website is not incorporated by reference into this prospectus and should not be considered a part of this prospectus.
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RISK FACTORS
Investing in the securities involves a high degree of risk. You should carefully consider the risks in the documents incorporated by reference
in this prospectus and any prospectus supplement, as well as other information we include or incorporate by reference into this prospectus and any applicable prospectus supplement, before making an
investment decision. The occurrence of any of such risks might cause you to lose all or part of your investment. Such risks represent those risks and uncertainties that we believe are material to our
business, financial condition and results of operations, our ability to make distributions to our stockholders and the trading price of the securities. Some statements in this prospectus and in the
documents incorporated by reference in this prospectus constitute forward-looking statements. Please refer to the section captioned "Cautionary Statement Regarding Forward-Looking Statements." Actual
results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks described in the documents incorporated herein by
reference, including (i) our annual report on Form 10-K for the fiscal
year ended December 31, 2018, and our Quarterly Reports on Form 10-Q for the periods ended
March 31, 2019,
June 30, 2019 and
September 30, 2019, which are on file with the SEC and are
incorporated herein by reference and (ii) other documents we file with the SEC that are deemed incorporated by reference into this prospectus.
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USE OF PROCEEDS
Unless otherwise described in the applicable prospectus supplement to this prospectus used to offer specific securities, we intend to use the
net proceeds from the sale of securities under this prospectus to potentially acquire additional properties and for general corporate purposes, which may include, without limitation, the repayment of
outstanding indebtedness, capital expenditures and working capital. Pending the application of the net proceeds from any sale of securities under this prospectus, we may invest the net proceeds in
interest-bearing accounts, money market accounts and/or interest bearing securities, in each case, in a manner that is consistent with maintaining our qualification as a REIT.
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DESCRIPTION OF COMMON STOCK
The following summary of the material terms of our common stock does not purport to be complete. For a complete
description, we refer you to the Maryland General Corporation Law, or the MGCL, and to our charter and bylaws. For a more complete understanding of our common stock, we encourage you to read carefully
this entire prospectus, as well as our charter and bylaws, each of which is incorporated herein by reference, and the following summary is qualified in its entirety by reference to our charter and
bylaws. See "Where You Can Find More Information" for information on how to obtain documents from us, including our charter and bylaws.
General
We are authorized to issue 450,000,000 shares of common stock. Our charter authorizes our Board of Directors, with the approval of a majority of
the entire Board of Directors and without any action on the part of our stockholders, to amend our charter to increase or decrease the aggregate number of authorized shares of stock or the number of
authorized shares of stock of any class or series without stockholder approval. As of November 4, 2019, we had 20,177,693 outstanding shares of common stock. Under Maryland law, stockholders
generally are not liable for a corporation's debts or obligations.
Dividends, Liquidation and Other Rights
Subject to the preferential rights, if any, of holders of any other class or series of stock and to the provisions of our charter regarding
restrictions on ownership and transfer of our stock, holders of our common stock:
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have the right to receive ratably any distributions from funds legally available therefor, when, as and if authorized by our Board of Directors
and declared by us; and
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are entitled to share ratably in the assets of our company legally available for distribution to the holders of our common stock in the event
of our liquidation, dissolution or winding up of our affairs.
There
are generally no redemption, sinking fund, conversion, preemptive or appraisal rights with respect to our common stock.
Voting Rights of Common Stock
Subject to the provisions of our charter regarding restrictions on ownership and transfer of our stock and except as may otherwise be specified
in the terms of any class or series of stock, each outstanding share of our common stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of
directors and, except as may be provided with respect to any other class or series of stock, the holders of such shares will possess the exclusive voting power. There is no cumulative voting in the
election of our directors, and directors will be elected by a plurality of the votes cast in the election of directors. Consequently, at each annual meeting of stockholders, the holders of a majority
of the outstanding shares of our common stock can elect all of the directors then standing for election, and the holders of the remaining shares will not be able to elect any directors.
Power to Reclassify and Issue Stock
Our Board of Directors may classify any unissued shares of preferred stock, and reclassify any unissued shares of common stock or any previously
classified but unissued shares of preferred stock into other classes or series of stock, including one or more classes or series of stock that have priority over our common stock with respect to
voting rights or distributions or upon liquidation, and authorize us to issue the newly classified shares. Prior to the issuance of shares of each class or series, our Board
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Directors is required by the MGCL and our charter to set, subject to the provisions of our charter regarding the restrictions on ownership and transfer of our stock, the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption for each such class or series. These actions can be
taken without stockholder approval, unless stockholder approval is required by applicable law, the terms of any other class or series of our stock or the rules of any stock exchange or automated
quotation system on which our stock may be then listed or quoted.
Power to Increase or Decrease Authorized Stock and Issue Additional Shares of Our Common Stock
Our charter authorizes our Board of Directors, with the approval of a majority of the entire Board of Directors, to amend our charter to
increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series without stockholder approval. We believe that the power of
our Board of Directors to increase or decrease the number of authorized shares of stock and to classify or reclassify unissued shares of our common stock or preferred stock and thereafter to cause us
to issue such shares of stock provides us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs which might arise. The additional classes or
series, as well as the additional shares of stock, will be available for future issuance without further action by our stockholders, unless such action is required by applicable law, the terms of any
other class or series of stock or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. Our Board of Directors could authorize us to issue a
class or series that could, depending upon the terms of the particular class or series, delay, defer or prevent a transaction or a change in control of our company that might involve a premium price
for our stockholders or otherwise be in their best interests.
Restrictions on Ownership and Transfer
In order for us to qualify as a REIT under the Internal Revenue Code, or the Code, our stock must be beneficially owned by 100 or more persons
during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable
year. Also, not more than 50% of the value of the outstanding shares of stock (after taking into account options to acquire shares of stock) may be owned, directly, indirectly or through application
of certain attribution rules by five or fewer individuals (as defined in the Code to include certain entities such as qualified pension plans) at any time during the last half of a taxable year (other
than the first year for which an election to be a REIT has been made).
Our
charter contains restrictions on the ownership and transfer of our stock that are intended to assist us in complying with these requirements and continuing to qualify as a REIT. The
relevant sections of our charter provide that, subject to the exceptions described below, no person or entity may actually or beneficially own, or be deemed to own by virtue of the applicable
constructive ownership provisions of the Code, more than 9.8% (in value or in number of shares, whichever is more restrictive) of the outstanding shares of our common stock, or 9.8% in value of the
outstanding shares of all classes and series of our stock. We refer to each of these restrictions as an "ownership limit" and collectively as the "ownership limits." A person or entity that would have
acquired actual, beneficial or constructive ownership of our stock but for the application of the ownership limits or any of the other restrictions on ownership and transfer of our stock discussed
below is referred to as a "prohibited owner."
The
constructive ownership rules under the Code are complex and may cause stock owned actually or constructively by a group of related individuals and/or entities to be owned
constructively by one individual or entity. As a result, the acquisition of less than 9.8% of our capital or common stock (or the acquisition of an interest in an entity that owns, actually or
constructively, our stock) by an individual or entity, could, nevertheless cause that individual or entity, or another individual or entity,
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own constructively in excess of 9.8% of such stock and thereby violate the applicable ownership limit.
Our
Board of Directors, in its sole and absolute discretion, prospectively or retroactively, may exempt a person from either or both of the ownership limits if doing so would not result
in us being "closely held" within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise
failing to qualify as a REIT and our Board of Directors determines that:
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such exemption will not cause any individual to actually or beneficially own more than 9.8% in value of the outstanding shares of all classes
and series of our stock; and
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subject to certain exceptions, the person does not and will not own, actually or constructively, an interest in a tenant of ours (or a tenant
of any entity owned in whole or in part by us) that would cause us to own, actually or constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in such
tenant.
As
a condition of the exception, our Board of Directors may require an opinion of counsel or ruling of the United States Internal Revenue Service, in either case in form and substance
satisfactory to our Board of Directors, in its sole and absolute discretion, in order to determine or ensure our status as a REIT and representations and undertakings from the person seeking the
exemption or excepted holder limit in order to make the determinations above. Our Board of Directors may impose such conditions or restrictions as it deems appropriate in connection with such an
exception.
Our
Board of Directors may, in its sole and absolute discretion, increase or decrease one or both of the ownership limits for one or more persons, except that a decreased ownership limit
will not be effective for any person whose actual, beneficial or constructive ownership of our stock exceeds the decreased ownership limit at the time of the decrease until the person's actual,
beneficial or constructive ownership of our stock equals or falls below the decreased ownership limit, although any further acquisition of shares of our stock or beneficial or constructive ownership
of our stock will violate the decreased ownership limit. Our Board of Directors may not increase or decrease any ownership limit if, among other limitations, the new ownership limit would allow five
or fewer persons to actually or beneficially own more than 49% in value of our outstanding stock, could cause us to be "closely held" under Section 856(h) of the Code (without regard to whether
the ownership interest is held during the last half of a taxable year) or could otherwise cause us to fail to qualify as a REIT.
Our
charter further prohibits:
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any person from actually, beneficially or constructively owning shares of our stock that could result in us being "closely held" under
Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise cause us to fail to qualify as a REIT (including, but
not limited to, actual, beneficial or constructive ownership of shares of our stock that could result in us owning (actually or constructively) an interest in a tenant that is described in
Section 856(d)(2)(B) of the Code if the income we derive from such tenant, taking into account our other income that would not qualify under the gross income requirements of
Section 856(c) of the Code, would cause us to fail to satisfy any such gross income requirements imposed on REITs); and
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any person from transferring shares of our stock if such transfer would result in shares of our stock being beneficially owned by fewer than
100 persons (determined without reference to any rules of attribution).
Any
person who acquires or attempts or intends to acquire actual, beneficial or constructive ownership of shares of our stock that will or may violate the ownership limits or any of the
other restrictions on ownership and transfer of our stock described above must give written notice
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immediately
to us or, in the case of a proposed or attempted transaction, provide us at least 15 days prior written notice, and provide us with such other information as we may request in order
to determine the effect of such transfer on our status as a REIT.
The
ownership limits and other restrictions on ownership and transfer of our stock described above will not apply if our Board of Directors determines that it is no longer in our best
interests to attempt to qualify, or to continue to qualify, as a REIT or that compliance is no longer required in order for us to qualify as a REIT.
Pursuant
to our charter, if any purported transfer of our stock or any other event would otherwise result in any person violating the ownership limits or such other limit established by
our Board of Directors, or could result in us being "closely held" within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last
half of a taxable year) or otherwise failing to qualify as a REIT, then that number of shares causing the violation (rounded up to the nearest whole share) will be automatically transferred to, and
held by, a trust for the exclusive benefit of one or more charitable organizations selected by us. The prohibited owner will have no rights in shares of our stock held by the trustee. The automatic
transfer will be effective as of the close of business on the business day prior to the date of the violative transfer or other event that results in the transfer to the trust. Any dividend or other
distribution paid to the prohibited owner, prior to our discovery that the shares had been automatically transferred to a trust as described above, must be repaid to the trustee upon demand. If the
transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the applicable restriction on ownership and transfer of our stock, then that transfer
of the number of shares that otherwise would cause any person to violate the above restrictions will be void. If any transfer of our stock would result in shares of our stock being beneficially owned
by fewer than 100 persons (determined without reference to any rules of attribution), then any such purported transfer will be void and of no force or effect and the intended transferee will acquire
no rights in the shares.
Shares
of our stock transferred to the trustee are deemed offered for sale to us, or our designee, at a price per share equal to the lesser of (i) the price per share in the
transaction that resulted in the transfer of the shares to the trust (or, in the event of a gift, devise or other such transaction, the last reported sale price on the day of the transfer or other
event that resulted in the transfer of such shares to the trust) and (ii) the last reported sale price on the date we accept, or our designee accepts, such offer. We must reduce the amount
payable to the prohibited owner by the amount of dividends and distributions paid to the prohibited owner and owed by the prohibited owner to the trustee and pay the amount of such reduction to the
trustee for the benefit of the charitable beneficiary. We have the right to accept such offer until the trustee has sold the shares of our stock held in the trust. Upon a sale to us, the interest of
the charitable beneficiary in the shares sold terminates and the trustee must distribute the net proceeds of the sale to the prohibited owner and any dividends or other distributions held by the
trustee with respect to such stock will be paid to the charitable beneficiary.
If
we do not buy the shares, the trustee must, within 20 days of receiving notice from us of the transfer of shares to the trust, sell the shares to a person or persons designated
by the trustee who could own the shares without violating the ownership limits or other restrictions on ownership and transfer of our stock. Upon such sale, the trustee must distribute to the
prohibited owner an amount equal to the lesser of (i) the price paid by the prohibited owner for the shares (or, if the prohibited owner did not give value in connection with the transfer or
other event that resulted in the transfer to the trust (e.g., a gift, devise or other such transaction), the last reported sale price on the day of the transfer or other event that resulted in
the transfer of such shares to the trust) and (ii) the sales proceeds (net of commissions and other expenses of sale) received by the trustee for the shares. The trustee will reduce the amount
payable to the prohibited owner by the amount of dividends and other distributions paid to the prohibited owner and owed by the prohibited owner to the trustee. Any net sales proceeds in excess of the
amount payable to the prohibited owner will be immediately paid to the
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charitable
beneficiary, together with any dividends or other distributions thereon. In addition, if prior to our discovery that shares of our stock have been transferred to the trustee, such shares of
stock are sold by a prohibited owner, then such shares shall be deemed to have been sold on behalf of the trust and, to the extent that the prohibited owner received an amount for or in respect of
such shares that exceeds the amount that such prohibited owner was entitled to receive, such excess amount shall be paid to the trustee upon demand.
The
trustee will be designated by us and will be unaffiliated with us and with any prohibited owner. Prior to the sale of any shares by the trust, the trustee will receive, in trust for
the charitable beneficiary, all dividends and other distributions paid by us with respect to such shares, and may exercise all voting rights with respect to such shares for the exclusive benefit of
the charitable beneficiary.
Subject
to Maryland law, effective as of the date that the shares have been transferred to the trust, the trustee may, at the trustee's sole
discretion:
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rescind as void any vote cast by a prohibited owner prior to our discovery that the shares have been transferred to the trust; and
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recast the vote in accordance with the desires of the trustee acting for the benefit of the beneficiary of the trust.
However,
if we have already taken irreversible corporate action, then the trustee may not rescind and recast the vote.
If
our Board of Directors or a committee thereof determines that a proposed transfer or other event has taken place that violates the restrictions on ownership and transfer of our stock
set forth in our charter, our Board of Directors or such committee may take such action as it deems advisable in its sole and absolute discretion to refuse to give effect to or to prevent such
transfer, including, but not limited to, causing us to redeem shares of stock, refusing to give effect to the transfer on our books or instituting proceedings to enjoin the transfer.
Every
owner of 5% or more (or such lower percentage as required by the Code or the income tax regulations promulgated thereunder) of the outstanding shares of our stock, within
30 days after the end of each taxable year, must give written notice to us stating the name and address of such owner, the number of shares of each class and series of our stock that the owner
beneficially owns and a description of the manner in which the shares are held. Each such owner also must provide us with any additional information that we request in order to determine the effect,
if any, of the person's actual or beneficial ownership on our status as a REIT and to ensure compliance with the ownership limits. In addition, any person that is an actual owner, beneficial owner or
constructive owner of shares of our stock and any person (including the stockholder of record) who is holding shares of our stock for an actual owner, beneficial owner or constructive owner must, on
request, disclose to us such information as we may request in good faith in order to determine our status as a REIT and comply with requirements of any taxing authority or governmental authority or to
determine such compliance and to ensure compliance with the ownership limits.
Any
certificates representing shares of our stock will bear a legend referring to the restrictions on ownership and transfer of our stock described above.
These
restrictions on ownership and transfer could delay, defer or prevent a transaction or a change of control of our company that might involve a premium price for our common stock
that our stockholders believe to be in their best interest.
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Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer and Trust Company, LLC.
Listing
Our common stock is listed on the New York Stock Exchange under the symbol "CHCT." On November 4, 2019, the closing price for our common
stock, as reported on the New York Stock Exchange, was $48.36 per share. As of November 4, 2019, the number of stockholders of record of our common stock was 23.
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DESCRIPTION OF PREFERRED STOCK
The following description sets forth certain general terms of the shares of our preferred stock to which any prospectus
supplement may relate. This description and the description contained in any prospectus supplement are not complete and are in all respects subject to and qualified in their entirety by reference to
our charter, the applicable articles supplementary that describes the terms of the related class or series of our preferred stock, and our bylaws, each of which we will make available upon
request.
General
Our charter provides that we may issue up to 50,000,000 shares of preferred stock, $0.01 par value per share. Our charter authorizes our Board
of Directors to increase or decrease the number of authorized shares without stockholder approval. As of November 4, 2019, no shares of our preferred stock were issued and outstanding.
Subject
to the limitations prescribed by Maryland law and our charter and bylaws, our Board of Directors is authorized to establish the number of shares constituting each series of
preferred stock and to fix 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 our Board of Directors or duly authorized committee thereof.
The
prospectus supplement relating to the series of preferred stock offered thereby will describe the specific terms of such securities,
including:
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the title and stated value of such preferred stock;
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the number of shares of such preferred stock offered, the liquidation preference per share and the offering price of such shares;
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the dividend rate(s), period(s) and payment date(s) or method(s) of calculation thereof applicable to such preferred stock;
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whether dividends shall be cumulative or non-cumulative and, if cumulative, the date from which dividends on such preferred stock shall
accumulate;
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the procedures for any auction and remarketing, if any, for such preferred stock;
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the provisions for a sinking fund, if any, for such preferred stock;
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the provisions for redemption, if applicable, of such preferred stock;
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any listing of such preferred stock on any securities exchange;
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the terms and conditions, if applicable, upon which shares of such preferred stock will be convertible into shares of our common stock,
including the conversion price (or manner of calculation thereof) and conversion period;
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a discussion of material U.S. federal income tax considerations applicable to such preferred stock;
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any limitations on issuance of any series of preferred stock ranking senior to or on a parity with such series of preferred stock as to
dividend rights and rights upon liquidation, dissolution or winding up of our affairs;
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in addition to those limitations described herein, any other limitations on actual and constructive ownership and restrictions on transfer, in
each case as may be appropriate to preserve our status as a REIT; and
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any other specific terms, preferences, rights, limitations or restrictions of such preferred stock.
Holders
of preferred stock will be subject to the ownership restrictions of our charter. See "Description of Common StockRestrictions on Ownership and Transfer."
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DESCRIPTION OF DEPOSITARY SHARES
The following description, together with the additional information we may include in any applicable prospectus
supplements, summarizes the material terms and provisions of the preferred stock represented by depositary shares that we may offer under this prospectus and the related deposit agreements, depositary
shares and receipts representing depositary shares. While the terms summarized below will apply generally to any depositary shares that we may offer, we will describe the particular terms of any
series of depositary shares in more detail in the applicable prospectus supplement. If we indicate in the prospectus supplement, the terms of any depositary shares offered under that prospectus
supplement may differ from the terms described below. Specific deposit agreements, depositary shares and receipts representing depositary shares will contain additional important terms and provisions
and will be incorporated by reference as an exhibit to the registration statement, which includes this prospectus.
General
We may, at our option, elect to offer fractional interests in preferred stock, rather than preferred stock. If we exercise this option, we will
appoint a depositary to issue depositary receipts representing those fractional interests. Preferred stock of each series represented by depositary shares will be deposited under a separate deposit
agreement between us and the depositary. The prospectus supplement relating to a series of depositary shares will provide the name and address of the depositary. Subject to the terms of the applicable
deposit agreement, each owner of depositary shares will be entitled to all of the dividend, voting, conversion, redemption, liquidation and other rights and preferences of the preferred stock
represented by those depositary shares.
Depositary
receipts issued pursuant to the applicable deposit agreement will evidence ownership of depositary shares. Upon surrender of depositary receipts at the office of the
depositary, and upon payment of the charges provided in and subject to the terms of the deposit agreement, a holder of depositary shares will be entitled to receive the preferred shares underlying the
surrendered depositary receipts.
Distributions
A depositary will be required to distribute all dividends or other cash distributions received in respect of the applicable 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. Fractions will be rounded down to the
nearest whole cent.
If
the distribution is other than in cash, a depositary will be required to distribute property received by it to the record holders of depositary receipts entitled thereto, unless the
depositary determines that it is not feasible to make the distribution. In that case, the depositary may, with our approval, sell the property and distribute the net proceeds from the sale to the
holders of depositary shares.
Depositary
shares that represent preferred stock converted or exchanged will not be entitled to distributions. The deposit agreement also will contain provisions relating to the manner
in which any subscription or similar rights we offer to holders of preferred stock will be made available to holders of depositary shares. All distributions will be subject to obligations of holders
to file proofs, certificates and other information and to pay certain charges and expenses to the depositary.
Withdrawal of Preferred Stock
You may receive the number of whole shares of your series of preferred stock and any money or other property represented by your depositary
receipts after surrendering your depositary receipts at the corporate trust office of the depositary. Shares of partial preferred stock will not be issued. If the
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depositary
shares that you surrender exceed the number of depositary shares that represent the number of whole shares of preferred stock you wish to withdraw, then the depositary will deliver to you
at the same time a new depositary receipt evidencing the excess number of depositary shares. Once you have withdrawn your preferred stock, you will not be entitled to re-deposit such preferred stock
under the deposit agreement in order to receive depositary shares. We do not expect that there will be any public trading market for shares of withdrawn preferred stock.
Redemption of Depositary Shares
If we redeem a series of the preferred stock underlying the depositary shares, the depositary will redeem those shares from the proceeds it
receives. The redemption price per depositary share will be equal to the applicable fraction of the redemption price per share payable with respect to the series of the preferred stock. The redemption
date for depositary shares will be the same as that of the preferred stock. If we are redeeming less than all of the depositary shares, the depositary will select the depositary shares we are
redeeming by lot or pro rata as the depositary may determine.
After
the date fixed for redemption, the depositary shares called for redemption will no longer be deemed outstanding. All rights of the holders of the depositary shares and the related
depositary receipts will cease at that time, except the right to receive the money or other property to which the holders of depositary shares were entitled upon redemption. Receipt of the money or
other property is subject to surrender to the depositary of the depositary receipts evidencing the redeemed depositary shares.
Voting of the Underlying Preferred Stock
Upon receipt of notice of any meeting at which the holders of the preferred stock are entitled to vote, a depositary will be required to mail
the information contained in the notice of meeting to the record holders of the depositary shares representing such preferred stock. Each record holder of depositary receipts on the record date will
be entitled to instruct the depositary as to how the holder's depositary shares will be voted. The record date for the depositary shares will be the same as the record date for the preferred stock.
The depositary will vote the shares as you instruct. We will agree to take all reasonable action that the depositary deems necessary in order to enable it to vote the preferred stock in that manner.
If you do not instruct the depositary how to vote your shares, the depositary will abstain from voting those shares. The depositary will not be responsible for any failure to carry out any voting
instruction, or for the manner or effect of any vote, as long as its action or inaction is in good faith and does not result from its gross negligence or willful misconduct.
Liquidation Preference
Upon our liquidation, whether voluntary or involuntary, each holder of depositary shares will be entitled to the fraction of the liquidation
preference accorded each share of preferred stock represented by the depositary shares, as described in the applicable prospectus supplement.
Conversion or Exchange of Preferred Stock
The depositary shares will not themselves be convertible into or exchangeable for common stock or preferred stock or any of our other securities
or property. Nevertheless, if so specified in the applicable prospectus supplement, the depositary receipts may be surrendered by holders to the applicable depositary with written instructions to it
to instruct us to cause the conversion of the preferred stock represented by the depositary shares. Similarly, if so specified in the applicable prospectus supplement, we may require you to surrender
all of your depositary receipts to the applicable depositary upon our requiring the conversion or exchange of the preferred stock represented by the depositary shares into other securities or rights.
We will agree that, upon receipt of the instruction and any amounts payable
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in
connection with the conversion or exchange, we will cause the conversion or exchange using the same procedures as those provided for delivery of preferred shares to effect the conversion or
exchange. If you are converting only a part of the depositary shares, the depositary will issue you a new depositary receipt for any unconverted depositary shares.
Amendment and Termination of a Deposit Agreement
We and the applicable depositary are permitted to amend the provisions of the depositary receipts and the deposit agreement. However, the
holders of at least a majority of the applicable depositary shares then outstanding (or such greater approval as is required by the then current rules of any stock exchange or trading market, if any,
on which we shall have listed the applicable underlying series of preferred stock for trading or as otherwise provided in our organizational documents) must approve any amendment that adds or
increases fees or charges or prejudices an important right of holders. Every holder of an outstanding depositary receipt at the time any amendment becomes effective, by continuing to hold the receipt,
will be bound by the applicable deposit agreement, as amended.
Any
deposit agreement may be terminated by us upon not less than 30 days' prior written notice to the applicable depositary if (1) the termination is necessary to preserve
our status as a REIT or (2) a majority of each series of preferred shares affected by the termination consents to the termination. When either event occurs, the depositary will be required to
deliver or make available to each holder of depositary receipts, upon surrender of the depositary receipts held by the holder, the number of whole or fractional preferred shares as are represented by
the depositary shares evidenced by the depositary receipts, together with any other property held by the depositary with respect to the depositary receipts. In addition, a deposit agreement will
automatically terminate if:
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all depositary shares have been redeemed;
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there shall have been a final distribution in respect of the related preferred stock in connection with our liquidation and the distribution
has been made to the holders of depositary receipts evidencing the depositary shares underlying the preferred stock; or
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each related share of preferred stock shall have been converted or exchanged into securities not represented by depositary shares.
Charges of a Depositary
We will pay all transfer and other taxes and governmental charges arising solely from the existence of a deposit agreement. In addition, we will
pay the fees and expenses of a depositary in connection with the initial deposit of the preferred stock and any redemption of preferred stock. However, holders of depositary receipts will pay any
transfer or other governmental charges and the fees and expenses of a depositary for any duties the holders request to be performed that are outside of those expressly provided for in the applicable
deposit agreement.
Resignation and Removal of a Depositary
A depositary may resign at any time by providing us notice of its election to resign. In addition, we may at any time remove a depositary. Any
resignation or removal will take effect when we appoint a successor depositary and it accepts the appointment. We must appoint a successor depositary within 60 days after delivery of the notice
of resignation or removal. A depositary must be a bank or trust company that has its principal office in the United States and a combined capital and surplus of at least $50 million.
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Miscellaneous
A depositary will be required to forward to holders of depositary receipts any reports and communications from us that it receives with respect
to the related preferred stock, including, without limitation, proxy solicitation materials. Holders of depository receipts will be able to inspect the transfer books of the depository and the list of
holders of receipts upon reasonable notice. Neither we nor any depositary will be liable if either party is prevented from or delayed in performing its obligations under a deposit agreement by law or
any circumstances beyond its control. Our obligations and those of the depositary under a deposit agreement will be limited to performing duties in good faith and without gross negligence or willful
misconduct.
Neither
we nor any depositary will be obligated to prosecute or defend any legal proceeding in respect of any depositary receipts, depositary shares or related preferred stock unless
satisfactory indemnity is furnished. We and each depositary will be permitted to rely on written advice of counsel or accountants, on information provided by persons presenting preferred stock for
deposit, by holders of depositary receipts, or by other persons believed in good faith to be competent to give the information, and on documents believed in good faith to be genuine and signed by a
proper party.
If
a depositary receives conflicting claims, requests or instructions from any holder of depositary receipts, on the one hand, and us, on the other hand, the depositary shall be entitled
to act on the claims, requests or instructions received from us.
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DESCRIPTION OF RIGHTS
We may issue rights to our stockholders for the purchase of shares of our common stock. Each series of rights will be issued under a separate
rights agreement to be entered into between us and a bank or trust company, as rights agent, all as set forth in the prospectus supplement relating to the particular issue of rights. The rights agent
will act solely as our agent in connection with the certificates relating to the rights of such series and will not assume any obligation or relationship of agency or trust for or with any holders of
rights certificates or beneficial owners of rights. The rights
agreement and the rights certificates relating to each series of rights will be filed with the SEC and incorporated by reference as an exhibit to the registration statement of which this prospectus is
a part.
The
applicable prospectus supplement will describe the following terms, where applicable, of the rights to be issued:
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the date for determining the stockholders entitled to the rights distribution;
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the aggregate number of shares of common stock purchasable upon exercise of such rights and the exercise price;
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the aggregate number of rights being issued;
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the date, if any, on and after which such rights may be transferable separately;
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the date on which the right to exercise such rights shall commence and the date on which such right shall expire;
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any provisions for changes to or adjustments in the exercise price or number of securities issuable upon exercise of the rights;
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any special U.S. federal income tax consequences; and
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any other terms of such rights, including terms, procedures and limitations relating to the distribution, exchange and exercise of such rights.
Restrictions on Ownership
Holders of rights will be subject to the ownership restrictions of our charter. See "Description of Common StockRestrictions on
Ownership and Transfer."
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DESCRIPTION OF DEBT SECURITIES
The following description, together with the additional information we include in any applicable prospectus supplement,
summarizes certain general terms and provisions of our debt securities. When we offer to sell a particular series of debt securities, we will describe the specific terms of the series in a supplement
to this prospectus. We will also indicate in the prospectus supplement the extent to which the general terms and provisions described in this prospectus apply to a particular series of debt
securities. To the extent the information contained in the prospectus supplement differs from this summary description, you should rely on the information in the prospectus
supplement.
We
may issue debt securities either separately, or together with, or upon the conversion or exercise of or in exchange for, other securities described in this prospectus. Unless
otherwise specified in a supplement to this prospectus, the debt securities will be the direct, unsecured obligations of the Company and may be issued in one or more series.
The
debt securities will be issued under an indenture between the Company and a trustee. We have summarized select portions of the indenture below. The summary is not complete. The form
of the indenture has been filed as an exhibit to the registration statement and you should read the indenture and debt securities carefully for provisions that may be important to you. Capitalized
terms used in the summary and not defined in this prospectus have the meanings specified in the indenture.
General
The terms of each series of our debt securities will be established by or pursuant to a resolution of our Board of Directors and set forth or
determined in the manner provided in such resolutions, in an officer's certificate or by a supplemental indenture. The particular terms of each series of debt securities will be described in a
prospectus supplement relating to such series, including any pricing supplement or term sheet.
Unless
otherwise specified in a supplement to this prospectus, the debt securities will be direct, unsecured obligations of the Company. We can issue an unlimited amount of debt
securities under the indenture that may be in one or more series with the same or various maturities, at par, at a premium, or at a discount. We will set forth in a prospectus supplement, including
any pricing supplement or term sheet, relating to any series of debt securities being offered, the aggregate principal amount and the following terms of the debt securities, to the extent
applicable:
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the title and ranking of the debt securities (including the terms of any subordination provisions);
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the price or prices (expressed as a percentage of the principal amount) at which we will sell the debt securities;
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any limit on the aggregate principal amount of the debt securities;
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the date or dates on which the principal on the debt securities is payable;
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the rate or rates (which may be fixed or variable) per annum or the method used to determine the rate or rates (including any commodity,
commodity index, stock exchange index or financial index) at which the debt securities will bear interest, the date or dates from which interest will accrue, the date or dates on which interest will
commence and be payable and any regular record date for the interest payable on any interest payment date;
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the place or places where principal of, and any premium and interest on, the debt securities will be payable, the method of such payment, where
debt securities may be surrendered for registration of transfer or exchange and where notices and demands to us relating to the debt securities may be delivered;
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the period or periods within which, the price or prices at which and the terms and conditions upon which we may redeem the debt securities;
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any obligation we have to redeem or purchase the debt securities pursuant to any sinking fund or analogous provisions or at the option of a
holder of debt securities and the period or periods within which, the price or prices at which and the terms and conditions upon which the debt securities shall be redeemed or purchased, in whole or
in part, pursuant to such obligation;
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the dates on which and the price or prices at which we will repurchase debt securities at the option of the holders of debt securities and
other detailed terms and provisions of these repurchase obligations;
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the denominations in which the debt securities will be issued, if other than denominations of $1,000 and any integral multiple thereof;
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whether the debt securities will be issued in bearer or registered form and, if the latter, whether they will be issued in the form of
certificated debt securities or global debt securities;
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the portion of principal amount of the debt securities payable upon declaration of acceleration of the maturity date, if other than the
principal amount;
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the currency of denomination of the debt securities, which may be U.S. dollars or any foreign currency, and if such currency of denomination is
a composite currency, the agency or organization, if any, responsible for overseeing such composite currency;
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the designation of the currency, currencies or currency units in which payment of principal of, and any premium and interest on, the debt
securities will be made;
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if payments of principal of, or any premium or interest on, the debt securities will be made in one or more currencies or currency units other
than that or those in which the debt securities are denominated, the manner in which the exchange rate with respect to these payments will be determined;
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the manner in which the amounts of payment of principal of, and any premium and interest on, the debt securities will be determined, if these
amounts may be determined by reference to an index based on a currency or currencies other than that in which the debt securities are denominated or designated to be payable or by reference to a
commodity, commodity index, stock exchange index or financial index;
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any provisions relating to any security provided for the debt securities or for any guarantees;
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any addition to, deletion of or change in the events of default described in this prospectus or in the indenture with respect to the debt
securities and any change in the acceleration provisions described in this prospectus or in the indenture with respect to the debt securities;
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any addition to, deletion of or change in the covenants described in this prospectus or in the indenture with respect to the debt securities;
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any other terms of the debt securities, which may supplement, modify or delete any provision of the indenture as it applies to that series,
including any terms that may be required under applicable law or regulations or advisable in connection with the marketing of the securities;
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a discussion of any material United States federal income tax considerations applicable to an investment in the debt securities;
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any depositaries, interest rate calculation agents, exchange rate calculation agents or other agents with respect to the debt securities;
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any provisions relating to conversion or exchange of any debt securities, including, if applicable, the conversion or exchange price and
period, provisions as to whether conversion or exchange will be mandatory, at the option of the holders thereof or at our option, the events requiring an adjustment of the conversion or exchange price
and provisions affecting conversion or exchange if such debt securities are redeemed;
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whether the debt securities will be senior debt securities or subordinated debt securities and, if applicable, a description of the
subordination terms thereof;
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whether the debt securities are entitled to the benefits of the guarantee of any guarantor, and whether any such guarantee is made on a senior
or subordinated basis and, if applicable, a description of the subordination terms of any such guarantee;
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whether any underwriter(s) will act as market maker(s) for the debt securities; and
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the extent to which a secondary market for the debt securities is expected to develop.
We
may issue debt securities that provide for an amount less than their stated principal amount to be due and payable upon declaration of acceleration of their maturity pursuant to the
terms of the
indenture. We will provide you with information on other special considerations applicable to any of these debt securities in the applicable prospectus supplement.
If
we denominate the purchase price of any of the debt securities in a foreign currency or currencies or a foreign currency unit or units, or if the principal of, and any premium and
interest on, any series of debt securities is payable in a foreign currency or currencies or a foreign currency unit or units, we will provide you with information on the restrictions, elections,
general United States federal income tax considerations, specific terms and other information with respect to that issue of debt securities and such foreign currency or currencies or foreign currency
unit or units in the applicable prospectus supplement.
Transfer and Exchange
Each debt security will be represented by either one or more global securities registered in the name of The Depositary Trust Company, or DTC,
or a nominee of the depositary (we will refer to any debt security represented by a global debt security as a "book-entry debt security"), or a certificate issued in definitive registered form (we
will refer to any debt security represented by a certificated security as a "certificated debt security") as set forth in the applicable prospectus supplement. Except as otherwise set forth in this
prospectus or the applicable prospectus supplement, book-entry debt securities will not be issuable in certificated form.
A
debtholder may transfer or exchange certificated debt securities at any office we maintain for this purpose in accordance with the terms of the indenture. No service charge will be
made for any transfer or exchange of certificated debt securities, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with a transfer or
exchange.
A
debtholder may effect the transfer of certificated debt securities and the right to receive the principal of, and any premium and interest on, certificated debt securities only by
surrendering the certificate representing those certificated debt securities and either reissuance by us or the trustee of the certificate to the new holder or the issuance by us or the trustee of a
new certificate to the new holder.
No Protection in the Event of a Change of Control
Unless we state otherwise in the applicable prospectus supplement, the debt securities will not contain any provisions that may afford holders
of the debt securities protection in the event we
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undergo
a change in control or in the event of a highly leveraged transaction (whether or not such transaction results in a change in control) that could adversely affect holders of debt securities.
Covenants
We will set forth in the applicable prospectus supplement any restrictive covenants applicable to any issue of debt securities.
Consolidation, Merger and Sale of Assets
We may not consolidate with or merge with or into, or convey, transfer or lease all or substantially all of our properties and assets to, any
person, which we refer to as a successor person, unless:
-
-
we are the surviving entity or the successor person (if other than us) is an entity organized and validly existing under the laws of any U.S.
domestic jurisdiction and expressly assumes our obligations on the debt securities and under the indenture;
-
-
immediately after giving effect to the transaction, no default or event of default shall have occurred and be continuing;
-
-
if we are not the successor person, each guarantor (if any), unless it has become the successor person, confirms that its guarantee shall
continue to apply to the obligations under the debt securities and the indenture to the same extent as prior to such merger, conveyance, transfer or lease, as applicable; and
-
-
certain other conditions are met.
Notwithstanding
the above, any of our subsidiaries may consolidate with, merge into or transfer all or part of its properties and assets to us.
Events of Default
The term "event of default" means, with respect to any series of our debt securities, any of the
following:
-
-
default in the payment of any interest upon any debt security of that series when it becomes due and payable, and continuance of that default
for a period of 30 days (unless the entire amount of the payment is deposited by us with the trustee or with a paying agent prior to the expiration of the 30-day period);
-
-
default in the payment of principal of any debt security of that series at its maturity, upon acceleration, redemption or otherwise;
-
-
default in the performance or breach of any other covenant or warranty by us in the indenture (other than a covenant or warranty that has been
included in the indenture solely for the benefit of a series of debt securities other than that series), which default continues uncured for a period of 90 days after we receive written notice
from the trustee or we and the trustee receive written notice from the holders of not less than a majority in principal amount of the outstanding debt securities of that series as provided in the
indenture;
-
-
certain voluntary or involuntary events of bankruptcy, insolvency or reorganization of our company; and
-
-
any other event of default provided with respect to our debt securities of that series that is described in the applicable prospectus
supplement.
No
event of default with respect to a particular series of our debt securities (except as to certain events of bankruptcy, insolvency or reorganization) necessarily constitutes an event
of default with
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respect
to any other series of debt securities. The occurrence of certain events of default or an acceleration under the indenture may constitute an event of default under certain of our or our
subsidiaries' indebtedness outstanding from time to time.
If
an event of default with respect to our outstanding debt securities of any series occurs and is continuing, then the trustee or the holders of not less than a majority in principal
amount of the outstanding debt securities of that series may, by a notice in writing to us (and to the trustee if given by the holders), declare to be due and payable immediately the principal (or, if
the debt securities of that series are discount securities, that portion of the principal amount as may be specified in the terms of that series) of, and any accrued and unpaid interest on, all debt
securities of that series. In the case of an event of default resulting from certain events of bankruptcy, insolvency or reorganization, the principal (or such specified amount) of, and any accrued
and unpaid interest on, all outstanding debt securities will become and be immediately due and payable without any declaration or other act on the
part of the trustee or any holder of outstanding debt securities. At any time after a declaration of acceleration with respect to debt securities of any series has been made, but before a judgment or
decree for payment of the money due has been obtained by the trustee, the holders of a majority in principal amount of the outstanding debt securities of that series may rescind and annul the
acceleration if all events of default, other than the non-payment of accelerated principal and interest, if any, with respect to debt securities of that series, have been cured or waived as provided
in the indenture. We refer you to the prospectus supplement relating to any series of debt securities that are discount securities for the particular provisions relating to acceleration of a portion
of the principal amount of such discount securities upon the occurrence of an event of default.
The
indenture provides that the trustee will be under no obligation to exercise any of its rights or powers under the indenture unless the trustee receives indemnity satisfactory to it
against any cost, liability or expense that might be incurred by it in exercising such right or power. Subject to certain rights of the trustee, the holders of a majority in principal amount of the
outstanding debt securities of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power
conferred on the trustee with respect to the debt securities of that series.
No
holder of any debt security of any series will have any right to institute any proceeding, judicial or otherwise, with respect to the indenture or for the appointment of a receiver or
trustee, or for any remedy under the indenture, unless:
-
-
that holder has previously given to the trustee written notice of a continuing event of default with respect to debt securities of that series,
and
-
-
the holders of at least a majority in principal amount of the outstanding debt securities of that series have made written request, and offered
reasonable indemnity or security, to the trustee to institute the proceeding as trustee, and the trustee has not received from the holders of at least a majority in principal amount of the outstanding
debt securities of that series a direction inconsistent with that request and has failed to institute the proceeding within 60 days.
Notwithstanding
any other provision in the indenture, the holder of any debt security will have an absolute and unconditional right to receive payment of the principal of, and any
premium and interest on, that debt security on or after the due dates expressed in that debt security and to institute suit for the enforcement of payment.
The
indenture requires us, within 120 days after the end of our fiscal year, to furnish to the trustee a statement as to compliance with the indenture. If a default or event of
default occurs and is continuing with respect to the debt securities of any series and if it is known to a responsible officer of the trustee, the trustee shall mail to each holder of the debt
securities of that series notice of a default or event of default within 90 days after knowledge of its occurrence. The indenture provides that the
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trustee
may withhold notice to the holders of debt securities of any series of any default or event of default (except in payment on any debt securities of that series) with respect to debt securities
of that series if the trustee determines in good faith that withholding notice is in the interest of the holders of those debt securities.
Modification and Waiver
We and the trustee may modify and amend the indenture or the debt securities of any series without the consent of any holder of any debt
security:
-
-
to cure any ambiguity, omission, defect or inconsistency;
-
-
to comply with covenants in the indenture described above under the heading "Consolidation, Merger and Sale of Assets;"
-
-
to provide for uncertificated securities in addition to or in place of certificated securities;
-
-
to surrender any of our rights or powers under the indenture;
-
-
to add covenants or events of default for the benefit of the holders of debt securities of any series;
-
-
to comply with the applicable procedures of the applicable depositary;
-
-
to make any change that does not adversely affect the rights of any holder of debt securities;
-
-
to provide for the issuance of and establish the form and terms and conditions of debt securities of any series as permitted by the indenture;
-
-
to effect the appointment of a successor trustee with respect to the debt securities of any series and to add to or change any of the
provisions of the indenture to provide for or facilitate administration by more than one trustee;
-
-
to comply with requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act;
-
-
to reflect the release of a guarantor of the debt securities in accordance with the terms of the indenture; or
-
-
to add guarantors with respect to any or all of the debt securities or to secure any or all of the debt securities or the guarantees.
We
may also modify and amend the indenture with the consent of the holders of at least a majority in principal amount of the outstanding debt securities of each series affected by the
modifications or amendments. We may not make any modification or amendment without the consent of the holders of each affected debt security then outstanding if that amendment
will:
-
-
reduce the amount of debt securities whose holders must consent to an amendment, supplement or waiver;
-
-
reduce the rate of or extend the time for payment of interest (including default interest) on any debt security;
-
-
reduce the principal of or premium on, or change the fixed maturity of, any debt security, or reduce the amount of, or postpone the date fixed
for, the payment of any sinking fund or analogous obligation with respect to any series of debt securities;
-
-
reduce the principal amount of discount securities payable upon acceleration of maturity;
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-
-
waive a default or event of default in the payment of the principal of, or any premium or interest on, any debt security (except a rescission
of acceleration of the debt securities of any series by the holders of at least a majority in aggregate principal amount of the then outstanding debt securities of that series and a waiver of the
payment default that resulted from such acceleration);
-
-
make the principal of, or any premium or interest on, any debt security payable in any currency other than that stated in the debt security;
-
-
make any change to certain provisions of the indenture relating to, among other things, the right of holders of debt securities to receive
payment of the principal of, or any premium and interest on, those debt securities and to institute suit for the enforcement of any such payment and to waivers or amendments;
-
-
waive a redemption payment with respect to any debt security; or
-
-
if the debt securities of that series are entitled to the benefit of a guarantee, release any guarantor of such series other than as provided
in the indenture or modify the guarantee in any manner adverse to the holders.
Except
for certain specified provisions, the holders of at least a majority in principal amount of the outstanding debt securities of any series may on behalf of the holders of all debt
securities of that series waive our compliance with provisions of the indenture. The holders of a majority in principal amount of the outstanding debt securities of any series may on behalf of the
holders of all of the debt securities of such series waive any past default under the indenture with respect to that series and its consequences, except a default in the payment of the principal of,
or any premium or interest on, any debt security of that series; provided, however, that the holders of a majority in principal amount of the outstanding debt securities of any series may rescind an
acceleration and its consequences, including any related payment default that resulted from the acceleration.
Defeasance of Debt Securities and Certain Covenants in Certain Circumstances
Legal Defeasance. The indenture provides that, unless otherwise provided by the terms of the applicable series of debt securities, we
may be
discharged from any and all obligations in respect of the debt securities of any series (subject to certain exceptions). We will be so discharged upon the deposit with the trustee, in trust, of money
and/or U.S. government obligations or, in the case of debt securities denominated in a single currency other than U.S. dollars, government obligations of the government that issued or caused to be
issued such currency, that, through the payment of interest and principal in accordance with their terms, will provide money or U.S. government obligations in an amount sufficient in the opinion of a
nationally recognized firm of independent public accountants or investment bank to pay and discharge each installment of principal of, any premium and interest on, and any mandatory sinking fund
payments in respect of, the debt securities of that series on the stated maturity of those payments in accordance with the terms of the indenture and those debt securities.
This
discharge may occur only if, among other things, we have delivered to the trustee an opinion of counsel stating that we have received from, or there has been published by, the
United States Internal Revenue Service, or IRS, a ruling or, since the date of execution of the indenture, there has been a change in the applicable United States federal income tax law, in either
case to the effect that, and based thereon such opinion shall confirm that, the holders of the debt securities of that series will not recognize income, gain or loss for United States federal income
tax purposes as a result of the deposit, defeasance and discharge and will be subject to United States federal income tax on the same amounts and in the same manner and at the same times as would have
been the case if the deposit, defeasance and discharge had not occurred.
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Defeasance of Certain Covenants. The indenture provides that, unless otherwise provided by the terms of the applicable series of debt
securities,
upon compliance with certain conditions:
-
-
we may omit to comply with the covenant described under the heading "Consolidation, Merger and Sale of Assets" and certain other covenants set
forth in the indenture, as well as any additional covenants that may be set forth in the applicable prospectus supplement, and
-
-
any omission to comply with those covenants will not constitute a default or an event of default with respect to the debt securities of that
series, or covenant defeasance.
The
conditions include:
-
-
depositing with the trustee money and/or U.S. government obligations or, in the case of debt securities denominated in a single currency other
than U.S. dollars, government obligations of the government that issued or caused to be issued such currency, that, through the payment of interest and principal in accordance with their terms, will
provide money in an amount sufficient in the opinion of a nationally recognized firm of independent public accountants or investment bank to pay and discharge each installment of principal of, any
premium and interest on, and any mandatory sinking fund payments in respect of the debt securities of that series on the stated maturity of those payments in accordance with the terms of the indenture
and those debt securities, and
-
-
delivering to the trustee an opinion of counsel to the effect that the holders of the debt securities of that series will not recognize income,
gain or loss for United States federal income tax purposes as a result of the deposit and related covenant defeasance and will be subject to United States federal income tax on the same amounts and in
the same manner and at the same times as would have been the case if the deposit and related covenant defeasance had not occurred.
Covenant Defeasance and Events of Default. In the event we exercise our option to effect covenant defeasance with respect to any series
of debt
securities and the debt securities of that series are declared due and payable because of the occurrence of any event of default, the amount of money and/or U.S. government obligations or foreign
government obligations on deposit with the trustee will be sufficient to pay amounts due on the debt securities of that series at the time of their stated maturity but may not be sufficient to pay
amounts due on the debt securities of that series at the time
of the acceleration resulting from the event of default. In such a case, we would remain liable for those payments.
"Foreign
Government Obligations" means, with respect to debt securities of any series that are denominated in a currency other than U.S. dollars, direct obligations of, or obligations
guaranteed by, the government that issued or caused to be issued such currency for the payment of which obligations its full faith and credit is pledged and which are not callable or redeemable at the
option of the issuer thereof.
Regarding the Trustee
The indenture provides that, except during the continuance of an event of default, the trustee will perform only such duties as are specifically
set forth in the indenture. During the existence of an event of default, the trustee will exercise such rights and powers vested in it under the indenture and use the same degree of care and skill in
its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.
The
indenture and provisions of the Trust Indenture Act that are incorporated by reference therein contain limitations on the rights of the trustee, should it become one of our
creditors, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such
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claim
as security or otherwise. The trustee is permitted to engage in other transactions with us or any of our affiliates; provided, however, that if it acquires any conflicting interest (as defined
in the indenture or in the Trust Indenture Act), it must eliminate such conflict or resign.
No Personal Liability of Directors, Officers, Employees or Stockholders
None of our past, present or future directors, officers, employees, stockholders or controlling persons, as such, will have any liability for
any of our obligations under the debt securities or the indenture or for any claim based on, or in respect or by reason of, such obligations or their creation. By accepting a debt security, each
holder waives and releases all such liability. This waiver and release is part of the consideration for the issue of the debt securities. However, this waiver and release may not be effective to waive
liabilities under United States federal securities laws, and it is the view of the SEC that such a waiver is against public policy.
Governing Law
The indenture and the debt securities, including any claim or controversy arising out of or relating to the indenture or the debt securities,
will be governed by the laws of the State of New York (without regard to the conflicts of laws provisions thereof other than Section 5-1401 of the General Obligations Law).
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DESCRIPTION OF WARRANTS
The following description, together with the additional information we may include in any applicable prospectus
supplements, summarizes the material terms and provisions of the warrants that we may offer under this prospectus and the related warrant agreements and warrant certificates. While the terms
summarized below will apply generally to any warrants that we may offer, we will describe the particular terms of any series of warrants in more detail in the applicable prospectus supplement. If we
indicate in the prospectus supplement, the terms of any warrants offered under that prospectus supplement may differ from the terms described below. Specific warrant agreements will contain additional
important terms and provisions and will be incorporated by reference as an exhibit to the registration statement, which includes this prospectus.
General
We may issue warrants for the purchase of common stock, preferred stock, depositary shares and/or units in one or more series. We may issue
warrants independently or together with common stock, preferred stock, depositary shares and/or units, and the warrants may be attached to or separate from these securities.
We
will evidence each series of warrants by warrant certificates that we will issue under a separate warrant agreement. We will enter into the warrant agreement with a warrant agent. We
will indicate the name and address of the warrant agent in the applicable prospectus supplement relating to a particular series of warrants.
We
will describe in the applicable prospectus supplement the terms of the series of warrants, including:
-
-
the offering price and aggregate number of warrants offered;
-
-
the currency for which the warrants may be purchased;
-
-
if applicable, the designation and terms of the securities with which the warrants are issued and the number of warrants issued with each such
security;
-
-
if applicable, the date on and after which the warrants and the related securities will be separately transferable;
-
-
the designation, amount and terms of the securities purchasable upon exercise of such warrants;
-
-
if applicable, the date on and after which such warrants and the securities purchasable upon exercise of such warrants will be separately
transferable;
-
-
the effect of any merger, consolidation, sale or other disposition of our business on the warrant agreement and the warrants;
-
-
the terms of any rights to redeem or call the warrants;
-
-
any provisions for changes to or adjustments in the exercise price or number of securities issuable upon exercise of the warrants;
-
-
the periods during which, and places at which, the warrants are exercisable;
-
-
the manner of exercise;
-
-
the dates on which the right to exercise the warrants will commence and expire;
-
-
the manner in which the warrant agreement and warrants may be modified;
-
-
federal income tax consequences of holding or exercising the warrants;
-
-
the terms of the securities issuable upon exercise of the warrants; and
-
-
any other specific terms, preferences, rights or limitations of or restrictions on the warrants.
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DESCRIPTION OF UNITS
We may issue units comprised of common stock, preferred stock, depositary shares, warrants and other securities in any combination. We may issue
units in such amounts and in as many distinct series as we wish. This section outlines certain provisions of the units that we may issue. If we issue units, they will be issued under one or more unit
agreements to be entered into between us and a bank or other financial institution, as unit agent. The information described in this section may not be complete in all respects and is qualified
entirely by reference to the unit agreement with respect to the units of any particular series. The specific terms of any series of units offered will be described in the applicable prospectus
supplement. If so described in a particular supplement, the specific terms of any series of units may differ from the general description of terms presented below. We urge you to read any prospectus
supplement related to any series of units we may offer, as well as the complete
unit agreement and unit certificate that contain the terms of the units. If we issue units, forms of unit agreements and unit certificates relating to such units will be incorporated by reference as
exhibits to the registration statement, which includes this prospectus.
Each
unit that we may issue will be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and
obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities included in the unit may not be held or transferred separately, at
any time or at any time before a specified date. The applicable prospectus supplement may describe:
-
-
the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those
securities may be held or transferred separately;
-
-
any provisions of the governing unit agreement;
-
-
the price or prices at which such units will be issued;
-
-
the applicable U.S. federal income tax considerations relating to the units;
-
-
any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units; and
-
-
any other terms of the units and of the securities comprising the units.
The
provisions described in this section, as well as those described under "Description of Common Stock", "Description of Preferred Stock," "Description of Depositary Shares" and
"Description of Warrants" will apply to the securities included in each unit, to the extent relevant and as may be updated in any prospectus supplements.
Issuance in Series
We may issue units in such amounts and in as many distinct series as we wish. This section summarizes terms of the units that apply generally to
all series. Most of the financial and other specific terms of your series will be described in the applicable prospectus supplement.
Unit Agreements
We will issue the units under one or more unit agreements to be entered into between us and a bank or other financial institution, as unit
agent. We may add, replace or terminate unit agents from time to time. We will identify the unit agreement under which each series of units will be issued and the unit agent under that agreement in
the applicable prospectus supplement.
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The
following provisions will generally apply to all unit agreements unless otherwise stated in the applicable prospectus supplement:
Modification without Consent
We and the applicable unit agent may amend any unit or unit agreement without the consent of any
holder:
-
-
to cure any ambiguity in any provisions of the governing unit agreement that differ from those described below;
-
-
to correct or supplement any defective or inconsistent provision; or
-
-
to make any other change that we believe is necessary or desirable and will not adversely affect the interests of the affected holders in any
material respect.
We
do not need any approval to make changes that affect only units to be issued after the changes take effect. We may also make changes that do not adversely affect a particular unit in
any material respect, even if they adversely affect other units in a material respect. In those cases, we do not need to obtain the approval of the holder of the unaffected unit; we need only obtain
any required approvals from the holders of the affected units.
Modification with Consent
We may not amend any particular unit or a unit agreement with respect to any particular unit unless we obtain the consent of the holder of that
unit, if the amendment would:
-
-
impair any right of the holder to exercise or enforce any right under a security included in the unit if the terms of that security require the
consent of the holder to any changes that would impair the exercise or enforcement of that right; or
-
-
reduce the percentage of outstanding units or any series or class the consent of whose holders is required to amend that series or class, or
the applicable unit agreement with respect to that series or class, as described below.
Any
other change to a particular unit agreement and the units issued under that agreement would require the following approval:
-
-
If the change affects only the units of a particular series issued under that agreement, the change must be approved by the holders of a
majority of the outstanding units of that series; or
-
-
If the change affects the units of more than one series issued under that agreement, it must be approved by the holders of a majority of all
outstanding units of all series affected by the change, with the units of all the affected series voting together as one class for this purpose.
These
provisions regarding changes with majority approval also apply to changes affecting any securities issued under a unit agreement, as the governing document.
In
each case, the required approval must be given by written consent.
Unit Agreements Will Not Be Qualified under Trust Indenture Act
No unit agreement will be qualified as an indenture, and no unit agent will be required to qualify as a trustee, under the Trust Indenture Act.
Therefore, holders of units issued under unit agreements will not have the protections of the Trust Indenture Act with respect to their units.
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Mergers and Similar Transactions Permitted; No Restrictive Covenants or Events of Default
The unit agreements will not restrict our ability to merge or consolidate with, or sell our assets to, another corporation or other entity or to
engage in any other transactions. If at any time we merge or consolidate with, or sell our assets substantially as an entirety to, another corporation or other entity, the successor entity will
succeed to and assume our obligations under the unit agreements. We will then be relieved of any further obligation under these agreements.
The
unit agreements will not include any restrictions on our ability to put liens on our assets, including our interests in our subsidiaries, nor will they restrict our ability to sell
our assets. The unit agreements also will not provide for any events of default or remedies upon the occurrence of any events of default.
Governing Law
The unit agreements and the units will be governed by Maryland law.
Form, Exchange and Transfer
We will issue each unit in globali.e., book-entryform only. Units in book-entry form will be represented by a
global security registered in the name of a depositary, which will be the holder of all the units represented by the global security. Those who own beneficial interests in a unit will do so through
participants in the depositary's system, and the rights of these indirect owners will be governed solely by the applicable procedures of the depositary and its participants. We will describe
book-entry securities, and other terms regarding the issuance and registration of the units in the applicable prospectus supplement.
Each
unit and all securities comprising the unit will be issued in the same form.
If
we issue any units in registered, non-global form, the following will apply to them:
-
-
The units will be issued in the denominations stated in the applicable prospectus supplement. Holders may exchange their units for units of
smaller denominations or combined into fewer units of larger denominations, as long as the total amount is not changed.
-
-
Holders may exchange or transfer their units at the office of the unit agent. Holders may also replace lost, stolen, destroyed or mutilated
units at that office. We may appoint another entity to perform these functions or perform them ourselves.
-
-
Holders will not be required to pay a service charge to transfer or exchange their units, but they may be required to pay for any tax or other
governmental charge associated with the transfer or exchange. The transfer or exchange, and any replacement, will be made only if our transfer agent is satisfied with the holder's proof of legal
ownership. The transfer agent may also require an indemnity before replacing any units.
-
-
If we have the right to redeem, accelerate or settle any units before their maturity, and we exercise our right as to less than all those units
or other securities, we may block the exchange or transfer of those units during the period beginning 15 days before the day we mail the notice of exercise and ending on the day of that
mailing, in order to freeze the list of holders to prepare the mailing. We may also refuse to register transfers of or exchange any unit selected for early settlement, except that we will continue to
permit transfers and exchanges of the unsettled portion of any unit being partially settled. We may also block the transfer or exchange of any unit in this manner if the unit includes securities that
are or may be selected for early settlement.
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Only
the depositary will be entitled to transfer or exchange a unit in global form, since it will be the sole holder of the unit.
Payments and Notices
In making payments and giving notices with respect to our units, we will follow the procedures as described in the applicable prospectus
supplement.
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GLOBAL SECURITIES
Book-Entry, Delivery and Form
Unless we indicate differently in a prospectus supplement, the securities initially will be issued in book-entry form and represented by one or
more global notes or global securities, or, collectively, global securities. The global securities will be deposited with, or on behalf of, DTC and registered in the name of Cede & Co.,
the nominee of DTC. Unless and until it is exchanged for individual certificates evidencing securities under the limited circumstances described below, a global security may not be transferred except
as a whole by the depositary to its nominee or by the nominee to the depositary, or by the depositary or its nominee to a successor depositary or to a nominee of the successor depositary.
DTC
has advised that it is:
-
-
a limited-purpose trust company organized under the New York Banking Law,
-
-
a "banking organization" within the meaning of the New York Banking Law,
-
-
a member of the Federal Reserve System,
-
-
a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and
-
-
a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act.
DTC
holds securities that its participants deposit with DTC. DTC also facilitates the settlement among its participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in participants' accounts, thereby eliminating the need for physical movement of securities certificates. "Direct participants"
in DTC include securities brokers and dealers, including underwriters, banks, trust companies, clearing corporations and other organizations. DTC is a wholly owned subsidiary of The Depository
Trust & Clearing Corporation, or DTCC. DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing
agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others, which we sometimes refer to as indirect participants, that clear through or
maintain a custodial relationship with a direct participant, either directly or indirectly. The rules applicable to DTC and its participants are on file with the SEC.
Purchases
of securities under the DTC system must be made by or through direct participants, which will receive a credit for the securities on DTC's records. The ownership interest of
the actual purchaser of a security, which we sometimes refer to as a beneficial owner, is in turn recorded on the direct and indirect participants' records. Beneficial owners of securities will not
receive written confirmation from DTC of their purchases. However, beneficial owners are expected to receive written confirmations providing details of their transactions, as well as periodic
statements of their holdings, from the direct or indirect participants through which they purchased securities. Transfers of ownership interests in global securities are to be accomplished by entries
made on the books of participants acting on behalf of beneficial owners. Beneficial owners will not receive certificates representing their ownership interests in the global securities, except under
the limited circumstances described below.
To
facilitate subsequent transfers, all global securities deposited by direct participants with DTC will be registered in the name of DTC's partnership nominee, Cede & Co.,
or such other name as may be requested by an authorized representative of DTC. The deposit of securities with DTC and their registration in the name of Cede & Co. or such other nominee
will not change the beneficial ownership of the securities. DTC has no knowledge of the actual beneficial owners of the securities. DTC's records reflect only the identity of the direct participants
to whose accounts the securities are credited,
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which
may or may not be the beneficial owners. The participants are responsible for keeping account of their holdings on behalf of their customers.
So
long as the securities are in book-entry form, you will receive payments and may transfer securities only through the facilities of the depositary and its direct and indirect
participants. We will maintain an office or agency in the location specified in the prospectus supplement for the applicable securities, where notices and demands in respect of the securities and the
indenture may be delivered to us and where certificated securities may be surrendered for payment, registration of transfer or exchange.
Conveyance
of notices and other communications by DTC to direct participants, by direct participants to indirect participants and by direct participants and indirect participants to
beneficial owners will be governed by arrangements among them, subject to any legal requirements in effect from time to time.
Redemption
notices will be sent to DTC. If less than all of the securities of a particular series are being redeemed, DTC's practice is to determine by lot the amount of the interest of
each direct participant in the securities of such series to be redeemed.
Neither
DTC nor Cede & Co. (or such other DTC nominee) will consent or vote with respect to the securities. Under its usual procedures, DTC will mail an omnibus proxy to us
as soon as possible after the record date. The omnibus proxy assigns the consenting or voting rights of Cede & Co. to those direct participants to whose accounts the securities of such
series are credited on the record date, identified in a listing attached to the omnibus proxy.
So
long as securities are in book-entry form, we will make payments on those securities to the depositary or its nominee, as the registered owner of such securities, by wire transfer of
immediately available funds. If securities are issued in definitive certificated form under the limited circumstances described below, we will have the option of making payments by check mailed to the
addresses of the persons entitled to payment or by wire transfer to bank accounts in the United States designated in writing to the applicable trustee or other designated party at least 15 days
before the applicable payment date by the persons entitled to payment, or such shorter time as may be satisfactory to the applicable trustee or other designated party.
Redemption
proceeds, distributions and dividend payments on the securities will be made to Cede & Co., or such other nominee as may be requested by an authorized
representative of DTC. DTC's practice is to credit direct participants' accounts upon DTC's receipt of funds and corresponding detail information from us on the payment date in accordance with their
respective holdings shown on DTC records. Payments by participants to beneficial owners will be governed by standing instructions and customary practices, as is the case with securities held for the
account of customers in bearer form or registered in "street name." Those payments will be the responsibility of participants and not of DTC or us, subject to any statutory or regulatory requirements
in effect from time to time. Payment of redemption proceeds, distributions and dividend payments to Cede & Co., or such other nominee as may be requested by an authorized representative
of DTC, is our responsibility, disbursement of payments to direct participants is the responsibility of DTC, and disbursement of payments to the beneficial owners is the responsibility of direct and
indirect participants.
Except
under the limited circumstances described below, purchasers of securities will not be entitled to have securities registered in their names and will not receive physical delivery
of securities. Accordingly, each beneficial owner must rely on the procedures of DTC and its participants to exercise any rights under the securities and the indenture.
The
laws of some jurisdictions may require that some purchasers of securities take physical delivery of securities in definitive form. Those laws may impair the ability to transfer or
pledge beneficial interests in securities.
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DTC
may discontinue providing its services as securities depositary with respect to the securities at any time by giving reasonable notice to us. Under such circumstances, in the event
that a successor depositary is not obtained, securities certificates are required to be printed and delivered.
As
noted above, beneficial owners of a particular series of securities generally will not receive certificates representing their ownership interests in those securities. However,
if:
-
-
DTC notifies us that it is unwilling or unable to continue as a depositary for the global security or securities representing such series of
securities or if DTC ceases to be a clearing agency registered under the Exchange Act at a time when it is required to be registered and a successor depositary is not appointed within 90 days
of the notification to us or of our becoming aware of DTC's ceasing to be so registered, as the case may be;
-
-
we determine, in our sole discretion, not to have such securities represented by one or more global securities; or
-
-
an event of default has occurred and is continuing with respect to such series of securities;
we
will prepare and deliver certificates for such securities in exchange for beneficial interests in the global securities. Any beneficial interest in a global security that is exchangeable under the
circumstances described in the preceding sentence will be exchangeable for securities in definitive certificated form registered in the names that the depositary directs. It is expected that these
directions
will be based upon directions received by the depositary from its participants with respect to ownership of beneficial interests in the global securities.
We
have obtained the information in this section and elsewhere in this prospectus concerning DTC and DTC's book-entry system from sources that are believed to be reliable, but we take no
responsibility for the accuracy of this information.
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CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR
CHARTER AND BYLAWS
The following summary of certain provisions of Maryland law and of our charter and bylaws does not purport to be
complete and is subject to and qualified in its entirety by reference to Maryland law and our charter and bylaws, copies of which are filed as exhibits to the registration statement of which this
prospectus is part. See "Where You Can Find More Information" and "Incorporation Of Certain Documents By Reference."
Our Board of Directors
Our charter and bylaws provide that the number of directors of our company may be established, increased or decreased only by a majority of our
entire Board of Directors but may not be fewer than the minimum number required under the MGCL, which is one, nor, unless our bylaws are amended, more than 11. We currently have five members on our
Board of Directors.
Each
of our directors is elected by our stockholders to serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualifies under the MGCL.
Holders of shares of our common stock do not have cumulative voting rights in the election of directors. Directors are elected by a plurality of the votes cast.
Removal of Directors
Our charter provides that, subject to the rights of holders of one or more classes or series of preferred stock to elect or remove one or more
directors, a director may be removed only for cause (as defined in our charter) and only by the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of
directors. This provision, when coupled with the exclusive power of our Board of Directors to fill vacant directorships, may preclude stockholders from removing incumbent directors except for cause
and by a substantial affirmative vote and filling the vacancies created by such removal with their own nominees.
Business Combinations
Under the MGCL, certain "business combinations" (including a merger, consolidation, share exchange or, in certain circumstances specified under
the statute, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and any interested stockholder, or an affiliate of such an interested stockholder,
are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Maryland law defines an interested stockholder as any person (other than
the corporation or any of its subsidiaries) who:
-
-
beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation's outstanding voting stock after the date on
which the Company had 100 or more beneficial owners of its stock; or
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-
is an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial
owner of 10% or more of the voting power of the then outstanding voting stock of the corporation after the date on which the corporation had 100 or more beneficial owners of its stock.
A
person is not an interested stockholder under the statute if the Board of Directors approved in advance the transaction by which the person otherwise would have become an interested
stockholder. In approving a transaction, however, a Board of Directors may provide that its approval is subject to compliance, at or after the time of the approval, with any terms and conditions
determined by it.
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After
such five-year period, any such business combination must be recommended by the Board of Directors of the corporation and approved by the affirmative vote of at
least:
-
-
80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and
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-
two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder
with whom (or with whose affiliate) the business combination is to be effected or held by an affiliate or associate of the interested stockholder.
These
supermajority approval requirements do not apply if, among other conditions, the corporation's common stockholders receive a minimum price (as defined in the MGCL) for their shares
and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares.
These
provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a corporation's Board of Directors prior to the time that the interested
stockholder becomes an interested stockholder. Our Board of Directors has, by resolution, elected to opt out of the business combination provisions of the MGCL and will not be permitted to opt in in
the future without the affirmative vote of a majority of the votes cast on the matter by stockholders entitled to vote. Notwithstanding the foregoing, an alteration or repeal of this resolution will
not have any effect on any business combinations that have been consummated or upon any agreements existing at the time of such modification or repeal.
Control Share Acquisitions
The MGCL provides that holders of "control shares" of a Maryland corporation acquired in a "control share acquisition" have no voting rights
with respect to their control shares except to the extent approved by the affirmative vote of at least two-thirds of the votes entitled to be cast in the election of directors, generally, excluding
shares of stock in a corporation in respect of which any of the following persons is entitled to exercise or direct the exercise of the voting power of such shares in the election of directors:
(1) the person who made or proposes to make a control share acquisition, (2) an officer of the corporation or (3) an employee of the corporation who is also a director of the
corporation. "Control shares" are voting shares of stock that, if aggregated with all other such shares of stock previously acquired by the acquirer or in respect of which the acquirer is able to
exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following
ranges of voting power:
-
-
one-tenth or more but less than one-third;
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-
one-third or more but less than a majority; or
-
-
a majority or more of all voting power.
Control
shares do not include shares that the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A "control share acquisition"
means the acquisition, directly or indirectly, of ownership of, or the power to direct the exercise of voting power with respect to, issued and outstanding control shares, subject to certain
exceptions.
A
person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking to pay expenses and making an "acquiring person
statement" as described in the MGCL), may compel the Board of Directors to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the
control shares. If no request for a special meeting is made, the corporation may itself present the question at any stockholders meeting.
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If
voting rights of control shares are not approved at the meeting or if the acquiring person does not deliver an "acquiring person statement" as required by the statute, then, subject
to certain conditions and limitations, the corporation may redeem any or all of the control shares (except those for which voting rights have previously been approved) for fair value determined,
without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer or of any meeting of stockholders at which the voting rights
of such shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled
to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share paid by
the acquirer in the control share acquisition.
The
control share acquisition statute does not apply to: (1) shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or
(2) acquisitions approved or exempted by the charter or bylaws of the corporation.
Our
bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of shares of our stock. Our Board of Directors may not amend or
eliminate this provision at any time in the future without the affirmative vote of a majority of the votes cast on the matter by stockholders entitled to vote.
Subtitle 8
Subtitle 8 of Title 3 of the MGCL permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at
least three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its Board of Directors and notwithstanding any contrary provision in the charter or
bylaws, to any or all of the following five provisions:
-
-
a classified board consisting of three classes;
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-
a two-thirds vote requirement for removing a director;
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-
a requirement that the number of directors be fixed only by vote of the directors;
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-
a requirement that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of the class of
directors in which the vacancy occurred; or
-
-
a majority stockholder vote requirement for the calling of a special meeting of stockholders.
We
have opted in our charter not to be subject to any provision of Subtitle 8 of Title 3 of the MGCL unless approved by the affirmative vote of a majority of the votes cast on the matter
by stockholders entitled to vote generally in the election of directors. However, through provisions in our charter and bylaws unrelated to Subtitle 8, we already (1) require a two-thirds vote
for the removal of any director from the board, which removal will be allowed only for cause, (2) vest in the board the exclusive power to fix the number of directorships, subject to
limitations set forth in our charter and bylaws, and (3) require, unless called by the chairman of our Board of Directors, our president, our chief executive officer or our Board of Directors,
the request of stockholders entitled to cast not less than a majority of all votes entitled to be cast on a matter at such meeting to call a special meeting to consider and vote on any matter that may
properly be considered at a meeting of stockholders.
Stockholder Rights Plan
We do not have a stockholder rights plan and our Board of Directors has adopted a policy providing that our board may not adopt any stockholder
rights plan unless the adoption of the plan has been approved by the affirmative vote of a majority of the votes cast on the matter by stockholders entitled to vote on the matter, except that our
Board of Directors may adopt a stockholder rights plan
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without
the prior approval of our stockholders if our board, in the exercise of its duties, determines that seeking prior stockholder approval would not be in our best interests under the
circumstances then existing. The policy further provides that if a stockholder rights plan is adopted by our board without the prior approval of our stockholders, the stockholder rights plan will
expire on the date of the first annual meeting of stockholders held after the first anniversary of the adoption of the plan, unless an extension of the plan is approved by our stockholders.
Amendments to Our Charter and Bylaws
Other than amendments to certain provisions of our charter described below and amendments permitted to be made without stockholder approval
under Maryland law or by a specific provision in the charter, our charter may be amended only if such amendment is declared advisable by
our Board of Directors and approved by the affirmative vote of a majority of all the votes entitled to be cast on such matter. The provisions of our charter relating to the removal of directors or the
vote required to amend such provisions may be amended only if such amendment is declared advisable by our Board of Directors and approved by the affirmative vote of stockholders entitled to cast not
less than two-thirds of all of the votes entitled to be cast on the matter. Except for amendments to the provisions of the bylaws related to the control share acquisition act and the business
combination statute, which require the approval of not less than a majority of votes entitled to be cast on the matter, our Board of Directors has the exclusive power to adopt, alter or repeal any
provision of our bylaws or to make new bylaws.
Exclusive Forum
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any
derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of any duty owed by us or by any director or officer or other employee to us or to our
stockholders, (c) any action asserting a claim against us or any director or officer or other employee arising pursuant to any provision of the MGCL or our charter or bylaws or (d) any
action asserting a claim against us or any director or officer or other employee that is governed by the internal affairs doctrine shall be the Circuit Court for Baltimore City, Maryland, or, if that
Court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division.
Meetings of Stockholders
Under our bylaws, annual meetings of stockholders must be held each year at a date, time and place determined by our Board of Directors. Special
meetings of stockholders may be called by the chairman of our Board of Directors, our chief executive officer, our president and our Board of Directors. Subject to the provisions of our bylaws, a
special meeting of stockholders to act on any matter that may properly be considered at a meeting of stockholders must be called by our secretary upon the written request of stockholders entitled to
cast a majority of all of the votes entitled to be cast on the matter at such meeting who have requested the special meeting in accordance with the procedures specified in our bylaws and provided the
information and certifications required by our bylaws. Only matters set forth in the notice of a special meeting of stockholders may be considered and acted upon at such a meeting.
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Advance Notice of Director Nominations and New Business
Our bylaws provide that:
-
-
with respect to an annual meeting of stockholders, nominations of individuals for election to the Board of Directors and the proposal of
business to be considered by stockholders at the annual meeting may be made only:
-
-
pursuant to our notice of the meeting;
-
-
by or at the direction of our Board of Directors; or
-
-
by a stockholder who was a stockholder of record both at the time of giving of the notice required by our bylaws and at the time
of the annual meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on such other business and who has provided the information and certifications required
by the advance notice procedures set forth in our bylaws.
-
-
with respect to special meetings of stockholders, only the business specified in our notice of meeting may be brought before the meeting of
stockholders, and nominations of individuals for election to our Board of Directors may be made only:
-
-
by or at the direction of our Board of Directors; or
-
-
provided that the meeting has been called for the purpose of electing directors, by a stockholder who is a stockholder of record
both at the time of giving of the notice required by our bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who has
provided the information and certifications required by the advance notice procedures set forth in our bylaws.
The
purpose of requiring stockholders to give advance notice of nominations and other proposals is to afford our Board of Directors the opportunity to consider the qualifications of the
proposed nominees or the advisability of the other proposals and, to the extent considered necessary by our Board of Directors, to inform stockholders and make recommendations regarding the
nominations or other proposals. The advance notice procedures also permit a more orderly procedure for conducting our stockholder meetings.
Anti-takeover Effect of Certain Provisions of Maryland Law and of Our Charter and Bylaws
The restrictions on ownership and transfer of our stock, the provisions of our charter regarding the removal of directors, the exclusive power
of our Board of Directors to fill vacancies on the board and the advance notice provisions of the bylaws could delay, defer or prevent a transaction or a change of control of our company that might
involve a premium price for holders of our common stock or otherwise be in their best interests. Likewise, if our Board of Directors or stockholders, as applicable, were to opt in to the business
combination provisions of the MGCL or the provisions of Subtitle 8 of Title 3 of the MGCL, or if the provision in our bylaws opting out of the control share acquisition provisions of the MGCL were
amended or rescinded, these provisions of the MGCL could have similar anti-takeover effects.
Extraordinary Transactions
Under the MGCL, a Maryland corporation generally cannot dissolve, merge, sell all or substantially all of its assets, engage in a statutory
share exchange or engage in similar
transactions outside the ordinary course of business unless approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter unless
a lesser percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is set forth in the
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corporation's
charter. As permitted by the MGCL, our charter provides that any of these actions may be approved by the affirmative vote of stockholders entitled to cast a majority of all of the votes
entitled to be cast on the matter. Many of our operating assets are and will be held by our subsidiaries, and these subsidiaries may be able to merge or sell all or substantially all of their assets
without the approval of our stockholders.
Appraisal Rights
Our charter provides that our stockholders generally will not be entitled to exercise statutory appraisal rights.
Dissolution
Our dissolution must be declared advisable by a majority of our entire Board of Directors and approved by the affirmative vote of stockholders
entitled to cast a majority of all of the votes entitled to be cast on the matter.
Indemnification and Limitation of Directors' and Officers' Liability
Maryland law permits a Maryland corporation to include in its charter a provision eliminating the liability of its directors and officers to the
corporation and its stockholders for money
damages except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or active and deliberate dishonesty that is established by a final judgment
and is material to the cause of action. Our charter contains a provision that eliminates such liability to the maximum extent permitted by Maryland law.
The
MGCL requires a Maryland corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful, on the merits or
otherwise, in the defense of any proceeding to which he or she is made a party by reason of his or her service in that capacity. The MGCL permits a Maryland corporation to indemnify its present and
former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be
made or are threatened to be made a party by reason of their service in those or other capacities unless it is established that:
-
-
the act or omission of the director or officer was material to the matter giving rise to the proceeding and:
-
-
was committed in bad faith; or
-
-
was the result of active and deliberate dishonesty;
-
-
the director or officer actually received an improper personal benefit in money, property or services; or
-
-
in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.
However,
under the MGCL, a Maryland corporation may not indemnify a director or officer for an adverse judgment in a suit by or on behalf of the corporation or if the director or officer
was adjudged liable on the basis that personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the MGCL permits a Maryland corporation to advance reasonable expenses to a director or officer, without requiring a preliminary
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determination
of the director's or officer's ultimate entitlement to indemnification, upon the corporation's receipt of:
-
-
a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for
indemnification by the corporation; and
-
-
a written undertaking by the director or officer or on the director's or officer's behalf to repay the amount paid or reimbursed by the
corporation if it is ultimately determined that the director or officer did not meet the standard of conduct.
Our
charter authorizes us to obligate our company and our bylaws obligate us, to the fullest extent permitted by Maryland law in effect from time to time, to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding, without requiring a preliminary determination of the director's or officer's ultimate entitlement to indemnification,
to:
-
-
any present or former director or officer who is made or threatened to be made a party to or witness in the proceeding by reason of his or her
service in that capacity; or
-
-
any individual who, while serving as our director or officer and at our request, serves or has served as a director, officer, partner, trustee,
member or manager of another corporation, REIT, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party
to or witness in the proceeding by reason of his or her service in that capacity.
Our
charter and bylaws also permit us, with the approval of our Board of Directors, to indemnify and advance expenses to any person who served a predecessor of ours in any of the
capacities described above and to any employee or agent of our company or a predecessor of our company.
We
have entered into indemnification agreements with each of our executive officers and directors whereby we agree to indemnify such executive officers and directors to the fullest
extent permitted by Maryland law against all expenses and liabilities, subject to limited exceptions. These indemnification agreements also provide that upon an application for indemnity by an
executive officer or directors to a court of appropriate jurisdiction, such court may order us to indemnify such executive officer or directors.
Insofar
as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under the Securities Act, we have been informed that in
the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Restrictions on Ownership and Transfer
Subject to certain exceptions, our charter provides that no person or entity may actually or beneficially own, or be deemed to own by virtue of
the applicable constructive ownership provisions of the Code, more than 9.8% (in value or number of shares, whichever is more restrictive) of the outstanding shares of our common stock or more than
9.8% in value of the outstanding shares of our capital stock. For a more detailed description of this and other restrictions on ownership and transfer of our stock, see "Description of Common
StockRestrictions on Ownership and Transfer."
REIT Qualification
Our charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without approval of our stockholders, if
it determines that it is no longer in our best interests to continue to be qualified as a REIT.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the current material U.S. federal income tax considerations associated with an investment in shares of our
capital stock and debt securities. As used in this section, unless the context otherwise requires, the terms "we" and "our" refer solely to Community Healthcare Trust Incorporated and not to our
subsidiaries and affiliates, which have not elected to be taxed as REITs for U.S. federal income tax purposes. The statements in this section are based on the current U.S. federal income tax laws,
including the Code, the Treasury Regulations, rulings and other administrative interpretations and practices of the IRS, and judicial decisions, all as currently in effect, and all of which are
subject to differing interpretations or to change, possibly with retroactive effect. We cannot assure you that new laws, interpretations of law, or court decisions, any of which may take effect
retroactively, will not cause any statement in this section to be inaccurate. Moreover, this summary does not deal with all tax aspects that might be relevant to you, as a prospective stockholder or
holder of debt securities, in light of your personal circumstances, nor does it deal with particular types of stockholders or holder of debt securities that are subject to special treatment under the
Code, such as insurance companies, tax-exempt organizations (except to the limited extent discussed below under "Taxation of Tax-Exempt Stockholders"), financial
institutions, broker-dealers persons subject to alternative minimum tax, persons holding our stock as part of a hedge, straddle or other risk reduction, constructive sale or conversion transaction,
non-U.S. individuals and foreign corporations (except to the limited extent discussed below under "Taxation of Non-U.S. Stockholders") and other persons subject to special tax rules.
Moreover, this summary assumes that you will hold our capital stock or debt securities as a "capital asset" for U.S. federal income tax purposes, which generally means property held for investment.
This
summary does not constitute tax advice and is not a substitute for careful tax planning. We urge you, as a prospective investor, to consult your own tax advisor regarding the
specific tax consequences to you of a purchase of shares of our common stock or debt securities, the ownership and sale of such shares or debt securities and of our election to be taxed as a REIT.
These consequences include the federal, state, local, foreign and other tax consequences of such purchase, ownership, sale and election and the effect of potential changes in the applicable tax laws.
Opinion of Counsel
In connection with the filing of this prospectus, Baker, Donelson, Bearman, Caldwell and Berkowitz, PC, or Baker Donelson, will render an
opinion that we qualified to be taxed as a REIT under the U.S. federal income tax laws for our taxable year ended December 31, 2015, and that our organization and our current and proposed
method of operations will enable us to continue to satisfy in the future, the requirements for qualification for taxation as a REIT. Investors should be aware that Baker Donelson's opinion will be
based upon various customary assumptions relating to our organization and operation, will be conditioned upon certain representations and covenants made by our management as to factual matters,
including representations regarding our organization, the nature of our current and anticipated assets and income, and the conduct of our current and proposed business operations. Baker Donelson's
opinion is not binding upon the Internal Revenue Service, or IRS, or any court and speaks as of the date issued. In addition, Baker Donelson's opinion will be based on existing U.S. federal income tax
law governing qualification as a REIT, which is subject to change either prospectively or retroactively. Moreover, our qualification and taxation as a REIT will depend upon our ability to meet on a
continuing basis, through actual results, certain qualification tests set forth in the U.S. federal income tax laws. Those qualification tests involve the percentage of income that we earn from
specified sources, the percentage of our assets that falls within specified categories, the diversity of ownership of shares of our beneficial interest, and the percentage of our earnings that we
distribute. Baker Donelson will not review our compliance with those tests on a continuing basis. Accordingly, no assurance can be given that our actual results of operations for any particular
taxable
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year
will satisfy such requirements. While we intend to operate so that we will continue to qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of
factual determinations, and the possibility of future changes in our circumstances or the law relating to REIT qualification, no assurance can be given by tax counsel or by us that we will qualify as
a REIT for any particular year. Baker Donelson's opinion does not foreclose the possibility that we may have to use one or more of the REIT savings provisions described below, which could require us
to pay an excise or penalty tax (which could be material) in order for us to maintain our REIT qualification. For a discussion of the tax consequences of our failure to qualify as a REIT, see "Failure
to Qualify."
Taxation of our Company
We were organized on March 28, 2014 as a Maryland corporation. We have elected to be taxed as a REIT for U.S. federal income tax purposes
commencing with our taxable year ended December 31, 2015. We believe that, commencing with such taxable year, we were organized and have operated in such a manner as to qualify for taxation as
a REIT under the U.S. federal income tax laws, and we intend to continue to operate in such a manner, but no assurances can be given that we will operate in a manner so as to qualify or remain
qualified as a REIT. This section discusses the laws governing the U.S. federal income tax treatment of a REIT and its stockholders. These laws are highly technical and complex.
Assuming
we qualify as a REIT, we generally will not be subject to U.S. federal corporate income tax on that portion of the ordinary income or capital gain that we distribute currently
to our stockholders because the REIT provisions of the Code generally allow a REIT to deduct distributions paid to its stockholders. The benefit of that tax treatment is that it avoids the "double
taxation," or taxation at both the corporate and stockholder levels, that generally results from owning shares in a corporation.
However,
even if we qualify for taxation as a REIT, we will be subject to U.S. federal tax in the following circumstances:
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we will be taxed at regular corporate rates on our undistributed REIT taxable income, including undistributed net capital gains;
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for tax year prior to January 1, 2018, under some circumstances, we will be subject to corporate alternative minimum tax, the corporate
alternative minimum tax has been repealed effective for tax years beginning on or after January 1, 2018;
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if we have net income from the sale or other disposition of "foreclosure property" that is held primarily for sale to customers in the ordinary
course of business or other non-qualifying income from foreclosure property, we will be subject to tax at the highest corporate rate on that income;
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if we have net income from prohibited transactions (which are, in general, sales or other dispositions of property other than foreclosure
property held primarily for sale to customers in the ordinary course of business), that net income will be subject to a 100% tax;
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if we fail to satisfy either of the 75% or 95% gross income tests (discussed below) but have nonetheless maintained our qualification as a REIT
because applicable conditions have been met, we will be subject to a 100% tax on an amount equal to the greater of the amount by which we fail the 75% or 95% test multiplied by a fraction calculated
to reflect our profitability;
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if we fail to distribute during each year at least the sum of (i) 85% of our REIT ordinary income for the year, (ii) 95% of our
REIT capital gain net income for such year and (iii) any undistributed taxable income from prior periods, we will be subject to a 4% excise tax on the excess of the required distribution over
the amounts actually distributed;
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if we have built-in gain assets at the time of the effectiveness of our REIT election and make an election to be taxed immediately or recognize
gain on the disposition of such asset during the five-year period following the effectiveness of our REIT election or if we acquire any asset from a C corporation (i.e., a corporation generally
subject to corporate-level tax) in a carryover-basis transaction and we subsequently recognize gain on the disposition of the asset during the five-year period beginning on the date on which we
acquired the asset, then all or a portion of the gain may be subject to tax at the highest regular corporate income tax rate, pursuant to guidelines issued by the IRS;
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if we receive income that was not determined on an arm's-length basis from one of our taxable REIT subsidiaries, or TRSs, we will be subject to
a 100% tax on the amount of our non-arm's-length income;
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if we fail to satisfy the asset test (as discussed below) but nonetheless maintain our qualification as a REIT because certain other
requirements have been met, we will be subject to a tax equal to the greater of (a) $50,000, or (b) an amount determined by multiplying the highest rate of tax for corporations by the
net income generated by the assets for the period beginning on the first date of the failure and ending on the day we dispose of the assets (or otherwise satisfy the requirements for maintaining REIT
qualification);
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if we fail to satisfy one or more requirements for REIT qualification, other than the 95% and 75% gross income tests and other than the asset
test, but nonetheless maintain our qualification as a REIT because certain other requirements have been met, we will be subject to a $50,000 penalty for each failure; and
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if we fail to comply with the record keeping requirements in ascertaining the actual ownership of the outstanding shares of our stock, we may
be subject to a $50,000 penalty for each failure.
The
earnings of our lower-tier entities that are treated as C corporations, including any TRS, will be subject to U.S. federal corporate income tax.
In
addition, notwithstanding our qualification as a REIT, we may also have to pay certain taxes, including payroll taxes and state and local income, property and other taxes on our
assets and operations. We also could be subject to tax in situations and on transactions not presently contemplated.
Requirements for Qualification
In order for us to qualify, and continue to qualify, as a REIT, we must meet, generally on a continuing basis, the requirements discussed below
relating to our organization, sources of income, nature of assets, distributions of income to our stockholders and recordkeeping.
Organization Requirements
In order to qualify for taxation as a REIT under the Code, we are required to:
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be organized as a corporation, trust, or association;
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be taxable as a domestic corporation but for our election to be taxed as a REIT under Sections 856 through 860 of the Code;
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be managed by one or more trustees or directors;
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have transferable shares;
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not be a financial institution or an insurance company;
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have at least 100 stockholders for at least 335 days of each taxable year of 12 months;
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not be closely held;
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elect to be a REIT, or make such election for a previous taxable year, and satisfy all relevant filing and other administrative requirements
established by the IRS that must be met to elect and maintain REIT status; use a calendar year for U.S. federal income tax purposes and comply with the recordkeeping requirements of the U.S. federal
income tax laws;
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distribute all earnings and profits attributable to a taxable year in which we do not qualify as a REIT by the end of our first year as a REIT;
and
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meet certain other tests, described below, regarding the nature of our income and assets.
As
a Maryland corporation, we satisfy the first and second requirements, and we have filed an election to be taxed as a REIT with the IRS with our federal tax return for 2015. In
addition, we are managed by a Board of Directors, we have transferable shares and we do not intend to operate as a financial institution or insurance company. We utilize the calendar year for federal
income tax reporting purposes. We would be treated as closely held only if five or fewer individuals or certain tax-exempt entities own, directly or indirectly, more than 50% (by value) of our shares
at any time during the last half of our taxable year. For purposes of the closely held test, the Code generally permits a look-through for pension funds and certain other tax-exempt entities to the
beneficiaries of the entity to determine if the REIT is closely held. After the issuance of our common stock pursuant to our IPO, we had issued stock with enough diversity of ownership to meet this
requirement and the 100 stockholder requirement.
In
addition, our charter provides for restrictions regarding transfer of shares that are intended to assist us in continuing to satisfy these share ownership requirements. Such transfer
restrictions are described in "Description of Common StockRestrictions on Ownership and Transfer." These provisions permit us to refuse to recognize certain transfers of shares that may
violate these share ownership requirements. However, we can offer no assurance that our refusal to recognize a transfer will be effective. Notwithstanding compliance with the share ownership
requirements outlined above, tax-exempt stockholders may be required to treat all or a portion of their distributions from us as unrelated business taxable income as defined in Section 512(a)
of the Code if tax-exempt stockholders, in the aggregate, exceed certain ownership thresholds set forth in the Code. See "Taxation of Tax-Exempt Stockholders" below.
Ownership of Interests in Partnerships and Qualified REIT Subsidiaries
In the case of a REIT that is a partner in an entity treated as a partnership for U.S. federal income tax purposes, Treasury Regulations provide
that the REIT is deemed to own its proportionate share, based on its interest in partnership capital, of the assets of the partnership and is deemed to have earned its allocable share of partnership
income for purposes of the applicable REIT qualification tests. Also, if a REIT owns a qualified REIT subsidiary, which is defined as a corporation wholly-owned by a REIT that does not elect to be
taxed as a TRS under the Code, the REIT will be deemed to own all of the subsidiary's assets and liabilities and it will be deemed to be entitled to treat the income of that subsidiary as its own. In
addition, the character of the assets and gross income of the partnership or qualified REIT subsidiary shall retain the same character in the hands of the REIT for purposes of satisfying the gross
income tests and asset tests set forth in the Code.
We
intend to control any partnerships and limited liability companies we may invest in, and we intend to operate them in a manner consistent with the requirements for our qualification
as a REIT. However, we may from time to time be a limited partner or non-managing member in some of our partnerships and limited liability companies. If a partnership or limited liability company in
which we
own an interest takes or expects to take actions that could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity. In addition, it is
possible that
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a
partnership or limited liability company could take an action which could cause us to fail a gross income or asset test, and that we would not become aware of such action in time to dispose of our
interest in the partnership or limited liability company or take other corrective action on a timely basis. In that case, we could fail to qualify as a REIT unless we were entitled to relief, as
described below.
Taxable REIT Subsidiaries
A TRS is a subsidiary of a REIT that makes a joint election with the REIT to be treated as a TRS. Additionally, a corporation of which a TRS
directly or indirectly owns more than 35% of the voting power or value of the securities is automatically treated as a TRS without an election. The separate existence of a TRS, unlike a "qualified
REIT subsidiary" as discussed above, is not ignored for U.S. federal income tax purposes. Accordingly, a TRS is generally subject to corporate income tax on its earnings, which may reduce the cash
flow generated by such entity. Because a parent REIT does not include the assets and income of a TRS in determining the parent's compliance with the REIT qualification requirements, a TRS may be used
by the parent REIT to undertake activities indirectly that the REIT might otherwise be precluded from undertaking directly or through pass-through subsidiaries.
A
TRS may not directly or indirectly operate or manage any healthcare facilities or lodging facilities or provide rights to any brand name under which any healthcare facility or lodging
facility is operated. A TRS is not considered to operate or manage a "qualified healthcare property" or "qualified lodging facility" solely because the TRS directly or indirectly possesses a license,
permit, or similar instrument enabling it to do so.
Rent
that we receive from a TRS will qualify as "rents from real property" under two scenarios. Under the first scenario, rent we receive from a TRS will qualify as "rents from real
property" as long as (1) at least 90% of the leased space in the property is leased to persons other than TRSs and related-party tenants, and (2) the amount paid by the TRS to rent space
at the property is substantially comparable to rents paid by other tenants of the property for comparable space, as described in further detail below under "Gross Income
TestsRents from Real Property." If we lease space to a TRS in the future, we will seek to comply with these requirements. Under the second scenario, rents that we receive from a TRS will
qualify as "rents from real property" if the TRS leases
a property from us that is a "qualified healthcare property" and such property is operated on behalf of the TRS by a person who qualifies as an "independent contractor" and who is, or is related to a
person who is, actively engaged in the trade or business of operating "qualified healthcare properties" for any person unrelated to us and the TRS (an "eligible independent contractor"). A "qualified
healthcare property" includes any real property and any personal property that is, or is necessary or incidental to the use of, a hospital, nursing facility, assisted living facility, congregate care
facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients and which is operated by a provider of such services which
is eligible for participation in the Medicare program with respect to such facility. Our properties generally will not be treated as "qualified healthcare properties." Accordingly, we do not currently
intend to lease our properties to a TRS. However, to the extent we acquire or own "qualified healthcare properties" in the future, we may lease such properties to a TRS.
Gross Income Tests
We must satisfy two gross income tests annually to maintain our qualification as a REIT:
First,
at least 75% of our gross income for each taxable year must consist of defined types of income that we derive, directly or indirectly, from investments relating to real property
or mortgages on
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real
property or qualified temporary investment income. Qualifying income for purposes of the 75% gross income test generally includes:
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rents from real property;
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interest on debt secured by mortgages on real property, or on interests in real property, and, for taxable years after December 31,
2015, interest on debt secured by mortgages on both real and personal property if the fair market value of such personal property does not exceed 15% of the total fair market value of all such
property;
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dividends or other distributions on, and gain from the sale of, shares in other REITs;
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gain from the sale of real estate assets (excluding gain from the sale of a nonqualified "publicly offered REIT" debt instrument), other than
property held primarily for sale to customers in the ordinary course of business;
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income derived from the operation, and gain from the sale of, certain property acquired at or in lieu of foreclosure on a lease of, or
indebtedness secured by, such property ("foreclosure property"); and
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income derived from the temporary investment of new capital that is attributable to the issuance of our shares or a public offering of our debt
with a maturity date of at least five years and that we receive during the one-year period beginning on the date on which we received such new capital.
Second,
in general, at least 95% of our gross income for each taxable year must consist of income that is qualifying income for purposes of the 75% gross income test, other types of
interest and dividends, gain from the sale or disposition of shares or securities, or any combination of these.
The
Secretary of the Treasury is given broad authority to determine whether particular items of gain or income qualify under the 75% and 95% gross income tests, or are to be excluded
from the measure of gross income for such purposes. For example, cancellation of indebtedness income and gross income from our sale of property that we hold primarily for sale to customers in the
ordinary course of business is excluded from both the numerator and the denominator in both gross income tests. In addition, income and gain from "hedging transactions," as defined in
"Gross Income TestsHedging Transactions," that we enter into to hedge indebtedness incurred or to be incurred to acquire or carry real estate assets and that are clearly and
timely identified as such will be
excluded from both the numerator and the denominator for purposes of the 75% and 95% gross income tests. In addition, certain foreign currency gains will be excluded from gross income for purposes of
one or both of the gross income tests. See "Gross Income TestsForeign Currency Gain" below.
The
following paragraphs discuss the specific application of the gross income tests to us.
Rents from Real Property
Rent that we receive, or are deemed to receive, from real property that we own and lease to tenants will qualify as "rents from real property,"
which is qualifying income for purposes of the 75% and 95% gross income tests, only if each of the following conditions is met:
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First, the rent must not be based, in whole or in part, on the income or profits of any person, but may be based on a fixed percentage or
percentages of receipts or sales and the percentages are fixed at the time the leases are entered into, are not renegotiated during the term of the leases in a manner that has the effect of basing
rent on income or profits and conform with normal business practice.
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Second, neither we nor a direct or indirect owner of 10% or more in value of our shares may own, actually or constructively, 10% or more of a
tenant, referred to as a "related party tenant,"
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There
are two exceptions to the related-party tenant rule described in the preceding paragraph for TRSs. Under the first exception, rent that we receive from a TRS will qualify as "rents
from real property" as long as (1) at least 90% of the leased space in the property is leased to persons other than TRSs and related-party tenants, and (2) the amount paid by the TRS to
rent space at the property is substantially comparable to rents paid by other tenants of the property for comparable space. The "substantially comparable" requirement must be satisfied when the lease
is entered into, when it is extended, and when the lease is modified, if the modification increases the rent paid by the TRS. If the requirement that at least 90% of the leased space in the related
property is rented to unrelated tenants is met when a lease is entered into, extended, or modified, such requirement will continue to be met as long as there is no increase in the space leased to any
TRS or related party tenant. Any increased rent attributable to a modification of a lease with a TRS in which we own directly or indirectly more than 50% of the voting power or value of the stock (a
"controlled TRS") will not be treated as "rents from real property." If in the future we receive rent from a TRS, we will seek to comply with this exception.
Under
the second exception, a TRS is permitted to lease healthcare properties from the related REIT as long as it does not directly or indirectly operate or manage any healthcare
facilities or provide rights to any brand name under which any healthcare facility is operated. Rent that we receive from a TRS will qualify as "rents from real property" as long as the "qualified
healthcare property" is operated on behalf of the TRS by an "independent contractor" who is adequately compensated, who does not, directly or through its stockholders, own more than 35% of our shares,
taking into account certain ownership attribution rules, and who is, or is related to a person who is, actively engaged in the trade or business of operating "qualified healthcare properties" for any
person unrelated to us and the TRS (an "eligible independent contractor"). A "qualified healthcare property" includes any real property and any personal property that is, or is necessary or incidental
to the use of, a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or
ancillary services to patients and which is operated by a provider of such services which is eligible for participation in the Medicare program with respect to such facility. Our properties generally
will not be treated as "qualified healthcare properties." Accordingly, we do not currently intend to lease properties to a TRS. However, to the extent we acquire or own "qualified healthcare
properties" in the future, we may lease such properties to a TRS.
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Third, if the rent attributable to personal property leased in connection with a lease of real property is 15% or less of the total rent
received under the lease, then the rent attributable to personal property will qualify as rents from real property. The allocation of rent between real and personal property is based on the relative
fair market values of the real and personal property. If the 15% threshold is exceeded, the rent attributable to personal property will not qualify as rents from real property.
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Fourth, we generally must not operate or manage our real property or furnish or render services to our tenants, other than through an
"independent contractor" who is adequately compensated and from whom we do not derive revenue. However, we need not provide services through an "independent contractor," but instead may provide
services directly to our tenants, if the services are "usually or customarily rendered" in connection with the rental of space for occupancy only and are not considered to be provided for the tenants'
convenience. In addition, we may provide a minimal amount of "noncustomary" services to the tenants of a property, other than through an independent contractor, as long as our income from the services
(valued at not less than 150% of our direct cost of performing such services) does not exceed 1% of our income from the related property. Furthermore, we may own up to 100% of the shares of a TRS
which may provide customary and noncustomary services to our tenants without tainting our rental income from the related properties.
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Fifth, in order for the rent payable under the leases of our properties to constitute "rents from real property," the leases must be respected
as true leases for federal income tax purposes and not treated as service contracts, joint ventures, financing arrangements, or another type of arrangement. We generally treat our leases with respect
to our properties as true leases for federal income tax purposes; however, there can be no assurance that the IRS would not consider a particular lease a financing arrangement instead of a true lease
for federal income tax purposes. In that case, our income from that lease would be interest income rather than rent and would be qualifying income for purposes of the 75% gross income test to the
extent that our "loan" does not exceed the fair market value of the real estate assets associated with the facility. All of the interest income from our loan would be qualifying income for purposes of
the 95% gross income test. We believe that the characterization of a lease as a financing arrangement would not adversely affect our ability to qualify as a REIT.
If
a portion of the rent that we receive from a property does not qualify as "rents from real property" because the rent attributable to personal property exceeds 15% of the total rent
for a taxable year, the
portion of the rent that is attributable to personal property will not be qualifying income for purposes of either the 75% or 95% gross income test. Thus, if such rent attributable to personal
property, plus any other income that is nonqualifying income for purposes of the 95% gross income test, during a taxable year exceeds 5% of our gross income during the year, we would lose our REIT
qualification. If, however, the rent from a particular property does not qualify as "rents from real property" because either (1) the rent is considered based on the income or profits of the
related tenant, (2) the tenant either is a related party tenant or fails to qualify for the exceptions to the related party tenant rule for qualifying TRSs or (3) we furnish noncustomary
services to the tenants of the property in excess of the one percent threshold, or manage or operate the property, other than through a qualifying independent contractor or a TRS, none of the rent
from that property would qualify as "rents from real property."
We
do not anticipate leasing significant amounts of personal property pursuant to our leases. Moreover, we do not intend to perform any services other than customary ones for our
tenants, unless such services are provided through independent contractors from whom we do not receive or derive income or a TRS. Accordingly, we anticipate that our leases will generally produce rent
that qualifies as "rents from real property" for purposes of the 75% and 95% gross income tests.
In
addition to the rent, the tenants may be required to pay certain additional charges. To the extent that such additional charges represent reimbursements of amounts that we are
obligated to pay to third parties such charges generally will qualify as "rents from real property." To the extent such additional charges represent penalties for nonpayment or late payment of such
amounts, such charges should qualify as "rents from real property." However, to the extent that late charges do not qualify as "rents from real property," they instead will be treated as interest that
qualifies for the 95% gross income test.
Interest
The term "interest" generally does not include any amount received or accrued, directly or indirectly, if the determination of such amount
depends in whole or in part on the income or profits of any person. However, interest generally includes the following:
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an amount that is based on a fixed percentage or percentages of receipts or sales; and
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an amount that is based on the income or profits of a debtor, as long as the debtor derives substantially all of its income from leasing
substantially all of its interest in the real property securing the debt, and only to the extent that the amounts received by the debtor would be qualifying "rents from real property" if received
directly by a REIT.
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If
a loan contains a provision that entitles a REIT to a percentage of the borrower's gain upon the sale of the real property securing the loan or a percentage of the appreciation in the
property's value as of a specific date, income attributable to that loan provision will be treated as gain from the sale of the property securing the loan, which generally is qualifying income for
purposes of both gross income tests.
Interest
on debt secured by a mortgage on real property or on interests in real property generally is qualifying income for purposes of the 75% gross income test. For taxable years after
December 31, 2015, interest on debt secured by mortgages on both real and personal property if the fair market value of such personal property does not exceed 15% of the total fair market value
of all such property is also qualifying income for purposes of the 75% gross income test. However, if a loan is secured by real property and other property and the highest principal amount of a loan
outstanding during a taxable year exceeds the fair market value of the real property securing the loan as of the date the REIT agreed to originate or acquire the loan (or, if the loan has experienced
a "significant modification" since its origination or acquisition by the REIT, then as of the date of that "significant modification"), a portion of the interest income from such loan will not be
qualifying income for purposes of the 75% gross income test, but will be qualifying income for purposes of the 95% gross income test. The portion of the interest income that will not be qualifying
income for purposes of the 75% gross income test will be equal to the interest income attributable to the portion of the principal amount of the loan that is not secured by real property, that is, the
amount by which the loan exceeds the value of the real estate that is security for the loan.
Dividends
Our share of any dividends received from any corporation (including any TRS, but excluding any REIT) in which we own an equity interest will
qualify for purposes of the 95% gross income test but not for purposes of the 75% gross income test. Our share of any dividends received from any other REIT in which we own an equity interest, if any,
will be qualifying income for purposes of both gross income tests.
Prohibited Transactions
A REIT will incur a 100% tax on the net income derived from any sale or other disposition of property, other than foreclosure property, that the
REIT holds primarily for sale to customers in the ordinary course of a trade or business. Net income derived from such prohibited transactions is excluded from gross income for purposes of the 75% and
95% gross income tests. We believe that none of our properties will be held primarily for sale to customers and that a sale of any of our properties will not be in the ordinary course of our business.
Whether a REIT holds a property "primarily for sale to customers in the ordinary course of a trade or business" depends, however, on the facts and circumstances in effect from time to time, including
those related to a particular property. The Code provides safe harbor provisions pursuant to which sales of properties held for at least two years and meeting certain other requirements will not give
rise to prohibited transactions income.
We
will attempt to comply with the terms of the safe-harbor provisions. However, we cannot assure you that we will be able to comply with the safe-harbor provisions or that we will avoid
owning property that may be characterized as property that we hold "primarily for sale to customers in the ordinary course of a trade or business." The prohibited transactions tax will not apply to
gains from the sale of property that is held through a TRS or other taxable corporation, although such income will be taxed to the corporation at regular corporate income tax rates.
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Fee Income
Fee income generally will not be qualifying income for purposes of either the 75% or 95% gross income tests. Any fees earned by a TRS, such as
fees for providing asset management and construction management services to third parties, will be excluded from the gross income tests.
Foreclosure Property
We will be subject to tax at the maximum corporate rate on any income from foreclosure property, which includes certain foreign currency gains
and related deductions, other than income that otherwise would be qualifying income for purposes of the 75% gross income test, less expenses directly connected with the production of that income.
However, gross income from foreclosure property will qualify under the 75% and 95% gross income tests. Foreclosure property is any real property, including interests in real property, and any personal
property incident to such real property:
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that is acquired by a REIT as the result of the REIT having bid on such property at foreclosure, or having otherwise reduced such property to
ownership or possession by agreement or process of law, after there was a default or when default was imminent on a lease of such property or on indebtedness that such property secured;
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for which the related loan was acquired by the REIT at a time when the default was not imminent or anticipated; and
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for which the REIT makes a proper election to treat the property as foreclosure property.
Foreclosure
property also includes certain "qualified healthcare properties" (as defined above under "Rents from Real Property") acquired by a REIT as a result of the
termination of a lease of such property (other than by reason of a default, or the imminence of a default, on the lease).
A
REIT will not be considered to have foreclosed on a property where the REIT takes control of the property as a mortgagee-in-possession and cannot receive any profit or sustain any loss
except as a creditor of the mortgagor. Property generally ceases to be foreclosure property at the end of the third taxable year (or, with respect to qualified healthcare property, the second taxable
year) following the taxable year in which the REIT acquired the property, or longer if an extension is granted by the
Secretary of the Treasury. However, this grace period terminates and foreclosure property ceases to be foreclosure property on the first day:
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on which a lease is entered into for the property that, by its terms, will give rise to income that does not qualify for purposes of the 75%
gross income test, or any amount is received or accrued, directly or indirectly, pursuant to a lease entered into on or after such day that will give rise to income that does not qualify for purposes
of the 75% gross income test;
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on which any construction takes place on the property, other than completion of a building or any other improvement where more than 10% of the
construction was completed before default became imminent; or
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which is more than 90 days after the day on which the REIT acquired the property and the property is used in a trade or business which
is conducted by the REIT, other than through an independent contractor from whom the REIT itself does not derive or receive any income.
Hedging Transactions
From time to time, we may enter into hedging transactions with respect to one or more of our assets or liabilities. Our hedging activities may
include entering into interest rate swaps, caps, and floors, options to purchase such items, and futures and forward contracts. Income and gain from "hedging transactions" will be excluded from gross
income for purposes of both the 75% and 95%
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gross
income tests provided we satisfy the indemnification requirements discussed below. A "hedging transaction" means either (1) any transaction entered into in the normal course of our trade
or business primarily to manage the risk of interest rate, price changes, or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, to
acquire or carry real estate assets, (2) any transaction entered into primarily to manage the risk of currency fluctuations with respect to any item of income or gain that would be qualifying
income under the 75% or 95% gross income test (or any property which generates such income or gain) or (3) for taxable years beginning after December 31, 2015, to hedge the income or
loss from prior hedging transactions, where the property or indebtedness which was the subject of the prior hedging transaction was extinguished or disposed of. We are required to clearly identify any
such hedging transaction before the close of the day on which it was acquired, originated, or entered into and to satisfy other identification requirements. We intend to structure any hedging
transactions in a manner that does not jeopardize our qualification as a REIT.
Foreign Currency Gain
Certain foreign currency gains will be excluded from gross income for purposes of one or both of the gross income tests. "Real estate foreign
exchange gain" will be excluded from gross income for purposes of the 75% and 95% gross income tests. Real estate foreign exchange gain generally includes foreign currency gain attributable to any
item of income or gain that is qualifying income for purposes of the 75% gross income test, foreign currency gain attributable to the acquisition or ownership of (or becoming or being the obligor
under) obligations secured by mortgages on real property or an interest in real property and certain foreign currency gain attributable to certain "qualified business units" of a REIT. "Passive
foreign exchange gain" will be excluded from gross income for purposes of the 95% gross income test. Passive foreign exchange gain generally includes real estate foreign exchange gain as described
above, and also includes foreign currency gain attributable to any item of income or gain that is qualifying income for purposes of the 95% gross income test and foreign currency gain attributable to
the acquisition or ownership of (or becoming or being the obligor under) obligations. These exclusions for real estate foreign exchange gain and passive foreign exchange gain do not apply to any
certain foreign currency gain derived from dealing, or engaging in substantial and regular trading, in securities. Such gain is treated as nonqualifying income for purposes of both the 75% and 95%
gross income tests.
Failure to Satisfy Gross Income Tests
If we fail to satisfy one or both of the gross income tests for any taxable year, we nevertheless may qualify as a REIT for that year if we
qualify for relief under certain provisions of the U.S. federal income tax laws. Those relief provisions are generally available if:
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-
our failure to meet those tests is due to reasonable cause and not to willful neglect; and
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following our identification of such failure for any taxable year, we file a schedule of the sources of our income in accordance with
regulations prescribed by the Secretary of the Treasury.
We
cannot predict, however, whether in all circumstances we would qualify for the relief provisions. In addition, as discussed above in "Taxation of Our Company," even if
the relief provisions apply, we would incur a 100% tax on the gross income attributable to the greater of the amount by which we fail the 75% gross income test or the 95% gross income test multiplied,
in either case, by a fraction intended to reflect our profitability.
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Asset Tests
To qualify as a REIT, we also must satisfy the following asset tests at the end of each quarter of each taxable year. First, at least 75% of the
value of our total assets must consist of:
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cash or cash items, including certain receivables and money market funds and, in certain circumstances, foreign currencies;
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government securities;
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interests in real property, including leaseholds and options to acquire real property and leaseholds;
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interests in mortgage loans secured by real property;
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shares in other REITs;
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investments in shares or debt instruments during the one-year period following our receipt of new capital that we raise through equity
offerings or public offerings of debt with at least a five-year term, or the 75% asset test; and
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for taxable years beginning after December 31, 2015, debt instruments issued by publicly offered REITs, interests in mortgages secured
by both real property and personal property if the fair market value of such personal property does not exceed 15% of the total fair market value of all such property, and personal property leased in
connection with real property for which the rent attributable to personal property is not greater than 15% of the total rent received under the lease.
Second,
of our investments not included in the 75% asset class, the value of our interest in any one issuer's securities may not exceed 5% of the value of our total assets, or the 5%
asset test.
Third,
of our investments not included in the 75% asset class, we may not own more than 10% of the voting power of any one issuer's outstanding securities or more than 10% of the value
of any one issuer's outstanding securities, or the 10% vote test and 10% value test, respectively.
Fourth,
for taxable years beginning before January 1, 2018, no more than 25% of the value of our total assets may consist of the securities of one or more TRSs, and for taxable
years beginning on or after January 1, 2018, no more than 20% of the value of our total assets may consist of the securities of one or more TRSs.
Fifth,
no more than 25% of the value of our total assets may consist of the securities of TRSs, other non-TRS taxable subsidiaries and other assets that are not qualifying assets for
purposes of the 75% asset test, or the 25% securities test.
For
purposes of the 5% asset test, the 10% vote test and the 10% value test, the term "securities" does not include shares in another REIT, equity or debt securities of a qualified REIT
subsidiary or a TRS, mortgage loans that constitute real estate assets, or equity interests in a partnership. The term "securities," however, generally includes debt securities issued by a partnership
or another REIT, except that for purposes of the 10% value test, the term "securities" does not include:
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"Straight debt" securities, which is defined as a written unconditional promise to pay on demand or on a specified date a sum certain in money
if (1) the debt is not convertible, directly or indirectly, into equity, and (2) the interest rate and interest payment dates are not contingent on profits, the borrower's discretion, or
similar factors. "Straight debt" securities do not include any securities issued by a partnership or a corporation in which we or any controlled TRS (i.e., a TRS in which we own directly or
indirectly more than 50% of the voting power or value of the shares) hold non-"straight debt" securities that have an aggregate value of more than 1% of the
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For
purposes of the 10% value test, our proportionate share of the assets of a partnership is our proportionate interest in any securities issued by the partnership, without regard to
the securities described in the last two bullet points above.
We
will monitor the status of our assets for purposes of the various asset tests and will manage our portfolio in order to comply at all times with such tests. If we fail to satisfy the
asset tests at the end of a calendar quarter, we will not lose our REIT qualification if:
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we satisfied the asset tests at the end of the preceding calendar quarter; and
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the discrepancy between the value of our assets and the asset test requirements arose from changes in the market values of our assets and was
not wholly or partly caused by the acquisition of one or more non-qualifying assets.
If
we did not satisfy the condition described in the second item, above, we still could avoid disqualification by eliminating any discrepancy within 30 days after the close of the
calendar quarter in which it arose.
If
we violate the 5% asset test, the 10% vote test or the 10% value test described above at the end of any quarter of a taxable year, we will not lose our REIT qualification if
(1) the failure is de minimis (up to the lesser of 1% of the value of our assets or $10 million) and (2) we dispose of assets causing the failure or otherwise comply with the
asset tests within six months after the last day of the quarter in which we identify such failure. In the event of a failure of any of the asset tests (other than de minimis failures described in the
preceding sentence), as long as the failure was due to reasonable cause and not to willful neglect, we will not lose our REIT qualification if we (1) dispose of assets causing the failure or
otherwise comply with the asset tests within six months after the last day of the
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quarter
in which we identify the failure, (2) we file a schedule with the IRS describing each asset that caused the failure and (3) pay a tax equal to the greater of $50,000 or
21% of the net income from the assets causing the failure during the period in which we failed to satisfy the asset tests.
We
believe that the assets that we will hold will satisfy the foregoing asset test requirements. However, we will not obtain independent appraisals to support our conclusions as to the
value of our assets. Moreover, the values of some assets may not be susceptible to a precise determination. As a result, there can be no assurance that the IRS will not contend that our ownership of
assets violates one or more of the asset tests applicable to REITs.
Distribution Requirements
Each year, we must distribute dividends, other than capital gain dividends and deemed distributions of retained capital gain, to our
stockholders in an aggregate amount at least equal to:
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the sum of:
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90% of our "REIT taxable income," computed without regard to the dividends paid deduction and our net capital gain or loss, and
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90% of our after-tax net income, if any, from foreclosure property, minus
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the sum of certain items of non-cash income.
We
must pay such distributions in the taxable year to which they relate, or in the following taxable year if either (1) we declare the distribution before we timely file our U.S.
federal income tax return for the year and pay the distribution on or before the first regular dividend payment date after such declaration or (2) we declare the distribution in October,
November or December of the taxable year, payable to stockholders of record on a specified day in any such month, and we actually pay the dividend before the end of January of the following year. The
distributions under clause (1) are taxable to the stockholders in the year in which paid, and the distributions in clause (2) are treated as paid on December 31st of the
prior taxable year. In both instances, these distributions relate to our prior taxable year for purposes of the 90% distribution requirement.
We
will pay U.S. federal income tax on any taxable income, including net capital gain that we do not distribute to our stockholders. Furthermore, if we fail to distribute during a
calendar year, or by the end of January following the calendar year in the case of distributions with declaration and record dates falling in the last three months of the calendar year, at least the
sum of:
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85% of our REIT ordinary income for such year,
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95% of our REIT capital gain income for such year, and
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any undistributed taxable income from prior periods.
We
will incur a 4% nondeductible excise tax on the excess of such required distribution over the amounts we actually distribute.
We
may elect to retain and pay income tax on the net long-term capital gain we receive in a taxable year. If we so elect, we will be treated as having distributed any such retained
amount for purposes of the 4% nondeductible excise tax described above. We intend to make timely distributions sufficient to
satisfy the annual distribution requirements and to avoid corporate federal income tax and the 4% nondeductible excise tax.
It
is possible that, from time to time, we may experience timing differences between the actual receipt of income and actual payment of deductible expenses and the inclusion of that
income and deduction of such expenses in arriving at our REIT taxable income. For example, we may not deduct recognized capital losses from our "REIT taxable income." Further, it is possible that,
from time to
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time,
we may be allocated a share of net capital gain from an entity taxed as a partnership for U.S. federal income tax purposes in which we own an interest that is attributable to the sale of
depreciated property that exceeds our allocable share of cash attributable to that sale. As a result of legislation enacted in 2017, we generally will be required to take certain amounts in income no
later than the time such amounts are reflected on certain financial statements. The application of this rule may require the accrual of income with respect to certain debt instruments or
mortgage-backed securities, such as original issue discount or market discount, earlier than would be the case under the general tax rules, although the precise application of this rule is unclear at
this time. This rule generally will be effective for tax years beginning after December 31, 2017 or, for debt instruments or mortgage-backed securities issued with original issue discount, for
tax years beginning after December 31, 2018. As a result of the foregoing, we may have less cash than is necessary to distribute taxable income sufficient to avoid corporate income tax and the
excise tax imposed on certain undistributed income. In such a situation, we may need to borrow funds or issue additional shares of common or preferred stock, if possible, pay taxable dividends of our
shares or debt securities.
We
may be able to satisfy the 90% distribution test with taxable distributions of our shares or debt securities. The IRS has issued private letter rulings to other REITs treating certain
distributions that are paid partly in cash and partly in shares as dividends that would satisfy the REIT annual distribution requirement and qualify for the dividends paid deduction for U.S. federal
income tax purposes. Those rulings may be relied upon only by taxpayers whom they were issued. In such a circumstance we might request a similar ruling from the IRS. In addition, the IRS previously
issued a revenue procedure authorizing publicly traded REITs to make elective cash/shares dividends, but that revenue procedure does not apply to 2015 and future taxable years. Accordingly, it is
unclear whether and to what extent we will be able to make taxable dividends payable in cash and shares. We have no current intention to make a taxable dividend payable in our shares.
In
order for distributions to be counted as satisfying the annual distribution requirement applicable to REITs and to provide us with a REIT-level tax deduction, the distributions must
not be "preferential dividends" unless we qualify as a "publicly offered REIT." A distribution is not a preferential dividend if the distribution is (1) pro rata among all outstanding shares
within a particular class, and (2) in accordance with the preferences among different classes of stock as set forth in our organizational documents. We believe that we are, and expect we will
continue to be, a "publicly offered REIT."
Under
certain circumstances, we may be able to correct a failure to meet the distribution requirement for a year by paying "deficiency dividends" to our stockholders in a later year. We
may include such deficiency dividends in our deduction for dividends paid for the earlier year. Although we may be able to avoid income tax on amounts distributed as deficiency dividends, we will be
required to pay interest to the IRS based upon the amount of any deduction we take for deficiency dividends.
Recordkeeping Requirements
We must maintain certain records in order to qualify as a REIT. In addition, to avoid a monetary penalty, we must request, on an annual basis,
information from certain of our stockholders designed to disclose the actual ownership of our outstanding shares, and we must maintain a list of those persons failing or refusing to comply with such
request as part of our records. We intend to comply with these requirements.
Failure to Qualify
If we fail to qualify as a REIT in any taxable year, and no relief provision applies, we would be subject to U.S. federal income tax and, for
tax years beginning prior to January 1, 2018, any applicable alternative minimum tax, at regular corporate income tax rates on our taxable income determined without reduction for amounts
distributed to stockholders. In addition, we may be required to pay
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penalties
and interest with respect to such tax. In fact, we would not be required to distribute any amounts to stockholders in that year. In such event, to the extent of our current and accumulated
earnings and profits, distributions to stockholders generally would be taxable as ordinary dividend income. Subject to certain limitations under the U.S. federal income tax laws, corporate
stockholders may be eligible for the dividends received deduction and stockholders taxed at individual rates may be eligible for the reduced federal income tax rate of up to 20% on such dividends.
Unless we qualified for relief under specific statutory provisions, we also would be disqualified from taxation as a REIT for
the four taxable years following the year during which we ceased to qualify as a REIT. We cannot predict whether we would qualify for such statutory relief in all circumstances.
Taxation of Taxable U.S. Stockholders
As used in this prospectus, the term "U.S. stockholder" means a holder of our common stock that for U.S. federal income tax purposes
is:
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a citizen or resident of the United States;
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a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of
the United States, any of its states or the District of Columbia;
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an estate whose income is subject to U.S. federal income taxation regardless of its source; or
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any trust if (1) a court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have
the authority to control all substantial decisions of the trust or (2) it has a valid election in place to be treated as a U.S. person.
If
a partnership, entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the U.S. federal income tax treatment of a partner in the
partnership will generally depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership holding our common stock, you should consult your tax
advisor regarding the consequences of the ownership and disposition of our common stock by the partnership.
As
long as we qualify as a REIT, a taxable U.S. stockholder must generally take into account as ordinary income distributions made out of our current or accumulated earnings and profits
that we do not designate as capital gain dividends or retained long-term capital gain.
A
corporate U.S. stockholder will not qualify for the dividends received deduction generally available to corporations. In addition, dividends paid to a U.S. stockholder generally will
not qualify for the preferential tax rate for "qualified dividend income." The maximum tax rate for qualified dividend income received by U.S. stockholders taxed at individual rates is 20%. The
maximum tax rate on qualified dividend income is lower than the maximum tax rate on ordinary income, which is currently 37%. Qualified dividend income generally includes dividends paid by domestic C
corporations and certain qualified foreign corporations to U.S. stockholders that are taxed at individual rates. As long as we qualify as a REIT, our dividends generally will not be eligible for the
20% rate on qualified dividend income. As a result, our ordinary REIT dividends will be taxed at the higher tax rate applicable to ordinary income. However, non-corporate stockholders, including
individuals, generally may deduct 20% of dividends from a REIT, other than capital gains dividends and dividends treated as qualified dividend income, for taxable years beginning after
December 31, 2017 and before January 1, 2026, subject to certain limitations. Furthermore, the 20% tax rate for qualified dividend income will apply to our ordinary REIT dividends, if
any, that are (1) attributable to dividends received by us from non REIT corporations, such as any TRS we may form, or (2) attributable to income upon which we have paid corporate income
tax (e.g., to the extent that we distribute less than 100% of our taxable income). In general, to qualify for the reduced tax rate on qualified dividend income, a stockholder must hold our
common stock for more than 60 days during the 121-day period beginning on the date
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that
is 60 days before the date on which our common stock become ex-dividend. Individuals, trusts and estates whose income exceeds certain thresholds are also subject to an additional 3.8% net
investment income tax on dividends received from us. U.S. stockholders are urged to consult their own tax advisors regarding the implications of the net investment income tax resulting from an
investment in our shares.
A
U.S. stockholder generally will take into account as long-term capital gain any distributions that we designate as capital gain dividends without regard to the period for which the
U.S. stockholder has held our common stock. We generally will designate our capital gain dividends as either 20% or 25% rate distributions. See "Taxation of Taxable U.S.
StockholdersCapital Gains and Losses" for additional information. A corporate U.S. stockholder, however, may be required to treat up to 20% of certain capital gain dividends as ordinary
income.
The
amount of dividends we designate as qualified dividends and capital gains dividends with respect to any taxable year may not exceed the dividends we pay with respect to such year.
We
may elect to retain and pay income tax on the net long-term capital gain that we receive in a taxable year. In that case, to the extent that we designate such amount in a timely
notice to such stockholder, a U.S. stockholder would be taxed on its proportionate share of our undistributed long-term capital gain. The U.S. stockholder would receive a credit for its proportionate
share of the tax we paid. The U.S. stockholder would increase the basis in its shares by the amount of its proportionate share of our undistributed long-term capital gain, minus its share of the tax
we paid. We currently do not intend to retain any capital gains.
A
U.S. stockholder will not incur tax on a distribution in excess of our current and accumulated earnings and profits if the distribution does not exceed the adjusted basis of the U.S.
stockholder's common stock. Instead, the distribution will reduce the U.S. stockholder's adjusted basis in such shares. A U.S. stockholder will recognize a distribution in excess of both our current
and accumulated earnings and profits and the U.S. stockholder's adjusted basis in his or her shares as long-term capital gain, or short-term capital gain if the shares have been held for one year or
less, assuming the shares are a capital asset in the hands of the U.S. stockholder. In addition, if we declare a distribution in October, November, or December of any year that is payable to a U.S.
stockholder of record on a specified date in any such month, such distribution will be treated as both paid by us and received by the U.S. stockholder on December 31 of such year, provided that
we actually pay the distribution during January of the following calendar year.
U.S.
stockholders may not include in their individual income tax returns any of our net operating losses or capital losses. Instead, these losses are generally carried over by us for
potential offset against our future income. Taxable distributions from us and gain from the disposition of our common stock will not be treated as passive activity income and, therefore, stockholders
generally will not be able to apply any "passive activity losses," such as losses from certain types of limited partnerships in which the U.S. stockholder is a limited partner, against such income or
gain. In addition, taxable distributions from us and gain from the disposition of our common stock generally will be treated as investment income for purposes of the investment interest limitations.
We will notify U.S. stockholders after the close of our taxable year as to the portions of the distributions attributable to that year that constitute ordinary income, return of capital and capital
gain.
Taxation of U.S. Stockholders on the Disposition of Common Stock
In general, a U.S. stockholder will realize gain or loss in an amount equal to the difference between the sum of the fair market value of any
property and the amount of cash received in such disposition and the U.S. stockholder's adjusted tax basis. A stockholder's adjusted tax basis generally will equal the U.S. stockholder's acquisition
cost, increased by the excess of net capital gains deemed distributed to the U.S. stockholder (discussed above) less tax deemed paid on such gains and reduced by any returns of capital. A U.S.
stockholder generally must treat any gain or loss realized upon a
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taxable
disposition of our common stock as long-term capital gain or loss if the U.S. stockholder has held our common stock for more than one year and otherwise as short-term capital gain or loss.
However, a U.S. stockholder must treat any loss upon a sale or exchange of common stock held by such stockholder for six months or less as a long-term capital loss to the extent of capital gain
dividends and any other actual or deemed distributions from us that such U.S. stockholder treats as long-term capital gain. All or a portion of any loss that a U.S. stockholder realizes upon a taxable
disposition of our common stock may be disallowed if the U.S. stockholder purchases other shares of our common stock within 30 days before or after the disposition.
If
we redeem shares held by a U.S. stockholder, such U.S. stockholder will be treated as having sold the redeemed shares if (1) all of the U.S. stockholder's shares are redeemed
(after taking into consideration certain ownership attribution rules) or (2) such redemption is either (i) "not essentially equivalent" to a dividend or (ii) "substantially
disproportionate." If a redemption is not treated as a sale of the redeemed shares, it will be treated as a distribution made with respect to such shares. U.S. stockholders are urged to consult their
own tax advisors regarding the taxation of any particular redemption of our shares.
Capital Gains and Losses
A taxpayer generally must hold a capital asset for more than one year for gain or loss derived from its sale or exchange to be treated as
long-term capital gain or loss. The highest marginal individual income tax rate on ordinary income and short-term capital gains currently is 37%. The maximum tax rate on long-term capital gain
applicable to taxpayers taxed at individual rates is 20% for sales and exchanges of assets held for more than one year. The maximum tax rate on long-term capital gain from the sale or exchange of
"Section 1250 property," or depreciable real property, is 25%, which applies to the lesser of the total amount of the gain or the accumulated depreciation on the Section 1250 property.
Individuals,
trusts and estates whose income exceeds certain thresholds are also subject to an additional 3.8% net investment income tax on gain from the sale of shares of our common
stock. U.S. stockholders are urged to consult their own tax advisors regarding the implications of the net investment income tax resulting from an investment in our shares.
With
respect to distributions that we designate as capital gain dividends and any retained capital gain that we are deemed to distribute, we generally may designate whether such a
distribution is long-term capital gain or "unrecaptured section 1250 gain". Thus, the tax rate differential between capital gain and ordinary income for those taxpayers may be significant. In
addition, the characterization of income as capital gain or ordinary income may affect the deductibility of losses. A non-corporate taxpayer may deduct capital losses not offset by capital gains
against its ordinary income only up to a maximum annual amount of $3,000. A non-corporate taxpayer may carry forward unused capital losses indefinitely. A corporate taxpayer must pay tax on its net
capital gain at ordinary corporate rates. A corporate taxpayer may deduct capital losses only to the extent of capital gains, with unused losses being carried back three years and forward five years.
Taxation of Tax-Exempt Stockholders
This section is a summary of rules governing the U.S. federal income taxation of U.S. stockholders that are tax-exempt entities and is for
general information only. We urge tax-exempt stockholders to consult their own tax advisors to determine the impact of U.S. federal, state, and local income tax laws on the
purchase, ownership and disposition of our common stock, including any reporting requirements.
Tax-exempt
entities, including qualified employee pension and profit sharing trusts and individual retirement accounts, generally are exempt from U.S. federal income taxation. However,
they are subject
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to
taxation on their unrelated business taxable income, or UBTI. Although many investments in real estate generate UBTI, the IRS has issued a ruling that dividend distributions from a REIT to an
exempt employee pension trust do not constitute UBTI so long as the exempt employee pension trust does not otherwise use the shares of the REIT in an unrelated trade or business of the pension trust.
Based on that ruling, amounts that we distribute to tax-exempt stockholders generally should not constitute UBTI. However, if a tax-exempt stockholder were to finance (or be deemed to finance) its
acquisition of our common stock with debt, a portion of the income that it receives from us would constitute UBTI pursuant to the "debt-financed property" rules. Moreover, social clubs, voluntary
employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans that are exempt from taxation under special provisions of the U.S. federal income tax
laws are subject to different UBTI rules, which generally will require them to characterize distributions that they receive from us as UBTI. Finally, in certain circumstances, a qualified employee
pension or profit sharing trust that owns more than 10% of our shares must treat a percentage of the dividends that it receives from us as UBTI. Such percentage is equal to the gross income we derive
from an unrelated trade or business, determined as if we were a pension trust, divided by our total gross income
for the year in which we pay the dividends. That rule applies to a pension trust holding more than 10% of our shares only if:
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the percentage of our dividends that the tax-exempt trust must treat as UBTI is at least 5%;
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we qualify as a REIT by reason of the modification of the rule requiring that no more than 50% of our shares be owned by five or fewer
individuals that allows the beneficiaries of the pension trust to be treated as holding our shares in proportion to their actuarial interests in the pension trust; and
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either:
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one pension trust owns more than 25% of the value of our shares; or
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a group of pension trusts, each of which holds more than 10% of the value of our shares, collectively owns more than 50% of the
value of our shares.
Taxation of Non-U.S. Stockholders
This section is a summary of the rules governing the U.S. federal income taxation of non-U.S. stockholders. The term "non-U.S. stockholder"
means a holder of shares of our common stock that is not a U.S. stockholder, a partnership (or entity treated as a partnership for U.S. federal income tax purposes) or a tax-exempt stockholder. The
rules governing U.S. federal income taxation of nonresident alien individuals, foreign corporations, foreign partnerships, and other foreign stockholders are complex. We urge non-U.S. stockholders to
consult their own tax advisors to determine the impact
of U.S. federal, state, and local income tax laws on the purchase, ownership and disposition of shares of our common stock, including any reporting requirements.
Distributions
A non-U.S. stockholder that receives a distribution that is not attributable to gain from our sale or exchange of a "United States real property
interest," or USRPI, as defined below, and that we do not designate as a capital gain dividend or retained capital gain will recognize ordinary income to the extent that we pay such distribution out
of our current or accumulated earnings and profits. A withholding tax equal to 30% of the gross amount of the distribution ordinarily will apply to such distribution unless an applicable tax treaty
reduces or eliminates the tax. Under some treaties, lower withholding rates on dividends do not apply, or do not apply as favorably, to dividends from REITs.
However,
if a distribution is treated as effectively connected with the non-U.S. stockholder's conduct of a U.S. trade or business, the non-U.S. stockholder generally will be subject to
U.S. federal
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income
tax on the distribution at graduated rates, in the same manner as U.S. stockholders are taxed with respect to such distribution, and a non-U.S. stockholder that is a corporation also may be
subject to a 30% branch profits tax with respect to that distribution. The branch profits tax may be reduced by an applicable tax treaty. We plan to withhold U.S. income tax at the rate of 30% on the
gross amount of any such distribution paid to a non-U.S. stockholder unless either:
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a lower treaty rate applies and the non-U.S. stockholder provides us with an IRS Form W-8BEN or W-8BEN-E, as applicable, evidencing
eligibility for that reduced rate;
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-
the non-U.S. stockholder provides us with an IRS Form W-8ECI claiming that the distribution is effectively connected with the conduct of
a U.S. trade or business; or
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the distribution is treated as attributable to a sale of a USRPI under FIRPTA (discussed below).
A
non-U.S. stockholder will not incur tax on a distribution in excess of our current and accumulated earnings and profits if the excess portion of such distribution does not exceed the
adjusted basis of the non-U.S. stockholder in its shares of our common stock. Instead, the excess portion of such distribution will reduce the adjusted basis of the non-U.S. stockholder in such
shares. A non-U.S. stockholder will be subject to tax on a distribution that exceeds both our current and accumulated earnings and profits and the adjusted basis of the non-U.S. stockholder in its
shares of our common stock, if the non-U.S. stockholder otherwise would be subject to tax on gain from the sale or disposition of its shares of our common stock, as described below. Because we
generally cannot determine at the time we make a distribution whether the distribution will exceed our current and accumulated earnings and profits, we normally will withhold tax on the entire amount
of any distribution at the same rate as we would withhold on a dividend. However, a non-U.S. stockholder may claim a refund of amounts that we withhold if we later determine that a distribution in
fact exceeded our current and accumulated earnings and profits.
Under
FIRPTA (discussed below), we may be required to withhold 15% of any distribution that exceeds our current and accumulated earnings and profits. Consequently, although we intend to
withhold at a rate of 30% (or such lower rate as may be provided under an applicable tax treaty) on the entire amount of any distribution, to the extent that we do not do so, we will withhold at a
rate of 15% on any portion of a distribution not subject to withholding at a rate of 30%.
For
any year in which we qualify as a REIT, a non-U.S. stockholder may incur tax on distributions that are attributable to gain from our sale or exchange of a USRPI under FIRPTA. A USRPI
includes interests in real property located in the United States or the Virgin Islands and shares in corporations at least 50% by value of whose real property interests and assets used or held for use
in a trade or business consist of USRPI. Under FIRPTA, a non-U.S. stockholder is taxed on distributions attributable to gain from sales of USRPIs as if such gain were effectively connected with a U.S.
trade or business of the non-U.S. stockholder. A non-U.S. stockholder thus would be taxed on such a distribution at the normal capital gains rates applicable to U.S. stockholders, subject to
applicable alternative minimum tax and a special alternative minimum tax in the case of a nonresident alien individual. A non-U.S. corporate stockholder not entitled to treaty relief or exemption also
may be subject to the 30% branch profits tax on such a distribution. Unless you are a stockholder that owns not more than 10% of our capital stock, or are a "qualified shareholder" or a "qualified
foreign pension fund" (both as defined below), we must withhold 21% of any distribution that we could designate as a capital gain dividend. A non-U.S. stockholder may receive a credit against its tax
liability for the amount we withhold.
In
addition, distributions to certain non-U.S. publicly traded stockholders that meet certain record-keeping and other requirements ("qualified shareholders") are exempt from FIRPTA,
except to
the extent owners of such qualified shareholders that are not also qualified stockholders own, actually or constructively, more than 10% of our capital stock. Furthermore, distributions to "qualified
foreign
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pension
funds" or entities all of the interests of which are held by "qualified foreign pension funds" are exempt from FIRPTA. Non-U.S. holders should consult their tax advisors regarding the
application of these rules.
Although
not free from doubt, amounts we designate as retained capital gains in respect of the common stock held by U.S. stockholders generally should be treated with respect to non-U.S.
stockholders in the same manner as actual distributions by us of capital gain dividends. Under this approach, a non-U.S. stockholder would be able to offset as a credit against its U.S. federal income
tax liability resulting from its proportionate share of the tax paid by us on such retained capital gains, and to receive from the IRS a refund to the extent the non-U.S. stockholder's proportionate
share of such tax paid by us exceeds its actual U.S. federal income tax liability, provided that the non-U.S. stockholder furnishes required information to the IRS on a timely basis. We currently do
not intend to retain any capital gains.
Dispositions
A non-U.S. stockholder generally will not incur tax under FIRPTA with respect to gain on a sale of shares of common stock as long as, at all
times during a specified testing period, non-United States persons hold, directly or indirectly, less than 50% in value of our outstanding stock. We cannot assure you that this test will be met. Even
if we meet this test, pursuant to "wash sale" rules under FIRPTA, a non-U.S. stockholder may incur tax under FIRPTA to the extent such stockholder disposes of our common stock within a certain period
prior to a capital gain distribution and directly or indirectly (including through certain affiliates) reacquires our common stock within certain prescribed periods. In addition, even if we do not
meet the "domestically controlled" test, a non-U.S. stockholder that owned, actually or constructively, 10% or less of the outstanding common stock at all times during a specified testing period will
not incur tax under FIRPTA on gain from a sale of common stock if the stock is "regularly traded" on an established securities market. An actual or deemed disposition of our capital stock by such
stockholders may also be treated as a dividend. Furthermore, dispositions of our capital stock by "qualified foreign pension funds" or entities all of the interests of which are held by "qualified
foreign pension funds" are exempt from FIRPTA. Any gain subject to tax under FIRPTA will be treated in the same manner as it would be in the hands of U.S. stockholders subject to alternative minimum
tax, but under a special alternative minimum tax in the case of nonresident alien individuals. Non-U.S. holders should consult their tax advisors regarding the application of these rules.
A
non-U.S. stockholder generally will incur tax on gain from the sale of common stock not subject to FIRPTA if:
-
-
the gain is effectively connected with the conduct of the non-U.S. stockholder's U.S. trade or business, in which case the non-U.S. stockholder
will be subject to the same treatment as U.S. stockholders with respect to the gain; or
-
-
the non-U.S. stockholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable
year, in which case the non-U.S. stockholder will incur a 30% tax on capital gains.
Taxation of Holders of Debt Securities
The following is a summary of certain U.S. federal income tax considerations relating to the ownership and disposition of debt securities that
we may offer for "U.S. Holders" or "Non-U.S. Holders" (each, as defined below and collectively, "Holders"). Except where noted, this summary deals only with debt securities held as capital assets
(within the meaning of Section 1221 of the Code), by a Holder who purchases the debt securities for cash at their original "issue price" within the meaning of Section 1273 of the Code
(generally, the first price at which a substantial amount of the debt securities
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are
sold to the public). This discussion does not address the tax consequences to subsequent purchasers of debt securities.
This
discussion does not describe all of the U.S. federal income tax considerations that may be relevant to a Holder in light of its particular circumstances or to Holders subject to
special rules, including, without limitation, dealers in securities or currencies, financial institutions, insurance companies,
regulated investment companies, real estate investment trusts, tax-exempt entities, former citizens or residents of the United States, pass-through entities (e.g., S corporations, partnerships
or other entities taxable as partnerships for U.S. federal income tax purposes), "controlled foreign corporations," "passive foreign investment companies," U.S. Holders (as defined below) whose
functional currency is not the U.S. dollar, and persons that hold the debt securities in connection with a straddle, hedging, conversion or other risk reduction transaction. Furthermore, this summary
does not consider the effect of the U.S. federal estate or gift tax laws, state, local, or foreign income tax laws, or any U.S. federal alternative minimum tax considerations.
The
U.S. federal income tax considerations set forth below are based upon the Code, Treasury regulations promulgated thereunder, court decisions, and rulings and pronouncements of the
IRS all as in effect on the date hereof, and all of which are subject to change, possibly on a retroactive basis, and to differing interpretations, so as to result in U.S. federal income tax
considerations different from those summarized below. We have not sought any ruling from the IRS with respect to statements made and conclusions reached in this summary, and there can be no assurance
that the IRS will agree with such statements and conclusions.
As
used herein, the term "U.S. Holder" means a beneficial owner of a debt security that is for U.S. federal income tax purposes:
-
-
an individual who is a citizen or resident of the United States;
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-
a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the
United States, any state thereof or the District of Columbia;
-
-
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
-
-
a trust, if a court within the United States is able to exercise primary jurisdiction over its administration and one or more U.S. persons have
the authority to control all of its substantial decisions, or if the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.
As
used herein, the term "Non-U.S. Holder" means a beneficial owner of a debt security that is a non-resident alien or a foreign corporation for U.S. federal income tax purposes.
If
a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of a debt security, the tax treatment of a partner in the
partnership generally will depend upon the status of the partner and the activities of the partnership. A partnership considering an investment in the debt securities and partners in such a
partnership are urged to consult their tax advisors about the U.S. federal income tax consequences of the purchase, ownership and disposition of the debt securities.
Investors
considering the purchase of the debt securities are urged to consult their own tax advisors with respect to the application of the U.S. federal income tax laws to their
particular situations as well as any tax consequences arising under the U.S. federal estate or gift tax rules or under the laws of any state, local or foreign taxing jurisdiction or under any
applicable tax treaty.
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U.S. Holders
The following discussion is a summary of certain U.S. federal income tax considerations generally applicable to a U.S. Holder.
Effect of contingent interest
We may issue debt securities on which we may be required to pay additional interest in certain circumstances. If we cannot determine that the
contingencies triggering such
additional interest payments are remote or incidental, a U.S. Holder of such debt securities generally would be required to accrue ordinary income on such debt securities in excess of stated interest,
and to treat any income realized on the taxable disposition of such debt securities as ordinary income rather than capital gain. The remainder of this discussion assumes that the debt securities are
not treated as "contingent payment debt instruments" within the meaning of the Code.
Stated interest and original issue discount
Qualified stated interest on a note (as defined below) generally will be included in the income of a U.S. Holder as ordinary income from
domestic sources at the time such interest is received or accrued in accordance with the U.S. Holder's method of accounting for tax purposes.
If
the issue price of the debt securities is less than their stated redemption price at maturity, then the debt securities will be treated as being issued with original issue discount
("OID") for U.S. federal income tax purposes unless the difference between their issue price and their stated redemption price at maturity is less than a statutory de minimis amount.
The
amount of OID on the debt securities will be de minimis if it is less than 0.0025 multiplied by the product of their stated redemption price at maturity and the number of complete
years to maturity. The "stated redemption price at maturity" of a debt security is the total of all payments to be made under the debt security other than "qualified stated interest" (generally,
stated interest that is unconditionally payable in cash or property at least annually at a single fixed rate or at certain floating rates that properly take into account the length of the interval
between stated interest payments); and, generally, is expected to equal the principal amount of the debt security.
If
the difference between the issue price and the stated redemption price at maturity of the debt securities is more than the statutory de minimis amount, the debt securities will be
treated as having been issued with OID. The amount of OID on the debt securities, which is equal to such difference, must be included in income as ordinary interest as it accrues (generally using a
constant yield method), regardless of such U.S. Holder's regular method of tax accounting. This may result in recognition of income in advance of receipt of the cash payments attributable to such
income.
U.S.
Holders purchasing debt securities with OID should consult their tax advisors regarding computation of OID accruals.
Sale, redemption, exchange or other taxable disposition of debt securities by a U.S. Holder
Upon the sale, exchange, redemption, repurchase, retirement or other disposition of a debt security, a U.S. Holder generally will recognize
capital gain or loss equal to the difference between (i) the amount of cash proceeds and the fair market value of any property received on the disposition (except to the extent such amount is
attributable to accrued but unpaid stated interest, which is taxable as ordinary income if not previously included in such Holder's income) and (ii) such U.S. Holder's adjusted tax basis in the
debt security.
A
U.S. Holder's adjusted tax basis in a debt security generally will equal the cost of the debt security to such Holder increased by the amount of OID (if any) previously included in
income by such
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Holder
and decreased by the amount of any prior payments other than qualified stated interest payments.
Capital
gain or loss recognized upon the disposition of a debt security will be a long-term capital gain or loss if the debt security was held for more than one year. The maximum tax
rate on long-term capital gains to non-corporate U.S. Holders is currently 20%. The deductibility of capital losses is subject to limitations.
Non-U.S. Holders
The rules governing the U.S. federal income taxation of a Non-U.S. Holder are complex and no attempt will be made herein to provide more than a
general summary of such rules. Non-U.S. Holders should consult their tax advisors to determine the effect of U.S. federal, state, local and foreign tax laws, as well as tax treaties, with regard to an
investment in our debt securities.
Interest
A Non-U.S. Holder holding our debt securities on its own behalf generally will be exempt from U.S. federal income and withholding taxes on
payments of interest on a debt security (which for purposes of this discussion of Non-U.S. Holders includes any original issue discount on a note) that is not effectively connected with the conduct of
a trade or business in the United States by the Non-U.S. Holder unless (i) such Non-U.S. Holder is a direct or indirect 10% or greater partner in the Operating Partnership, (ii) such
Non-U.S. Holder is a controlled foreign corporation related to the Operating Partnership, directly or indirectly, (iii) such Non-U.S. Holder is a bank extending credit pursuant to a loan
agreement entered into in the ordinary course of its trade or business, or (iv) withholding is required under FATCA (discussed below).
In
order for a Non-U.S. Holder to qualify for this exemption from taxation and withholding on interest, the "withholding agent" (generally, the last U.S. payor or a non-U.S. payor who is
a qualified intermediary or withholding foreign partnership) must have received a statement (generally made on the relevant IRS Form W-8BEN or IRS Form W-8BEN-E) from the Non-U.S. Holder
that: (i) is signed under penalties of perjury by the beneficial owner of the debt security, (ii) certifies that such owner is a Non-U.S. Holder and (iii) provides the beneficial
owner's name and address.
To
the extent that interest income with respect to our debt securities is not exempt from U.S. federal withholding tax as described above, a Non-U.S. Holder will be subject to U.S.
federal income tax currently imposed at a 30% rate unless (1) such tax is eliminated or reduced under an applicable income tax treaty and the Non-U.S. Holder complies with the applicable
certification requirement (generally, by providing a properly completed IRS Form W-8BEN or IRS Form W-8BEN-E) or (2) such interest income is effectively connected with the
Non-U.S. Holder's conduct of a trade or business in the United States (and, if an applicable income tax treaty so provides, is attributable to a permanent establishment or fixed base within the United
States) and the Non-U.S. Holder establishes that such interest is not subject to withholding (generally, by providing an IRS Form W-8ECI).
Sale, redemption, exchange or other taxable disposition of debt securities by a Non-U.S. Holder
Any gain realized on the sale, redemption, exchange, retirement, repurchase, or other taxable disposition of our debt securities by a Non-U.S.
Holder (except to the extent such amount is attributable to accrued interest, which would be taxable as described above) will generally be exempt from U.S. federal income and withholding taxes so long
as: (i) the gain is not effectively connected with the conduct of a trade or business in the United States by the Non-U.S. Holder (and, if an applicable income tax treaty so provides, is not
attributable to a U.S. permanent establishment or fixed base within the United States) and (ii) in the case of a foreign individual, the Non-U.S. Holder is not
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present
in the United States for 183 days or more in the taxable year in which the gain is realized and certain other requirements are met.
Effectively Connected Income
A Non-U.S. Holder whose gain or interest income with respect to our debt securities is effectively connected with the conduct of a trade or
business in the United States by such Non-U.S. Holder (and, if an applicable income tax treaty so provides, is attributable to a U.S. permanent establishment or fixed base within the United States)
will generally be subject to U.S. federal income tax on the gain or interest income at regular U.S. federal income tax rates on a net basis, as if the non-U.S. Holder were a U.S. person. In addition,
if the Non-U.S. Holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its "dividend equivalent amount" within the meaning of the Code for the taxable year, subject
to adjustment, unless it qualifies for a lower rate or an exemption under an applicable tax treaty. The withholding tax discussed above will not apply to effectively connected income, provided the
non-U.S. Holder furnishes an IRS Form W-8ECI or the relevant IRS Form W-8BEN or W-8BEN-E, as applicable.
Information Reporting Requirements and Withholding
We will report to our stockholders and to the IRS the amount of distributions we pay during each calendar year, and the amount of tax we
withhold, if any. Under the backup withholding rules, a stockholder may be subject to backup withholding at a rate of 24% with respect to distributions unless the
stockholder:
-
-
is a corporation or qualifies for certain other exempt categories and, when required, demonstrates this fact; or
-
-
provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with the
applicable requirements of the backup withholding rules.
A
stockholder who does not provide us with its correct taxpayer identification number also may be subject to penalties imposed by the IRS. Any amount paid as backup withholding will be
creditable against the stockholder's U.S. federal income tax liability. In addition, we may be required to withhold a portion of capital gain distributions to any stockholders who fail to certify
their non-foreign status to us.
Backup
withholding will generally not apply to payments of dividends made by us or our paying agents, in their capacities as such, to a non-U.S. stockholder provided that the non-U.S.
stockholder furnishes to us or our paying agent the required certification as to its non-U.S. status, such as providing a valid IRS Form W-8BEN or W-8BEN-E, as applicable, or W-8ECI, or certain
other requirements are met. Notwithstanding the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person that
is not an exempt recipient. Payments of the proceeds from a disposition or a redemption of our stock effected outside the U.S. by a non-U.S. stockholder made by or through a foreign office of a broker
generally will not be subject to information reporting or backup withholding. However, information reporting (but not backup withholding) generally will apply to such a payment if the broker has
certain connections with the U.S. unless the broker has documentary evidence in its records that the beneficial owner is a non-U.S. stockholder and specified conditions are met or an exemption is
otherwise established. Payment of the proceeds from a disposition by a non-U.S. stockholder of common stock made by or through the U.S. office of a broker is generally subject to information reporting
and backup withholding unless the non-U.S. stockholder certifies under penalties of perjury that it is not a U.S. person and satisfies certain other requirements, or otherwise establishes an exemption
from information reporting and backup withholding.
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Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against the stockholder's U.S. federal income tax
liability if certain required information is furnished to the IRS. Stockholders should consult their own tax advisors regarding application of backup withholding to them and the availability of, and
procedure for obtaining an exemption from, backup withholding.
Tax Aspects of Our Investments in Partnerships
The following discussion summarizes certain U.S. federal income tax considerations applicable to our direct or indirect investments in our
Operating Partnership and any subsidiary partnerships or limited liability companies that we form or acquire (each individually a "Partnership" and, collectively, the "Partnerships"). The discussion
does not cover state or local tax laws or any U.S. federal tax laws other than income tax laws.
Classification as Disregarded Entities
An unincorporated entity with one owner will be classified as an entity disregarded from such owner for U.S. federal income tax purposes if it
does not elect to be taxed as a corporation for U.S. federal income tax purposes and otherwise is treated as a disregarded entity under the Treasury Regulations relating to entity classification, or
check-the-box regulations. For U.S. federal income tax purposes, the assets, income and loss of an entity disregarded from its owner are treated as the direct assets, income and loss of the owner.
Initially, and until the admission of additional partners, if any, we expect our Operating Partnership to be classified as an entity disregarded from us for U.S. federal income tax purposes.
Classification as Partnerships
An unincorporated entity with at least two owners will be classified as a partnership, rather than as a corporation, for U.S. federal income tax
purposes if it:
-
-
does not elect to be taxed as a corporation for U.S. federal income tax purposes and otherwise is treated as a partnership under the
check-the-box regulations; and
-
-
is not a "publicly-traded partnership" taxable as a corporation for U.S. federal income tax purposes.
We
do not intend to make an election to treat any Partnership as a corporation for U.S. federal income tax purposes.
In
addition, we intend to structure our investments in any Partnership to avoid the treatment of such Partnership as a publicly traded partnership taxable as a corporation. A
publicly-traded partnership is a partnership whose interests are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof.
Treasury Regulations provide limited safe harbors from the definition of a publicly-traded partnership. Pursuant to one of those safe harbors, or the private placement exclusion, interests in a
partnership will not be treated as readily tradable on a secondary market or the substantial equivalent thereof if (1) all interests in the partnership were issued in a transaction or
transactions that were not required to be registered under the Securities Act, and (2) the partnership does not have more than 100 partners at any time during the partnership's taxable year. In
determining the number of partners in a partnership, a person owning an interest in a partnership, grantor trust, or S corporation that owns an interest in the partnership is treated as a partner in
such partnership only if (1) substantially all of the value of the owner's interest in the entity is attributable to the entity's direct or indirect interest in the partnership and (2) a
principal purpose of the use of the entity is to permit the partnership to satisfy the 100-partner limitation. A publicly-traded partnership will not, however, be treated as a corporation for any
taxable
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year
if 90% or more of the partnership's gross income for such year consists of certain passive income, including real property rents, gains from the sale or other disposition of real property,
interest, and dividends, or the 90% passive income exception. We intend that each Partnership in which we own an interest either will qualify for the private placement exception or will qualify for
the 90% passive income exception.
Although
we intend that each Partnership will be classified either as a disregarded entity (in the case of a Partnership with one owner) or as a partnership for U.S. federal income tax
purposes, we have not requested, and do not intend to request, a ruling from the IRS that any Partnership will be classified as either a partnership or disregarded entity for U.S. federal income tax
purposes. If any material Partnership were taxable as a corporation, rather than as a partnership or a disregarded entity, for U.S. federal income tax purposes, we likely would not be able to qualify
as a REIT. SeeGross Income Tests" andAsset Tests." In addition, any change in a Partnership's status for tax purposes might be treated as a taxable event, in which case we
might incur tax liability without any related cash distribution. See "Distribution Requirements."
Further, items of income and deduction of such Partnership would not pass through to its partners, and its partners would be treated as stockholders for U.S. federal income tax purposes. Consequently,
such Partnership would be required to pay income tax at corporate rates on its net income, and distributions to its partners would constitute dividends that would not be deductible in computing such
Partnership's taxable income.
Partners, Not the Partnerships, Subject to Tax
A partnership is not a taxable entity for U.S. federal income tax purposes. Rather, we are required to take into account our allocable share of
each Partnership's income, gains, losses, deductions, and credits for any taxable year of such Partnership ending within or with our taxable year, without regard to whether we have received or will
receive any distribution from such Partnership.
Partnership Allocations
Although a partnership agreement generally will determine the allocation of income and losses among partners, such allocations will be
disregarded for tax purposes if they do not comply with the provisions of the U.S. federal income tax laws governing partnership allocations. If an allocation is not recognized for U.S. federal income
tax purposes, the item subject to the allocation will be reallocated in accordance with the partners' interests in the partnership, which will be determined by taking into account all of the facts and
circumstances relating to the economic arrangement of the partners with respect to such item. Each Partnership's allocations of taxable income, gain, and loss are intended to comply with the
requirements of the U.S. federal income tax laws governing partnership allocations.
Tax Allocations with Respect to Contributed Properties
Income, gain, loss, and deduction attributable to appreciated or depreciated property that is contributed to a partnership in exchange for an
interest in the partnership must be allocated in a manner such that the contributing partner is charged with, or benefits from, respectively, the unrealized gain or unrealized loss associated with the
property at the time of the contribution, or the 704(c) Allocations. The amount of the unrealized gain or unrealized loss ("built-in gain" or "built-in loss") is generally equal to the difference
between the fair market value of the contributed
property at the time of contribution and the adjusted tax basis of such property at the time of contribution (a "book-tax difference"). Any property purchased for cash initially will have an adjusted
tax basis equal to its fair market value, resulting in no book-tax difference. A book-tax difference attributable to depreciable property generally is decreased on an annual basis as a result of
depreciation deductions to the contributing partner for book purposes but not for tax purposes. The 704(c) Allocations are solely for federal income tax purposes and do not affect the book capital
accounts or other economic or legal arrangements among the partners.
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The
Treasury Department has issued regulations requiring partnerships to use a "reasonable method" for allocating items with respect to which there is a book-tax difference and outlining
several reasonable allocation methods. Under certain available methods, the carryover basis of contributed properties in the hands of a partnership we own an interest in (1) could cause us to
be allocated lower amounts of depreciation deductions for tax purposes than would be allocated to us if all contributed properties were to have a tax basis equal to their fair market value at the time
of the contribution and (2) in the event of a sale of such properties, could cause us to be allocated taxable gain in excess of the economic or book gain allocated to us as a result of such
sale, with a corresponding benefit to the contributing partners. An allocation described in (2) above might cause us to recognize taxable income in excess of cash proceeds in the event of a
sale or other disposition of property, which may adversely affect our ability to comply with the REIT distribution requirements and may result in a greater portion of our distributions being taxed as
dividends. We do not know what method a partnership we own an interest in will use to account for book-tax differences.
Basis in Partnership Interest
Our adjusted tax basis in any Partnership interest we own generally will be:
-
-
the amount of cash and the basis of any other property we contribute to the Partnership;
-
-
increased by our allocable share of the Partnership's income (including tax-exempt income) and our allocable share of indebtedness of the
partnership; and
-
-
reduced, but not below zero, by our allocable share of the Partnership's loss, the amount of cash and the basis of property distributed to us,
and constructive distributions resulting from a reduction in our share of indebtedness of the Partnership.
Loss
allocated to us in excess of our basis in a Partnership interest will not be taken into account until we again have basis sufficient to absorb the loss. A reduction of our share of
Partnership indebtedness will be treated as a constructive cash distribution to us, and will reduce our adjusted tax basis in the partnership interest. Distributions, including constructive
distributions, in excess of the basis of our Partnership interest will constitute taxable income to us. Such distributions and constructive distributions normally will be characterized as long-term
capital gain.
Partnership Audits
For tax years beginning after December 31, 2017, in the event of a federal income tax audit the Partnership, rather than the
Partnership's partners, could be liable for the payment of certain taxes, including interest and penalties, or the partners could be liable for the tax but required to pay interest at a higher rate
than would otherwise apply to underpayments. Furthermore, the "partnership representative" of the partnership will have exclusive authority to bind all partners to any federal income tax proceeding.
Depreciation Deductions Available to Partnerships
The initial tax basis of property is the amount of cash and the basis of property given as consideration for the property. A Partnership in
which we are a partner generally will depreciate property for U.S. federal income tax purposes under the modified accelerated cost recovery system of depreciation, or MACRS. Under MACRS, each
partnership generally will depreciate furnishings over a seven year recovery period and equipment over a five year recovery period using a 200% declining balance method and a half-year convention. If,
however, the partnership places more than 40% of its furnishings and equipment in service during the last three months of a taxable year, a
mid-quarter depreciation convention must be used for the furnishings and equipment placed in service during that year. Under MACRS, the partnership generally will depreciate buildings and improvements
over a
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39 year
recovery period using a straight line method and a mid-month convention. A partnership's initial basis in properties acquired in exchange for units of a partnership should be the same
as the transferor's basis in such properties on the date of acquisition by the partnership. Although the law is not entirely clear, a partnership generally will depreciate such property for U.S.
federal income tax purposes over the same remaining useful lives and under the same methods used by the transferors. A Partnership's tax depreciation deductions will be allocated among the partners in
accordance with their respective interests in the partnership, except to the extent that any Partnership is required under the U.S. federal income tax laws governing partnership allocations to use a
method for allocating tax depreciation deductions attributable to contributed or revalued properties that results in our receiving a disproportionate share of such deductions.
Sale of a Partnership's Property
Generally, any gain realized by a Partnership on the sale of property held by the Partnership for more than one year will be long-term capital
gain, except for any portion of such gain that is treated as depreciation or cost recovery recapture. Under Section 704(c) of the Code, any gain or loss recognized by a Partnership on the
disposition of contributed or revalued properties will be allocated first to the partners of the Partnership who contributed such properties or who were partners at the time of such revaluation to the
extent of their built-in gain or built-in loss on those properties for federal income tax purposes. The partners' built-in gain or built-in loss on such contributed properties will equal the
difference between the partners' proportionate share of the book value of those properties and the partners' tax basis allocable to those properties at the time of the contribution as reduced for any
decrease in the "book-tax difference." See "Tax Aspects of Our Investments in PartnershipsTax Allocations With Respect to Contributed Properties." Any remaining gain or loss
recognized by the Partnership on the disposition of the contributed properties, and any gain or loss recognized by the Partnership on the disposition of the other properties, will be allocated among
the partners in accordance with the Partnership's allocation provisions (subject to the restrictions described above).
Our
share of any gain realized by a Partnership on the sale of any property held by the Partnership as inventory or other property held primarily for sale to customers in the ordinary
course of the Partnership's trade or business will be treated as income from a prohibited transaction that is subject to a 100% tax. Such prohibited transaction income may have an adverse effect upon
our ability to satisfy
the income tests for REIT status. See "Gross Income Tests" for additional information. We do not presently intend to acquire or hold or to allow any Partnership to acquire or hold any
property that represents inventory or other property held primarily for sale to customers in the ordinary course of our or such Partnership's trade or business.
Other Tax Consequences
Legislative or Other Actions Affecting REITs
The present U.S. federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or
administrative action at any time. The REIT rules are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department which may result in
statutory changes as well as revisions to regulations and interpretations. Additionally, several of the tax considerations described in this prospectus are currently under review and are subject to
change. Prospective stockholders are urged to consult with their own tax advisors regarding the effect of potential changes to the federal tax laws on an investment in our common stock.
State and Local Taxes
We and/or our stockholders may be subject to taxation by various states and localities, including those in which we or a stockholder transacts
business, owns property or resides. The state and local tax
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treatment
may differ from the U.S. federal income tax treatment described above. Consequently, you should consult your own tax advisor regarding the effect of state and local tax laws on an investment
in our common stock.
Foreign Account Tax Compliance Act
Under the Foreign Account Tax Compliance Act, or FATCA, withholding is required at a rate of 30 percent on dividends in respect of our
common stock held by certain foreign financial institutions (including investment funds), unless such institution enters into an agreement with the Secretary of the Treasury to report, on an annual
basis, information with respect to shares in the institution held by certain United States persons and by certain non-US entities that are wholly or partially owned by United States persons and to
withhold certain amounts paid to certain account holders and financial institutions. Similarly, dividends in respect of, and gross proceeds from the sale of, our common stock held by an investor that
is a non-financial non-US entity will be subject to withholding at a rate of 30 percent, unless such entity either (i) certifies to us that such entity does not have any "substantial
United States owners" or (ii) provides certain information regarding the entity's "substantial United States owners," which we will in turn provide to the Secretary of the Treasury. Non-United
States stockholders are encouraged to consult with their tax advisors regarding the possible implications of the legislation on their investment in our common stock.
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PLAN OF DISTRIBUTION
We may offer and sell the securities that may be offered pursuant to this prospectus to or through one or more underwriters, dealers and agents,
or directly to purchasers, on a continuous or delayed basis. We will set forth in the applicable prospectus supplement a description of the specific plan of distribution of the securities that may be
offered pursuant to this prospectus.
LEGAL MATTERS
The validity of the securities offered by means of this prospectus and certain U.S. federal income tax matters have been passed upon for us by
Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C.
EXPERTS
The consolidated financial statements and schedules of Community Healthcare Trust Incorporated as of December 31, 2018 and 2017 and for
each of the three years in the period ended December 31, 2018 incorporated by reference in this Prospectus have been so incorporated in reliance on the report of BDO USA, LLP, an
independent registered public accounting firm, incorporated herein by reference, given on the authority of said firm as experts in auditing and accounting.
The
historical statement of revenues and certain direct operating expenses of (a) the Kindred Rehabilitation Hospital property for the year ended December 31, 2018, and
(b) the Smokey Point Behavioral Center property for the year ended December 31, 2018, incorporated by reference in this Prospectus have been so incorporated in reliance on the reports of
BDO USA, LLP, an independent auditor, incorporated herein by reference, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information requirements of the Exchange Act and, in accordance therewith, file annual, quarterly and special reports,
proxy statements and other information with the SEC. These documents may be accessed through the SEC's electronic data gathering, analysis and retrieval system, or EDGAR, via electronic means,
including the SEC's home page on the Internet (www.sec.gov).
We
have the authority to designate and issue more than one class or series of shares capital stock having various preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of redemption. See "Description of Common Stock
"and "Description of Preferred Stock". We will furnish a full statement of the relative rights and preferences of each class or series of our shares of capital stock which has been so designated and
any restrictions on the ownership or transfer of our shares of capital stock to any stockholder upon request and without charge. Written requests for such copies should be directed to Investor
Relations, Community Healthcare Trust Incorporated, 3326 Aspen Grove Drive, Suite 150, Franklin, TN 37067, or by telephone request to (615) 771-3052. Our website is located at
www.chct.reit . Information contained on our website is not incorporated by reference into this prospectus and, therefore, is not part of this prospectus or any accompanying prospectus supplement.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the information and reports we file with it, which means that we can disclose important
information to you by referring you to these documents. The information incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will
automatically update and supersede the information already incorporated by reference. We are incorporating by reference the documents listed below, which we have already filed with the SEC, and any
future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, except as to any portion of any future report or document that is not deemed filed under such
provisions, until we sell all of the securities:
-
-
Our Annual Report on
Form 10-K for the year ended December 31, 2018;
-
-
Our Quarterly Reports on Form 10-Q for the quarter ended
March 31, 2019,
June 30, 2019 and
September 30, 3019;
-
-
Our Current Reports on Form 8-K, filed with the SEC on
January 3, 2019,
March 11, 2019,
April 1, 2019,
May 3, 2019,
May 16, 2019 and
November 5, 2019;
-
-
The description of our common stock
contained in our registration statement on Form 8-A filed with the SEC on May 19, 2015, including any amendments and reports filed for the purpose of updating such
description.
In
addition, any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial registration statement and prior to
effectiveness of the registration statement shall be deemed to be incorporated by reference, except as to any portion of any future report or document that is not deemed filed under such provisions.
Upon
written or oral request, we will provide, without charge, to each person, including any beneficial owner, to whom a copy of this prospectus is delivered, a copy of the documents
incorporated by reference into this prospectus. You may request a copy of these filings, and any exhibits we have specifically incorporated by reference as an exhibit in this prospectus, at no cost by
writing or telephoning us at the following address:
Investor
Relations
Community Healthcare Trust Incorporated
3326 Aspen Grove Drive, Suite 150
Franklin, TN 37067
Telephone: (615) 771-3052.
This
prospectus is part of a registration statement we filed with the SEC. We have incorporated exhibits into this registration statement. You should read the exhibits carefully for
provisions that may be important to you.
You
should rely only on the information incorporated by reference or provided in this prospectus or any prospectus supplement. We have not authorized anyone to provide you with different
information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus or in the documents
incorporated by reference is accurate as of any date other than the date on the front of this prospectus or those documents.
THE
INFORMATION CONTAINED ON, OR ACCESSIBLE THROUGH, OUR WEBSITE IS NOT INCORPORATED INTO AND DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS.
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PART IIINFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses payable by Community Healthcare Trust Incorporated (the "Registrant" or the "Company") in connection with the issuance and
distribution of the securities being registered (other than underwriting discounts and commissions, if any) are set forth below. Each item listed is estimated, except for the Securities and Exchange
Commission (the "SEC") registration fee.
|
|
|
|
|
SEC registration fee
|
|
$
|
|
*
|
Legal fees and expenses
|
|
$
|
|
**
|
Accounting fees and expenses
|
|
$
|
|
**
|
Printing fees and expenses
|
|
$
|
|
**
|
Transfer agent and trustee fees
|
|
$
|
|
**
|
Miscellaneous
|
|
$
|
|
**
|
|
|
|
|
|
Total
|
|
$
|
|
**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
*
-
The
registrants are registering an indeterminate amount of securities under this registration statement and, in accordance with Rules 456(b) and 457(r) under
the Securities Act, the registrants are deferring payment of all of the registration fee.
-
**
-
Because
an indeterminate amount of securities is covered by this registration statement, the expenses in connection with the issuance and distribution of the
securities are not currently determinable. The foregoing sets forth the general categories of fees and expenses that we anticipate we will incur in connection with the offering of securities under
this registration statement. An estimate of the aggregate fees and expenses in connection with the distribution of the securities being offered will be included in any applicable prospectus
supplement.
Item 15. Indemnification of Directors and Officers
Maryland law permits a Maryland corporation to include in its charter a provision eliminating the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active
and deliberate dishonesty that is established by a final judgment and is material to the cause of action. Our charter contains a provision which eliminates our directors' and officers' liability to
the maximum extent permitted by Maryland law.
Maryland
law requires a Maryland corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful, on the merits
or otherwise, in the defense of any proceeding to which he or she is made or threatened to be made a party by reason of his or her service in that capacity. Maryland law permits a Maryland corporation
to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any
proceeding to which they may be made or threatened to be made a party by reason of their service in those or other capacities unless it is established that: (a) the act or omission of the
director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty; (b) the
director or officer actually received an improper personal benefit in
money, property or services; or (c) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. However, under
Maryland law, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that personal benefit was
improperly received, unless in either case a court orders indemnification and then only for expenses. In
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addition,
Maryland law permits a Maryland corporation to advance reasonable expenses to a director or officer upon the corporation's receipt of (a) a written affirmation by the director or
officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification and (b) a written undertaking by him or her or on his or her behalf to repay
the amount paid or reimbursed by the corporation if it is ultimately determined that the standard of conduct was not met.
Our
charter authorizes us to obligate ourselves and our bylaws obligate us, to the maximum extent permitted by Maryland law, to indemnify any present or former director or officer or any
individual who, while a director or officer of our company and at our request, serves or has served as a director, director, officer, partner, member, manager, employee, or agent of another REIT,
corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his
or her service in that capacity from and against any claim or liability to which that individual may become subject or which that individual may incur by reason of his or her service in any of the
foregoing capacities and to pay or reimburse his or her reasonable expenses in advance of final disposition of a proceeding.
We
have entered into indemnification agreements with each of our officers and directors whereby we agree to indemnify such officers and directors to the fullest extent permitted by
Maryland law against all expenses and liabilities, subject to limited exceptions. These indemnification agreements also provide that upon an application for indemnity by an officer or director to a
court of appropriate jurisdiction, such court may order us to indemnify such officer or director.
Insofar
as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under the Securities Act, we have been informed that in
the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Item 16. Exhibits
A list of exhibits filed with this registration statement on Form S-3 is set forth on the Exhibit Index and is incorporated herein by
reference.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and
(iii) To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such
information in the registration statement;
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provided, however, that paragraphs (a)(l)(i), (a)(l)(ii) and (a)(l)(iii) of this section do not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the
registration statement;
(2) That,
for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;
(3) To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;
(4) That,
for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus
was deemed part of and included in the registration statement; and
(ii) Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating
to an offering made pursuant to Rule 415(a)(l)(i), (vii), or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be
deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be
deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof; provided, however , that no statement made in a registration statement or prospectus that is part of the registration statement or
made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any
such document immediately prior to such effective date;
(5) That,
for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the
undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and
will be considered to offer or sell such securities to such purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
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(iii) The
portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser;
(6) That,
for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange
Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof;
(7) To
supplement the prospectus, after the expiration of the subscription period, to set forth the results of the subscription offer, the transactions by the underwriters
during the subscription period, the amount of unsubscribed securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public offering by the
underwriters is to be made on terms differing from those set forth on the cover page of the prospectus, a post-effective amendment will be filed to set forth the terms of such offering;
(8) Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue; and
(9) To
file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act
of 1939 in accordance with the rules and regulations prescribed by the Securities and Exchange Commission under Section 305(b)(2) of the Trust Indenture Act of 1939.
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EXHIBIT INDEX
|
|
|
|
Exhibit No.
|
|
Description
|
|
1.1
|
*
|
Form of Underwriting Agreement
|
|
4.1
|
|
Corporate Charter of Community Healthcare Trust Incorporated, as amended(1)
|
|
4.2
|
|
Bylaws of Community Healthcare Trust Incorporated, as amended(2)
|
|
4.3
|
|
Form of Certificate of Common Stock of Community Healthcare Trust Incorporated(3)
|
|
4.4
|
*
|
Form of Articles Supplementary
|
|
4.5
|
*
|
Form of Deposit Agreement, including form of Community Healthcare Trust Incorporated Depositary Receipt for Community Healthcare Trust Incorporated depositary shares
|
|
4.6
|
*
|
Form of Warrant Agreement
|
|
4.7
|
*
|
Form of Unit Agreement
|
|
4.8
|
*
|
Form of Rights Agreement
|
|
4.9
|
|
Form of Indenture(4)
|
|
5.1
|
|
Opinion of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC regarding the legality of the securities being registered
|
|
8.1
|
|
Opinion of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC with respect to tax matters
|
|
23.1
|
|
Consent of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC (included in Exhibit 5.1)
|
|
23.2
|
|
Consent of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC (included in Exhibit 8.1)
|
|
23.3
|
|
Consent of BDO USA, LLP
|
|
24.1
|
|
Powers of Attorney (included in signature pages of this Form S-3)
|
|
25.1
|
**
|
Form T-1 Statement of Eligibility of Trustee for Indenture of Community Healthcare Trust Incorporated under the Trust Indenture Act of 1939, as amended
|
-
*
-
To
be filed by amendment or as an exhibit to a document to be incorporated or deemed to be incorporated by reference in this registration statement, including a
Current Report on Form 8-K.
-
**
-
To
be filed by amendment pursuant to Section 305(b)(2) of the Trust Indenture Act of 1939, as amended.
-
(1)
-
Filed
as Exhibit 3.1 to Amendment No. 2 to the Registration Statement on Form S-11 of the Company filed with the Securities and Exchange
Commission on May 6, 2015 (Registration No. 333-203210) and incorporated by reference.
-
(2)
-
Filed
as Exhibit 3.2 to the Registration Statement on Form S-11 of the Company filed with the Securities and Exchange Commission on April 2,
2015 (Registration No. 333-203210) and incorporated by reference.
-
(3)
-
Filed
as Exhibit 4.1 to the Registration Statement on Form S-11 of the Company filed with the Securities and Exchange Commission on April 2,
2015 (Registration No. 333-203210) and incorporated by reference.
-
(4)
-
Filed
as Exhibit 4.9 to the Registration Statement on Form S-3 of the Company (Registration No. 333-213614), filed with the Securities and
Exchange Commission on September 13, 2016 and incorporated by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Franklin,
State of Tennessee, on November 5, 2019
|
|
|
|
|
COMMUNITY HEALTHCARE TRUST INCORPORATED
|
|
|
/s/ TIMOTHY G. WALLACE
Timothy G. Wallace
Chief Executive Officer and President
(Principal Executive Officer)
|
KNOW
ALL MEN BY THESE PRESENTS, that this registration statement has been signed by the following persons in the capacities and on the dates stated and that each person whose signature
appears below hereby constitutes and appoints Timothy G. Wallace and David Dupuy and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments to the registration statement),
and to file the same, with all exhibits thereto, and any other documents in connection therewith, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
|
|
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Signature
|
|
Title
|
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Date
|
|
|
|
|
|
/s/ TIMOTHY G. WALLACE
Timothy G. Wallace
|
|
Chief Executive Officer and President and Chairman of the Board (Principal Executive Officer)
|
|
November 5, 2019
|
/s/ DAVID H. DUPUY
David H. Dupuy
|
|
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
|
|
November 5. 2019
|
/s/ LEIGH ANN STACH
Leigh Ann Stach
|
|
Executive Vice President and Chief Accounting Officer (Principal Accounting Officer)
|
|
November 5, 2019
|
/s/ ALAN GARDNER
Alan Gardner
|
|
Director
|
|
November 5, 2019
|
II-6
Table of Contents
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Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ ROBERT HENSLEY
Robert Hensley
|
|
Director
|
|
November 5, 2019
|
/s/ CLAIRE GULMI
Claire Gulmi
|
|
Director
|
|
November 5, 2019
|
/s/ R. LAWRENCE VAN HORN
R. Lawrence Van Horn
|
|
Director
|
|
November 5, 2019
|
II-7
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