-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, rO9ePX2dAtwvPHRO+6Aqi/q7S+lR9FNKFdWtv+x+S1FUd3i780mp14ARfOYpiARb OGjaDNLhccKrrkWk9ZxwcA== 0000950131-95-000434.txt : 19950301 0000950131-95-000434.hdr.sgml : 19950301 ACCESSION NUMBER: 0000950131-95-000434 CONFORMED SUBMISSION TYPE: 424B5 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950224 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROPERTY TRUST OF AMERICA CENTRAL INDEX KEY: 0000080737 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 746056896 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B5 SEC ACT: 1933 Act SEC FILE NUMBER: 033-86444 FILM NUMBER: 95514794 BUSINESS ADDRESS: STREET 1: 7777 MARKET CENTER AVE CITY: EL PASO STATE: TX ZIP: 79912 BUSINESS PHONE: 9158773900 MAIL ADDRESS: STREET 1: 7777 MARKET CENTER AVE CITY: EL PASO STATE: TX ZIP: 79912 FORMER COMPANY: FORMER CONFORMED NAME: EL PASO REAL ESTATE INVESTMENT TRUST DATE OF NAME CHANGE: 19700108 424B5 1 PROSPECTUS SUPPLEMENT Rule 424(b)(5) Registration No. 33-86444 PROSPECTUS SUPPLEMENT - ----------------- (TO PROSPECTUS DATED DECEMBER 1, 1994) LOGO 17,800,000 COMMON SHARES OF BENEFICIAL INTEREST Property Trust of America ("PTR") is an equity real estate investment trust that primarily owns, develops, acquires and operates income-producing multifamily properties in the southwestern and western United States. The last reported sale price of PTR's Common Shares of Beneficial Interest, $1.00 par value per share (the "Common Shares"), on the New York Stock Exchange (the "NYSE") on February 10, 1995 was $16.75. See "Price Range of Common Shares and Distributions." This Prospectus Supplement relates to up to 17,800,000 Common Shares that PTR is offering to its shareholders in a subscription offering (the "Offering") at a price of $16.375 per Common Share (the "Subscription Price"). Each holder of record of Common Shares at the close of business on February 21, 1995 (the "Record Date"), other than PTR's largest shareholder, Security Capital Realty Incorporated (which management intends to name Security Capital Group Incorporated, herein referred to as "Security Capital Group"), is entitled to subscribe for one Common Share at the Subscription Price for every 1.94 Common Shares held of record at the close of business on the Record Date. The subscription period will expire on March 23, 1995 at 5:00 p.m., New York City time, or such later date as PTR may determine in its sole discretion (the "Expiration Date"). The right of holders of Common Shares on the Record Date to subscribe for Common Shares at the Subscription Price is not transferable. See "The Offering--Subscription Right." To the extent that shareholders do not subscribe for all Common Shares to which they are entitled, PTR will allocate available Common Shares to oversubscribing shareholders (including Security Capital Group as if it had fully subscribed for Common Shares based on the number of Common Shares it is receiving in the Merger (as hereinafter defined)) and, at its discretion, to third parties. Security Capital Markets Group Incorporated ("Capital Markets Group"), an affiliate of PTR, will act as placement agent. See "The Offering--Oversubscription Privilege" and "-- Unsubscribed Shares and Third Party Sales." The closing of the Offering is conditioned upon the consummation of the merger (the "Merger") of Security Capital Pacific Incorporated ("PACIFIC") with and into PTR. See "The Merger" and "The Offering--Condition to Closing." Upon consummation of the Merger, PTR will change its name to "Security Capital Pacific Trust." The Offering is designed to allow PTR shareholders other than Security Capital Group the opportunity to purchase Common Shares at the same price at which PACIFIC shareholders are receiving Common Shares in the Merger and to maintain PTR's current balance sheet ratios. To assure maintenance of PTR's current balance sheet ratios, Security Capital Group has agreed to purchase $50 million of Common Shares in the Offering, which amount will be reduced to the extent that subscriptions are received by PTR from parties other than Security Capital Group. See "The Offering--Principal Shareholder." Shareholders of PTR who do not fully subscribe for Common Shares in the Offering will own a smaller equity ownership and voting interest in PTR after the consummation of the Offering and the Merger than if they were to fully subscribe for Common Shares. There is no minimum number of Common Shares required to be sold as a condition to the consummation of the Offering. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC DISCOUNT(1) PTR(2) - ------------------------------------------------------------------------------------------ Per Common Share................ $16.375 None $16.375 - ------------------------------------------------------------------------------------------ Total........................... $291,475,000 None $291,475,000 - ------------------------------------------------------------------------------------------
(1) PTR has agreed to indemnify the placement agent against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "The Offering--Unsubscribed Shares and Third Party Sales." (2) Before deducting expenses payable by PTR, estimated at $300,000. The date of this Prospectus Supplement is February 10, 1995 IN CONNECTION WITH THIS OFFERING, PTR OR ITS AFFILIATES MAY EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON SHARES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. PROSPECTUS SUPPLEMENT SUMMARY The following summary is qualified in its entirety by the detailed information appearing elsewhere in this Prospectus Supplement or the accompanying Prospectus or incorporated herein or therein by reference. Adjusted pro forma information regarding 47,814 multifamily units owned (comprising operating properties, developments under construction and developments in planning) as of December 31, 1994 includes 5,703 multifamily units and land for the development of 840 multifamily units being acquired by PTR in the Merger, and are shown at their cost plus budgeted renovations and budgeted development cost, as applicable. Other pro forma financial information does not give effect to the completion of planned renovations, developments under construction and developments in planning. PROPERTY TRUST OF AMERICA PTR's objective is to be the preeminent real estate operating company focusing on multifamily property in its target market. PTR's REIT Manager is Security Capital (Southwest) Incorporated (the "REIT Manager" or "REIT Management"), a wholly owned subsidiary of Security Capital Group. Through its REIT Manager, PTR is a fully integrated operating company which engages in development, acquisition, operation and long term ownership of multifamily properties. PTR currently owns and operates or is developing 47,814 multifamily units, on an adjusted pro forma basis. The aggregate adjusted pro forma investment cost, including planned renovations, of all of PTR's adjusted pro forma multifamily properties is $1.89 billion. See "Property Trust of America" for a detail of PTR's investment cost. PTR has elected to be taxed as a real estate investment trust ("REIT") for federal income tax purposes. PTR seeks to achieve long term sustainable growth in cash flow and distributions through a commitment to fundamental real estate research, actively reviewing and reallocating assets to product types and submarkets with strong growth prospects, developing industry-leading multifamily product designed for the largest renter groups and making opportunistic acquisitions. See "Business-- Strategy for Cash Flow and Distribution Growth." PTR has traditionally focused on multifamily assets in the Southwest. At its meeting on November 4, 1994, PTR's Board of Trustees (the "Board") expanded PTR's target market to include a six-state region of the western United States comprised of California, Idaho, Nevada, Oregon, Utah and Washington. The assets being acquired from PACIFIC in the Merger are located in some of these markets, which PTR's REIT Manager believes have significant growth prospects. Pursuant to the Merger, each then outstanding share of PACIFIC common stock will be converted into the right to receive 0.611 Common Shares (the "Exchange Ratio"). The Exchange Ratio was determined by dividing $10.00 (the value of a share of PACIFIC common stock as agreed upon between PTR and PACIFIC) by $16.375 (the closing sale price of the Common Shares on the NYSE on December 6, 1994, the date the Merger Agreement (as hereinafter defined) was entered into, which is the same as the Subscription Price). The price of $16.375 per share on which the Exchange Ratio was based exceeded the 30-day trailing average of the closing price for the Common Shares on the NYSE (the Common Share price increased following the announcement of the proposed Merger but such increase cannot be attributed solely to the Merger). The $10.00 value of a share of PACIFIC common stock essentially represents PACIFIC's cost of its properties and is the same price at which PACIFIC sold shares of its common stock in all of its prior private offerings. Upon consummation of the Merger, PTR will change its name to "Security Capital Pacific Trust." See "The Merger." A copy of the Joint Proxy/Information Statement and Prospectus relating to the Merger is being sent to shareholders under separate cover. The REIT Manager believes that PTR's expanded target market presents attractive opportunities for long term increases in per share operating results because of its growing job market and population. After completion of the Merger, the REIT Manager will change its name to "Security Capital Pacific Incorporated." S-3 PTR highlights include: . The Merger, which will result in PTR's entry into attractive, growing target markets in the western United States, the addition to PTR's portfolio of 18 operating properties (including two properties to be acquired by PACIFIC within 40 days of the date of this Prospectus Supplement) comprising 5,703 multifamily units with a total investment cost, including planned renovations, of $251.8 million, and three development properties (including one development property to be acquired by PACIFIC within 40 days of the date of this Prospectus Supplement) comprising 840 multifamily units and an increase in PTR's pro forma per share operating results for 1994. See "The Merger." . Average rental rates increased 6.42% for PTR's multifamily properties that were fully operational throughout both 1994 and 1993. At December 31, 1994, on an adjusted pro forma basis, PTR's operating multifamily properties were 95.1% leased. . PTR believes that development of multifamily properties from the ground up that are built for long term ownership and are designed to meet broad renter preferences and demographic trends will provide a greater source of long term cash flow growth in the future than acquisitions. PTR expects to complete an additional 815 multifamily units after the date of this Prospectus Supplement and before March 31, 1995. On an adjusted pro forma basis, PTR has completed $208.9 million of developments, has $204.6 million of developments under construction and owns land for which it is planning $296.7 million of developments. . Security Capital Group, PTR's largest shareholder, which owns 31.9% of the Common Shares, is the owner of the REIT Manager and has provided investment capital to PTR, at the same times and on the same terms made available to public investors and other shareholders. See "The Offering-- Principal Shareholder." . Based on forecasts published by Woods & Poole Economics, Inc., the projected growth in population of PTR's primary target market, including PACIFIC's primary target market, is 39.5% for the years 1994-2015, whereas the projected growth in population in the U.S. as a whole for such period is 19.2%. For the same time period, job growth is projected to be 31.5% in PTR's primary target market, including PACIFIC's primary target market, and 22.4% in the U.S. as a whole. . A review of local market information in PTR's primary target market, including PACIFIC's primary target market, indicates that the number of multifamily units for which building permits have been issued has declined significantly from mid-1980 levels. In 1985, 55,005 units were permitted as compared to 32,394 units in 1994. . PTR's long term debt as a percentage of total book capitalization was 27% at December 31, 1994, on a pro forma basis after giving effect to the Merger and certain operating multifamily properties subsequently acquired or to be acquired within 40 days of the date of this Prospectus Supplement by PTR and PACIFIC and not including the effects of the Offering. At February 10, 1995, PTR had $125 million of borrowings outstanding under its $275 million revolving line of credit, which PTR is negotiating to increase to $350 million. S-4 PROPERTY TRUST OF AMERICA SUMMARY OF MULTIFAMILY PROPERTIES The information on the chart below is as of December 31, 1994 and includes 5,703 multifamily units and land for the development of 840 multifamily units being acquired in the Merger.
ACQUISITION OR COMPLETION PERCENTAGE BUDGETED DATE UNITS LEASED(1) COST(2) -------------- ----- ---------- -------------- PROPERTIES STABILIZED AT DECEMBER 31, 1994(3): Woodside Village--Houston, Texas........................ 07/15/75 196 98.4% $ 6,390,709 Tigua Village--El Paso, Texas*....................... 05/31/78 184 93.4 2,148,995 Las Flores--El Paso, Texas*... 12/31/83 468 93.6 8,026,456 Park Place Phase I--Las Cruces, New Mexico*.......... 03/15/89 160 91.1 4,457,581 Spring Park--El Paso, Texas*.. 09/30/90 180 93.9 5,211,767 Rancho Vizcaya--Santa Fe, New Mexico....................... 08/28/91 212 96.2 11,969,064 Pavilions Phase I-- Albuquerque, New Mexico...... 09/12/91 118 94.6 7,355,179 Park Place Phase II--Las Cruces, New Mexico*.......... 09/30/91 132 91.1 4,132,729 Shadow Ridge Phase I--El Paso, Texas........................ 12/31/91 208 92.8 5,367,233 Cobblestone Village--San Antonio, Texas............... 02/27/92 184 93.5 4,381,994 Sonoran Terraces--Tucson, Arizona...................... 03/09/92 374 97.9 17,772,755 Contour Place--San Antonio, Texas........................ 03/12/92 126 88.1 2,572,120 San Marina--Phoenix, Arizona.. 04/08/92 400 97.0 6,831,797 Cobble Creek--Tucson, Arizona. 05/19/92 301 96.0 7,650,415 Dobson Bay Club--Phoenix, Arizona...................... 05/27/92 166 97.6 6,139,504 Mountain Village--El Paso, Texas........................ 05/29/92 288 98.6 7,078,119 Sandia Ridge--Albuquerque, New Mexico....................... 06/05/92 272 97.8 7,344,375 Craycroft Gardens--Tucson, Arizona...................... 07/09/92 101 99.0 1,935,453 The Crest--El Paso, Texas*.... 07/31/92 232 94.0 7,963,798 Tierra Antigua--Tucson, Arizona...................... 07/31/92 147 95.9 5,424,623 Pavilions Phase II-- Albuquerque, New Mexico*..... 07/31/92 122 94.6 8,025,027 Homestead Village-Skillman-- Dallas, Texas*............... 08/24/92 133 87.2 3,068,546 Villas of St. Tropez Phase I-- San Antonio, Texas........... 09/17/92 273 92.3 10,712,283 Hickory Ridge--Denver, Colorado..................... 09/18/92 688 97.2 23,187,032 Lakeside Villas--San Antonio, Texas........................ 09/30/92 292 91.8 13,519,664 Oakhampton Place--San Antonio, Texas........................ 09/30/92 280 93.9 12,124,821 Spyglass--Austin, Texas....... 11/06/92 298 97.3 10,400,762 Sunwood--Denver, Colorado..... 11/20/92 156 95.5 5,985,392 Superstition Park--Phoenix, Arizona...................... 12/03/92 376 96.3 12,447,988 Papago Crossing--Phoenix, Arizona...................... 12/10/92 180 96.1 3,706,106 Homestead Village-Stemmons-- Dallas, Texas*............... 12/13/92 132 95.4 3,189,094 The Enclave--Santa Fe, New Mexico....................... 12/23/92 204 97.6 9,713,612 Moorings at Mesa Cove-- Phoenix, Arizona............. 12/30/92 406 96.1 16,997,914 Camino Real--San Antonio, Texas........................ 02/03/93 176 93.8 6,140,490 Sundown Village Phase I-- Tucson, Arizona.............. 02/25/93 250 99.6 8,412,991 Doubletree--El Paso, Texas.... 03/18/93 284 96.8 6,125,928 San Marin--Phoenix, Arizona*.. 03/31/93 276 99.3 17,971,199 The Ridge--Austin, Texas...... 04/21/93 326 99.4 10,393,046 Windsail--Tucson, Arizona..... 04/27/93 300 98.3 9,818,935 Vista del Sol--Albuquerque, New Mexico................... 05/07/93 168 99.4 5,913,461 Cambrian--Denver, Colorado.... 05/13/93 383 98.4 11,947,276
S-5 PROPERTY TRUST OF AMERICA SUMMARY OF MULTIFAMILY PROPERTIES
ACQUISITION OR COMPLETION PERCENTAGE BUDGETED DATE UNITS LEASED(1) COST(2) -------------- ----- ---------- -------------- Reflections Phase I--Denver, Colorado..................... 05/19/93 208 99.0% $ 8,680,207 The Cedars--Denver, Colorado.. 05/21/93 408 97.6 16,691,066 Homestead Village-Tollway-- Dallas, Texas*............... 05/28/93 120 88.9 2,725,748 Cielo Vista--El Paso, Texas... 06/30/93 378 87.8 6,093,804 Villas of Castle Hills--San Antonio, Texas............... 07/02/93 163 95.7 5,851,373 Rancho Mirage--San Antonio, Texas........................ 07/02/93 254 91.7 4,751,305 Shadowood--Austin, Texas...... 07/29/93 235 99.2 6,452,750 Wellington Place--Albuquerque, New Mexico................... 08/11/93 280 100.0 9,785,156 The Shores/The Marina--San Antonio, Texas............... 08/24/93 232 84.5 6,547,380 The Phoenix--El Paso, Texas*.. 08/31/93 336 89.6 9,923,565 Fox Creek--Denver, Colorado... 09/10/93 175 100.0 6,401,246 Pheasant Run--Phoenix, Arizona...................... 09/15/93 248 98.8 8,569,634 Bay Club--Phoenix, Arizona.... 09/28/93 472 98.7 14,797,329 Cannon Place--Austin, Texas... 10/27/93 184 97.3 6,675,422 Woodland Park--Dallas, Texas.. 10/29/93 216 94.0 7,277,592 Somerset--Dallas, Texas....... 10/29/93 372 94.9 14,754,689 Cranbrook Forest--Houston, Texas........................ 10/29/93 261 98.1 7,056,757 Apple Ridge--Dallas, Texas.... 10/29/93 304 98.4 10,668,599 Warrington--Oklahoma City, Oklahoma..................... 11/04/93 204 96.1 6,154,000 Southern Slope--Tulsa, Oklahoma..................... 11/12/93 142 96.5 5,402,015 Squire's Court--Portland, Oregon+...................... 11/16/93 235 98.7 11,203,680 Knight's Castle--Portland, Oregon+...................... 11/16/93 296 98.0 13,518,037 Double Tree I--Portland, Oregon+...................... 11/16/93 245 98.8 10,695,197 Corrales Pointe--Albuquerque, New Mexico................... 11/30/93 208 99.5 6,672,274 Haystack--Tucson, Arizona..... 12/01/93 272 98.5 6,984,174 Pineloch--Houston, Texas...... 12/09/93 440 89.8 13,560,000 Summerstone--Dallas, Texas.... 12/15/93 192 100.0 6,979,764 Post Oak Ridge--Dallas, Texas. 12/15/93 486 98.8 14,798,701 Applegate--San Antonio, Texas. 12/15/93 344 94.5 9,894,553 Towne East Village--San Antonio, Texas............... 12/15/93 100 88.0 2,396,708 The Gables--San Antonio, Texas........................ 12/15/93 192 97.4 6,907,240 Indian Creek--Dallas, Texas... 12/15/93 328 97.3 10,696,422 Marbach Park--San Antonio, Texas........................ 12/15/93 304 93.1 7,853,076 Palisades Park--San Antonio, Texas........................ 12/15/93 328 85.4 8,004,562 Weslayan Oaks--Houston, Texas. 12/15/93 84 96.4 3,914,302 Anderson Mill Oaks--Austin, Texas........................ 12/15/93 350 98.0 12,310,395 The Pond--San Antonio, Texas.. 12/15/93 328 89.9 11,763,776 Panther Springs--San Antonio, Texas........................ 12/15/93 88 86.4 3,968,075 Braeswood Park--Houston, Texas........................ 12/16/93 240 96.7 12,524,337 Sunstone--Phoenix, Arizona.... 12/16/93 242 100.0 10,447,227 Presidio at South Mountain-- Phoenix, Arizona............. 12/16/93 600 98.5 31,332,354 Riverwood Heights--Portland, Oregon+...................... 12/16/93 240 100.0 10,166,734 Quail Run--Dallas, Texas...... 12/16/93 278 98.6 11,019,101 Custer Crossing--Dallas, Texas........................ 12/16/93 244 97.5 10,423,339 Club at the Green--Portland, Oregon+...................... 12/16/93 254 98.8 11,358,973
S-6 PROPERTY TRUST OF AMERICA SUMMARY OF MULTIFAMILY PROPERTIES
ACQUISITION OR COMPLETION PERCENTAGE BUDGETED DATE UNITS LEASED(1) COST(2) -------------- ------ ---------- -------------- Rock Creek--Austin, Texas.... 12/17/93 314 98.4% $ 9,862,320 Villa Caprice--Tucson, Arizona..................... 12/20/93 268 97.4 8,753,390 The Ridge--Phoenix, Arizona.. 12/27/93 380 97.6 12,613,234 Entrada Point--Albuquerque, New Mexico.................. 01/31/94 208 98.1 7,335,000 Saddle Brook--Austin, Texas*. 01/31/94 308 98.1 13,216,332 King's Crossing--Las Vegas, Nevada+..................... 02/03/94 440 99.6 19,639,670 Homestead Village-North Richland Hills--Dallas, Texas*...................... 02/28/94 134 90.0 3,513,248 Homestead Village-West by Northwest--Houston, Texas*.. 02/28/94 134 92.4 3,428,244 Homestead Village-Coit Road-- Dallas, Texas*.............. 02/28/94 134 87.0 3,408,182 Mountain Shadow--Salt Lake City, Utah+................. 03/18/94 174 98.3 5,761,388 Sunterra--Las Vegas, Nevada+. 03/18/94 444 100.0 14,421,605 Greenpointe--Salt Lake City, Utah+....................... 03/18/94 192 99.5 6,183,091 The Crescent--San Antonio, Texas*...................... 03/31/94 306 97.4 15,573,787 Comanche Wells--Albuquerque, New Mexico.................. 04/20/94 179 95.5 5,027,401 Silvercliff--Denver, Colorado.................... 04/29/94 312 97.8 16,214,719 Seahawk--Houston, Texas...... 04/29/94 224 97.8 8,419,252 La Mirage--Austin, Texas*.... 04/30/94 348 99.1 17,121,033 Chasewood--Houston, Texas.... 05/12/94 260 95.0 13,511,682 Cimarron Trail--Oklahoma City, Oklahoma.............. 06/28/94 228 97.8 7,036,565 Horizons at Peccole Ranch-- Las Vegas, Nevada+.......... 06/28/94 408 94.1 21,734,646 Apple Creek--Omaha, Nebraska. 06/30/94 384 96.1 13,402,075 Plaza Del Oro--Houston, Texas....................... 06/30/94 348 93.4 12,227,201 San Marquis South--Phoenix, Arizona*.................... 07/31/94 264 99.2 13,462,263 The Meadows of Santa Fe-- Santa Fe, New Mexico*....... 07/31/94 296 95.3 12,758,637 San Antigua--Phoenix, Arizona*.................... 08/31/94 320 99.7 23,863,867 Homestead Village-Park Ten-- Houston, Texas*............. 10/31/94 135 59.4 3,921,104 ------ ----- -------------- SUBTOTALS/AVERAGE.......... 29,404 95.9% $1,057,018,807 ------ ----- -------------- PROPERTIES PRE-STABILIZED AT DECEMBER 31, 1994(3): Scottsdale Greens--Phoenix, Arizona..................... 01/24/94 644 85.3% $ 26,981,655 Scripps Landing--San Diego, California.................. 01/25/94 160 96.3 9,020,999 Beverly Palms--Houston, Texas....................... 02/02/94 362 98.9 10,140,866 North Mountain Village-- Phoenix, Arizona............ 04/14/94 568 98.8 18,334,000 Rio Cancion--Tucson, Arizona. 04/14/94 379 97.9 19,249,435 Peaks at Papago Park Phase I--Phoenix, Arizona......... 05/02/94 624 98.7 28,088,175 Foxfire--Phoenix, Arizona.... 05/02/94 188 100.0 7,221,226 Tierrasanta Ridge--San Diego, California.................. 06/14/94 340 83.8 19,602,589 Homestead Village-Fuqua-- Houston, Texas*............. 06/30/94 134 69.2 3,326,902 The Hamptons--Las Vegas, Nevada+..................... 07/27/94 492 95.5 20,133,834 Brompton Court--Houston, Texas....................... 07/28/94 794 85.5 30,509,630 Meridian at Murrayhill-- Portland, Oregon+........... 09/23/94 312 95.5 16,995,087
S-7 PROPERTY TRUST OF AMERICA SUMMARY OF MULTIFAMILY PROPERTIES
ACQUISITION OR COMPLETION PERCENTAGE BUDGETED DATE UNITS LEASED(1) COST(2) -------------- ----- ---------- -------------- Walden Pond--Seattle, Washington+.................. 10/21/94 316 96.2% $ 13,739,441 Anchor Village--Las Vegas, Nevada+...................... 10/26/94 896 91.3 40,420,407 Homestead Village-Westheimer-- Houston, Texas*.............. 10/31/94 134 68.8 4,006,834 Homestead Village-Bammel- Westfield--Houston, Texas*... 10/31/94 134 77.8 3,454,878 Homestead Village- Fredricksburg--San Antonio, Texas*....................... 10/31/94 136 66.1 4,097,811 Dymaxion--San Antonio, Texas.. 11/22/94 190 97.9 4,526,350 Shadow Ridge Phase II--El Paso, Texas*................. 11/30/94 144 92.8 6,899,180 Timber Ridge--Dallas, Texas... 12/01/94 160 98.8 7,029,520 Dockside--San Antonio, Texas.. 12/22/94 73 89.0 2,188,275 Logan's Ridge--Seattle, Washington+.................. 12/23/94 258 95.5 13,385,000 Cherry Creek--Salt Lake City, Utah+........................ 01/17/95 225 95.2 8,835,000 Double Tree II--Portland, Oregon+...................... (4) 124 94.4 6,750,000 Matanza Creek--Seattle, Washington+.................. (4) 152 95.0 6,849,000 ----- ---- -------------- SUBTOTALS/AVERAGE........... 7,939 91.9% $ 331,786,094 ----- ---- -------------- DEVELOPMENTS UNDER CONSTRUCTION AT DECEMBER 31, 1994: Homestead Village-Stemmons Phase II--Dallas, Texas...... 04/09/92 57 N/A $ 1,465,810 Acacia Park--El Paso, Texas... 02/24/93 336 N/A 13,702,840 Sterling Heights--San Antonio, Texas........................ 07/09/93 224 N/A 12,042,790 Reflections Phase II--Denver, Colorado..................... 07/14/93 208 N/A 11,377,941 Sundown Village Phase II-- Tucson, Arizona.............. 08/20/93 80 N/A 4,488,912 Ridgeline Village II--Austin, Texas........................ 09/09/93 456 N/A 24,855,550 San Marquis North--Phoenix, Arizona...................... 09/14/93 208 N/A 10,769,191 La Paloma--Albuquerque, New Mexico....................... 10/01/93 424 N/A 24,127,423 Hunter's Run--Austin, Texas... 10/19/93 240 N/A 11,641,735 Homestead Village-Stafford-- Houston, Texas............... 10/28/93 134 N/A 3,637,570 Homestead Village-West Arlington--Dallas, Texas..... 11/15/93 138 N/A 3,978,937 Medical Drive--San Antonio, Texas........................ 12/30/93 276 N/A 13,314,855 Patriot Apartments--El Paso, Texas........................ 01/12/94 320 N/A 12,319,867 Estancia del Sol--Albuquerque, New Mexico................... 03/23/94 192 N/A 11,966,124 Homestead Village-South Arlington--Dallas, Texas..... 05/02/94 141 N/A 3,986,916 Homestead Village-Medical Center--Houston, Texas....... 05/09/94 165 N/A 5,299,295 Memorial Oaks Phase I-- Houston, Texas............... 05/09/94 360 N/A 18,632,819 Homestead Village- Willowbrook--Houston, Texas.. 06/27/94 138 N/A 3,915,589 Homestead Village-Burnet Road--Austin, Texas.......... 08/22/94 133 N/A 4,037,582 Homestead Village- I10/DeZavala--San Antonio, Texas........................ 09/29/94 142 N/A 4,337,173 Homestead Village- 281/Bitters--San Antonio, Texas........................ 10/05/94 154 N/A 4,685,337 ----- -------------- SUBTOTALS................... 4,526 $ 204,584,256 ----- -------------- DEVELOPMENTS IN PLANNING AT DECEMBER 31, 1994: Ridgeline Village I--Austin, Texas........................ 09/09/93 168 N/A $ 9,038,567 Ridgeline Village III--Austin, Texas........................ 09/09/93 448 N/A 26,265,345 Hobby Horse--Austin, Texas.... 09/22/93 168 N/A 10,157,709
S-8 PROPERTY TRUST OF AMERICA SUMMARY OF MULTIFAMILY PROPERTIES
ACQUISITION OR COMPLETION PERCENTAGE BUDGETED DATE UNITS LEASED(1) COST(2) -------------- ------ ---------- -------------- Hobby Horse Railroad--Austin, Texas....................... 10/19/93 168 N/A $ 7,935,670 Memorial Heights Phase I-- Houston, Texas.............. 03/18/94 360 N/A 18,278,833 Memorial Heights Phase II-- Houston, Texas.............. 03/18/94 476 N/A 24,324,922 St. Francis--Santa Fe, New Mexico...................... 03/31/94 176 N/A 10,231,709 Villas of St. Tropez Phase II--San Antonio, Texas...... 04/18/94 96 N/A 4,252,438 Peaks at Papago Park Phase II--Phoenix, Arizona........ 05/02/94 136 N/A 6,956,888 Memorial Oaks Phase II-- Houston, Texas.............. 05/09/94 264 N/A 13,402,564 Walker Ranch Phase I--San Antonio, Texas.............. 05/12/94 452 N/A 22,770,415 Walker Ranch Phase II--San Antonio, Texas.............. 05/12/94 356 N/A 16,915,683 Walker Ranch Phase III--San Antonio, Texas.............. 05/12/94 120 N/A 6,319,656 Reno Vista Ridge--Reno, Nevada+..................... 05/13/94 324 N/A 17,857,146 Remington--Salt Lake City, Utah+....................... 07/26/94 288 N/A 15,049,022 Ventana Canyon--Tucson, Arizona..................... 08/31/94 432 N/A 24,103,983 Homestead Village-Denver Tech Center--Denver, Colorado.... 09/14/94 158 N/A 5,104,377 Homestead Village-Iliff-- Denver, Colorado............ 10/31/94 138 N/A 4,361,076 Homestead Village- Scottsdale--Phoenix, Arizona..................... 11/15/94 120 N/A 4,075,227 Seven Bar Ranch Phase I-- Albuquerque, New Mexico..... 11/22/94 368 N/A 18,293,294 Seven Bar Ranch Phase II-- Albuquerque, New Mexico..... 11/22/94 252 N/A 12,526,930 Homestead Village-Ft. Worth-- Dallas, Texas............... 11/29/94 99 N/A 2,802,661 Homestead Village-Las Colinas--Dallas, Texas...... 12/16/94 150 N/A 4,539,311 Scholls Ferry--Portland, Oregon+..................... (4) 228 N/A 11,170,682 ------ -------------- SUBTOTALS.................. 5,945 $ 296,734,108 ------ -------------- TOTALS..................... 47,814 $1,890,123,265 ====== ==============
- -------- *Property developed by PTR. +Property being acquired by PTR in the Merger. Acquisition date shown represents date acquired by PACIFIC. (1) Represents percentage leased as of December 31, 1994. The information presented for properties acquired subsequent to December 31, 1994 is based on information provided by the seller of the property. (2) Represents cost at December 31, 1994, including planned renovations and budgeted development cost for properties stabilized or pre-stabilized. Budgeted development cost at December 31, 1994 includes the cost of land, fees, permits, payments to contractors, architectural and engineering fees and interest and property taxes to be capitalized during the construction period, for properties under development. (3) For definitions of stabilized and pre-stabilized, see "Business-- Multifamily Properties." (4) Properties to be acquired by PACIFIC within 40 days of the date of this Prospectus Supplement. LAND HELD FOR DEVELOPMENT AT DECEMBER 31, 1994 While land prices are favorable, PTR has acquired and will acquire, on an unleveraged basis, prudent amounts of zoned land for multifamily development in the foreseeable future. At December 31, 1994, PTR held three sites for future multifamily development, aggregating approximately 71.6 acres in two target market cities. Such land was acquired on an unleveraged basis and represents an aggregate investment cost of $2.99 million. For purposes of the property charts and other information in this Prospectus Supplement, land held for prospective developments, which comprises less than 1% of assets, based on cost, is not aggregated with the multifamily properties. S-9 THE OFFERING Securities Offered.......... 17,800,000 Common Shares. Subscription Right.......... Each holder of record of Common Shares on the Record Date is entitled to subscribe for one Common Share at the Subscription Price for every 1.94 Common Shares held of record at the close of business on the Record Date. The right of holders of Common Shares on the Record Date to subscribe for Common Shares at the Subscription Price is not transferable. See "The Offering--Subscription Right." Oversubscription Privilege.. A holder of Common Shares on the Record Date who fully subscribes for all Common Shares to which such holder is entitled may also subscribe for additional Common Shares, at the Subscription Price, to the extent all of the Common Shares covered by this Prospectus Supplement are not subscribed for by other shareholders. See "The Offering--Oversubscription Privilege." Expiration Date............. The subscription period will expire on March 23, 1995 at 5:00 p.m., New York City time, or such later date as PTR may determine in its sole discretion. See "The Offering--Expiration Date." Subscription Price.......... $16.375 per Common Share. Closing Price of the Common Shares on the NYSE on December 6, 1994, (the day prior to announcement of the Offering and the Merger).................... $16.375 per Common Share. Closing Price of the Common Shares on the NYSE on February 10, 1995.......... $16.75 per Common Share. Subscription and Escrow Chemical Bank, PTR Subscription Offering, P.O. Agent...................... Box 3085, GPO Station, New York, NY 10116-3085; or 55 Water Street, North Bldg., Room 234--2nd Floor, New York, NY 10041. Common Shares Outstanding Before the Offering and the Merger................. 50,456,038 Common Shares Outstanding After the Offering and the Merger..................... 76,724,498 (assuming the Offering is fully subscribed) Use of Proceeds............. The Offering is intended to provide funds for the development and acquisition of multifamily properties, for the repayment of indebtedness under PTR's revolving credit line and for working capital purposes. See "Use of Proceeds." Condition to Closing........ The closing of the Offering is conditioned upon the consummation of the Merger. See "The Merger" and "The Offering--Condition to Closing." S-10 SUMMARY HISTORICAL FINANCIAL DATA (Amounts in thousands, except ratio information and per share data)
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ------------------ --------------------------------------------- 1994 1993 1993 1992 1991 1990 1989 -------- -------- -------- -------- ------- ------- ------- OPERATIONS SUMMARY: Rental Income........... $131,103 $ 50,852 $ 76,186 $ 31,010 $14,721 $12,207 $10,101 Total Revenues.......... 133,196 52,354 78,418 32,779 15,817 13,314 10,856 General and Administrative Expenses............... 522 433 660 436 697 1,241 984 REIT Management Fee..... 9,443 4,619 7,073 2,711 793 -- -- Earnings from Operations(1).......... 33,004 14,289 23,191 9,037 2,078 1,969 989 Gain (loss) on Sale of Investments............ -- 2,302 2,302 (51) (611) 101 -- Preferred Share Distributions Paid..... 12,075 -- 1,341 -- -- -- -- Net Earnings Attributable to Common Shares................. 20,929 16,591 24,152 8,986 1,467 2,070 989 Common Share Distributions Paid(2).. $ 33,970 $ 20,019 $ 29,162 $ 13,059 $ 4,179 $ 4,259 $ 4,204 PER SHARE DATA: Net Earnings Attributable to Common Shares................. $ 0.46 $ 0.49 $ 0.66 $ 0.46 $ 0.21 $ 0.41 $ 0.20 Common Share Distributions Paid(2).. 0.75 0.615 0.82 0.70 0.64 0.84 0.83 Preferred Share Distributions Paid..... $ 1.3125 $ -- $ 0.1458 $ -- $ -- $ -- $ -- Weighted Average Common Shares Outstanding 45,490 33,950 36,549 19,435 7,123 5,071 5,065 OTHER DATA: Funds from Operations Attributable to Common Shares(3) $ 41,315 $ 24,579 $ 36,422 $ 15,268 $ 5,404 $ 4,335 $ 3,626 Net Cash Provided by Operating Activities... 66,747 27,636 49,275 20,252 6,092 1,647 4,533 Net Cash Used by Investing Activities... (307,156) (198,405) (529,093) (229,489) (33,553) (12,905) (11,797) Net Cash Provided by Financing Activities... $247,359 $220,808 $478,345 $185,130 $57,259 $ 9,941 $ 7,327
SEPTEMBER 30, DECEMBER 31, ------------- ------------------------------------------ 1994 1993 1992 1991 1990 1989 ------------- -------- -------- -------- ------- ------- FINANCIAL POSITION: Real Estate Owned, at cost................... $1,233,021 $872,610 $337,274 $117,572 $84,892 $70,117 Total Assets............ 1,244,537 890,301 342,235 141,020 81,544 69,278 Line of Credit.......... 53,500 51,500 54,802 101 8,522 10,416 Long Term Debt.......... 200,000 -- -- -- -- -- Mortgages Payable....... 96,200 48,872 30,824 35,772 32,599 15,634 Total Liabilities....... 386,913 135,284 94,186 38,707 44,138 29,682 Shareholders' Equity.... $ 857,624 $755,017 $248,049 $102,313 $37,406 $39,596 Number of Common Shares Outstanding............ 50,397 44,645 27,034 13,161 5,071 5,071
- -------- (1) Earnings from operations for the nine months ended September 30, 1994 and for both the nine months ended September 30, 1993 and the year ended December 31, 1993 reflect a $1.6 million and a $2.3 million provision, respectively, for possible losses relating to investments in non- multifamily properties. (2) A distribution of $0.25 per Common Share was declared by PTR's Trustees on December 28, 1993 and was paid on February 18, 1994 to shareholders of record as of February 4, 1994. (3) Funds from Operations means net income computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. PTR believes that Funds from Operations is helpful in understanding a property portfolio in that such calculation reflects cash flow from operating activities and the properties' ability to support interest payments and general operating expenses before the impact of certain activities, such as gains or losses from property sales and changes in accounts receivable and accounts payable. Funds from Operations should not be considered as an alternative to net earnings or any other GAAP measurement of performance as an indicator of PTR's operating performance or as an alternative to cash flows from operating, investing or financing activities as a measure of liquidity. S-11 RECENT OPERATING RESULTS The following tables set forth preliminary unaudited Total Revenues, Funds from Operations Attributable to Common Shares, Net Earnings Attributable to Common Shares, Net Earnings Attributable to Common Shares per Share, Weighted Average Common Shares Outstanding and Common Share Distributions Paid for the twelve months ended December 31, 1994 and 1993 for PTR.
YEAR ENDED DECEMBER 31, ---------------- 1994 1993 -------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Total Revenues................................................ $186,105 $78,418 Funds from Operations Attributable to Common Shares........... $ 58,208 $36,422 Net Earnings Attributable to Common Shares.................... $ 30,619 $24,152 Net Earnings Attributable to Common Shares per Share.......... $ 0.66 $ 0.66 Weighted Average Common Shares Outstanding.................... 46,734 36,549 Common Share Distributions Paid............................... $ 1.00 $ 0.82
SUMMARY PRO FORMA FINANCIAL DATA The following tables set forth certain unaudited pro forma condensed combined financial information for PTR after giving effect to (i) the Merger, (ii) certain operating multifamily properties subsequently acquired or to be acquired within 40 days of the date of this Prospectus Supplement by PTR and PACIFIC and (iii) the Offering (to the extent of $50 million for which a standby purchase commitment exists), as if these transactions had been consummated, with respect to statements of earnings data, at January 1, 1993, or, with respect to balance sheet data, as of September 30, 1994. The following tables present such information as if the Merger had been accounted for under the purchase method. The information presented is derived from, should be read in conjunction with, and is qualified in its entirety by reference to, the unaudited pro forma condensed combined financial data and the notes thereto and the separate historical financial statements and the notes thereto incorporated by reference herein. The unaudited pro forma condensed combined financial data have been included for comparative purposes only and do not purport to be indicative of the results of operations or financial position which actually would have been obtained if these transactions had been effected at the dates indicated or of the financial position or results of operations which may be obtained in the future.
NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 1994(1) 1993(1)(2) ------------- ------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATIONS SUMMARY: Rental Income....................................... $172,987 $202,972 Total Revenues...................................... 174,885 204,943 General and Administrative Expense.................. 579 585 REIT Management Fee................................. 12,319 13,559 Net Earnings from Operations(3)..................... 43,249 44,038 Net Earnings Attributable to Common Shares.......... 31,174 35,817 PER SHARE DATA: Net Earnings Attributable to Common Shares.......... $ 0.52 $ 0.63 Common Share Distributions(4)....................... 0.75 0.82 Weighted Average Common Shares Outstanding.......... 60,350 57,221 OTHER DATA: Funds from Operations Attributable to Common Shares(5).......................................... $ 57,261 $ 64,285
S-12
SEPTEMBER 30, 1994(1) ------------- FINANCIAL POSITION: Real Estate Owned, at cost........................... $1,494,520 Total Assets......................................... 1,499,120 Line of Credit....................................... 58,123 Long Term Debt....................................... 200,000 Mortgages Payable.................................... 155,638 Total Liabilities.................................... 452,896 Shareholders' Equity(6).............................. $1,046,224 Number of Common Shares Outstanding.................. 61,918
- -------- (1) The amounts presented herein have been restated to reflect the effects of properties acquired during 1993, 1994 and 1995 by PTR and PACIFIC, including two properties to be acquired within 40 days of the date of this Prospectus Supplement. (2) Reflects operations of PACIFIC from October 22, 1993 (the date of its inception). (3) PTR's earnings from operations for the nine months ended September 30, 1994 and for the year ended December 31, 1993 reflect a $1.6 million and a $2.3 million provision, respectively, for possible losses relating to investments in non-multifamily properties. (4) A distribution of $0.25 per Common Share was declared by PTR's Trustees on December 28, 1993 and was paid on February 18, 1994 to shareholders of record as of February 4, 1994. (5) Funds from Operations means net income computed in accordance with GAAP, excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and, in the case of PTR, amortization, and after adjustments for unconsolidated partnerships and joint ventures. PTR believes that Funds from Operations is helpful in understanding a property portfolio in that such calculation reflects cash flow from operating activities and the properties' ability to support interest payments and general operating expenses before the impact of certain activities, such as gains or losses from property sales and changes in accounts receivable and accounts payable. Funds from Operations should not be considered as an alternative to net earnings or any other GAAP measurement of performance as an indicator of PTR's or PACIFIC's operating performance or as an alternative to cash flows from operating, investing or financing activities as a measure of liquidity. (6) This calculation assumes the issuance of approximately 8,468,460 Common Shares, based on an Exchange Ratio of 0.611 Common Shares for each share of PACIFIC common stock outstanding at the effective time of the Merger. The actual number of Common Shares issuable in the Merger may vary in accordance with the terms of the Merger Agreement. S-13 PROPERTY TRUST OF AMERICA PTR's objective is to be the preeminent real estate operating company focusing on multifamily property in its target market. As a fully integrated operating company, through its experienced REIT Manager, PTR engages in development, acquisition, operation and long term ownership of multifamily properties. PTR currently owns and operates or is developing 47,814 multifamily units, on an adjusted pro forma basis. The aggregate adjusted pro forma investment cost, including planned renovations, of all of PTR's adjusted pro forma multifamily properties is $1.89 billion. This amount is comprised of the historical recorded investment in real estate at September 30, 1994 of $1.23 billion plus subsequent real estate acquisitions of $265.3 million, including $252.2 million being acquired in the Merger, planned renovation costs of $24.5 million and budgeted costs to complete development properties of $403.7 million, less investment in non-multifamily properties and land held for future development of $36.4 million. PTR has elected to be taxed as a REIT for federal income tax purposes. PTR seeks to achieve long term sustainable growth in cash flow and distributions through a commitment to fundamental real estate research, actively reviewing and reallocating assets to product types and submarkets with strong growth prospects, developing industry-leading multifamily product designed for the largest renter groups and making opportunistic acquisitions. See "Business--Strategy for Cash Flow and Distribution Growth." PTR has traditionally focused on multifamily assets in the Southwest. At its meeting on November 4, 1994, the Board expanded PTR's target market to include a six-state region of the western United States comprised of California, Idaho, Nevada, Oregon, Utah and Washington. The assets being acquired from PACIFIC in the Merger are located in some of these markets, which the REIT Manager believes have significant growth prospects. The REIT Manager believes that PTR's expanded target market presents attractive opportunities for long term increases in per share operating results because of its growing job market and population. PTR was formed in 1963 and is a real estate investment trust organized under the laws of Maryland. Its principal executive offices are located at 7777 Market Center Avenue, El Paso, Texas 79912, and its telephone number is (915) 877-3900. THE MERGER On December 6, 1994, PTR, PACIFIC and Security Capital Group entered into an Agreement and Plan of Merger (the "Merger Agreement") providing for the Merger of PACIFIC with and into PTR. At such time as the Merger becomes effective, each then outstanding share of PACIFIC common stock will be converted into the right to receive 0.611 Common Shares. No fractional Common Shares will be issued in the Merger, but holders of PACIFIC common stock will be entitled to receive a pro rata cash payment in lieu thereof. The Exchange Ratio was determined by dividing $10.00 (the value of a share of PACIFIC common stock as agreed upon between PTR and PACIFIC) by $16.375 (the closing sale price of the Common Shares on the NYSE on December 6, 1994, which is the same as the Subscription Price). The price of $16.375 per share on which the Exchange Ratio was based exceeded the 30-day trailing average of the closing price of the Common Shares on the NYSE (the Common Share price increased following the announcement of the proposed Merger but such increase cannot be attributed solely to the Merger). The $10.00 value of a share of PACIFIC common stock agreed upon between PTR and PACIFIC essentially represents PACIFIC's cost of its properties and is the same price at which PACIFIC sold shares of its common stock in all of its prior private offerings. PTR and PACIFIC have scheduled special meetings of their respective shareholders to be held on March 23, 1995 to vote on the Merger. The affirmative vote of the holders of at least two-thirds of the outstanding Common Shares and at least two-thirds of the outstanding PACIFIC common stock is required to approve the Merger. Security Capital Group, which owned 31.9% of the Common Shares on February 10, 1995, has agreed to vote all such Common Shares in favor of the Merger. Security Capital Group has also agreed to S-14 vote its 97.6% ownership of PACIFIC common stock in favor of the Merger, thereby assuring approval of the Merger by PACIFIC's shareholders. The Merger is subject to the satisfaction or waiver of certain other conditions, and the Merger Agreement may be terminated at any time prior to the closing in certain circumstances. The closing of the Merger is a condition to the closing of the Offering. See "The Offering--Condition to Closing." PTR will be the surviving entity in the Merger and its name will be changed to "Security Capital Pacific Trust." The current trustees and executive officers of PTR will continue in office after the Merger. PTR does not currently anticipate any changes in its investment strategies or policies or its distribution policy in connection with the Merger other than the resulting expansion of its existing target market. After completion of the Merger, the REIT Manager will change its name to "Security Capital Pacific Incorporated." For a more detailed description of the terms of the Merger, refer to the Joint Proxy/Information Statement and Prospectus sent to shareholders under separate cover. USE OF PROCEEDS The net proceeds to PTR from the sale of the Common Shares offered hereby are estimated to be approximately $291.2 million (assuming the sale of all 17,800,000 Common Shares in the Offering). The net proceeds will be used for the development and acquisition of additional multifamily properties, as suitable opportunities arise, for the repayment of indebtedness under PTR's revolving line of credit and for working capital purposes. See "Business-- Strategic Accomplishments." Pending investment in multifamily properties, PTR will invest any remaining net proceeds in short term money market instruments. At February 10, 1995, approximately $125 million of borrowings were outstanding under PTR's $275 million unsecured revolving line of credit with Texas Commerce Bank National Association, as agent bank ("TCB"), which matures in August 1996 and bears interest at the greater of prime (9.0%) or the federal funds rate plus 0.5% (6.4531%) or, at PTR's option, LIBOR plus 1.75% (7.875% based upon a one month contract). The interest rate may increase to LIBOR plus 2.0% if PTR's senior unsecured debt were downgraded by Standard & Poor's Corporation. PTR is currently negotiating an increase in this line to $350 million. In addition, pursuant to the terms of the Merger, PTR is obligated to pay the outstanding balance of PACIFIC's revolving line of credit prior to consummation of the Merger. At February 10, 1995, approximately $45.3 million of borrowings were outstanding under PACIFIC's revolving line of credit. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources." S-15 CAPITALIZATION The following table sets forth the book capitalization of PTR at September 30, 1994, and as adjusted to give effect to (i) the Merger, (ii) certain operating multifamily properties subsequently acquired or to be acquired within 40 days of the date of this Prospectus Supplement by PTR and PACIFIC and (iii) the Offering (to the extent of $50 million for which a standby purchase commitment exists and excluding expenses of the Offering). The table should be read in conjunction with the financial statements of PTR incorporated by reference herein.
SEPTEMBER 30, 1994 ---------------------- AS HISTORICAL ADJUSTED ---------- ---------- (AMOUNTS IN THOUSANDS EXCEPT SHARE DATA) Mortgages payable............................... $ 96,200 $ 155,638 ---------- ---------- Long Term Unsecured Debt (1): 6 7/8% Notes due 2008......................... 100,000 100,000 7 1/2% Notes due 2014......................... 100,000 100,000 ---------- ---------- 200,000 200,000 ---------- ---------- Shareholders' Equity: Shares of Beneficial Interest, $1.00 par value; 150,000,000 shares authorized; Series A Preferred Shares (liquidation preference $25.00 per share); 9,200,000 shares issued.............................. 230,000 230,000 Common Shares; 50,561,666 shares issued, 62,083,561 shares issued as adjusted....... 50,562 62,083 Additional paid-in capital.................. 621,787 798,866 Distributions in excess of net earnings......... (42,796) (42,796) Less Common Shares held in treasury, at cost-- 164,478........................................ (1,929) (1,929) ---------- ---------- Total Shareholders' Equity (2).................. 857,624 1,046,224 ---------- ---------- Total Capitalization (2).................. $1,153,824 $1,401,862 ========== ==========
- -------- (1) The Notes (as hereinafter defined) have an average life to maturity of 14.25 years and an average effective interest cost, inclusive of offering discounts, issuance costs and an interest rate protection agreement, of 7.37% per annum. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources-- Financing Activities." (2) If the Offering is fully subscribed, Total Shareholders' Equity and Total Capitalization, as adjusted, will be $1,287,700,000 and $1,643,338,000, respectively. S-16 PRICE RANGE OF COMMON SHARES AND DISTRIBUTIONS The Common Shares are listed on the NYSE under the symbol "PTR." The following table sets forth the high and low sale prices of the Common Shares as reported in the New York Stock Exchange Composite Tape by CompuServe, and distributions declared, for the periods indicated.
HIGH LOW DISTRIBUTIONS ------- ------- ------------- 1992 First Quarter............................. $12 1/8 $ 9 3/4 $0.175 Second Quarter............................ 11 3/4 10 0.175 Third Quarter............................. 12 3/4 10 7/8 0.175 Fourth Quarter............................ 14 1/2 11 3/4 0.175(1) 1993 First Quarter............................. 20 14 0.205 Second Quarter............................ 19 5/8 17 1/8 0.205 Third Quarter............................. 21 5/8 18 3/8 0.205 Fourth Quarter............................ 21 1/2 17 5/8 0.205 1994 First Quarter............................. 21 5/8 18 1/4 0.250(2) Second Quarter............................ 20 1/8 17 3/4 0.250 Third Quarter............................. 18 7/8 17 5/8 0.250 Fourth Quarter............................ 18 3/8 15 1/2 0.250 1995 First Quarter (through February 10)....... 18 3/8 16 3/4 0.2875(3)
- -------- (1) Declared in the third quarter of 1992 for payment in the fourth quarter of 1992. (2) Declared in the fourth quarter of 1993 for payment in the first quarter of 1994. (3) Declared in the fourth quarter of 1994 and payable February 13, 1995 to holders of record on February 2, 1995. See the cover page of this Prospectus Supplement for the price of a Common Share as of a recent date. On February 10, 1995, there were approximately 50,456,038 Common Shares outstanding, which were held of record by approximately 3,500 shareholders. PTR, in order to qualify as a REIT, is required to make distributions (other than capital gain distributions) to its shareholders in amounts at least equal to (i) the sum of (A) 95% of its "REIT taxable income" (computed without regard to the dividends paid deduction and its net capital gain) and (B) 95% of the net income (after tax), if any, from foreclosure property, minus (ii) the sum of certain items of noncash income. PTR's distribution strategy is to distribute what it believes is a conservative percentage of its cash flow, permitting PTR to retain funds for capital improvements and other investments while funding its distributions. PTR has paid 75 consecutive quarterly cash distributions. PTR announces the following year's projected annual distribution level after the Board's annual budget review and approval in December of each year. At its December 6, 1994 board meeting, the Board announced a projected increase in the annual distribution level from $1.00 to $1.15 per Common Share. The payment of distributions is subject to the discretion of the Board and is dependent upon the financial condition and operating results of PTR. For federal income tax purposes, distributions may consist of ordinary income, capital gains, non-taxable return of capital or a combination thereof. Distributions that exceed PTR's current and accumulated earnings and profits (calculated for tax purposes) constitute a return of capital rather than a dividend and reduce the shareholder's basis in his or her Common Shares. To the extent that a distribution exceeds both current and accumulated earnings and profits and the shareholder's basis in his or her Common Shares, it will generally S-17 be treated as gain from the sale or exchange of that shareholder's Common Shares. PTR annually notifies shareholders of the taxability of distributions paid during the preceding year. The following summarizes the taxability of distributions paid in 1994, 1993 and 1992 in respect of the Common Shares. The estimated taxability of the 1994 distributions is based on preliminary, unaudited financial information.
YEAR ENDED DECEMBER 31, ----------------------- 1994 1993 1992 1991 ----- ----- ----- ----- Per Common Share: Ordinary Income................................. $0.68 $0.65 $0.67 $0.25 Capital Gains................................... -- 0.11 0.03 -- Return of Capital............................... 0.32 0.06 -- 0.39 ----- ----- ----- ----- Total......................................... $1.00 $0.82 $0.70 $0.64 ===== ===== ===== =====
No portion of the 1992 distributions constituted return of capital, due to certain acquisition and sale transactions consummated in 1992 that increased reported earnings and profits for 1992. Under federal income tax rules, PTR's earnings and profits are first allocated to its Preferred Shares (as hereinafter defined), which increases the portion of the Common Shares distribution classified as return of capital. PTR's tax returns have not been examined by the Internal Revenue Service and, therefore, the taxability of distributions is subject to change. The portion of distributions characterized as return of capital results primarily from the excess of distributions over earnings, primarily because non-cash charges such as depreciation are added to earnings in determining distribution levels. Depreciation has increased as new properties have been added. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations." DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN PTR has a Dividend Reinvestment and Share Purchase Plan (the "Plan") that allows holders of Common Shares to acquire additional Common Shares by automatically reinvesting distributions. Common Shares are acquired pursuant to the Plan at a price equal to 98% of the market price of such Common Shares, without payment of any brokerage commission or service charge. The Plan also allows shareholders to purchase a limited number of additional Common Shares at 98% of the market price of such Common Shares, by making optional cash payments, without payment of any brokerage commission or service charge. Shareholders who do not participate in the Plan continue to receive distributions as declared. BUSINESS STRATEGY FOR CASH FLOW AND DISTRIBUTION GROWTH PTR seeks to achieve long term sustainable growth in cash flow and distributions through a commitment to fundamental real estate research, actively reviewing and reallocating assets to product types and submarkets with strong growth prospects, developing industry-leading multifamily product designed for the largest renter groups and making opportunistic acquisitions. Commitment to Fundamental Real Estate Research. PTR utilizes its affiliate, Security Capital (U.S.) Investment Research Incorporated ("Security Capital (U.S.) Investment Research"), to conduct comprehensive evaluations of its target markets on a submarket-by-submarket basis to identify those submarkets and product types that present above average prospects for cash flow growth. These evaluations, combined with PTR's experience in development and as one of the largest multifamily property owners in its target market, enable PTR to identify the submarkets with the highest projected job and population growth and to determine the product type to develop, acquire and own in each submarket to appeal to the local resident base. S-18 Asset Review and Reallocation. PTR develops and acquires properties with a view to effective long term operation and ownership. REIT Management's asset managers actively review PTR's asset base. These reviews generate operating and capital plans and, with guidance from Security Capital (U.S.) Investment Research, identify submarkets and product types that PTR believes represent better long term growth opportunities. In evaluating each multifamily community owned or being considered for development or acquisition, the REIT Manager focuses on those components that it believes provide the greatest opportunity for consistent rental increases and high occupancies over the long term. Submarket locations and demographics, unit size, density and amenities of each community are important contributors to long term income growth. Based upon PTR's market research and in an effort to optimize its portfolio allocation, PTR may from time to time seek to dispose of assets that in management's view do not meet PTR's long term investment criteria and redeploy the proceeds therefrom, preferably through like-kind exchanges, into assets that it believes provide better long term growth opportunities. Development. On an adjusted pro forma basis, PTR has completed $208.9 million of developments, has $204.6 million of developments under construction and owns land for which it is planning $296.7 million of developments. PTR has engaged in multifamily development since 1970. PTR has developed from the ground up, or has under development, 37.6%, based on cost, of its multifamily portfolio as of December 31, 1994, on an adjusted pro forma basis. Historically, actual operating results on properties developed by PTR have generally exceeded projected operating results and the results available from acquisitions. PTR's development strategy is to focus on developing state of the art product in attractive submarkets to meet renter preferences and demographic trends. PTR believes that developing communities designed for long term appeal to the largest portion of the renter base will allow PTR to achieve more consistent rental increases and higher occupancies over the long term and, thereby, realize cash flow growth. PTR minimizes development risks by having zoning, site planning, construction budgets and similar risks resolved or assumed by third parties prior to PTR's commitment. PTR also targets development for markets with high occupancy rates where population and job growth trends indicate increasing future demand. PTR cannot eliminate all development risk but believes that the opportunities to better control product and realize higher returns from development properties compensate for the retained risk. Development opportunities also permit PTR to incorporate into multifamily communities proprietary technologies and designs aimed at enhancing long term rental growth while reducing ongoing maintenance costs. PTR has had the opportunity to evaluate and refine its multifamily product through its long history of development. PTR, unlike a typical merchant builder, intends to own long term the properties that it develops. Hence, PTR focuses on the quality of construction, materials and design with a view towards minimizing long term operation and maintenance costs. REIT Management believes that development of multifamily units from the ground up that are built for long term ownership and are designed to meet broad renter preferences and demographic trends will provide a greater source of long term cash flow growth in the future. Therefore, while land prices are favorable, PTR has acquired and will acquire, on an unleveraged basis, prudent amounts of zoned land for multifamily development in the foreseeable future. For purposes of the property charts and other information in this Prospectus Supplement, land held for these prospective developments, which comprises less than 1% of assets, based on cost, is not aggregated with the multifamily properties. Opportunistic Acquisitions. Based on research provided by Security Capital (U.S.) Investment Research, PTR selectively takes advantage of market opportunities to acquire undeveloped land and multifamily properties at attractive prices. PTR's experienced acquisition and due diligence professionals have selectively acquired $897.1 million of multifamily properties, including planned renovations, and land for the development of $626.2 million of multifamily properties, including budgeted development costs, since January 1, 1992. PTR believes that effective execution of the strategy described above will contribute to long term growth in cash flow and distributions. S-19 MULTIFAMILY PROPERTIES PTR categorizes operating multifamily properties (which include all properties not under development) as either "stabilized" or "pre-stabilized." The term "stabilized" means that renovation, repositioning, new management and new marketing programs (or development and marketing in the case of newly- developed properties) have been completed and in effect for a sufficient period of time (but in no case longer than 12 months or, in the case of properties requiring major rehabilitation, as long as 18 months) to achieve 93% occupancy at market rents. Prior to being "stabilized," a property is considered "pre- stabilized." Due to its active development and acquisition programs, 76.1% of PTR's adjusted pro forma operating multifamily properties, based on cost, were classified by PTR as stabilized as of December 31, 1994, with another 5.4% expected to be stabilized by March 31, 1995. At December 31, 1994, PTR's adjusted pro forma operating multifamily properties were 95.1% leased. PTR's adjusted pro forma multifamily properties are primarily garden style, two-story multifamily dwellings that range in size from 57 units to 896 units. Resident leases are generally for six-month to twelve-month terms and require security deposits. PTR owns 25 properties that will contain affordable corporate efficiency units to be rented for terms generally shorter than six months. As of December 31, 1994, nine of these properties were under development, including one in the leasing stage, and five were in planning. PTR expects to develop more of these properties. PTR believes that its multifamily communities generally occupy strategic locations in growing submarkets. Excluding corporate efficiency properties, the average unit size for adjusted pro forma properties operating, under development and in planning is 834 square feet, with 53.5% of the units having two or more bedrooms. Many units have washer/dryer connections and walk-in closets, which REIT Management believes substantially enhance marketability. PTR improves attractiveness by investing in extensive landscaping when developing or repositioning multifamily units. Other features frequently included in PTR's multifamily communities are swimming pools, playgrounds, volleyball courts, fitness centers and community rooms. PTR expects to continue to focus a portion of its future development and acquisition efforts on moderate income multifamily housing, which includes moderately priced apartments and efficiency units priced to appeal to the largest sector of the renter market, based on income, age and family size. NON-MULTIFAMILY PROPERTIES PTR focuses its investment and development activities on multifamily properties. It will continue to aggressively manage non-multifamily properties in order to maximize cash flow, and periodic sales of non-multifamily properties may occur as opportunities arise. Hotel. PTR owns a 338-room, five-story hotel building located in the Fisherman's Wharf area of San Francisco, California. The hotel building is leased to Holiday Inns of America, Inc. The lease expires in 2018. Holiday Inns has recently renovated portions of this building at its own expense. The effective annual rent is 25% of the hotel's gross room revenues and 5% of gross food and beverage sales. Holiday Inns operates this building jointly with its 243-room building across the street, and PTR's rental income is based on total revenues for both buildings, prorated based on the number of rooms in PTR's building. Average occupancy for the one-year period ended December 31, 1994 was 82.8%, at an average room rate of $89.77. Office/Industrial. PTR owns one office building through a 40% owned joint venture, and owns three industrial properties. PTR's office building is located in the Dallas, Texas metropolitan area. At December 31, 1994, this office building was 96.1% leased. PTR's industrial properties are warehouse/showroom facilities located in Texas and California, ranging in size from 37,200 square feet to 130,000 square feet and were 100% leased at December 31, 1994. S-20 INVESTMENT ANALYSIS Prospective property investments are analyzed pursuant to several underwriting criteria, including purchase price, competition and other market factors, and prospects for growth in income and market value. PTR's development or acquisition decision is based upon the expected contribution of the property to cash flow growth and increases in shareholder distributions. The expected economic contribution is based on an estimate of all cash revenues from leases and other revenue sources, minus expenses incurred in operating the property (generally, real estate taxes, insurance, maintenance, personnel costs and utility charges, but excluding depreciation, debt service and amortization of loan costs). Residual value and the effects of debt financing are not considered in the calculation. For operating properties that PTR has acquired, stabilized operations generally have been achieved six to 12 months after acquisition. For properties that PTR has developed, stabilized operations generally have been achieved 12 to 18 months after construction commenced. "Stabilized" means that capital improvements, repositioning, new management and new marketing programs (or development and marketing, in the case of newly developed properties) have been completed and in effect for a sufficient period of time (but in no case longer than 12 months or, in the case of properties requiring major rehabilitation, as long as 18 months) to achieve stabilized occupancy (typically 93%) at market rents. At December 31, 1994, PTR's stabilized adjusted pro forma properties were 95.9% leased. The economic contribution of properties cannot be predicted with certainty, and no assurance can be given that developed or acquired properties will contribute to increased cash flow and shareholder distributions, or that developments and acquisitions will be available on comparable terms in the future. STRATEGIC ACCOMPLISHMENTS Developments and Acquisitions The REIT Manager's development and acquisition specialists are each assigned to a specific metropolitan area within PTR's target market where they are present each week to review available properties and meet with potential sellers. PTR has selectively developed and acquired multifamily properties where land costs, demographic trends and market trends indicate a high likelihood of achieving expected operating results. This system has resulted in multifamily property developments and acquisitions on favorable terms. As of December 31, 1994, on an adjusted pro forma basis, the multifamily portfolio consisted of the following:
NUMBER OF UNITS TOTAL COST(1) -------- -------------- Properties Acquired.............................. 31,807 $1,179,908,094 Developments Completed........................... 5,536 208,896,807 Developments Under Construction.................. 4,526 204,584,256 Developments in Planning......................... 5,945 296,734,107 ------ -------------- Totals....................................... 47,814 $1,890,123,264 ====== ==============
- -------- (1) Represents cost, including planned renovations, for properties owned at December 31, 1994. Represents acquisition cost, including planned renovations, for 5,703 multifamily units and land for the development of 840 multifamily units being acquired in the Merger. Represents budgeted development cost, which includes the cost of land, fees, permits, payments to contractors, architectural and engineering fees and interest and property taxes to be capitalized during the construction period, for properties under development. Does not include land held for future development, which is less than 1% of assets based on cost. At February 10, 1995, PTR and PACIFIC on a combined basis had contingent contracts or letters of intent, subject to final due diligence, to acquire land for the near term development of 4,973 multifamily units with an aggregate estimated development cost of $223.9 million. At the same date, PTR and PACIFIC on a S-21 combined basis also had contingent contracts or letters of intent, subject to final due diligence, for the acquisition of 1,782 additional multifamily units with an aggregate investment cost of $75.6 million, including planned renovations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." Asset Management The REIT Manager believes that a successful REIT must actively manage its properties in order to increase cash flow and enhance the long term economic performance of the properties. Prior to retaining the REIT Manager, PTR's properties were managed by several different property managers for whom PTR was one of many customers. In order to gain more control over multifamily operations, in August 1991, the REIT Manager retained SCG Realty Services Incorporated ("SCG Realty Services"), a property management firm, to replace other firms as the property manager for most of PTR's multifamily properties. At December 31, 1994, SCG Realty Services managed 81.4% of PTR's adjusted pro forma operating multifamily units, with the balance in various stages of transition to SCG Realty Services' management. SCG Realty Services has over 955 employees dedicated to the management of PTR's properties. SCG Realty Services emphasizes locally-based management of PTR's properties and has opened ten local offices to serve PTR's target market. This network improves SCG Realty Services' ability to respond to changes in local market conditions and resident needs. The REIT Manager believes that SCG Realty Services has developed superior operating procedures, financial controls, information systems and training programs, which it expects to positively affect rental returns and occupancy rates. In addition, incentive compensation programs have been implemented for on-site property managers to further improve the performance of the properties. SCG Realty Services also assists the REIT Manager in performing due diligence on properties being evaluated for acquisition and in preparing property operating budgets. The REIT Manager has taken an active role in overseeing SCG Realty Services' management of PTR's multifamily properties. Security Capital Group owns 100% of SCG Realty Services' voting stock. The REIT Manager has assembled a staff of asset managers to provide better oversight and long term direction. Capital Markets REIT Management believes that a successful REIT must have the ability to access the equity and debt markets efficiently, expeditiously and inexpensively. PTR's capital markets ability permits it to capitalize on the development and acquisition opportunities that PTR believes exist in its target market. In order to maximize this function and enhance relationships with major institutional sources of capital, Security Capital Group has formed a registered broker-dealer subsidiary, Security Capital Markets Group Incorporated ("Capital Markets Group"). Capital Markets Group's services are included in the REIT Manager's fee and do not result in a separate charge to PTR. Capital Markets Group and the REIT Manager have arranged innovative public offering structures, underwritten offerings and substantial credit facilities for PTR, including: In June 1991, PTR raised $21.4 million of net proceeds from a rights offering to holders of Common Shares; In November 1991, PTR raised $45.6 million of net proceeds from a public offering of Common Shares to shareholders and institutions; In April 1992, PTR raised $69.8 million of net proceeds from a public offering of Common Shares that was 71% underwritten by a syndicate of investment banks; In October 1992, PTR raised $73.4 million of net proceeds from a rights offering to holders of Common Shares and new institutional investors and a sale of shelf-registered Common Shares; In February and March 1993, PTR raised $129.5 million of net proceeds from a public offering of Common Shares that was 82% underwritten by a syndicate of investment banks; S-22 In September 1993, PTR raised $165.3 million of net proceeds from a rights offering to holders of Common Shares and a sale of shelf-registered Common Shares to institutional investors; In November 1993, PTR raised $219.7 million of net proceeds from an underwritten public offering of Cumulative Convertible Series A Preferred Shares of Beneficial Interest, $1.00 par value per share ("Preferred Shares"); In February 1994, PTR raised $196.4 million of net proceeds from an underwritten public offering of fully amortizing, long term senior debt securities (see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources-- Financing Activities"); and In August 1994, PTR raised $101.8 million of net proceeds from a rights offering to holders of Common Shares. For the Common Share offerings, PTR's underwriting commissions (all of which were paid to unaffiliated underwriters) have been $8.8 million, representing 1.42% of gross proceeds of $618.5 million, compared to an average commission cost of 5.49% for all public equity REIT offerings of common shares, other than initial public offerings, from January 1, 1991 through December 31, 1994, or $25.2 million less than the industry average commission on the same amount of gross proceeds. When the REIT Manager was retained, PTR had $14.3 million of lines of credit available to it for developments and acquisitions. The REIT Manager has arranged increases in PTR's borrowing capacity as follows: In October 1991, the REIT Manager negotiated a $20 million line of credit for PTR from TCB at an interest rate of prime plus 1/2 of 1%; In August 1992, with the REIT Manager's assistance in the syndication process, TCB arranged with a group of banks to increase this line of credit to $72 million at an interest rate of prime plus 1/4 of 1%; In February 1993, the REIT Manager negotiated and assisted in syndicating an increase in the line of credit to $125 million; In November 1993, the REIT Manager negotiated and assisted in syndicating an extension of this line of credit from August 1994 to August 1995 and an increase to $200 million, with a reduction in interest rate to prime or, at PTR's option, LIBOR plus 2%; In August 1994, the REIT Manager negotiated and assisted in converting the line of credit to an unsecured facility; In October 1994, the REIT Manager negotiated and assisted in syndicating an extension of the line of credit from August 1995 to August 1996 and an increase to $275 million, with a reduction in interest rate to the greater of prime or the federal funds rate plus 0.5% or, at PTR's option, LIBOR plus 1.75% to 2.0% (varying based upon the rating of PTR's senior unsecured debt by Standard & Poor's Corporation); and In January 1995, the REIT Manager commenced negotiations to increase the line of credit to $350 million and achieve pricing concessions. PTR's increased borrowing capacity enables it to develop and acquire multifamily properties prior to equity and long term debt offerings and to eliminate or minimize the amount of cash it must invest in short term investments at low yields. PTR expects to fund additional growth in 1995 through this Offering and, if needed, further issuances of unsecured long term, fixed rate amortizing debt securities similar to the Notes issued in February 1994. PTR's strategy includes maintaining a conservative ratio of long term debt to total book capitalization (27% at December 31, 1994, on a pro forma basis after giving effect to the Merger and certain operating multifamily properties subsequently acquired or to be acquired within 40 days of the date of this Prospectus supplement by PTR and PACIFIC and not including the effects of the Offering). PTR believes its current S-23 conservative leverage provides considerable flexibility to prudently utilize long term debt as a financing tool in the future. During 1995, PTR intends to prudently increase its capital base with debt, while keeping long term debt below 50% of total book capitalization. PTR also intends to limit the sum of total long term and outstanding revolving credit debt to less than 50% of the sum of book capitalization and outstanding revolving credit debt (34% at December 31, 1994, on a pro forma basis after giving effect to the Merger and certain operating multifamily properties subsequently acquired or to be acquired within 40 days of the date of this Prospectus Supplement by PTR and PACIFIC and not including the effects of the Offering). REIT MANAGEMENT GENERAL The REIT Manager provides both strategic and day-to-day management for PTR, including research, investment analysis, acquisition and development services, asset management, capital markets services, disposition of assets and legal and accounting services, all of which are included in the REIT Management fee. Hence, PTR depends upon the quality of the management provided by the REIT Manager. As of February 10, 1995, 95 professionals were employed by the REIT Manager and its specialized service affiliates (including professionals employed by PACIFIC's REIT manager). The REIT Manager also provides office and other facilities for PTR's needs. The REIT Manager believes that the quality of management should be assessed in light of the following factors: Management Depth/Succession. Management should have several senior executives with the leadership, operational, investment and financial skills and experience to oversee the entire operations of the REIT. The REIT Manager believes that several of its senior officers could serve as the principal executive officer and continue PTR's performance. See "--Directors, Trustees and Officers of PTR, the REIT Manager and Relevant Affiliates." Strategic Vision. Management should have the strategic vision to determine an investment focus that provides favorable initial yields and growth prospects. The REIT Manager demonstrated its strategic vision by focusing PTR on multifamily properties in target markets where demographic and supply factors have permitted high occupancies at increasing rents. This favorable environment has been enhanced by financing constraints for competitors, which have permitted investments by PTR on attractive terms. See "Business--Strategic Accomplishments--Developments and Acquisitions" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Research Capability. Management should have the means for researching markets to determine appropriate investment opportunities. PTR divides its target market into numerous submarkets for analysis purposes. The REIT Manager and its affiliate, Security Capital (U.S.) Investment Research, have several professionals devoting substantial time to research, on a submarket-by- submarket basis, who are closely supervised by the Managing Directors of the REIT Manager; hence, the REIT Manager's research has provided guidance for PTR's strategic focus and investment program. Investment Committee Process. Investment committees should provide discipline and guidance to the investment activities of the REIT in order to achieve its investment goals. The members of the REIT Manager's Investment Committee have a combined 69 years of experience in the real estate industry. See "--Directors, Trustees and Officers of PTR, the REIT Manager and Relevant Affiliates." The Investment Committee receives detailed written analyses and research, in a standardized format, from the REIT Manager's development and acquisition personnel and evaluates all prospective investments pursuant to uniform underwriting criteria prior to submission of investment recommendations to the Board. The quality of the REIT Manager's Investment Committee process is evident from the ability of PTR to achieve its investment goals, generally realizing its projected initial returns and growth from multifamily investments. Development/Redevelopment Capability. Development returns generally are higher than acquisition returns. PTR can better control property quality of developed properties than acquired properties. Hence, S-24 development is an important source of cash flow growth even during competitive acquisition markets. By internally developing projects and redeveloping well located operating properties, management can capture for the REIT the value that normally escapes through sales premiums paid to successful developers. The REIT Manager's personnel have substantial development and redevelopment experience, as described in "--Directors, Trustees and Officers of PTR, the REIT Manager and Relevant Affiliates." The REIT Manager has 33 full-time development professionals (which include seven due diligence professionals). The REIT Manager has under construction 4,526 multifamily units for PTR, with a total budgeted cost of $204.6 million, and has in the final planning stages, on an adjusted pro forma basis, an estimated 5,945 multifamily units with a total budgeted cost of $296.7 million. The REIT Manager has engaged in substantial development on behalf of PTR at attractive yields that have exceeded projections. See "Business--Multifamily Properties" and "--Strategic Accomplishments--Developments and Acquisitions." Acquisitions Capability/Due Diligence Process. Management should have experienced senior personnel dedicated to acquiring investments and performing intelligent and thorough due diligence. The REIT Manager has 12 full-time acquisition and due diligence professionals (including the seven due diligence professionals who also focus on development) and has developed uniform systems and procedures for due diligence. As described under "Business--Strategic Accomplishments--Developments and Acquisitions," the REIT Manager's acquisition and due diligence personnel have screened and selected a large volume of successful investments. Capital Markets Capability. Management must be able effectively to raise equity and debt capital for the REIT in order for the REIT to achieve growth through investment. As set forth under "Business--Strategic Accomplishments-- Capital Markets," the REIT Manager has successfully arranged funding for PTR's investment program. Operating Capability. Management can substantially improve cash flow by actively and effectively managing assets. As described under "Business-- Strategy for Cash Flow and Distribution Growth" and "--Strategic Accomplishments--Asset Management," the REIT Manager and its affiliates have devoted substantial personnel and financial resources to control and effectively administer the management of PTR's multifamily assets. Communications/Shareholder Relations Capability. A REIT's success in capital markets and asset acquisition activities can be enhanced by management's ability to effectively communicate the REIT's strategy and performance to investors, sellers of property and the financial media. The REIT Manager believes that PTR has now generally established an excellent reputation among these constituencies through its performance and the REIT Manager's communications ability. The REIT Manager provides at its expense full-time personnel who prepare informational materials for and conduct periodic meetings with shareholders, the investment community and analysts. Successfully combining the foregoing attributes can establish for a REIT the ability to increase cash flow and the market valuation of the REIT's portfolio. PTR's cash flow and market valuation have both increased under the REIT Manager's administration. DIRECTORS, TRUSTEES AND OFFICERS OF PTR, THE REIT MANAGER AND RELEVANT AFFILIATES Trustees of PTR and Directors and Senior Officers of the REIT Manager. Members of the REIT Manager's Investment Committee are designated by an asterisk. *C. RONALD BLANKENSHIP--45--Chairman of PTR; since March 1991, Chairman of the REIT Manager and Managing Director of Security Capital Group; from June 1988 to March 1991, Regional Partner, Trammell Crow Residential, Chicago, Illinois (multifamily real estate development and property management); prior thereto, Executive Vice President and Chief Financial Officer, The Mischer Corporation, S-25 Houston, Texas (multibusiness holding company with investments primarily in real estate). While with Trammell Crow Residential, Mr. Blankenship was on the Management Board for Trammell Crow Residential Services, a property management company that managed approximately 90,000 multifamily units nationwide, and was chief executive officer of Trammell Crow Residential Services-North, which managed 10,000 multifamily units in the Midwest and Northeast. In his various positions prior to his affiliation with the REIT Manager, Mr. Blankenship supervised the development of approximately 9,300 multifamily units. Mr. Blankenship supervises the overall operations of PTR and the REIT Manager. JAMES A. CARDWELL--62--Trustee of PTR; Chairman and Chief Executive Officer, Petro PSC, L.P., El Paso, Texas (operation of full-service truck stopping centers); Director, El Paso Electric Company. JOHN T. KELLEY, III--54--Trustee of PTR; advisory Trustee of Security Capital Industrial Trust, Aurora, Colorado (ownership and development of industrial parks in the western, midwestern and southeastern United States), an affiliate of the REIT Manager; from 1987 to 1991, Chairman of the Board, Kelley-Harris Company, Inc., El Paso, Texas (real estate investment company); from 1968 to 1987, Managing Director, LaSalle Partners Limited, Chicago, Illinois (corporate real estate services). Mr. Kelley is also a Director of Security Capital Group and Texas Commerce Bank El Paso, National Association. CALVIN K. KESSLER--63--Trustee of PTR; President and principal shareholder, Kessler Industries, Inc., El Paso, Texas (manufacturer of furniture and aluminum castings). WILLIAM G. MYERS--66--Trustee of PTR; Trustee of Security Capital Industrial Trust; Chief Executive Officer of Ojai Ranch and Investment Company, Inc., Santa Barbara, California, which he founded in 1963 (agri-business and other investments); Director, Idetek, Inc., Sunnyvale, California (food diagnostic start-up company). JAMES H. POLK, III--52--Trustee of PTR; Managing Director of Capital Markets Group since August 1992. Mr. Polk has been affiliated with the REIT Manager since March 1991; prior thereto, he was President of PTR for sixteen years. He is registered with the National Association of Securities Dealers, Inc. and is a past President of the National Association of Real Estate Investment Trusts, Inc. JOHN C. SCHWEITZER--50--Trustee of PTR; Managing Partner, Continental Properties Company, Austin, Texas (real estate and investments). PATRICK R. WHELAN--37--Director of the REIT Manager since February 1995; President of SCG Realty Services since October 1994, where he is responsible for overall property management; from February 1994 to October 1994, Senior Vice President and Co-Manager of Multifamily Acquisitions of Security Capital Group; from April 1991 to January 1994, Senior Vice President of Trammell Crow Company (development, acquisition and management of commercial properties) where he most recently had regional responsibilities for asset management, leasing and acquisitions/dispositions of a $300 million portfolio of properties. *DAVID C. DRESSLER, JR.--41--Managing Director of SCG Multifamily Development Incorporated ("SCG Multifamily Development") since January 1994, PTR since May 1993 and the REIT Manager since April 1992; from 1984 to May 1991, Regional Partner, Trammell Crow Residential, Boston, Massachusetts (multifamily real estate development and property management). While with Trammell Crow Residential, Mr. Dressler was on the Management Board for Trammell Crow Residential Services (managing 90,000 multifamily units nationwide) and was co- founder and a board member of Trammell Crow Residential Services-North, which managed 10,000 multifamily units in the Midwest and Northeast. In his various positions prior to his affiliation with the REIT Manager, Mr. Dressler supervised the development of approximately 6,500 multifamily units. Mr. Dressler supervises the development activities of the REIT Manager on behalf of PTR. CONSTANCE B. MOORE--39--Managing Director of PTR since May 1994, Director and Managing Director of the REIT Manager since March 1994, Senior Vice President of Security Capital Group from March 1993 to June 1994; from January 1990 to December 1992, President and Director of Kingswood Realty Advisors, Inc., investment advisor to ICM Property Investors, a NYSE listed REIT, and from March S-26 1991 to December 1992, President and Director of ICM Property Investors; from April 1989 to December 1989, consultant to Bedford Properties, a real estate development and management firm where Ms. Moore was responsible for acquiring a controlling interest in ICM Property Investors and Kingswood for Bedford; from January 1983 to November 1988, Senior Vice President and Director of Consolidated Capital Equities Corporation where she was in charge of portfolio and asset management for Consolidated Capital's $3.0 billion diversified debt and equity portfolio. *R. SCOT SELLERS--37--Managing Director of PTR since September 1994; from May 1994 to September 1994, Senior Vice President of PTR; Senior Vice President of SCG Multifamily Development since January 1994 where he has overall responsibility for PTR's development program; Director and Managing Director of the REIT Manager since September 1994; from April 1993 to May 1994, Senior Vice President of Security Capital Group, where he was responsible for portfolio acquisitions from institutional sources; from September 1981 to April 1993, Mr. Sellers was an operating partner and Vice President of Lincoln Property Company (LPC) (development, acquisition and management of multifamily properties) where he was responsible, among other things, for the development of more than 6,500 apartment units in a number of different markets. JOSHUA M. BROWN--43--Senior Vice President of PTR and the REIT Manager since September 1994, where he has overall responsibility for multifamily acquisitions and dispositions; from January 1991 to June 1994, President of Prentiss Properties Realty Advisors, Inc., where he directed the firm's tax- exempt institutional advisory business; from June 1983 to December 1990 Vice President of Fayez Sarofim & Co., where he worked with the firm's real estate advisory group, Sarofim Realty Advisors; prior thereto, Vice President, Director of Investment Administration for CB Institutional Realty Advisors in Los Angeles. *JOHN H. GARDNER, JR.--41--Director of the REIT Manager since February 1995; Senior Vice President of PTR and the REIT Manager since September 1994, where he has overall responsibility for multifamily asset management; from December 1984 to January 1993, Vice President of Asset Management and through September 1994, Managing Director and Principal of Copley Real Estate Advisors in Boston, where he had overall responsibility for the portfolio management function for eight accounts valued at $7.5 billion; prior thereto, Real Estate Manager of Equity Real Estate at John Hancock Companies. Other Officers. ARIEL AMIR--35--Vice President of Security Capital Group since June 1994; from September 1985 to April 1994, an attorney with the law firm of Weil, Gotshal & Manges, New York, New York where he practiced securities and corporate law for eight years. Mr. Amir provides securities offerings and corporate acquisition services to PTR. ANTHONY R. ARNEST--44--Vice President of PTR and the REIT Manager since November 1994, where he is the head of the due diligence group; from December 1990 to September 1994, Mr. Arnest maintained a private law practice specializing in real estate, development and business and financial consulting; from March 1990 to November 1990, Director of Infill Acquisitions with Lewis Homes of California; from January 1986 to March 1990, Vice President, Director of Acquisitions and Forward Planning/Due Diligence with Wesco Development; prior thereto, House Counsel for Torino Development. MARK G. CONROE--37--Vice President of PTR and the REIT Manager since January 1995, where he has overall responsibility for the multifamily corporate affordable housing development program, Homestead Village properties; from February 1994 to January 1995, Vice President of Security Capital Atlantic Incorporated, where he was a member of the development group; from October 1991 to February 1994, President of Classic Communities, Inc., a home building company; prior thereto, General Partner and Executive Vice President of the Mozart Development Company, a real estate development company. PETER M. GRIMM--52--Vice President of SCG Multifamily Development since January 1994 and Vice President of PTR, of which he has been an officer since 1975. S-27 JAMES M. HARLEY--42--Vice President of PTR and the REIT Manager since June 1993, where he provides asset management services for PTR's Homestead Village properties; from 1988 to July 1993, Regional Vice President--Acquisitions and Development of Holiday Inn Worldwide; prior thereto, Senior Vice President-- Hotel Division of Webb Companies, a Lexington, Kentucky based real estate development company. NELSON L. HENRY--59--Vice President of PTR since December 1994, where he is a member of the development group with responsibilities for production and project construction planning; from January 1983 to September 1993, Construction Vice President for Lincoln Property Company N.C. Inc. where he was responsible for the coordination of development in Colorado and California; prior thereto, President of Royal Investment Corporation, a regional multifamily and single-family developer. JAY S. JACOBSON--41--Vice President of SCG Multifamily Development since January 1994 and PTR since July 1993; from 1988 to June 1993, Vice President-- Residential Development for Michael Swerdlow Companies, Inc. and Hollywood Inc., South Florida real estate development/management companies under common control, where he was responsible for the planning and development of over 2,200 multifamily units as well as other development projects; from 1981 to 1988, General Partner and Chief Executive Officer of Meridian Land Company, a Denver-based real estate development company. WILLIAM KELL--38--Vice President of the REIT Manager since June 1991 and Vice President of PTR since October 1993, where he has overall responsibility for multifamily accounting and financial reporting; from 1987 to 1991, Vice President and Treasurer, Bohannon Development Corporation, El Paso, Texas (multifamily development); prior thereto, Manager with KPMG Peat Marwick in its El Paso, Texas office. STEVEN R. LEBLANC--37--Vice President of SCG Multifamily Development since January 1994 and PTR since March 1992; from 1984 to 1992, Operating Partner and Senior Vice President, Lincoln Property Company, Dallas, Texas (multifamily real estate owners and operators). B. THOMAS MILLER, JR.--33--Vice President of Security Capital (U.S.) Investment Research since January 1994 where he conducts strategic market analysis for the REIT Manager and affiliated companies; from December 1985 to December 1993, Senior Manager with the Arthur Andersen Real Estate Services Group in Washington D.C.; prior thereto, an Associate with Kenneth Leventhal & Co. in Dallas. GLENN E. MORGAN--34--Vice President of Security Capital (U.S.) Investment Research since January 1994, where he is responsible for market research; from December 1992 to December 1993, Mr. Morgan developed actuarial and econometric models for American Credit Indemnity, a subsidiary of Dun & Bradstreet. JOHN R. PATTERSON--43--Vice President of PTR and the REIT Manager since January 1995, where he has overall responsibility for operations and asset management of the corporate affordable housing product, Homestead Village properties; from July 1993 to January 1995, a Senior Vice President in business development at NationsBank in Atlanta; prior thereto, Division President and Partner of Trammell Crow Residential Services. THOMAS L. POE--37--Vice President of the REIT Manager since April 1992, Vice President of PTR since June 1994 and Controller of PTR since October 1994, where he is responsible for accounting and financial reporting; from 1988 to 1992, Vice President of Finance for the Mischer Corporation, Houston, Texas (real estate investments). HAROLD D. RILEY--58--Vice President of the REIT Manager since March 1991, where he provides accounting and financial reporting services; Vice President of PTR since 1974. PAUL E. SZUREK--34--Secretary and General Counsel of the REIT Manager and PTR; Senior Vice President, and from April 1991 to June 1993, Vice President, Secretary and General Counsel of Security Capital Group; prior thereto, a shareholder and attorney with the law firm of Kemp, Smith, Duncan & Hammond, El Paso, Texas, where he practiced securities law for seven years. Mr. Szurek provides securities offering and corporate acquisition services to PTR and oversees the provision of legal services to PTR. S-28 MARK N. TENNISON--34--Vice President of SCG Multifamily Development since January 1994 and PTR since July 1992; from May 1991 to July 1992, Executive Vice President/Chief Operating Officer of Metro Concap, Inc., an operator of over 7,100 multifamily units; from January 1991 to May 1991, attorney for the Federal Deposit Insurance Corporation; and from August 1987 to December 1990, Partner with Trammell Crow Residential (development, construction and management of multifamily properties). In addition, an affiliate of the REIT Manager employs a number of accounting professionals who provide centralized accounting services for PTR. Officers of PACIFIC's REIT Manager. Each of the following persons is expected to become an officer of PTR and the REIT Manager upon consummation of the Merger: MARK J. CHAPMAN--37--Vice President of PACIFIC since November 1994, where he is a member of the asset management group; from July 1989 to November 1994, Vice President at Copley Real Estate Advisors, Inc. where he directed asset management for Copley assets located from Connecticut to Virginia, valued in excess of $1.5 billion; prior thereto, Director of Asset Management for Liberty Real Estate with responsibility for assets east of the Mississippi River, including multifamily, office and retail properties. RICHARD W. DICKASON--38--Vice President of PACIFIC since December 1993, where he is a member of the development group; from July 1992 to September 1993, President at J.M. Peters Company/Capital Pacific Homes, where he acquired property for the development of single-family homes and apartments; from May 1980 to January 1992, Partner and Vice President of Lincoln Property Company N.C. Inc. where he was responsible for the acquisition, development, construction and management of a sizable multifamily residential portfolio in the California marketplace; prior thereto, Mr. Dickason represented private investors in the development of condominiums, townhouses, shopping centers and single-family homes throughout California. JOSEPH G. DI CRISTINA--35--Vice President of PACIFIC since August 1994, where he is a member of the development group; prior thereto, Vice President of Forward Planning at Robertson Homes. W. GEOFFREY JEWETT--46--Vice President of PACIFIC since November 1994, where he is a member of the asset management group; from May 1994 to November 1994, Vice President of Security Capital (Atlantic) Incorporated where he had overall responsibility for the acquisitions group; from September 1993 to April 1994, Mr. Jewett was involved with and then had overall responsibility for acquisitions for PACIFIC; prior thereto, Vice President of LaSalle Partners Limited in its acquisitions and property finance group where he provided investment property sale, financing and acquisition services on behalf of corporate and institutional clients throughout the western United States. JOHN JORDANO, III--38--Vice President of PACIFIC since August 1994, where he is a member of the development group; from January 1992 to July 1994, Senior Vice President of Prospect Partners where he was responsible for identifying and advising individual and corporate clients on financial institution and Resolution Trust Corporation REO apartment acquisition and investment opportunities in the western United States; prior thereto, Partner with Trammell Crow Residential Company where he established the Sacramento office and was responsible for the development of multifamily projects. GREGG A. PLOUFF--39--Vice President of PACIFIC since July 1994, and a member of the acquisitions group since November 1993; prior to November 1993, Mr. Plouff served in an acquisitions consulting capacity for PTR; prior thereto, Mr. Plouff was with Trammell Crow Residential, most recently as a partner, where he was involved with residential development in the Dallas, Chicago and Southern California markets. K. BRUCE WEBSTER--38--Senior Vice President of PACIFIC since November 1994, where he has responsibility for PACIFIC's portfolio performance and asset management; from June 1993 to November 1994, Vice President of Asset Management at Irvine Apartment Communities with responsibility for property operations, portfolio performance and long-term positioning; prior thereto, President and Chief Operating S-29 Officer of Trammell Crow Residential Services North where he had responsibility and accountability for management company operations and property performance in the midwestern and northeastern United States. DAVID B. WOODWARD--28--Vice President of PACIFIC since November 1993, where he has overall responsibility for asset management services; from June 1993 to October 1993, Mr. Woodward was with PTR where he was a member of the asset management group; prior thereto, asset manager with USF&G's Real Estate Division. Shareholder Relations and Capital Markets. The following persons provide shareholder relations and capital markets services to PTR: DOUGLAS K. BALL--54--Senior Vice President of PTR and the REIT Manager since June 1993, President since May 1994 and Senior Vice President from August 1993 to May 1994 of Capital Markets Group, where he participates in capital markets and institutional investor relations; from August 1990 to June 1993, Senior Vice President of Koll-Rubloff in its Strategic Management Division, where he provided strategic real estate consulting and transaction services to diverse corporate clients throughout the United States; from August 1988 to July 1990, engaged in private investment activities; from April 1981 to July 1988, Managing Director of LaSalle Partners Limited, where he served as Director of the Services Division. Prior thereto, Mr. Ball was National Director of Insurance Industry Marketing at IBM Corporation. Mr. Ball is registered with the National Association of Securities Dealers, Inc. K. SCOTT CANON--32--Vice President of Capital Markets Group since August 1993 and a member of Capital Markets Group since March 1992; from September 1991 to March 1992, a personal account director for Chase Manhattan Investment Services; from August 1987 to September 1991, a member of private client services for Goldman, Sachs & Co. Mr. Canon is registered with the National Association of Securities Dealers, Inc. JEFFREY A. COZAD--30--Senior Vice President of Capital Markets Group since December 1994, Vice President from September 1992 to November 1994 (in its New York office since June 1993) and a member of Capital Markets Group since March 1992; from August 1991 to August 1992, a member of Security Capital Group; in June 1991, Mr. Cozad obtained a M.B.A. from The University of Chicago; prior thereto, an analyst with LaSalle Partners Limited, where he provided corporate real estate services to major institutions from 1986 to 1989. Mr. Cozad is registered with the National Association of Securities Dealers, Inc. GERARD DE GUNZBURG--47--Vice President of Capital Markets Group in its New York office since January 1993; from June 1988 to December 1992, a consultant to American and European companies; prior thereto, Director and Partner of Lincoln Property Company, Europe, where he arranged real estate financing from 1976 to 1988. Mr. de Gunzburg is registered with the National Association of Securities Dealers, Inc. ALISON C. HEFELE--35--Vice President of Capital Markets Group since February 1994, where she provides capital markets services for affiliates of the firm; from January 1990 to February 1994, Vice President with Prudential Real Estate Investors (strategic planning and business development for institutional real estate investment management services); from September 1985 to January 1990, a management consultant with McKinsey & Company; prior thereto, a financial analyst with Morgan Stanley Realty Inc. Ms. Hefele is registered with the National Association of Securities Dealers, Inc. JAMES H. POLK, III--51--See "--Directors, Trustees and Officers of PTR, the REIT Manager and Relevant Affiliates--Trustees of PTR and Directors and Senior Officers of the REIT Manager." S-30 POTENTIAL CONFLICTS OF INTEREST The REIT Manager is philosophically opposed to engaging in, and has agreed in writing not to engage in, any principal transaction with PTR, including but not limited to purchases, sales or leases of property or borrowing or lending of funds, except for certain transactions approved by a majority of the independent Trustees not otherwise interested in such transaction as being fair and reasonable to PTR and on terms and conditions not less favorable to PTR than those available from unaffiliated third parties. Additionally, PTR's Restated Declaration of Trust prohibits PTR from selling property to a sponsor, the REIT Manager, a trustee or affiliates thereof. PTR's Restated Declaration of Trust further provides that PTR shall not enter into any other principal transaction (including without limitation the making of loans, borrowing money or investing in joint ventures) with a sponsor, the REIT Manager, a trustee or affiliates thereof, except for transactions approved by a majority of the independent Trustees not otherwise interested in such transaction as being fair and reasonable to PTR and on terms and conditions not less favorable to PTR than those available from unaffiliated third parties. The sole activity of the REIT Manager is advising PTR. The REIT Management Agreement (as hereinafter defined) permits affiliates of the REIT Manager to provide property management and other services to PTR for compensation. The fees charged for such services must be comparable to fees that would be charged by unaffiliated, qualified third parties. Any property management fees are reviewed annually by the Board and must be approved by a majority of the independent Trustees. See "Business--Strategic Accomplishments--Asset Management." With limited exceptions, officers and employees of the REIT Manager spend all their time on PTR's affairs. In the future, certain officers or employees may be transferred to or from other affiliates of the REIT Manager, consistent with REIT Management's plan for management depth and orderly succession. With a view to resolving potential conflicts of interest and protecting the interests of PTR's shareholders against such possible conflicts, PTR's Restated Declaration of Trust requires that a majority of the Board be unaffiliated with the REIT Manager or its affiliates. PTR's independent Trustees are required to monitor the performance of the REIT Manager. All affiliate transactions must be approved by a majority of independent Trustees. PTR's independent Trustees are compensated in Common Shares. PROPERTIES PORTFOLIO COMPOSITION The following table indicates the composition of PTR's properties, on an adjusted pro forma basis at December 31, 1994:
ADJUSTED PRO FORMA PERCENTAGE OF NUMBER OF ASSETS BASED PROPERTIES ON COST(1) ---------- ------------- Multifamily...................................... 182 98% Office/Industrial................................ 4 1 Hotel............................................ 1 1 --- --- Total........................................ 187 100% === ===
- -------- (1) Represents cost, including planned renovations and budgeted development cost, for properties owned at December 31, 1994. Represents acquisition cost, including planned renovations, for 5,703 multifamily units and land for the development of 840 multifamily units being acquired in the Merger. Budgeted development cost includes the cost of land, fees, permits, payments to contractors, architectural and engineering fees and interest and property taxes to be capitalized during the construction period, for properties under development. Does not include land held for future development, which is less than 1% of assets based on cost. S-31 GEOGRAPHIC DISTRIBUTION PTR's adjusted pro forma multifamily and non-multifamily properties are located in 22 metropolitan areas in 11 states. The table below demonstrates the geographic distribution of PTR's equity real estate investments, on an adjusted pro forma basis at December 31, 1994:
ADJUSTED PRO FORMA PERCENTAGE OF NUMBER OF ASSETS BASED PROPERTIES ON COST(1) ---------- ------------- Albuquerque, New Mexico.......................... 12 6% Austin, Texas.................................... 15 9 Dallas, Texas.................................... 21 7 Denver, Colorado................................. 10 6 El Paso, Texas................................... 13 5 Houston, Texas................................... 22 12 Las Cruces, New Mexico........................... 2 * Las Vegas, Nevada................................ 5 6 Oklahoma City, Oklahoma.......................... 2 1 Omaha, Nebraska.................................. 1 1 Ontario, California.............................. 1 * Phoenix, Arizona................................. 20 15 Portland, Oregon................................. 8 5 Reno, Nevada..................................... 1 1 Salt Lake City, Utah............................. 4 2 San Antonio, Texas............................... 28 12 San Diego, California............................ 2 1 San Francisco, California........................ 1 1 Santa Fe, New Mexico............................. 4 2 Seattle, Washington.............................. 3 2 Tucson, Arizona.................................. 11 6 Tulsa, Oklahoma.................................. 1 * --- --- Total........................................ 187 100% === ===
- -------- *Less than 1%. (1) Represents cost, including planned renovations and budgeted development cost, for properties owned at December 31, 1994. Represents acquisition cost, including planned renovations, for 5,703 multifamily units and land for the development of 840 multifamily units being acquired in the Merger. Budgeted development cost includes the cost of land, fees, permits, payments to contractors, architectural and engineering fees and interest and property taxes to be capitalized during the construction period, for properties under development. Does not include land held for future development, which is less than 1% of assets based on cost. S-32 SELECTED HISTORICAL FINANCIAL DATA The following table sets forth selected historical financial data for PTR and should be read in conjunction with the financial statements incorporated by reference herein (amounts in thousands, except ratio information and per share data).
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, -------------------- -------------------------------------------------- 1994 1993 1993 1992 1991 1990 1989 --------- --------- --------- --------- -------- -------- -------- OPERATIONS SUMMARY: Rental Income........... $ 131,103 $ 50,852 $ 76,186 $ 31,010 $ 14,721 $ 12,207 $ 10,101 Total Revenues.......... 133,196 52,354 78,418 32,779 15,817 13,314 10,856 General and Administrative Expenses............... 522 433 660 436 697 1,241 984 REIT Management Fee..... 9,443 4,619 7,073 2,711 793 -- -- Earnings from Operations(1).......... 33,004 14,289 23,191 9,037 2,078 1,969 989 Gain (loss) on Sale of Investments............ -- 2,302 2,302 (51) (611) 101 -- Preferred Share Distributions Paid..... 12,075 -- 1,341 -- -- -- -- Net Earnings Attributable to Common Shares................. 20,929 16,591 24,152 8,986 1,467 2,070 989 Common Share Distributions Paid(2).. $ 33,970 $ 20,019 $ 29,162 $ 13,059 $ 4,179 $ 4,259 $ 4,204 PER SHARE DATA: Net Earnings Attributable to Common Shares................. $ 0.46 $ 0.49 $ 0.66 $ 0.46 $ 0.21 $ 0.41 $ 0.20 Common Share Distributions Paid(2).. 0.75 0.615 0.82 0.70 0.64 0.84 0.83 Preferred Share Distributions Paid..... $ 1.3125 $ -- $ 0.1458 $ -- $ -- $ -- $ -- Weighted Average Common Shares Outstanding..... 45,490 33,950 36,549 19,435 7,123 5,071 5,065 OTHER DATA: Funds from Operations Attributable to Common Shares(3).............. $ 41,315 $ 24,579 $ 36,422 $ 15,268 $ 5,404 $ 4,335 $ 3,626 Net Cash Provided by Operating Activities... 66,747 27,636 49,275 20,252 6,092 1,647 4,533 Net Cash Used by Investing Activities... (307,156) (198,405) (529,093) (229,489) (33,553) (12,905) (11,797) Net Cash Provided by Financing Activities... $ 247,359 $ 220,808 $ 478,345 $ 185,130 $ 57,259 $ 9,941 $ 7,327
DECEMBER 31, SEPTEMBER 30, ------------------------------------------ 1994 1993 1992 1991 1990 1989 ------------- -------- -------- -------- ------- ------- FINANCIAL POSITION: Real Estate Owned, at cost................... $1,233,021 $872,610 $337,274 $117,572 $84,892 $70,117 Total Assets............ 1,244,537 890,301 342,235 141,020 81,544 69,278 Line of Credit.......... 53,500 51,500 54,802 101 8,522 10,416 Long Term Debt.......... 200,000 -- -- -- -- -- Mortgages Payable....... 96,200 48,872 30,824 35,772 32,599 15,634 Total Liabilities....... 386,913 135,284 94,186 38,707 44,138 29,682 Shareholders' Equity.... $ 857,624 $755,017 $248,049 $102,313 $37,406 $39,596 Number of Common Shares Outstanding............ 50,397 44,645 27,034 13,161 5,071 5,071
- -------- (1) Earnings from operations for the nine months ended September 30, 1994 and for both the nine months ended September 30, 1993 and the year ended December 31, 1993 reflect a $1.6 million and a $2.3 million provision, respectively, for possible losses relating to investments in non- multifamily properties. (2) A distribution of $0.25 per Common Share was declared by PTR's Trustees on December 28, 1993 and was paid on February 18, 1994 to shareholders of record as of February 4, 1994. (3) Funds from Operations means net income computed in accordance with GAAP, excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. PTR believes that Funds from Operations is helpful in understanding a property portfolio in that such calculation reflects cash flow from operating activities and the properties' ability to support interest payments and general operating expenses before the impact of certain activities, such as gains or losses from property sales and changes in accounts receivable and accounts payable. Funds from Operations should not be considered as an alternative to net earnings or any other GAAP measurement of performance as an indicator of PTR's operating performance or as an alternative to cash flows from operating, investing or financing activities as a measure of liquidity. S-33 RECENT OPERATING RESULTS The following tables set forth preliminary unaudited Total Revenues, Funds from Operations Attributable to Common Shares, Net Earnings Attributable to Common Shares, Net Earnings Attributable to Common Shares per Share, Weighted Average Common Shares Outstanding and Common Share Distributions Paid for the twelve months ended December 31, 1994 and 1993 for PTR.
YEAR ENDED DECEMBER 31, ---------------- 1994 1993 -------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Total Revenues........................................... $186,105 $78,418 Funds from Operations Attributable to Common Shares...... $ 58,208 $36,422 Net Earnings Attributable to Common Shares............... $ 30,619 $24,152 Net Earnings Attributable to Common Shares per Share..... $ 0.66 $ 0.66 Weighted Average Common Shares Outstanding............... 46,734 36,549 Common Share Distributions Paid.......................... $ 1.00 $ 0.82
SELECTED PRO FORMA FINANCIAL DATA The following tables set forth certain unaudited pro forma condensed combined financial information for PTR after giving effect to (i) the Merger, (ii) certain operating multifamily properties subsequently acquired or to be acquired within 40 days of the date of this Prospectus Supplement by PTR and PACIFIC and (iii) the Offering (to the extent of $50 million for which a standby purchase commitment exists), as if these transactions had been consummated, with respect to statements of earnings data, at January 1, 1993, or, with respect to balance sheet data, as of September 30, 1994. The following tables present such information as if the Merger had been accounted for under the purchase method. The information presented is derived from, should be read in conjunction with, and is qualified in its entirety by reference to, the unaudited pro forma condensed combined financial data and the notes thereto and the separate historical financial statements and the notes thereto incorporated by reference herein. The unaudited pro forma condensed combined financial data have been included for comparative purposes only and do not purport to be indicative of the results of operations or financial position which actually would have been obtained if these transactions had been effected at the dates indicated or of the financial position or results of operations which may be obtained in the future.
NINE MONTHS YEAR ENDED ENDED SEPTEMBER 30, DECEMBER 31, 1994(1) 1993(1)(2) ------------- ------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATIONS SUMMARY: Rental Income....................................... $172,987 $202,972 Total Revenues...................................... 174,885 204,943 General and Administrative Expense.................. 579 585 REIT Management Fee................................. 12,319 13,559 Net Earnings from Operations(3)..................... 43,249 44,038 Net Earnings Attributable to Common Shares.......... 31,174 35,817 PER SHARE DATA: Net Earnings Attributable to Common Shares.......... $ 0.52 $ 0.63 Common Share Distributions(4)....................... 0.75 0.82 Weighted Average Common Shares Outstanding.......... 60,350 57,221 OTHER DATA: Funds from Operations Attributable to Common Shares(5).......................................... $ 57,261 $ 64,285
S-34
SEPTEMBER 30, 1994(1) ------------- FINANCIAL POSITION: Real Estate Owned, at cost....................... $1,494,520 Total Assets..................................... 1,499,120 Line of Credit................................... 58,123 Long Term Debt................................... 200,000 Mortgages Payable................................ 155,638 Total Liabilities................................ 452,896 Shareholders' Equity(6).......................... $1,046,224 Number of Common Shares Outstanding.............. 61,918
- -------- (1) The amounts presented herein have been restated to reflect the effects of properties acquired during 1993, 1994 and 1995, by PTR and PACIFIC, including two properties to be acquired within 40 days of the date of this Prospectus Supplement. (2) Reflects operations of PACIFIC from October 22, 1993 (the date of its inception). (3) PTR's earnings from operations for the nine months ended September 30, 1994 and for the year ended December 31, 1993 reflect a $1.6 million and a $2.3 million provision, respectively, for possible losses relating to investments in non-multifamily properties. (4) A distribution of $0.25 per Common Share was declared by PTR's Trustees on December 28, 1993 and was paid on February 18, 1994 to shareholders of record as of February 4, 1994. (5) Funds from Operations means net income computed in accordance with GAAP, excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and, in the case of PTR, amortization, and after adjustments for unconsolidated partnerships and joint ventures. PTR believes that Funds from Operations is helpful in understanding a property portfolio in that such calculation reflects cash flow from operating activities and the properties' ability to support interest payments and general operating expenses before the impact of certain activities, such as gains or losses from property sales and changes in accounts receivable and accounts payable. Funds from Operations should not be considered as an alternative to net earnings or any other GAAP measurement of performance as an indicator of PTR's or PACIFIC's operating performance or as an alternative to cash flows from operating, investing or financing activities as a measure of liquidity. (6) This calculation assumes the issuance of approximately 8,468,460 Common Shares, based on an Exchange Ratio of 0.611 Common Shares for each share of PACIFIC common stock outstanding at the effective time of the Merger. The actual number of Common Shares issuable in the Merger may vary in accordance with the terms of the Merger Agreement. S-35 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW PTR's operating results depend primarily upon income from multifamily properties, which is substantially influenced by (i) the demand for and supply of multifamily units in PTR's target market and submarkets, (ii) operating expense levels and (iii) the pace and price at which PTR can develop and acquire additional multifamily properties. Capital and credit market conditions that affect PTR's cost of equity and debt capital also influence operating results. PTR's target market and submarkets have benefitted substantially in recent periods from demographic trends (including job and population growth) that increase the demand for multifamily units while financing constraints (specifically, reduced availability of development capital) have limited new construction to levels substantially below construction activity prior to 1986. Consequently, rental rates for multifamily units have increased more than the inflation rate for the last two years and are expected to continue experiencing such increases for the next twelve months. Expense levels also influence operating results, and rental expenses (other than real estate taxes) for multifamily properties have generally increased at approximately the same rate as rents for the past year and are expected to increase at a comparable rate for the next twelve months. REIT Management believes that development of multifamily properties from the ground up that are built for long term ownership and are designed to meet broad renter preferences and demographic trends will provide a greater source of long term cash flow growth in the future. Therefore, while land prices are favorable, PTR has acquired and will acquire, on an unleveraged basis, prudent amounts of zoned land for multifamily development in the foreseeable future. The REIT Manager believes PTR's ability to compete is significantly enhanced relative to other companies because of the REIT Manager's depth of development and acquisition personnel and presence in local markets combined with PTR's access to investment capital. RESULTS OF OPERATIONS Interim Period Comparison During the nine months ended September 30, 1994, PTR acquired 17 multifamily properties aggregating 6,203 units for a total purchase price, including planned renovations, of approximately $252.1 million and completed development of 10 multifamily properties aggregating 2,378 units with a completed cost of $109.2 million. At September 30, 1994, PTR had 3,629 multifamily units under construction with a budgeted completed cost of $148.7 million and had in the final planning stages an estimated 5,327 multifamily units with an aggregate budgeted completed cost of $264.3 million. During the nine months ended September 30, 1993, PTR acquired 17 multifamily properties aggregating 4,709 units for a total purchase price, including planned renovations, of approximately $146.6 million and completed development of 3 multifamily properties aggregating 732 units with a completed cost of $30.4 million. At September 30, 1993, PTR had 3,127 multifamily units under construction with a budgeted completed cost of $137.9 million. The percentage of PTR's total rental income generated by multifamily properties was 98.13% and 91.43% for the nine months ended September 30, 1994 and 1993, respectively. This percentage will continue to increase throughout 1995 due to past and ongoing multifamily property developments and acquisitions and the periodic sale of non-multifamily properties. Projected 1995 property level earnings before interest, taxes, depreciation and amortization ("EBITDA") for all operating multifamily properties owned by PTR as of December 31, 1994, on an adjusted pro forma basis not including the effects of the Offering, is 10.3% of PTR's aggregate cost for these properties. EBITDA does not represent and should not be substituted for net earnings as defined by GAAP and is not indicative of cash flows from operations or that cash flows are sufficient to fund all cash needs. Aggregate cost for the properties includes the purchase price, closing costs and budgeted capital improvements and marketing costs prior to stabilization. Projected EBITDA is based S-36 on current lease rates for stabilized properties and current market rates for properties being stabilized and on anticipated operating expenses. No assurance can be given that projected levels of EBITDA will be achieved by these properties or that future developments and acquisitions will achieve the same level of EBITDA relative to PTR's investment basis. Property Operations Including the newly acquired and developed assets, rental income increased $80.3 million (157.8%) for the nine months ended September 30, 1994 over 1993, partially offset by higher rental expenses which increased by $36.4 million (179.7%) and depreciation expense, which increased $10.6 million (156.5%) for the nine months ended September 30, 1994 over 1993. These increases are due to operating multifamily acquisitions and multifamily developments placed in service and to rental rate increases. For operating multifamily properties, which comprise 97% of PTR's total operating properties based on cost at September 30, 1994, rental expenses were 43.8% and 42.4% of rental revenues during the nine months ended September 30, 1994 and 1993, respectively. Multifamily Properties Fully Operating Throughout Both Periods For the 29 multifamily properties that were fully operating throughout both the nine months ended September 30, 1994 and 1993, property level EBITDA as a percentage of PTR's aggregate investment in these properties increased to 11.1% in 1994 from 10.6% in 1993. EBITDA does not represent and should not be substituted for net earnings as defined by GAAP and is not indicative of cash flows from operations or that cash flows are sufficient to fund all cash needs. This increase in return on investment, which is a function of rental rate growth, occupancy levels, expense rate growth and capital expenditure levels, is attributable primarily to growth in rental rates. This increase in return on investment was achieved at the same time that PTR increased its investment in these properties by $2.1 million as a result of renovation and other capital expenditures. The 7.4% increase in rental income (the majority resulting from a 6.81% rental rate increase) for such properties for the nine months ended September 30, 1994 as compared to the same period in 1993 was offset by increases in rental expenses, primarily due to real estate taxes and turnover expenses. Interest Income Interest income for the nine months ended September 30, 1994 increased $591,000 (39.3%) over 1993, primarily resulting from the addition of four purchase money notes aggregating $12.4 million received in 1993 in conjunction with non-multifamily property sales. Interest Expense Interest expense increased $10.5 million (297.3%) for the nine months ended September 30, 1994 as compared to 1993. The increase is primarily attributable to interest expense of $9.3 million resulting from the issuance of $200 million of long term notes in February 1994, as more fully discussed under "--Liquidity and Capital Resources--Financing Activities." Mortgage interest expense increased $2.3 million (115.1%) for the nine months ended September 30, 1994 as compared to 1993 as a result of the addition of six mortgages aggregating $56.8 million during the nine month period ended September 30, 1994 and three mortgages aggregating $27.0 million during 1993 that were assumed or given in connection with the acquisition of multifamily properties. Line of credit interest expense increased $1.6 million (52.4%) for the nine months ended September 30, 1994 as compared to 1993 resulting primarily from the amortization of additional loan costs (commitment fees, title policies and legal expenses) relating to PTR's revolving credit facility. Average borrowings on the line of credit were approximately $54.9 million (with an average interest rate of 7.24%) during the nine months ended September 30, 1994, as compared to average borrowings of $40.4 million (with an average interest rate of 6.30%) during 1993. S-37 The increases in interest expense were offset by an increase of $2.7 million (178.6%) in capitalized interest. The increase in capitalized interest is attributable to increased multifamily development activity for the nine months ended September 30, 1994 as compared to 1993. General and Administrative Expense and REIT Management Fee The REIT Management fee paid by PTR fluctuates with the level of PTR's pre- REIT Management fee cash flow, as defined in the REIT Management Agreement, and therefore increased by $4.8 million (104.4%) during the nine months ended September 30, 1994 as compared to 1993 because cash flow increased substantially. See "--REIT Management Agreement." With the issuance of $200 million of amortizing long term debt as more fully described under "--Liquidity and Capital Resources--Financing Activities," the REIT Management fee will effectively decline in proportion to PTR's earnings from operations because actual or assumed regularly scheduled principal and interest payments, as defined in such agreement, associated with the long term debt will be deducted from the cash flow amount on which the REIT Management fee is based. Property Dispositions and Provision for Possible Loss PTR develops and acquires properties with a view to effective long term operation and ownership. Based upon PTR's market research and in an effort to optimize its portfolio allocation, PTR may from time to time seek to dispose of assets that in management's view do not meet PTR's long term investment criteria and redeploy the proceeds therefrom, preferably through like-kind exchanges, into assets that it believes provide better long term growth opportunities. PTR is a minority partner with a 40% interest in a partnership that owns and operates an office building near Dallas, Texas. During the first quarter of 1994, the partnership adopted a strategy of disposing of the property rather than continuing to hold the property as a long term investment. As a result, the managing partner evaluated the building for net realizable value, which resulted in a provision for possible loss of $4 million. PTR's share of the loss provision is $1.6 million as reflected in the September 30, 1994 statement of earnings. PTR's net carrying value after the provision is $2.85 million. This provision has no impact on cash flow from operating activities nor does PTR have any financial obligation to the partnership. PTR focuses its investment and development activities on multifamily properties. PTR will continue to aggressively manage non-multifamily properties in order to maximize cash flow, and dispositions of such non-multifamily properties may occur as opportunities arise. Properties are periodically evaluated for net realizable value and provisions for possible losses are made if required. Preferred Share Distributions In November of 1993, PTR issued $230 million of Preferred Shares at $25 per share that are entitled to receive an annual distribution of $1.75 per share (7.0% annual distribution rate), which amounted to $12.075 million for the nine months ended September 30, 1994. The Preferred Share distributions do not reduce the amount PTR has budgeted for Common Share distributions but do increase the percentage of the Common Share distribution that constitutes a non-taxable return of capital. 1993 COMPARED TO 1992 During 1993, PTR acquired 53 multifamily properties aggregating 13,772 units for a total purchase price, including planned renovations, of approximately $453.7 million, most of which was invested in the fourth quarter of 1993. In addition, PTR completed development of three multifamily properties aggregating 732 units in 1993. During 1992, PTR acquired 20 multifamily properties aggregating 5,512 units for a total purchase price, including planned renovations, of approximately $183.0 million, most of which was invested after April 30, 1992. In addition, two multifamily properties aggregating 354 units then under development S-38 were completed in 1992. In addition, rental rates from multifamily assets that were stabilized (see "Business--Investment Analysis") during the fourth quarter of 1992 and throughout 1993 increased 6.98%. The percentage of PTR's total rental income generated by multifamily properties was 93.4% in 1993 and 76.3% in 1992. This percentage will continue to increase in future periods due to multifamily properties acquired in 1993 and 1994 as discussed above and the sale of non-multifamily properties as discussed below. During the period prior to a property being stabilized (see "Business-- Investment Analysis"), the REIT Manager's asset managers and the property managers begin implementing expense controls, reconfigure the resident mix, supervise renovations and implement a strategy to increase rental income. The full benefits of these changes are not reflected until after the properties are stabilized. As of December 31, 1993, 47% of the operating multifamily portfolio was stabilized as compared to 59% at December 31, 1992. Per unit rental expenses were 42.33% of per unit rental revenues during 1993, compared to 42.08% in 1992. Including the newly acquired and developed assets, net earnings increased $16.5 million (184%) for 1993 over 1992. The increased net earnings related primarily to property revenue increases of $45.2 million (145.6%), partially offset by higher rental expenses, which increased by $19.0 million (165.7%) for the period. Depreciation expense increased $5.2 million (97.8%) for 1993 over 1992. This increase is due to multifamily acquisitions and multifamily developments placed in service. Properties Stabilized Throughout Both Periods Multifamily. Rental income for the nine multifamily properties stabilized throughout both years increased approximately $705,800 (6.4%) for 1993, compared to 1992, partially offset by increases in rental expenses of $410,100 (9.0%) and depreciation of $72,700 (4.6%). The increase primarily related to a 5.74% average rental rate increase. Due primarily to commencement of major renovations at one of these properties and the temporary effects of a new development in one submarket, average occupancy decreased from 94.4% in 1992 to 92.8% in 1993. Non-Multifamily. Rental income, rental expenses and depreciation for non- multifamily properties owned throughout both years decreased $107,300 (3.1%), $420,300 (97.5%) and $44,000 (8.1%), respectively, for 1993, compared to 1992. The decrease in rental expense was primarily due to a decrease in land lease expense as a result of PTR's acquisition of the land underlying PTR's Holiday Inn building in San Francisco. Not included in these results are operating results from the eight non-multifamily properties sold during 1993. All Properties. For multifamily properties that were stabilized throughout both years and non-multifamily properties that were owned throughout both years, taken as a whole, rental income increased $598,600 (4.2%), rental expenses decreased $10,200 (.2%), and depreciation increased $83,900 (4.0%). Net income from property operations, after depreciation, for these properties increased $524,800 (7.2%) for 1993 over 1992. Interest and Other Income Interest and other income for 1993 increased 26.2%, primarily resulting from the addition of five purchase money notes aggregating $6.8 million received in 1992 and four purchase money notes aggregating $12.4 million received in 1993 in conjunction with property sales. Interest Expense Mortgage interest expense decreased $1.4 million (66.3%) for 1993, compared to 1992. The decrease is attributable to interest savings resulting from prepayments and pay offs aggregating $8.1 million on mortgages during 1993, an increase of $1.8 million (185%) in capitalized interest during 1993 over 1992 due to increased levels of multifamily development activity, and lower interest rates on an adjustable rate mortgage. S-39 Line of credit interest expense for 1993 was $2.1 million higher than for 1992, principally because of higher average outstanding balances and amortization of additional loan costs (commitment fees, title policies and legal expenses) relating to PTR's revolving credit facility, which was increased from $72 million to $200 million during 1993. Average borrowings were approximately $40.6 million (with an average interest rate of 6.3%) during 1993, as compared to average borrowings of $12.7 million (with an average interest rate of 6.6%) during 1992. PTR's interest expense will increase in future periods due to $200 million of long term, fully amortizing, senior unsecured notes issued in February 1994. See "--Liquidity and Capital Resources--Financing Activities." General and Administrative Expense and REIT Management Fee The REIT Management fee paid by PTR fluctuates with the level of PTR's pre- REIT Management fee cash flow and therefore increased by $4.4 million (161%) in 1993 as compared to 1992 because cash flow increased substantially. See "--REIT Management Agreement." As PTR arranges amortizing long term debt as more fully described in "--Liquidity and Capital Resources" below, the REIT Management fee will effectively decline in proportion to PTR's earnings from operations because actual or assumed regularly scheduled principal payments, as defined in such agreement, associated with the long term debt will be deducted from the cash flow amount on which the REIT Management fee is based. Property Sales and Provisions PTR sold eight non-multifamily properties during 1993 at an aggregate gain of $2.3 million. The overall result of these dispositions, net of provisions for possible losses ($2.3 million), was immaterial to PTR's financial position and results of operations. The provision for possible losses ($2.3 million) relates to the write-down to the lower of cost and net realizable value of two non- multifamily properties, Academy Mart Shopping Center and Ontario Industrial Building. The Academy Mart Shopping Center was sold in the third quarter of 1993. A provision of $1.2 million to reduce the property to its net realizable value was made in the second quarter. The single tenant occupant of the Ontario Industrial Building had indicated to PTR that it was not going to renew its lease which expired in early 1994. After reviewing the market conditions, it was determined that a write-down of $1.1 million was appropriate, which was recorded in the second quarter. ENVIRONMENTAL MATTERS PTR does not expect any environmental condition on its properties to materially adversely affect its results of operations or financial position. LIQUIDITY AND CAPITAL RESOURCES The REIT Manager considers PTR's liquidity and ability to generate cash to be adequate and expects it to continue to be adequate to meet PTR's development, acquisition, operating, debt service and shareholder distribution requirements. Net cash flow provided by operating activities increased by $39.1 million (141.5%) for the nine months ended September 30, 1994 as compared to 1993. Net cash flow provided by operating activities increased by $29.0 million (143%) for 1993 as compared to 1992. These increases are due primarily to multifamily property acquisitions and developments as described under "--Results of Operations" above. Investing Activities During the nine months ended September 30, 1994, PTR invested $319.3 million for the development, acquisition and renovation of multifamily properties, net of $56.8 million in mortgages. During the first nine months of 1993, PTR invested $205.9 million for the acquisition, development and renovation of multifamily S-40 properties, net of a $5 million mortgage. These developments, acquisitions and renovations were financed with cash on hand and borrowings under PTR's revolving line of credit, which were repaid with the proceeds from PTR's equity and debt offerings. PTR's investing activities used $108.8 million (55%) more cash in the first nine months of 1994 as compared to the first nine months of 1993 and $299.6 million (131%) more cash in 1993 as compared to 1992. The increase in investing activity was due to increased levels of multifamily property acquisitions and developments. At December 31, 1994, PTR had unfunded development commitments for developments under construction of $104.2 million. Additionally, the land PTR currently owns or controls through letters of intent or contingent contracts, subject to PTR's final due diligence, will allow for the development of 11,345 additional multifamily units and the land which PTR is acquiring or will control pursuant to the Merger will allow for the development of an additional 965 multifamily units, which will be an important generator of growth for PTR in 1995 and beyond. The foregoing developments are subject to a number of conditions, and PTR cannot predict with certainty that any of them will be consummated. Financing Activities PTR's financing activities for the nine months ended September 30, 1994 provided $26.6 million (12.0%) more cash flow than for the comparable period in 1993. The increase in cash flow provided by financing activities is primarily due to increased borrowings under the revolving line of credit. PTR's 1993 financing activities provided $293.2 million (158%) more cash flow than 1992 financing activities. The increase in cash flow provided by financing activities was primarily due to increased offering proceeds: net proceeds from equity offerings aggregating $514.2 million in 1993 as compared to $143.2 million in 1992. Proceeds from these offerings were used for development, acquisition and renovation of multifamily properties or to repay revolving credit balances incurred for such purposes and, in 1992, to purchase the land under the Holiday Inn. On August 4, 1994, PTR consummated a conversion of its $200 million revolving line of credit facility with TCB and the other participating lenders into an unsecured facility. Borrowings bear interest at the greater of prime or the federal funds rate plus 0.5% or, at PTR's option, LIBOR plus 1.75% (7.875% based upon a one month contract). The interest rate may increase to LIBOR plus 2.0% if PTR's senior unsecured debt were downgraded by Standard & Poor's Corporation. Additionally, there is a commitment fee of 0.125% per annum on the average unfunded line of credit balance. On October 27, 1994, the line of credit was increased to $275 million and the maturity was extended to August 15, 1996. In January 1995, the REIT Manager commenced negotiations to increase the line of credit to $350 million. The line of credit may annually be extended for an additional year with the approval of TCB and the other participating lenders. All debt incurrences are subject to covenants that PTR maintain (i) an interest coverage ratio of not less than 2:1 (the actual ratio was 5.1:1 at December 31, 1994), (ii) a debt to tangible net worth ratio no greater than 1:1 (the actual ratio was 0.5:1 at December 31, 1994), and (iii) an unencumbered pool of real estate properties of which certain properties must meet certain occupancy requirements and which have an aggregate historical cost of at least 175% of unsecured indebtedness. As of December 31, 1994, PTR was in compliance with all debt covenants. At February 10, 1995, there were $125 million of borrowings outstanding under the line of credit. PTR expects to finance developments, acquisitions and renovations with cash on hand and borrowings under its line of credit prior to future debt offerings in order to efficiently respond to market opportunities while minimizing the amount of cash invested in short term investments at lower yields. PTR believes that its current conservative ratio of long term debt to total long term capitalization, the sum of long term debt and shareholders' equity (27% at December 31, 1994, on a pro forma basis after giving effect to the Merger and certain operating multifamily properties subsequently acquired or to be acquired within 40 days of the date of this Prospectus Supplement by PTR and PACIFIC and not including the effects of the Offering), provides it considerable flexibility to prudently utilize long term debt as a future financing tool. PTR intends to limit the sum of long term debt and line of credit debt to less than 50% of the sum of total book S-41 capitalization. PTR expects to fund additional growth in 1995 through this Offering and, if needed, further issuances of unsecured long term, fixed rate amortizing debt securities similar to the Notes issued in February 1994. On August 16, 1994, PTR raised $101.8 million of net proceeds from a rights offering of 5,593,718 Common Shares of beneficial interest at a price of $18.25 per Common Share. PTR's shareholders of record on July 21, 1994 received a distribution of one right for each Common Share held of record. Eight rights were required to purchase one Common Share for $18.25 in the rights offering. Security Capital Group exercised in full its rights to acquire Common Shares in the offering at the same price paid by the public ($18.25 per Common Share) and acquired additional rights in open market purchases. Proceeds from the offering were used to fund developments and to invest in additional multifamily properties in PTR's target market and to repay borrowings under PTR's line of credit. On February 8, 1994, PTR issued $100 million of 6.875% Senior Notes due 2008 (the "2008 Notes") and $100 million of 7.5% Senior Notes due 2014 (the "2014 Notes," together with the 2008 Notes collectively referred to as the "Notes"). The 2008 Notes bear interest at 6.875% per annum and require annual principal payments of $12.5 million, commencing February 15, 2001. The 2014 Notes bear interest at 7.5% per annum and require aggregate annual principal payments of $10 million in 2009, $12.5 million in 2010, $15 million in 2011, $17.5 million in 2012, $20 million in 2013 and $25 million in 2014. In February 1994, PTR received $1.3 million in settlement of an interest protection agreement in the form of a Forward Treasury Lock Agreement entered into with an investment banker on January 28, 1994. The agreement included a determination date of February 1, 1994 and a settlement date of February 2, 1994. The notional amounts were $100 million with a reference price of 100.90625% and $75 million with a reference price of 110.4375%. On February 2, 1994, the settlement prices were 100.32813% and 109.46875%, respectively. There are no agreements outstanding. Collectively, the Notes have an average life to maturity of 14.25 years and an average effective interest cost, inclusive of offering discounts, issuance costs and an interest rate protection agreement, of 7.37% per annum. The Notes are redeemable at any time at the option of PTR, in whole or in part, at a redemption price equal to the sum of the principal amount of the Notes being redeemed plus accrued interest thereon to the redemption date plus a yield to maturity adjustment. The Notes are governed by the terms and provisions of an indenture agreement (the "Indenture") between PTR and State Street Bank and Trust Company, as trustee. Under the terms of the Indenture, PTR can incur additional debt only if, after giving effect to the debt being incurred and application of proceeds therefrom, (i) the ratio of debt to total assets, as defined in the Indenture, does not exceed 60% (the actual ratio was 29.5% at December 31, 1994), (ii) the ratio of secured debt to total assets, as defined in the Indenture, does not exceed 40% (the actual ratio was 7.0% at December 31, 1994), and (iii) PTR's pro forma interest coverage ratio, as defined in the Indenture, for the four preceding fiscal quarters is not less than 1.5 (the actual ratio was 4.0 for the fiscal quarter ended December 31, 1994). Distributions PTR's current distribution policy is to pay quarterly distributions to holders of Common Shares based upon what it believes to be a prudent percentage of cash flow. Because depreciation is a non-cash expense, cash flow typically will be greater than net earnings attributable to Common Shares. Therefore, quarterly distributions paid will generally be higher than quarterly net earnings. Distributions paid on Common Shares exceeded net earnings attributable to Common Shares by $13 million and $3.4 million for the nine months ended September 30, 1994 and 1993, respectively; and by $5.0 million and $4.1 million for 1993 and 1992, respectively, resulting in corresponding decreases in shareholders' equity for each of the respective periods. PTR announces the following year's projected annual distribution level after the Board's annual budget review and approval in December of each year. At its December 6, 1994 board meeting, the Board announced a projected increase in the annual distribution level from $1.00 to $1.15 per Common Share. The payment of distributions is subject to the discretion of the Board and is dependent upon the financial condition and operating results of PTR. S-42 Pursuant to the terms of the Preferred Shares, PTR is restricted from declaring or paying any distributions with respect to its Common Shares unless all cumulative distributions with respect to the Preferred Shares have been paid or sufficient funds have been set aside for distributions that have been declared for the then current distribution period with respect to the Preferred Shares. Funds from Operations means net earnings computed in accordance with GAAP, excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. PTR believes that Funds from Operations is helpful in understanding a property portfolio in that such calculation reflects cash flow from operating activities and the properties' ability to support interest payments and general operating expenses before the impact of certain activities, such as gains or losses from property sales and changes in accounts receivable and accounts payable. Funds from Operations attributable to Common Shares increased $16.7 million (68.1%) to $41.3 million for the nine months ended September 30, 1994 from $24.6 million for 1993, and increased from $15.3 million to $37.8 million from 1992 to 1993. The increases resulted primarily from increased properties in operation. Funds from Operations should not be considered as an alternative to net earnings or any other GAAP measurement of performance as an indicator of PTR's operating performance or as an alternative to cash flows from operating, investing or financing activities as a measure of liquidity. REIT MANAGEMENT AGREEMENT Effective March 1, 1991, PTR entered into a REIT management agreement (the "REIT Management Agreement") with the REIT Manager to provide management services to PTR. All officers of PTR are employees of the REIT Manager and PTR has no employees. See "REIT Management" for a description of the services included in the REIT Management fee. The REIT Management Agreement requires PTR to pay a base annual fee of $855,000 plus 16% of cash flow as defined in the REIT Management Agreement ("Cash Flow") in excess of $4,837,000. In the REIT Management Agreement, Cash Flow is calculated by reference to PTR's cash flow from operations before deducting (i) fees paid to the REIT Manager, (ii) extraordinary expenses incurred at the request of the independent Trustees of PTR, and (iii) 33% of any interest paid by PTR on convertible subordinated debentures (of which there have been none since inception of the REIT Management Agreement); and, after deducting actual or assumed regularly scheduled principal and interest payments for long term debt. The REIT Management Agreement provides that the long term debt described above under "--Liquidity and Capital Resources" will be treated as having regularly scheduled principal and interest payments like a 20-year, level monthly payment, fully amortizing mortgage, and the assumed principal and interest payments will be deducted from cash flow in determining the fee for future periods. Cash Flow does not include realized gains from dispositions of investments or income from cash equivalent investments. The REIT Manager also receives a fee of .25% per year on the average daily balance of cash equivalent investments. REIT management fees aggregated $13,182,000, $7,073,000 and $2,711,000 for the years ended December 31, 1994, 1993 and 1992, respectively. PTR is obligated to reimburse the REIT Manager for certain expenses incurred by the REIT Manager on behalf of PTR, primarily travel expenses incurred in seeking financing, property acquisitions, property sales, property development and similar activities on behalf of PTR. The REIT Management Agreement is renewable by PTR annually, subject to a determination by the independent Trustees that the REIT Manager's performance has been satisfactory and that the compensation payable to the REIT Manager is fair. PTR may terminate the REIT Management Agreement on 60 days' notice. Because of the year-to-year nature of the agreement, its maximum effect on PTR's results of operations cannot be predicted, other than that REIT Management fees will generally increase or decrease in proportion to cash flow increases or decreases. S-43 THE OFFERING SUBSCRIPTION RIGHT Each holder of record of Common Shares at the close of business on the Record Date, other than Security Capital Group, is entitled to subscribe for one Common Share (the "Subscription Right") for every 1.94 Common Shares held of record by such holder at the close of business on the Record Date, at the Subscription Price of $16.375 per Common Share. The right of holders of Common Shares on the Record Date to subscribe for Common Shares at the Subscription Price is not transferable. A holder of Common Shares on the Record Date may (a) fully subscribe for all Common Shares to which such holder is entitled, (b) subscribe for a portion of the Common Shares to which such holder is entitled or (c) not subscribe for any Common Shares pursuant to the Offering. In either of the latter two cases, the shareholder's relative equity ownership and voting interest in PTR would be smaller after the consummation of the Offering and the Merger than if the shareholder were to fully subscribe for Common Shares. The Offering is designed to allow PTR shareholders other than Security Capital Group the opportunity to purchase Common Shares at the same price at which PACIFIC shareholders are receiving Common Shares in the Merger and to maintain PTR's current balance sheet ratios. To assure maintenance of PTR's current balance sheet ratios, Security Capital Group has agreed to purchase $50 million of Common Shares in the Offering, which amount will be reduced to the extent that subscriptions are received from parties other than Security Capital Group. See "--Principal Shareholder." SUBSCRIPTION PRICE The Subscription Price for one Common Share in the Offering is $16.375. EXPIRATION DATE The subscription period for the Offering will expire at 5:00 p.m., New York City time, on March 23, 1995 or such later date as PTR may determine in its sole discretion. Notice will be given to shareholders of record on the Record Date, by mail or by publication in a newspaper of national circulation, of a new Expiration Date in the event that PTR extends the subscription period. OVERSUBSCRIPTION PRIVILEGE A holder of Common Shares on the Record Date who fully subscribes for all Common Shares to which such holder is entitled pursuant to the Subscription Right will have the further right to oversubscribe for additional Common Shares (the "Oversubscription Privilege"), at the Subscription Price, to the extent all of the Common Shares covered by this Prospectus Supplement are not subscribed for by other shareholders pursuant to the Subscription Right. Holders of Common Shares so entitled to exercise the Oversubscription Privilege may subscribe for as many Common Shares as desired (subject to the maximum number of Common Shares offered in the Offering and certain other restrictions). See "--Limitation on Subscriptions." If the demand for Common Shares pursuant to the Oversubscription Privilege exceeds the number of Common Shares available, holders of Common Shares (including Security Capital Group, to the extent that it oversubscribes, as if it had fully subscribed for Common Shares based on the number of Common Shares it is receiving in the Merger) shall participate in the Oversubscription Privilege (up to, but not exceeding, the number of Common Shares oversubscribed for by each such holder) pro rata based upon the number of Common Shares acquired by each such person pursuant to the Subscription Right (without regard to the number of Common Shares subscribed for by each such person pursuant to the Oversubscription Privilege), with fractional Common Shares adjusted in any manner PTR deems appropriate. Promptly after the Expiration Date, Capital Markets Group will send each subscriber exercising the Oversubscription Privilege a written confirmation of the number of Common Shares allocated to such subscriber under the Oversubscription Privilege. Any amounts overpaid by the subscriber will be refunded promptly without interest. See "--Subscription Proceeds." S-44 UNSUBSCRIBED SHARES AND THIRD PARTY SALES PTR, with the assistance of Capital Markets Group (which will not receive any compensation from PTR), will simultaneously with the Offering, on a limited basis, seek well-regarded, long term third-party investors to acquire any Common Shares for which subscriptions or oversubscriptions are not received or accepted ("Unsubscribed Shares"). Capital Markets Group will offer the Unsubscribed Shares, at the Subscription Price, on a best-efforts basis in jurisdictions where it is authorized to do so. PTR will not pay any person any commission or fee in connection with the offer or sale of the Common Shares. PTR will indemnify Capital Markets Group against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). No person has committed to underwrite the sale of Unsubscribed Shares to third parties. The REIT Manager will pay a fee of $250,000 to Capital Markets Group. PTR has agreed to pay the expenses of Capital Markets Group related to the Offering, which expenses are not expected to exceed $25,000. Third-party investors who desire to purchase Unsubscribed Shares should mail or deliver the subscription form (the "Subscription Form") to the Subscription Agent (as hereinafter defined) at the appropriate address set forth under "-- Subscription Agent." The Subscription Form must be properly completed and duly executed. Subscription Forms may be obtained by contacting the Secretary of PTR at (915) 877-2700. Subscriptions for less than 1,000 Common Shares from third- party investors will not be accepted. If subscriptions exceed available Common Shares, PTR may allocate available Unsubscribed Shares in PTR's sole discretion. Subscription Forms must be received by the Subscription Agent prior to 5:00 p.m., New York City time, on the Expiration Date. Subscription Forms received after such time will not be honored. Promptly after the Expiration Date, Capital Markets Group will send each third-party investor a written confirmation of the number of Common Shares allocated to such investor. On or prior to the fifth business day after the Expiration Date, third-party investors must deliver payment for the Common Shares subscribed for to the Subscription Agent by wire transfer of immediately available funds, based upon such investor's prorated allocation of Common Shares as notified by PTR or Capital Markets Group. Capital Markets Group is an affiliate of PTR's REIT Manager and, acting as placement agent, may be deemed to be an "underwriter" under the Securities Act in connection with the Offering. LIMITATION ON SUBSCRIPTIONS In its sole discretion, PTR may reduce subscriptions to ensure that no subscriber (other than Security Capital Group, which is permitted under PTR's Restated Declaration of Trust to own up to 49% of PTR's Common Shares, assuming conversion or exchange of all PTR convertible or exchangeable securities) will beneficially own more than 9.8% of PTR's Common Shares following consummation of the Offering. PTR's Restated Declaration of Trust limits each shareholder's beneficial ownership to 9.8% of the outstanding Common Shares without approval of the Board. The Board has the authority pursuant to PTR's Restated Declaration of Trust to redeem any Common Shares in excess of such 9.8% limit. See "Description of Common Shares--Restriction on Size of Holdings," in the accompanying Prospectus. CONDITION TO CLOSING The closing of the Offering is conditioned upon the consummation of the Merger. The consummation of the Merger is subject to a number of conditions. See "The Merger." In the event that the Merger Agreement is terminated or the Merger otherwise fails to occur on or prior to April 30, 1995 or the Offering otherwise fails to close for any reason on or prior to such date, all funds received from subscribers will be refunded promptly, together with a pro rata share of any net interest earned thereon. See "--Subscription Proceeds." WITHDRAWAL PTR reserves the right to withdraw the Offering at any time prior to or on the Expiration Date and for any reason (including, without limitation, the market price of the Common Shares), in which event all funds received from subscribers will be refunded promptly, together with a pro rata share of any net interest earned thereon. See "--Subscription Proceeds." S-45 PRINCIPAL SHAREHOLDER Security Capital Group currently owns approximately 31.9% of the outstanding Common Shares. Upon consummation of the Merger, Security Capital Group's ownership of Common Shares would increase to approximately 41.3% before giving effect to the Offering. In order to assure maintenance of PTR's balance sheet ratios, Security Capital Group has agreed to purchase $50 million of Common Shares in the Offering. Security Capital Group's investment will be reduced to the extent that subscriptions are received from shareholders other than Security Capital Group. Security Capital Group may oversubscribe for additional Common Shares and, if the demand for Common Shares pursuant to the Oversubscription Privilege exceeds the number of Common Shares available, Security Capital Group will participate in the Oversubscription Privilege, to the extent that it oversubscribes, pro rata together with other oversubscribing shareholders as if Security Capital Group had fully subscribed for Common Shares based on the number of Common Shares it is receiving in the Merger. If Security Capital Group acquires $50 million of Common Shares in the Offering and no other shareholder subscribes for Common Shares, Security Capital Group's ownership would further increase to 44.2% of the Common Shares. SUBSCRIPTION AGENT The subscription agent and escrow agent for the Offering is Chemical Bank (the "Subscription Agent"). The address to which Subscription Forms, Notices of Guaranteed Delivery and payments (other than wire transfers) should be mailed or delivered is: If by Regular Mail: If by Hand Delivery, Express Mail or Courier: Chemical Bank PTR Subscription Offering Chemical Bank P.O. Box 3085 PTR Subscription Offering GPO Station 55 Water Street, New York, New York 10116-3085 North Building Room 234--2nd Floor New York, New York 10041 Delivery of Subscription Forms, Notices of Guaranteed Delivery and payments (other than wire transfers) other than as set forth above will not constitute a valid delivery. ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE METHOD OF SUBSCRIBING FOR COMMON SHARES OR FOR ADDITIONAL COPIES OF THIS PROSPECTUS SUPPLEMENT SHOULD BE DIRECTED TO PTR'S INFORMATION AGENT, GEORGESON & COMPANY, INC., AT (800) 223-2064. FRACTIONAL SHARES No fractional Common Shares will be issued, and PTR may adjust for fractional Common Shares resulting from the exercise of the Oversubscription Privilege in any manner it deems appropriate. METHOD OF EXERCISING SUBSCRIPTION RIGHT AND OVERSUBSCRIPTION PRIVILEGE Common Shares may be subscribed for pursuant to the Subscription Right and the Oversubscription Privilege by properly completing and executing the Subscription Form accompanying this Prospectus Supplement and mailing or delivering the Subscription Form, together with payment of the full Subscription Price for each Common Share subscribed for pursuant to the Subscription Right and the Oversubscription Privilege, to the Subscription Agent at the appropriate address set forth above. Banks, trust companies, securities dealers and brokers that hold Common Shares as nominees for more than one beneficial owner may, upon proper showing to the Subscription Agent, exercise their Subscription Right and Oversubscription S-46 Privilege on the same basis as if the beneficial owners were record holders on the Record Date. Payments must be made in United States currency by personal check, cashier's check, bank draft or money order payable to the order of "PTR Subscription Offering." In the case of shareholders whose Common Shares are held of record through The Depository Trust Company ("DTC"), such shareholders may exercise the Subscription Right by returning a completed Subscription Form, together with payment of the full Subscription Price, which may be effected by transfer from such holder's DTC account to the Subscription Agent's DTC account. Except as described under "--Late Delivery of Payment and Subscription Forms," to be accepted, the properly completed Subscription Form and the payment must be received by the Subscription Agent prior to 5:00 p.m., New York City time, on the Expiration Date. Subscription Forms received after such time will not be accepted. The instruction letter accompanying the Subscription Form should be read carefully and strictly followed. DO NOT SEND SUBSCRIPTION FORMS OR PAYMENTS TO PTR. Except as described under the captions "--Unsubscribed Shares and Third Party Sales" and "--Late Delivery of Payments and Subscription Forms," no subscription will be deemed to have been received until the Subscription Agent has received delivery of a properly completed and executed Subscription Form and payment of the full Subscription Price. The risk of delivery of all documents and payments is on subscribers, not PTR or the Subscription Agent. If the mail is used, it is recommended that insured, registered mail, return receipt requested, be used and that a sufficient number of days be allowed to ensure delivery to the Subscription Agent before the Expiration Date. LATE DELIVERY OF PAYMENTS AND SUBSCRIPTION FORMS If, prior to the Expiration Date, the Subscription Agent has received a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form accompanying this Prospectus Supplement (either by hand, mail, telegram or facsimile transmission) specifying the name of the shareholder and the number of Common Shares subscribed for (stating separately the number of Common Shares subscribed for pursuant to the Subscription Right and the Oversubscription Privilege) and guaranteeing that the properly completed and executed Subscription Form and payment of the full Subscription Price for each Common Share subscribed for will be delivered to the Subscription Agent within five NYSE trading days after the Expiration Date, such subscription may be accepted, subject to the Subscription Agent's withholding the stock certificates for the Common Shares until receipt of the properly completed and executed Subscription Form and payment of such amount within such time period. The Notice of Guaranteed Delivery must be guaranteed by a commercial bank or a trust company having an office, branch or agency in the United States, a member firm of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. Notices of Guaranteed Delivery and payments should be mailed or delivered to the appropriate address set forth under "--Subscription Agent" or Notices of Guaranteed Delivery may be sent by facsimile to (212) 629-8015 or (212) 629- 8016. To confirm receipt of a facsimile transmission, subscribers may call (212) 613-7137. VALIDITY OF SUBSCRIPTIONS All questions with respect to the validity and form of exercise of the Subscription Right or the Oversubscription Privilege or third-party subscriptions for Unsubscribed Shares (including time of receipt and eligibility to participate in the Offering) will be determined solely by PTR, which determination shall be final and binding. Once made, subscriptions and directions are irrevocable, and no alternative, conditional or contingent subscriptions or directions will be accepted. PTR reserves the absolute right to reject any subscriptions or directions not properly submitted or the acceptance of which, in the opinion of PTR's counsel, would be unlawful. Any irregularities in connection with subscriptions must be cured prior to the Expiration Date unless waived by PTR in its sole discretion. Neither PTR nor the Subscription Agent shall be under any duty to give notification of defects in such subscriptions or incur any liability for failure to give such notification. A subscription will be deemed to have been accepted (subject to PTR's right to withdraw S-47 or terminate the Offering) only when a duly completed Subscription Form, any other required documents and good funds with respect to such subscription have been received by the Subscription Agent. PTR's interpretations of the terms and conditions of the Offering shall be final and binding. RIGHTS OF SUBSCRIBERS Subscribers will have no rights as shareholders of PTR with respect to Common Shares subscribed for until certificates representing such Common Shares are issued to them. Subscribers will have no right to revoke their subscriptions after delivery to the Subscription Agent of a completed and executed Subscription Form and any other required documents. SUBSCRIPTION PROCEEDS All proceeds received by the Subscription Agent with respect to the exercise of the Subscription Right and the Oversubscription Privilege and with respect to third-party subscriptions for Unsubscribed Shares will be held by the Subscription Agent in an escrow account. Such proceeds will be invested only in short term bank time deposits, short term certificates of deposit, short term government securities or any other investment permitted by Rule 15c2-4 under the Securities Exchange Act of 1934. If the Offering is withdrawn or terminated for any reason, the Subscription Agent will return promptly to each subscriber all funds received from such subscriber, together with a pro rata share of any net interest earned thereon. Amounts overpaid by subscribers due to proration of oversubscriptions or otherwise will be refunded promptly without interest. DELIVERY OF CERTIFICATES Certificates for Common Shares purchased in the Offering will be mailed as soon as practicable after the Expiration Date and receipt of all required documents and payment in full of the Subscription Price due for such Common Shares. In the case of shareholders whose Common Shares are held through DTC and third-party investors who arrange for delivery and payment through DTC, the appropriate participant account will be credited. A subscriber will be refunded, as soon as practicable after the Expiration Date, any portion of the amount previously paid without interest to the extent that his or her subscription pursuant to the Oversubscription Privilege or his or her subscription for Unsubscribed Shares is not accepted. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS REGARDING THE OFFERING The following is a summary of certain federal income tax consequences to PTR and shareholders of PTR resulting from the Offering. The discussion set forth below is based upon the Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated thereunder, judicial authority and current administrative rulings and pronouncements, as currently in effect. PTR has not requested a ruling from the Internal Revenue Service with respect to the federal income tax consequences of the Offering. Accordingly, no assurance can be given that the tax consequences will be as described below. Further, the federal income tax consequences to any particular shareholder may be affected by matters not discussed below. For example, certain types of investors (including individuals who are not United States citizens or residents, foreign corporations, life insurance companies and tax exempt organizations) may be subject to special rules not addressed herein. There also may be state, local or foreign tax considerations applicable to each shareholder. THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATION ONLY. EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE CONSEQUENCES OF THE OFFERING TO HIM OR HER UNDER FEDERAL LAW AND APPLICABLE STATE, LOCAL AND FOREIGN TAX LAWS. Consequences of the Offering. The discussion of federal income tax consequences of the Offering set forth below assumes that the Common Shares owned by a shareholder and the Common Shares issued pursuant to the Offering constitute capital assets in the hands of such shareholder. It should be noted that under current S-48 law, net capital gains of individuals are, under certain circumstances, taxed at lower rates than items of ordinary income. The deductibility of capital losses is subject to limitations. A shareholder should consult with a tax advisor for information concerning currently applicable federal tax rates. Subject to the assumptions and qualifications above, for federal income tax purposes: 1. No gain or loss will generally be recognized by a shareholder (including a foreign shareholder) upon the purchase of a Common Share pursuant to the Subscription Right or the Oversubscription Privilege. The tax basis of the Common Shares purchased pursuant to the Subscription Right or the Oversubscription Privilege will be equal to the Subscription Price paid for such Common Shares. The holding period of the Common Shares purchased pursuant to the Subscription Right or the Oversubscription Privilege will commence on the date of purchase. Upon the subsequent sale of such Common Shares (other than to PTR pursuant to a redemption), the shareholder will generally recognize capital gain or loss in an amount equal to the difference between the proceeds of the sale and the shareholder's tax basis of such Common Shares. Such gain or loss will be long term capital gain or loss if the shareholder's holding period for such Common Shares is more than one year on the date of sale. 2. PTR will not recognize any gain or loss upon the receipt of cash for Common Shares pursuant to the Subscription Right or the Oversubscription Privilege. 3. PTR will qualify as a "domestically-controlled REIT" so long as less than 50% in value of its Common Shares is held by foreign persons (i.e. non-resident aliens and foreign corporations, partnerships, trusts and estates). It is currently anticipated that PTR will qualify as a domestically-controlled REIT. Under these circumstances, gain from the sale of the Common Shares by a foreign person should not be subject to U.S. taxation, unless such gain is effectively connected with such person's U.S. business or, in the case of an individual foreign person, such person is present within the U.S. for more than 182 days in such taxable year. VALIDITY OF COMMON SHARES The validity of the Common Shares offered hereby will be passed upon for PTR by Mayer, Brown & Platt, Chicago, Illinois. Certain legal matters relating to the Offering will be passed upon for Capital Markets Group by Mayer, Brown & Platt, Chicago, Illinois. S-49 PROSPECTUS LOGO $564,784,800 DEBT SECURITIES, PREFERRED SHARES AND COMMON SHARES ---------------- Property Trust of America ("PTR") may from time to time offer in one or more series its (i) unsecured senior debt securities (the "Debt Securities"), (ii) Preferred Shares of Beneficial Interest, par value $1.00 per share (the "Preferred Shares") and (iii) Common Shares of Beneficial Interest, par value $1.00 per share (the "Common Shares"). The Debt Securities, Preferred Shares and Common Shares (collectively, the "Offered Securities") may be offered, separately or together, in separate series, in amounts, at prices and on terms to be set forth in a supplement to this Prospectus (a "Prospectus Supplement"). The specific terms of the Offered Securities in respect of which this Prospectus is being delivered will be set forth in the applicable Prospectus Supplement and will include, where applicable: (i) in the case of Debt Securities, the specific title, aggregate principal amount, currency, form (which may be registered or bearer, or certificated or global), authorized denominations, maturity, rate (or manner of calculation thereof) and time of payment of interest, terms for redemption at the option of PTR or repayment at the option of the Holder, terms for sinking fund payments, and any initial public offering price; (ii) in the case of Preferred Shares, the specific title and stated value, any dividend, liquidation, redemption, conversion, voting and other rights, and any initial public offering price; and (iii) in the case of Common Shares, any initial public offering price. In addition, such specific terms may include limitations on direct or beneficial ownership and restrictions on transfer of the Offered Securities, in each case as may be appropriate to preserve the status of PTR as a real estate investment trust ("REIT") for federal income tax purposes. The applicable Prospectus Supplement will also contain information, where applicable, about certain United States federal income tax considerations relating to, and any listing on a securities exchange of, the Offered Securities covered by such Prospectus Supplement. The Offered Securities may be offered directly, through agents designated from time to time by PTR, or to or through underwriters or dealers. If any agents or underwriters are involved in the sale of any of the Offered Securities, their names, and any applicable purchase price, fee, commission or discount arrangement between or among them, will be set forth, or will be calculable from the information set forth, in the applicable Prospectus Supplement. See "Plan of Distribution." No Offered Securities may be sold without delivery of the applicable Prospectus Supplement describing the method and terms of the offering of such series of Offered Securities. ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------- THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. ---------------- THE DATE OF THIS PROSPECTUS IS DECEMBER 1, 1994. AVAILABLE INFORMATION PTR is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; Room 1204, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such material can be obtained at prescribed rates from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. PTR's outstanding Common Shares and Cumulative Convertible Series A Preferred Shares of Beneficial Interest, $1.00 par value ("Series A Preferred Shares"), are listed on the New York Stock Exchange (the "NYSE") under the symbols "PTR" and "PTR-PRA," respectively, and all such reports, proxy statements and other information filed by PTR with the NYSE may be inspected at the NYSE's offices at 20 Broad Street, New York, New York 10005. This Prospectus constitutes part of a registration statement on Form S-3 (together with all amendments and exhibits, the "Registration Statement") filed by PTR with the Commission under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is hereby made to the Registration Statement. INCORPORATION BY REFERENCE There are incorporated herein by reference the following documents heretofore filed by PTR with the Commission: (a) PTR's Annual Report on Form 10-K for the fiscal year ended December 31, 1993; (b) PTR's Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 1994; (c) PTR's Current Reports on Form 8-K dated January 22, February 3 (as amended by Form 8 dated July 28, Form 8-K/A No. 1 dated May 21, and Form 8- K/A No. 2 dated August 11), November 4, November 22, and December 17, 1993, and February 2, April 29, May 3, July 11, July 19, July 27, and November 30, 1994; and (d) The description of PTR's preferred share purchase rights contained in PTR's registration statement on Form 8-A filed with the Commission on July 12, 1994 (as amended by Form 8-A/A No. 1 dated July 20, 1994). All documents subsequently filed by PTR pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering of the Offered Securities, shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein, or in any subsequently filed document which is also or is deemed to be incorporated by reference herein, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. PTR will provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus is delivered, upon the written or oral request of such person, a copy of any or all of the documents incorporated herein by reference, other than exhibits to such documents unless such exhibits are specifically incorporated by reference into such documents. Requests should be addressed to Secretary, Property Trust of America, 7777 Market Center Avenue, El Paso, Texas 79912, telephone number: (915) 877-3900. PROPERTY TRUST OF AMERICA PTR's objective is to be the preeminent real estate operating company focusing on multifamily property in its target market. As a fully integrated operating company, through its experienced REIT management team, PTR engages in development, acquisition, operation and long term ownership of multifamily properties. PTR operates as a REIT. PTR seeks to achieve long term sustainable growth in cash flow and dividends 2 through a commitment to fundamental real estate research, actively reviewing and reallocating assets to product types and submarkets with strong growth prospects, developing industry-leading multifamily product designed for the largest renter groups and making opportunistic acquisitions. PTR's REIT Manager, Security Capital (Southwest) Incorporated (the "REIT Manager" or "REIT Management"), provides PTR with strategic and day-to-day management, including research, investment analysis, development, acquisition, due diligence, asset management, capital markets, legal and accounting services. PTR's REIT Manager believes that PTR's target market presents attractive investment opportunities because of its growing population and job market and the reduced supply of real estate investment capital. PTR was formed in 1963 and is a real estate investment trust organized under the laws of Maryland. Its principal executive offices are located at 7777 Market Center Avenue, El Paso, Texas 79912, and its telephone number is (915) 877-3900. USE OF PROCEEDS Unless otherwise described in the applicable Prospectus Supplement, the net proceeds from the sale of the Offered Securities will be used for the development and acquisition of additional multifamily properties, as suitable opportunities arise, for the repayment of certain outstanding indebtedness at such time, for working capital purposes and, to a lesser extent, for capital improvements to properties. DESCRIPTION OF DEBT SECURITIES The Debt Securities are to be issued under an Indenture, dated as of February 1, 1994, as supplemented by the First Supplemental Indenture, dated as of February 2, 1994 (as so supplemented, the "Indenture"), between PTR and State Street Bank and Trust Company (the "Trustee"). The Indenture has been filed as an exhibit to the Registration Statement of which this Prospectus is a part and is available for inspection at the corporate trust office of the Trustee at 225 Franklin Street, Boston, Massachusetts 02110 or as described above under "Available Information." The Indenture is subject to, and governed by, the Trust Indenture Act of 1939, as amended (the "TIA"). The statements made hereunder relating to the Indenture and the Debt Securities to be issued thereunder are summaries of certain provisions thereof, do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all provisions of the Indenture and such Debt Securities. All section references appearing herein are to sections of the Indenture, and capitalized terms used but not defined herein shall have the respective meanings set forth in the Indenture. GENERAL The Debt Securities will be direct, unsecured obligations of PTR and will rank equally with all other unsecured and unsubordinated indebtedness of PTR. The Indenture provides that the Debt Securities may be issued without limit as to aggregate principal amount, in one or more series, in each case as established from time to time in or pursuant to authority granted by a resolution of the Board of Trustees of PTR or as established in one or more indentures supplemental to the Indenture. All Debt Securities of one series need not be issued at the same time and, unless otherwise provided, a series may be reopened, without the consent of the Holders of the Debt Securities of such series, for issuances of additional Debt Securities of such series (Section 301). The Indenture provides that there may be more than one Trustee thereunder, each with respect to one or more series of Debt Securities. Any Trustee under the Indenture may resign or be removed with respect to one or more series of Debt Securities, and a successor Trustee may be appointed to act with respect to such series (Section 608). In the event that two or more persons are acting as Trustee with respect to different series of Debt Securities, each such Trustee shall be a Trustee of a trust under the Indenture separate and apart from the trust administered by any other Trustee (Sections 101 and 609), and, except as otherwise indicated herein, any action described herein to be taken by the Trustee may be taken by each such Trustee with respect to, and only with respect to, the one or more series of Debt Securities for which it is Trustee under the Indenture. 3 Reference is made to the Prospectus Supplement relating to the series of Debt Securities being offered for the specific terms thereof, including: (1) the title of such Debt Securities; (2) the aggregate principal amount of such Debt Securities and any limit on such principal amount; (3) the percentage of the principal amount at which such Debt Securities will be issued and, if other than the full principal amount thereof, the portion of the principal amount thereof payable upon declaration of acceleration of the maturity thereof, or the method by which any such portion shall be determined; (4) the date or dates, or the method for determining such date or dates, on which the principal of such Debt Securities will be payable and the amount of principal payable thereon; (5) the rate or rates (which may be fixed or variable), or the method by which such rate or rates shall be determined, at which such Debt Securities will bear interest, if any; (6) the date or dates, or the method for determining such date or dates, from which any such interest will accrue, the Interest Payment Dates on which any such interest will be payable, the Regular Record Dates for such Interest Payment Dates, or the method by which such Dates shall be determined, the Person to whom such interest shall be payable, and the basis upon which interest shall be calculated if other than that of a 360- day year comprised of twelve 30-day months; (7) the place or places where the principal of (and premium or Make-Whole Amount (as defined), if any) and interest and Additional Amounts, if any, on such Debt Securities will be payable, where such Debt Securities may be surrendered for registration of transfer or exchange and where notices or demands to or upon PTR in respect of such Debt Securities and the Indenture may be served; (8) the period or periods within which, the price or prices (including the premium or Make-Whole Amount, if any) at which, the currency or currencies in which, and the other terms and conditions upon which such Debt Securities may be redeemed, as a whole or in part, at the option of PTR, if PTR is to have such an option; (9) the obligation, if any, of PTR to redeem, repay or purchase such Debt Securities pursuant to any sinking fund or analogous provision or at the option of a Holder thereof, and the period or periods within which, the price or prices at which and the terms and conditions upon which such Debt Securities will be redeemed, repaid or purchased, as a whole or in part, pursuant to such obligation; (10) if other than United States dollars, the currency or currencies in which such Debt Securities are denominated and payable, which may be a foreign currency or units of two or more foreign currencies or a composite currency or currencies, and the terms and conditions relating thereto; (11) whether the amount of payments of principal of (and premium or Make- Whole Amount, if any) or interest, if any, on such Debt Securities may be determined with reference to an index, formula or other method (which index, formula or method may, but need not be, based on a currency, currencies, currency unit or units or composite currency or currencies) and the manner in which such amounts shall be determined; (12) whether the principal of (and premium or Make-Whole Amount, if any) or interest or Additional Amounts, if any, on such Debt Securities are to be payable, at the election of PTR or a Holder, in one or more currencies other than that in which such Debt Securities are denominated or stated to be payable, the period or periods within which, and the terms and conditions upon which, such election may be made, and the time and manner of, and identity of the exchange rate agent with responsibility for, determining the exchange rate between the currency or currencies in which such Debt Securities are denominated or stated to be payable and the currency or currencies in which such Debt Securities are to be so payable; (13) any additions to, modifications of or deletions from the terms of such Debt Securities with respect to the Events of Default or covenants set forth in the Indenture; 4 (14) whether such Debt Securities will be issued in certificated or book- entry form; (15) whether such Debt Securities will be in registered or bearer form and, if in registered form, the denominations thereof if other than $1,000 and any integral multiple thereof and, if in bearer form, the denominations thereof if other than $5,000 and terms and conditions relating thereto; (16) the applicability, if any, of the defeasance and covenant defeasance provisions of Article Fourteen of the Indenture; (17) if such Debt Securities are to be issued upon the exercise of debt warrants, the time, manner and place for such Debt Securities to be authenticated and delivered; (18) whether and under what circumstances PTR will pay Additional Amounts as contemplated in the Indenture on such Debt Securities in respect of any tax, assessment or governmental charge and, if so, whether PTR will have the option to redeem such Debt Securities in lieu of making such payment; and (19) any other terms of such Debt Securities not inconsistent with the provisions of the Indenture (Section 301). The Debt Securities may provide for less than the entire principal amount thereof to be payable upon declaration of acceleration of the maturity thereof ("Original Issue Discount Securities"). Special United States federal income tax, accounting and other considerations applicable to Original Issue Discount Securities will be described in the applicable Prospectus Supplement. Under the Indenture, PTR will have the ability, in addition to the ability to issue Debt Securities with terms different from those of Debt Securities previously issued, without the consent of the Holders, to reopen a previous issue of a series of Debt Securities and issue additional Debt Securities of such series. Except as set forth below under "Certain Covenants--Limitations on Incurrence of Debt," the Indenture does not contain any other provisions that would limit the ability of PTR to incur indebtedness or that would afford Holders of Debt Securities protection in the event of a highly leveraged or similar transaction involving PTR or in the event of a change of control. However, PTR's Restated Declaration of Trust restricts beneficial ownership of PTR's outstanding Common Shares by a single person, or persons acting as a group, to 9.8% of such Common Shares, with certain exceptions (including an exception for the ownership of up to 49% of such Common Shares in the case of Security Capital Realty Incorporated ("Security Capital Realty")). See "Description of Common Shares-- Restriction on Size of Holdings." Additionally, the Articles Supplementary relating to the Series A Preferred Shares restrict beneficial ownership of such Series A Preferred Shares by a person, or persons acting as a group, to 25% of such Series A Preferred Shares. Similarly, the Articles Supplementary for each series of Preferred Shares will contain certain provisions restricting the ownership and transfer of the Preferred Shares. See "Description of Preferred Shares--Restrictions on Ownership." These restrictions are designed to preserve PTR's status as a REIT and, therefore, may act to prevent or hinder a change of control. Reference is made to the applicable Prospectus Supplement for information with respect to any deletions from, modifications of or additions to the Events of Default or covenants of PTR that are described below, including any addition of a covenant or other provision providing event risk or similar protection. DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER Unless otherwise described in the applicable Prospectus Supplement, the Debt Securities of any series issued in registered form will be issuable in denominations of $1,000 and integral multiples thereof. Unless otherwise described in the applicable Prospectus Supplement, the Debt Securities of any series issued in bearer form will be issuable in denominations of $5,000 (Section 302). Unless otherwise specified in the applicable Prospectus Supplement, the principal of (and premium or Make-Whole Amount, if any) and interest on any series of Debt Securities will be payable at the corporate 5 trust office of the Trustee, initially located at 225 Franklin Street, Boston, Massachusetts 02110; provided that, at the option of PTR, payment of interest may be made by check mailed to the address of the Person entitled thereto as it appears in the Security Register or by wire transfer of funds to such Person to an account maintained within the United States (Sections 301, 305, 306, 307 and 1002). Any interest not punctually paid or duly provided for on any Interest Payment Date with respect to a Debt Security ("Defaulted Interest") will forthwith cease to be payable to the Holder on the applicable Regular Record Date and either may be paid to the person in whose name such Debt Security is registered at the close of business on a special record date (the "Special Record Date") for the payment of such Defaulted Interest to be fixed by the Trustee, notice of which shall be given to the Holder of such Debt Security not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner, all as more completely described in the Indenture (Section 307). Subject to certain limitations imposed upon Debt Securities issued in book- entry form, the Debt Securities of any series will be exchangeable for other Debt Securities of the same series and of a like aggregate principal amount and tenor of different authorized denominations upon surrender of such Debt Securities at the corporate trust office of the Trustee referred to above. In addition, subject to certain limitations imposed upon Debt Securities issued in book-entry form, the Debt Securities of any series may be surrendered for registration of transfer thereof at the corporate trust office of the Trustee referred to above. Every Debt Security surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer. No service charge will be made for any registration of transfer or exchange of any Debt Securities, but PTR may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith (Section 305). If the applicable Prospectus Supplement refers to any transfer agent (in addition to the Trustee) initially designated by PTR with respect to any series of Debt Securities, PTR may at any time rescind the designation of any such transfer agent or approve a change in the location at which any such transfer agent acts, except that PTR will be required to maintain a transfer agent in each Place of Payment for such series. PTR may at any time designate additional transfer agents with respect to any series of Debt Securities (Section 1002). Neither PTR nor the Trustee shall be required to (i) issue, register the transfer of or exchange Debt Securities of any series during a period beginning at the opening of business 15 days before any selection of Debt Securities of that series to be redeemed and ending at the close of business on the day of mailing of the relevant notice of redemption; (ii) register the transfer of or exchange any Debt Security, or portion thereof, called for redemption, except the unredeemed portion of any Debt Security being redeemed in part; or (iii) issue, register the transfer of or exchange any Debt Security which has been surrendered for repayment at the option of the Holder, except the portion, if any, of such Debt Security not to be so repaid (Section 305). MERGER, CONSOLIDATION OR SALE PTR may consolidate with, or sell, lease or convey all or substantially all of its assets to, or merge with or into, any other entity, provided that (a) either PTR shall be the continuing entity, or the successor entity (if other than PTR) formed by or resulting from any such consolidation or merger or which shall have received the transfer of such assets is a Person organized and existing under the laws of the United States or any State thereof and shall expressly assume payment of the principal of (and premium or Make-Whole Amount, if any) and any interest (including Additional Amounts, if any) on all of the Debt Securities and the due and punctual performance and observance of all of the covenants and conditions contained in the Indenture; (b) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of PTR or any Subsidiary as a result thereof as having been incurred by PTR or such Subsidiary at the time of such transaction, no Event of Default under the Indenture, and no event which, after notice or the lapse of time, or both, would become such an Event of Default, shall have occurred and be continuing; and (c) an officer's certificate and legal opinion covering such conditions shall be delivered to the Trustee (Sections 801 and 803). 6 CERTAIN COVENANTS Limitations on Incurrence of Debt. PTR will not, and will not permit any Subsidiary to, incur any Debt (as defined below) if, immediately after giving effect to the incurrence of such additional Debt and the application of the proceeds thereof, the aggregate principal amount of all outstanding Debt of PTR and its Subsidiaries on a consolidated basis determined in accordance with generally accepted accounting principles is greater than 60% of the sum of (without duplication) (i) PTR's Total Assets (as defined below) as of the end of the calendar quarter covered in PTR's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be, most recently filed with the Commission (or, if such filing is not permitted under the Exchange Act, with the Trustee) prior to the incurrence of such additional Debt and (ii) the purchase price of any real estate assets or mortgages receivable acquired, and the amount of any securities offering proceeds received (to the extent that such proceeds were not used to acquire real estate assets or mortgages receivable or used to reduce Debt), by PTR or any Subsidiary since the end of such calendar quarter, including those proceeds obtained in connection with the incurrence of such additional Debt (Section 1004). In addition to the foregoing limitation on the incurrence of Debt, PTR will not, and will not permit any Subsidiary to, incur any Debt secured by any mortgage, lien, charge, pledge, encumbrance or security interest of any kind upon any of the property of PTR or any Subsidiary if, immediately after giving effect to the incurrence of such additional Debt and the application of the proceeds thereof, the aggregate principal amount of all outstanding Debt of PTR and its Subsidiaries on a consolidated basis which is secured by any mortgage, lien, charge, pledge, encumbrance or security interest on property of PTR or any Subsidiary is greater than 40% of PTR's Total Assets (Section 1004). In addition to the foregoing limitations on the incurrence of Debt, PTR will not, and will not permit any Subsidiary to, incur any Debt if the ratio of Consolidated Income Available for Debt Service (as defined below) to the Annual Service Charge (as defined below) for the four consecutive fiscal quarters most recently ended prior to the date on which such additional Debt is to be incurred shall have been less than 1.5, on a pro forma basis after giving effect thereto and to the application of the proceeds therefrom, and calculated on the assumption that (i) such Debt and any other Debt incurred by PTR and its Subsidiaries since the first day of such four-quarter period and the application of the proceeds therefrom, including to refinance other Debt, had occurred at the beginning of such period; (ii) the repayment or retirement of any other Debt by PTR and its Subsidiaries since the first day of such four- quarter period had been incurred, repaid or retired at the beginning of such period (except that, in making such computation, the amount of Debt under any revolving credit facility shall be computed based upon the average daily balance of such Debt during such period); (iii) in the case of Acquired Debt (as defined below) or Debt incurred in connection with any acquisition since the first day of such four-quarter period, the related acquisition had occurred as of the first day of such period with the appropriate adjustments with respect to such acquisition being included in such pro forma calculation; and (iv) in the case of any acquisition or disposition by PTR or its Subsidiaries of any asset or group of assets since the first day of such four-quarter period, whether by merger, stock purchase or sale, or asset purchase or sale, such acquisition or disposition or any related repayment of Debt had occurred as of the first day of such period with the appropriate adjustments with respect to such acquisition or disposition being included in such pro forma calculation (Section 1004). Existence. Except as permitted under "--Merger, Consolidation or Sale," PTR will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that PTR shall not be required to preserve any right or franchise if it determines that the preservation thereof is no longer desirable in the conduct of its business and that the loss thereof is not disadvantageous in any material respect to the Holders of the Debt Securities (Section 1005). Maintenance of Properties. PTR will cause all of its properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, 7 betterments and improvements thereof, all as in the judgment of PTR may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that PTR and its Subsidiaries shall not be prevented from selling or otherwise disposing for value its properties in the ordinary course of business (Section 1006). Insurance. PTR will, and will cause each of its Subsidiaries to, keep all of its insurable properties insured against loss or damage at least equal to their then full insurable value with financially sound and reputable insurance companies (Section 1007). Payment of Taxes and Other Claims. PTR will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all taxes, assessments and governmental charges levied or imposed upon it or any Subsidiary or upon the income, profits or property of PTR or any Subsidiary, and (ii) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of PTR or any Subsidiary; provided, however, that PTR shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings (Section 1008). Provision of Financial Information. Whether or not PTR is subject to Section 13 or 15(d) of the Exchange Act, PTR will, to the extent permitted under the Exchange Act, file with the Commission the annual reports, quarterly reports and other documents which PTR would have been required to file with the Commission pursuant to such Section 13 and 15(d) (the "Financial Statements") if PTR were so subject, such documents to be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which PTR would have been required so to file such documents if PTR were so subject. PTR will also in any event (x) within 15 days of each Required Filing Date (i) transmit by mail to all Holders of Debt Securities, as their names and addresses appear in the Security Register, without cost to such Holders, copies of the annual reports and quarterly reports which PTR would have been required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act if PTR were subject to such Sections and (ii) file with the Trustee copies of the annual reports, quarterly reports and other documents which PTR would have been required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act if PTR were subject to such Sections and (y) if filing such documents by PTR with the Commission is not permitted under the Exchange Act, promptly upon written request and payment of the reasonable cost of duplication and delivery, supply copies of such documents to any prospective Holder (Section 1009). As used herein, "Acquired Debt" means Debt of a Person (i) existing at the time such Person becomes a Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, in each case, other than Debt incurred in connection with, or in contemplation of, such Person becoming a Subsidiary or such acquisition. Acquired Debt shall be deemed to be incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Subsidiary. "Annual Service Charge" as of any date means the maximum amount which is payable in any period for interest on, and original issue discount of, Debt of PTR and its Subsidiaries and the amount of dividends which are payable in respect of any Disqualified Stock. "Capital Stock" means, with respect to any Person, any capital stock (including preferred stock), shares, interests, participations or other ownership interests (however designated) of such Person and any rights (other than debt securities convertible into or exchangeable for corporate stock), warrants or options to purchase any thereof. "Consolidated Income Available for Debt Service" for any period means Earnings from Operations (as defined below) of PTR and its Subsidiaries plus amounts which have been deducted, and minus amounts which have been added, for the following (without duplication): (a) interest on Debt of PTR and its 8 Subsidiaries, (b) provision for taxes of PTR and its Subsidiaries based on income, (c) amortization of debt discount, (d) provisions for gains and losses on properties and property depreciation and amortization, (e) the effect of any noncash charge resulting from a change in accounting principles in determining Earnings from Operations for such period and (f) amortization of deferred charges. "Debt" of PTR or any Subsidiary means any indebtedness of PTR or any Subsidiary, whether or not contingent, in respect of (i) borrowed money or evidenced by bonds, notes, debentures or similar instruments, (ii) indebtedness secured by any mortgage, pledge, lien, charge, encumbrance or any security interest existing on property owned by PTR or any Subsidiary, (iii) the reimbursement obligations, contingent or otherwise, in connection with any letters of credit actually issued or amounts representing the balance deferred and unpaid of the purchase price of any property or services, except any such balance that constitutes an accrued expense or trade payable, or all conditional sale obligations or obligations under any title retention agreement, (iv) the principal amount of all obligations of PTR or any Subsidiary with respect to redemption, repayment or other repurchase of any Disqualified Stock or (v) any lease of property by PTR or any Subsidiary as lessee which is reflected on PTR's Consolidated Balance Sheet as a capitalized lease in accordance with generally accepted accounting principles to the extent, in the case of items of indebtedness under (i) through (iii) above, that any such items (other than letters of credit) would appear as a liability on PTR's Consolidated Balance Sheet in accordance with generally accepted accounting principles, and also includes, to the extent not otherwise included, any obligation by PTR or any Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise (other than for purposes of collection in the ordinary course of business), Debt of another Person (other than PTR or any Subsidiary) (it being understood that Debt shall be deemed to be incurred by PTR or any Subsidiary whenever PTR or such Subsidiary shall create, assume, guarantee or otherwise become liable in respect thereof). "Disqualified Stock" means, with respect to any Person, any Capital Stock of such Person which by the terms of such Capital Stock (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable), upon the happening of any event or otherwise (i) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, (ii) is convertible into or exchangeable or exercisable for Debt or Disqualified Stock or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the Stated Maturity of the series of Debt Securities. "Earnings from Operations" for any period means net earnings excluding gains and losses on sales of investments, net as reflected in the financial statements of PTR and its Subsidiaries for such period determined on a consolidated basis in accordance with generally accepted accounting principles. "Total Assets" as of any date means the sum of (i) PTR's Undepreciated Real Estate Assets and (ii) all other assets of PTR determined in accordance with generally accepted accounting principles (but excluding accounts receivable and intangibles). "Undepreciated Real Estate Assets" as of any date means the cost (original cost plus capital improvements) of real estate assets of PTR and its Subsidiaries on such date, before depreciation and amortization determined on a consolidated basis in accordance with generally accepted accounting principles. EVENTS OF DEFAULT, NOTICE AND WAIVER The Indenture provides that the following events are "Events of Default" with respect to any series of Debt Securities issued thereunder: (a) default for 30 days in the payment of any installment of interest or Additional Amounts payable on any Debt Security of such series; (b) default in the payment of the principal of (or premium or Make-Whole Amount, if any, on) any Debt Security of such series at its Maturity; (c) default in making any sinking fund payment as required for any Debt Security of such series; (d) default in the performance of any other covenant of PTR contained in the Indenture (other than a covenant added to the Indenture solely for the benefit of a series of Debt Securities issued thereunder other than such series), continued for 60 days after written notice as provided in the Indenture; (e) default in the payment of an 9 aggregate principal amount exceeding $10,000,000 of any evidence of indebtedness of PTR or any mortgage, indenture or other instrument under which such indebtedness is issued or by which such indebtedness is secured, such default having occurred after the expiration of any applicable grace period and having resulted in the acceleration of the maturity of such indebtedness, but only if such indebtedness is not discharged or such acceleration is not rescinded or annulled; (f) the entry by a court of competent jurisdiction of one or more judgments, orders or decrees against PTR or any of its Subsidiaries in an aggregate amount (excluding amounts fully covered by insurance) in excess of $10,000,000 and such judgments, orders or decrees remain undischarged, unstayed and unsatisfied in an aggregate amount (excluding amounts fully covered by insurance) in excess of $10,000,000 for a period of 30 consecutive days; (g) certain events of bankruptcy, insolvency or reorganization, or court appointment of a receiver, liquidator or trustee of PTR or any Significant Subsidiary or for all or substantially all of either of its property; and (h) any other Event of Default provided with respect to a particular series of Debt Securities (Section 501). The term "Significant Subsidiary" means each significant subsidiary (as defined in Regulation S-X promulgated by the Commission) of PTR. If an Event of Default under the Indenture with respect to Debt Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Debt Securities of that series may declare the principal amount (or, if the Debt Securities of that series are Original Issue Discount Securities or Indexed Securities, such portion of the principal amount as may be specified in the terms thereof) of, and the Make-Whole Amount, if any, on, all of the Debt Securities of that series to be due and payable immediately by written notice thereof to PTR (and to the Trustee if given by the Holders). However, at any time after such a declaration of acceleration with respect to Debt Securities of such series (or of all Debt Securities then Outstanding under the Indenture, as the case may be) has been made, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the Holders of not less than a majority in principal amount of Outstanding Debt Securities of such series (or of all Debt Securities then Outstanding under the Indenture, as the case may be) may rescind and annul such declaration and its consequences if (a) PTR shall have deposited with the Trustee all required payments of the principal of (and premium or Make-Whole Amount, if any) and interest, and any Additional Amounts, on the Debt Securities of such series (or of all Debt Securities then outstanding under the Indenture, as the case may be), plus certain fees, expenses, disbursements and advances of the Trustee and (b) all Events of Default, other than the nonpayment of accelerated principal (or specified portion thereof and the Make-Whole Amount, if any) or interest, with respect to Debt Securities of such series (or of all Debt Securities then Outstanding under the Indenture, as the case may be) have been cured or waived as provided in the Indenture (Section 502). The Indenture also provides that the Holders of not less than a majority in principal amount of the Outstanding Debt Securities of any series (or of all Debt Securities then Outstanding under the Indenture, as the case may be) may waive any past default with respect to such series and its consequences, except a default (x) in the payment of the principal of (or premium or Make-Whole Amount, if any) or interest or Additional Amounts payable on any Debt Security of such series or (y) in respect of a covenant or provision contained in the Indenture that cannot be modified or amended without the consent of the Holder of each Outstanding Debt Security affected thereby (Section 513). The Trustee is required to give notice to the Holders of Debt Securities within 90 days of a default under the Indenture; provided, however, that the Trustee may withhold notice to the Holders of any series of Debt Securities of any default with respect to such series (except a default in the payment of the principal of (or premium or Make-Whole Amount, if any) or interest or Additional Amounts payable on any Debt Security of such series or in the payment of any sinking fund installment in respect of any Debt Security of such series) if the Responsible Officers of the Trustee consider such withholding to be in the interest of such Holders (Section 601). The Indenture provides that no Holders of Debt Securities of any series may institute any proceedings, judicial or otherwise, with respect to the Indenture or for any remedy thereunder, except in the case of failure of the Trustee, for 60 days, to act after it has received a written request to institute proceedings in respect of 10 an event of Default from the Holders of not less than 25% in principal amount of the Outstanding Debt Securities of such series, as well as an offer of reasonable indemnity (Section 507). This provision will not prevent, however, any Holder of Debt Securities from instituting suit for the enforcement of payment of the principal of (and premium or Make-Whole Amount, if any), interest on, and Additional Amounts payable with respect to, such Debt Securities at the respective due dates thereof (Section 508). Subject to provisions in the Indenture relating to its duties in case of default, the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any Holders of any series of Debt Securities then Outstanding under the Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity (Section 602). The Holders of not less than a majority in principal amount of the Outstanding Debt Securities of any series (or of all Debt Securities then Outstanding under the Indenture, as the case may be) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or of exercising any trust or power conferred upon the Trustee. However, the Trustee may refuse to follow any direction which is in conflict with any law or the Indenture, which may involve the Trustee in personal liability or which may be unduly prejudicial to the Holders of Debt Securities of such series not joining therein (Section 512). Within 120 days after the close of each fiscal year, PTR must deliver to the Trustee a certificate, signed by one of several specified officers, stating whether or not such officer has knowledge of any default under the Indenture and, if so, specifying each such default and the nature and status thereof (Section 1010). MODIFICATION OF THE INDENTURE Modifications and amendments of the Indenture may be made with the consent of the Holders of not less than a majority in principal amount of all Outstanding Debt Securities which are affected by such modification or amendment; provided, however, that no such modification or amendment may, without the consent of the Holder of each such Debt Security affected thereby, (a) change the Stated Maturity of the principal of (or premium or Make-Whole Amount, if any), or any installment of principal of or interest or Additional Amounts payable on, any such Debt Security; (b) reduce the principal amount of, or the rate or amount of interest on, or any premium or Make-Whole Amount payable on redemption of, or any Additional Amounts payable with respect to, any such Debt Security, or reduce the amount of principal of an Original Issue Discount Security or Make- Whole Amount, if any, that would be due and payable upon declaration of acceleration of the maturity thereof or would be provable in bankruptcy, or adversely affect any right of repayment of the Holder of any such Debt Security; (c) change the Place of Payment, or the coin or currency, for payment of principal of (and premium or Make-Whole Amount, if any), or interest on, or any Additional Amounts payable with respect to, any such Debt Security; (d) impair the right to institute suit for the enforcement of any payment on or with respect to any such Debt Security; (e) reduce the above-stated percentage of Outstanding Debt Securities of any series necessary to modify or amend the Indenture, to waive compliance with certain provisions thereof or certain defaults and consequences thereunder or to reduce the quorum or voting requirements set forth in the Indenture; or (f) modify any of the foregoing provisions or any of the provisions relating to the waiver of certain past defaults or certain covenants, except to increase the required percentage to effect such action or to provide that certain other provisions may not be modified or waived without the consent of the Holder of such Debt Security (Section 902). The Holders of not less than a majority in principal amount of Outstanding Debt Securities have the right to waive compliance by PTR with certain covenants in the Indenture (Section 1012). Modifications and amendments of the Indenture may be made by PTR and the Trustee without the consent of any Holder of Debt Securities for any of the following purposes: (i) to evidence the succession of another Person to PTR as obligor under the Indenture; (ii) to add to the covenants of PTR for the benefit of the Holders of all or any series of Debt Securities or to surrender any right or power conferred upon PTR in the Indenture; (iii) to add Events of Default for the benefit of the Holders of all or any series of Debt Securities; (iv) to add or change any provisions of the Indenture to facilitate the issuance of, or to liberalize 11 certain terms of, Debt Securities in bearer form, or to permit or facilitate the issuance of Debt Securities in uncertificated form, provided that such action shall not adversely affect the interests of the Holders of the Debt Securities of any series in any material respect; (v) to change or eliminate any provisions of the Indenture, provided that any such change or elimination shall become effective only when there are no Debt Securities Outstanding of any series created prior thereto which are entitled to the benefit of such provision; (vi) to secure the Debt Securities; (vii) to establish the form or terms of Debt Securities of any series and any related coupons; (viii) to provide for the acceptance of appointment by a successor Trustee or facilitate the administration of the trusts under the Indenture by more than one Trustee; (ix) to cure any ambiguity, defect or inconsistency in the Indenture or to make any other changes, provided that in each case, such action shall not adversely affect the interests of Holders of Debt Securities of any series in any material respect; (x) to close the Indenture with respect to the authentication and delivery of additional series of Debt Securities or to qualify, or maintain qualification of, the Indenture under the TIA; or (xi) to supplement any of the provisions of the Indenture to the extent necessary to permit or facilitate defeasance and discharge of any series of such Debt Securities, provided that such action shall not adversely affect the interests of the Holders of the Debt Securities of any series in any material respect (Section 901). The Indenture provides that in determining whether the Holders of the requisite principal amount of Outstanding Debt Securities of a series have given any request, demand, authorization, direction, notice, consent or waiver thereunder or whether a quorum is present at a meeting of Holders of Debt Securities, (i) the principal amount of an Original Issue Discount Security that shall be deemed to be outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon declaration of acceleration of the maturity thereof, (ii) the principal amount of a Debt Security denominated in a Foreign Currency that shall be deemed outstanding shall be the United States dollar equivalent, determined on the issue date for such Debt Security, of the principal amount (or, in the case of an Original Issue Discount Security, the United States dollar equivalent on the issue date of such Debt Security of the amount determined as provided in (i) above), (iii) the principal amount of an Indexed Security that shall be deemed outstanding shall be the principal face amount of such Indexed Security at original issuance, unless otherwise provided with respect to such Indexed Security pursuant to Section 301 of the Indenture, and (iv) Debt Securities owned by PTR or any other obligor upon the Debt Securities or any Affiliate of PTR or of such other obligor shall be disregarded (Section 101). The Indenture contains provisions for convening meetings of the Holders of Debt Securities of a series (Section 1501). A meeting may be called at any time by the Trustee, and also, upon request, by PTR or the Holders of at least 10% in principal amount of the Outstanding Debt Securities of such series, in any such case upon notice given as provided in the Indenture (Section 1502). Except for any consent that must be given by the Holder of each Debt Security affected by certain modifications and amendments of the Indenture, any resolution presented at a meeting or adjourned meeting duly reconvened at which a quorum is present may be adopted by the affirmative vote of the Holders of a majority in principal amount of the Outstanding Debt Securities of that series; provided, however, that, except as referred to above, any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Debt Securities of a series may be adopted at a meeting or adjourned meeting duly reconvened at which a quorum is present by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Debt Securities of that series. Any resolution passed or decision taken at any meeting of Holders of Debt Securities of any series duly held in accordance with the Indenture will be binding on all Holders of Debt Securities of that series. The quorum at any meeting called to adopt a resolution, and at any reconvened meeting, will be Persons holding or representing a majority in principal amount of the Outstanding Debt Securities of a series; provided, however, that if any action is to be taken at such meeting with respect to a consent or waiver which may be given by the Holders of not less than a specified percentage in principal amount of the Outstanding Debt Securities of a series, the Persons holding or representing such specified percentage in principal amount of the Outstanding Debt Securities of such series will constitute a quorum (Section 1504). 12 Notwithstanding the foregoing provisions, if any action is to be taken at a meeting of Holders of Debt Securities of any series with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that the Indenture expressly provides may be made, given or taken by the Holders of a specified percentage in principal amount of all Outstanding Debt Securities affected thereby, or of the Holders of such series and one or more additional series: (i) there shall be no minimum quorum requirement for such meeting and (ii) the principal amount of the Outstanding Debt Securities of such series that vote in favor of such request, demand, authorization, direction, notice, consent, waiver or other action shall be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under the Indenture (Section 1504). Any request, demand, authorization, direction, notice, consent, waiver or other action provided by the Indenture to be given or taken by a specified percentage in principal amount of the Holders of any or all series of Debt Securities may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such specified percentage of Holders in person or by agent duly appointed in writing; and, except as otherwise expressly provided in the Indenture, such action shall become effective when such instrument or instruments are delivered to the Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of the Indenture and (subject to Article Six) conclusive in favor of the Trustee and PTR, if made in the manner specified above (Section 1507). DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE PTR may discharge certain obligations to Holders of any series of Debt Securities that have not already been delivered to the Trustee for cancellation and that either have become due and payable or will become due and payable within one year (or scheduled for redemption within one year) by irrevocably depositing with the Trustee, in trust, funds in such currency or currencies, currency unit or units or composite currency or currencies in which such Debt Securities are payable in an amount sufficient to pay the entire indebtedness on such Debt Securities in respect of principal (and premium or Make-Whole Amount, if any) and interest and Additional Amounts payable to the date of such deposit (if such Debt Securities have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be (Section 401). The Indenture provides that, if the provisions of Article Fourteen are made applicable to the Debt Securities of or within any series pursuant to Section 301 of the Indenture, PTR may elect either (a) to defease and be discharged from any and all obligations with respect to such Debt Securities (except for the obligation to pay Additional Amounts, if any, upon the occurrence of certain events of tax, assessment or governmental charge with respect to payments on such Debt Securities and the obligations to register the transfer or exchange of such Debt Securities, to replace temporary or mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or agency in respect of such Debt Securities and to hold moneys for payment in trust) ("defeasance") (Section 1402) or (b) to be released from its obligations with respect to such Debt Securities under Sections 1004 to 1009, inclusive, of the Indenture (being the restrictions described under "--Certain Covenants") and, if provided pursuant to Section 301 of the Indenture, its obligations with respect to any other covenant, and any omission to comply with such obligations shall not constitute a default or an Event of Default with respect to such Debt Securities ("covenant defeasance") (Section 1403), in either case upon the irrevocable deposit by PTR with the Trustee, in trust, of an amount, in such currency or currencies, currency unit or units or composite currency or currencies in which such Debt Securities are payable at Stated Maturity, or Government Obligations (as defined below), or both, applicable to such Debt Securities which through the scheduled payment of principal and interest in accordance with their terms will provide money in an amount sufficient to pay the principal of (and premium or Make-Whole Amount, if any) and interest on such Debt Securities, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. Such a trust may only be established if, among other things, PTR has delivered to the Trustee an Opinion of Counsel (as specified in the Indenture) to the effect that the Holders of such Debt Securities will not 13 recognize income, gain or loss for United States federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred, and such Opinion of Counsel, in the case of defeasance, must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable United States federal income tax law occurring after the date of the Indenture (Section 1404). "Government Obligations" means securities which are (i) direct obligations of the United States of America or the government which issued the Foreign Currency in which the Debt Securities of a particular series are payable, for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America or such government which issued the Foreign Currency in which the Debt Securities of such series are payable, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America or such other government, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt (Section 101). Unless otherwise provided in the applicable Prospectus Supplement, if after PTR has deposited funds and/or Government Obligations to effect defeasance or covenant defeasance with respect to Debt Securities of any series, (a) the Holder of a Debt Security of such series is entitled to, and does, elect pursuant to Section 301 of the Indenture or the terms of such Debt Security to receive payment in a currency, currency unit or composite currency other than that in which such deposit has been made in respect of such Debt Security, or (b) a Conversion Event (as defined below) occurs in respect of the currency, currency unit or composite currency in which such deposit has been made, the indebtedness represented by such Debt Security shall be deemed to have been, and will be, fully discharged and satisfied through the payment of the principal of (and premium or Make-Whole Amount, if any) and interest on such Debt Security as they become due out of the proceeds yielded by converting the amount so deposited in respect of such Debt Security into the currency, currency unit or composite currency in which such Debt Security becomes payable as a result of such election or such cessation of usage based on the applicable market exchange rate (Section 1405). "Conversion Event" means the cessation of use of (i) a currency, currency unit or composite currency (other than the ECU or other currency unit) both by the government of the country which issued such currency and for the settlement of transactions by a central bank or other public institutions of or within the international banking community, (ii) the ECU both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities or (iii) any currency unit or composite currency other than the ECU for the purposes for which it was established. Unless otherwise provided in the applicable Prospectus Supplement, all payments of principal of (and premium or Make-Whole Amount, if any) and interest on any Debt Security that is payable in a Foreign Currency that ceases to be used by its government of issuance shall be made in United States dollars (Section 101). In the event PTR effects covenant defeasance with respect to any Debt Securities and such Debt Securities are declared due and payable because of the occurrence of any Event of Default other than the Event of Default described in clause (d) under "--Events of Default, Notice and Waiver" with respect to Sections 1004 to 1009, inclusive, of the Indenture (which Sections would no longer be applicable to such Debt Securities) or described in clause (g) under "--Events of Default, Notice and Waiver" with respect to any other covenant as to which there has been covenant defeasance, the amount in such currency, currency unit or composite currency in which such Debt Securities are payable, and Government Obligations on deposit with the Trustee, will be sufficient to pay amounts due on such Debt Securities at the time of their 14 Stated Maturity but may not be sufficient to pay amounts due on such Debt Securities at the time of the acceleration resulting from such Event of Default. However, PTR would remain liable to make payment of such amounts due at the time of acceleration. The applicable Prospectus Supplement may further describe the provisions, if any, permitting such defeasance or covenant defeasance, including any modifications to the provisions described above, with respect to the Debt Securities of or within a particular series. GLOBAL SECURITIES The Debt Securities of a series may be issued in whole or in part in the form of one or more global securities ("Global Securities") that will be deposited with, or on behalf of, a depository (the "Depository") identified in the applicable Prospectus Supplement relating to such series. Global Securities, if any, are expected to be deposited with The Depository Trust Company, as Depository. Global Securities may be issued in fully registered form and may be issued in either temporary or permanent form. Unless and until it is exchanged in whole or in part for the individual Debt Securities represented thereby, a Global Security may not be transferred except as a whole by the Depository for such Global Security to a nominee of such Depository or by a nominee of such Depository to such Depository or another nominee of such Depository or by the Depository or any nominee of such Depository to a successor Depository or any nominee of such successor. The specific terms of the depository arrangement with respect to a series of Debt Securities will be described in the applicable Prospectus Supplement relating to such series. Unless otherwise indicated in the applicable Prospectus Supplement, PTR anticipates that the following provisions will apply to depository arrangements. Upon the issuance of a Global Security, the Depository for such Global Security or its nominee will credit on its book-entry registration and transfer system the respective principal amounts of the individual Debt Securities represented by such Global Security to the accounts of persons that have accounts with such Depository ("Participants"). Such accounts shall be designated by the underwriters, dealers or agents with respect to such Debt Securities or by PTR if such Debt Securities are offered and sold directly by PTR. Ownership of beneficial interests in a Global Security will be limited to Participants or persons that may hold interests through Participants. Ownership of beneficial interests in such Global Security will be shown on, and the transfer of that ownership will be effected only through, records maintained by the applicable Depository or its nominee (with respect to beneficial interests of Participants) and records of Participants (with respect to beneficial interests of persons who hold through Participants). The laws of some states require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and laws may impair the ability to own, pledge or transfer beneficial interest in a Global Security. So long as the Depository for a Global Security or its nominee is the registered owner of such Global Security, such Depository or such nominee, as the case may be, will be considered the sole owner or holder of the Debt Securities represented by such Global Security for all purposes under the Indenture. Except as provided below or in the applicable Prospectus Supplement, owners of beneficial interest in a Global Security will not be entitled to have any of the individual Debt Securities of the series represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of any such Debt Securities of such series in definitive form and will not be considered the owners or holders thereof under the Indenture. Payments of principal of, any premium or Make-Whole Amount and any interest on, or any Additional Amounts payable with respect to, individual Debt Securities represented by a Global Security registered in the name of a Depository or its nominee will be made to the Depository or its nominee, as the case may be, as the registered owner of the Global Security representing such Debt Securities. None of PTR, the Trustee, any Paying Agent or the Security Registrar for such Debt Securities will have any responsibility or liability 15 for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Security for such Debt Securities or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. PTR expects that the Depository for a series of Debt Securities or its nominee, upon receipt of any payment of principal, premium, Make-Whole Amount or interest in respect of a permanent Global Security representing any of such Debt Securities, immediately will credit Participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Security for such Debt Securities as shown on the records of such Depository or its nominee. PTR also expects that payments by Participants to owners of beneficial interests in such Global Security held through such Participants 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." Such payments will be the responsibility of such Participants. If a Depository for a series of Debt Securities is at any time unwilling, unable or ineligible to continue as depository and a successor depository is not appointed by PTR within 90 days, PTR will issue individual Debt Securities of such series in exchange for the Global Security representing such series of Debt Securities. In addition, PTR may, at any time and in its sole discretion, subject to any limitations described in the applicable Prospectus Supplement relating to such Debt Securities, determine not to have any Debt Securities of such series represented by one or more Global Securities and, in such event, will issue individual Debt Securities of such series in exchange for the Global Security or Securities representing such series of Debt Securities. Individual Debt Securities of such series so issued will be issued in denominations, unless otherwise specified by PTR, of $1,000 and integral multiples thereof. NO PERSONAL LIABILITY No past, present or future trustee, officer, employee or shareholder, as such, of PTR or any successor thereof shall have any liability for any obligations of PTR under the Debt Securities or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Debt Securities by accepting such Debt Securities waives and releases all such liability. The waiver and release are part of the consideration for the issue of Debt Securities (Section 111). DESCRIPTION OF COMMON SHARES GENERAL PTR has 150 million Shares of Beneficial Interest, $1.00 par value, authorized. On November 11, 1994, PTR had 50,397,188 Common Shares issued and outstanding, which were held of record by approximately 3,450 shareholders. PTR has reserved 150,000 Common Shares for issuance upon the exercise of options pursuant to the Property Trust of America Share Option Plan for Outside Trustees. In addition, PTR held 164,478 Common Shares in treasury as of November 11, 1994 and 11,189,040 Common Shares were reserved for issuance upon conversion of Series A Preferred Shares. The following description sets forth certain general terms and provisions of the Common Shares to which any Prospectus Supplement may relate, including a Prospectus Supplement which provides for Common Shares issuable upon conversion of Preferred Shares. The statements below describing the Common Shares are in all respects subject to and qualified in their entirety by reference to the applicable provisions of PTR's Restated Declaration of Trust and Bylaws. The outstanding Common Shares are fully paid and, except as set forth below under "--Shareholder Liability," non-assessable. Each Common Share has one vote on all matters requiring a vote of shareholders. Holders of Common Shares do not have the right to cumulate their votes in the election of Trustees. Holders 16 of Common Shares are entitled to receive dividends when, as and if declared by the Board of Trustees. Common Shares do not have preemptive, redemption or conversion rights or the benefit of a sinking fund. In the event of a liquidation, dissolution or winding up of PTR, the holders of the Common Shares are entitled to receive ratably the assets remaining after satisfaction of all liabilities and payment of liquidation preferences and accrued dividends, if any, on the Series A Preferred Shares, any classes of preferred shares ranking on a parity with the Series A Preferred Shares with respect to the payment of dividends and amounts upon dissolution and winding up ("Parity Shares") and any preferred shares ranking senior to the Parity Shares with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up. The right of holders of the Common Shares are subject to the rights and preferences established by the Trustees for any preferred shares which may subsequently be issued by PTR. See "Description of Preferred Shares." PURCHASE RIGHTS On July 11, 1994, the Board of Trustees declared a dividend of one preferred share purchase right (a "Purchase Right") for each Common Share outstanding, payable to holders of Common Shares of record at the close of business on July 21, 1994. Each Purchase Right entitles the holder under certain circumstances to purchase from PTR one one-hundredth of a share of Series B Junior Participating Preferred Shares, par value $1.00 per share (the "Participating Preferred Shares") at a price of $60.00 per one one-hundredth of a Participating Preferred Share, subject to adjustment. Purchase Rights are exercisable when a person or group of persons acquires 20% or more of the outstanding Common Shares (49% in the case of Security Capital Realty and certain defined affiliates) or announces a tender offer for 25% or more of the outstanding Common Shares. Under certain circumstances, each Purchase Right entitles the holder to purchase, at the Purchase Right's then current exercise price, a number of Common Shares having a market value of twice the Purchase Right's exercise price. The acquisition of PTR pursuant to certain mergers or other business transactions would entitle each holder to purchase, at the Purchase Right's then current exercise price, a number of the acquiring company's common shares having a market value at that time equal to twice the Purchase Right's exercise price. The Purchase Rights held by certain 20% shareholders (other than Security Capital Realty) would not be exercisable. The Purchase Rights will expire in July 2004 and are subject to redemption in whole, but not in part, at a price of $0.01 per Purchase Right payable in cash, shares of PTR or any other form of consideration determined by PTR's Board of Trustees. TRANSFER AGENT The transfer agent and registrar for the Common Shares is Chemical Bank, P.O. Box 3068, JAF Building, New York, New York 10116-3068. The Common Shares are listed on the NYSE under the symbol "PTR." RESTRICTION ON SIZE OF HOLDINGS PTR's Restated Declaration of Trust restricts beneficial ownership of PTR's outstanding capital shares by a single person, or persons acting as a group, to 9.8% of PTR's Common Shares. Beneficial ownership of Common Shares includes Common Shares which a person may acquire upon conversion of Preferred Shares, including Series A Preferred Shares. The purposes of these provisions are to assist in protecting and preserving PTR's REIT status and to protect the interest of shareholders in takeover transactions by preventing the acquisition of a substantial block of shares unless the acquiror makes a cash tender offer for all outstanding shares. For PTR to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), not more than 50% in value of its outstanding capital shares may be owned by five or fewer individuals at any time during the last half of PTR's taxable year. The provision permits five persons to acquire up to a maximum of 9.8% of the Common Shares each, or an aggregate of 49% of the outstanding Common Shares, and, thus, assists the Trustees in protecting and preserving PTR's REIT status for tax purposes. Capital shares owned by a person or group of persons in excess of 9.8% (49% in the case of Security Capital Realty and certain defined affiliates) of PTR's outstanding Common Shares ("Excess Shares") are subject to redemption by PTR, at its option, upon 30 days' notice, at a price equal to the average daily per 17 share closing sale price during the 30-day period ending on the business day prior to the redemption date. PTR may make payment of the redemption price at any time or times up to the earlier of five years after the redemption date or liquidation of PTR. PTR may refuse to effect the transfer of any Common Shares which would make the transferee a holder of Excess Shares. Shareholders of PTR are required to disclose, upon demand of the Board of Trustees, such information with respect to their direct and indirect ownership of Common Shares as the Board of Trustees deems necessary to comply with the provisions of the Code pertaining to qualification, for tax purposes, of REITs, or to comply with the requirements of any other appropriate taxing authority. The 9.8% restriction does not apply to acquisitions by an underwriter in a public offering and sale of Common Shares or to any transaction involving the issuance of Common Shares in which a majority of the Board of Trustees determines that the eligibility of PTR to qualify as a REIT for federal income tax purposes will not be jeopardized or the disqualification of PTR as a REIT is advantageous to the shareholders. Security Capital Realty's ownership of Common Shares is attributed for tax purposes to its shareholders. The Board of Trustees has permitted Security Capital Realty to acquire up to 49% of PTR's outstanding Common Shares. TRUSTEE LIABILITY PTR's Restated Declaration of Trust provides that Trustees shall not be individually liable for any obligation or liability incurred by or on behalf of PTR or by Trustees for the benefit and on behalf of PTR. Under the Restated Declaration of Trust and Maryland law respecting REITs, Trustees are not liable to PTR or the shareholders for any act or omission except for acts or omissions which constitute bad faith, willful misfeasance, gross negligence or reckless disregard of duties to PTR and its shareholders. SHAREHOLDER LIABILITY Both Maryland statutory law governing REITs organized under the laws of that state (the "Maryland REIT Law") and PTR's Restated Declaration of Trust provide that shareholders shall not be personally or individually liable for any debt, act, omission or obligation of PTR or the Trustees. PTR's Restated Declaration of Trust further provides that PTR shall indemnify and hold each shareholder harmless from all claims and liabilities to which the shareholder may become subject by reason of his being or having been a shareholder and that PTR shall reimburse each shareholder for all legal and other expenses reasonably incurred by the shareholder in connection with any such claim or liability, except to the extent that such claim or liability arises out of the shareholder's bad faith, willful misconduct or gross negligence and provided that such shareholder gives PTR prompt notice of any such claim or liability and permits PTR to conduct the defense thereof. In addition, PTR is required to, and as a matter of practice does, insert a clause in its management and other contracts providing that shareholders assume no personal liability for obligations entered into on behalf of PTR. Nevertheless, with respect to tort claims, contractual claims where shareholder liability is not so negated, claims for taxes and certain statutory liability, the shareholders may, in some jurisdictions, be personally liable to the extent that such claims are not satisfied by PTR. Inasmuch as PTR carries public liability insurance which it considers adequate, any risk of personal liability to shareholders is limited to situations in which PTR's assets plus its insurance coverage would be insufficient to satisfy the claims against PTR and its shareholders. DESCRIPTION OF PREFERRED SHARES GENERAL Subject to limitations prescribed by Maryland law and the Restated Declaration of Trust, the Board of Trustees is authorized to issue, from the authorized but unissued capital shares of PTR, Preferred Shares in series and to establish from time to time the number of Preferred Shares to be included in such series and to fix the designation and any preferences, conversion and other rights, voting powers, restrictions, limitations 18 as to dividends, qualifications and terms and conditions of redemption of the shares of each series, and such other subjects or matters as may be fixed by resolution of the Board of Trustees or duly authorized committee thereof. On November 11, 1994, PTR had 9,200,000 of its Series A Preferred Shares, issued and outstanding and held of record by approximately 100 shareholders. Reference is made to the Prospectus Supplement relating to the Preferred Shares offered thereby for specific terms, including: (1) The title and stated value of such Preferred Shares; (2) The number of shares of such Preferred Shares offered, the liquidation preference per share and the offering price of such Preferred Shares; (3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of calculation thereof applicable to such Preferred Shares; (4) The date from which dividends on such Preferred Shares shall cumulate, if applicable; (5) The procedures for any auction and remarketing, if any, for such Preferred Shares; (6) The provision for a sinking fund, if any, for such Preferred Shares; (7) The provision for redemption, if applicable, of such Preferred Shares; (8) Any listing of such Preferred Shares on any securities exchange; (9) The terms and conditions, if applicable, upon which such Preferred Shares will be convertible into Common Shares of PTR, including the conversion price (or manner of calculation thereof); (10) Whether interests in such Preferred Shares will be represented by Global Securities; (11) Any other specific terms, preferences, rights, limitations or restrictions of such Preferred Shares; (12) A discussion of federal income tax considerations applicable to such Preferred Shares; (13) The relative ranking and preferences of such Preferred Shares as to dividend rights and rights upon liquidation, dissolution or winding up of the affairs of PTR; (14) Any limitations on issuance of any series of preferred stock ranking senior to or on a parity with such series of Preferred Shares as to dividend rights and rights upon liquidation, dissolution or winding up of the affairs of PTR; and (15) Any limitations on direct or beneficial ownership and restrictions on transfer, in each case as may be appropriate to preserve the status of PTR as a REIT. RANK Unless otherwise specified in the Prospectus Supplement, the Preferred Shares will, with respect to dividend rights and rights upon liquidation, dissolution or winding up of PTR, rank (i) senior to all classes or series of Common Shares, and to all equity securities ranking junior to such Preferred Shares; (ii) on a parity with all equity securities issued by PTR the terms of which specifically provide that such equity securities rank on a parity with the Preferred Shares; and (iii) junior to all equity securities issued by PTR the terms of which specifically provide that such equity securities rank senior to the Preferred Shares. DIVIDENDS Holders of Preferred Shares of each series shall be entitled to receive, when, as and if declared by the Board of Trustees of PTR, out of assets of PTR legally available for payment, cash dividends at such rates and on such dates as will be set forth in the applicable Prospectus Supplement. Each such dividend shall be payable to holders of record as they appear on the share transfer books of PTR on such record dates as shall be fixed by the Board of Trustees of PTR. 19 Dividends on any series of the Preferred Shares may be cumulative or noncumulative, as provided in the applicable Prospectus Supplement. Dividends, if cumulative, will be cumulative from and after the date set forth in the applicable Prospectus Supplement. If the Board of Trustees of PTR fails to declare a dividend payable on a dividend payment date on any series of the Preferred Shares for which dividends are noncumulative, then the holders of such series of the Preferred Shares will have no right to receive a dividend in respect of the dividend period ending on such dividend payment date, and PTR will have no obligation to pay the dividend accrued for such period, whether or not dividends on such series are declared payable on any future dividend payment date. If Preferred Shares of any series are outstanding, no full dividends shall be declared or paid or set apart for payment on the Preferred Shares of PTR of any other series ranking, as to dividends, on a parity with or junior to the Preferred Shares of such series for any period unless (i) if such series of Preferred Shares has a cumulative dividend, full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Preferred Shares of such series for all past dividend periods and the then current dividend period or (ii) if such series of Preferred Shares does not have a cumulative dividend, full dividends for the then current dividend period have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Preferred Shares of such series. When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Preferred Shares of any series and the shares of any other series of Preferred Shares ranking on a parity as to dividends with the Preferred Shares of such series, all dividends declared upon Preferred Shares of such series and any other series of Preferred Shares ranking on a parity as to dividends with such Preferred Shares shall be declared pro rata so that the amount of dividends declared per share on the Preferred Shares of such series and such other series of Preferred Shares shall in all cases bear to each other the same ratio that accrued dividends per share on the Preferred Shares of such series (which shall not include any cumulation in respect of unpaid dividends for prior dividend periods if such series of Preferred Shares does not have a cumulative dividend) and such other series of Preferred Shares bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Preferred Shares of such series which may be in arrears. Except as provided in the immediately preceding paragraph, unless (i) if such series of Preferred Shares has a cumulative dividend, full cumulative dividends on the Preferred Shares of such series have been or contemporaneously are declared and paid or declared and a sum sufficient of the payment thereof set apart for payment for all past dividend periods and the then current dividend period and (ii) if such series of Preferred Shares does not have a cumulative dividend, full dividends on the Preferred Shares of such series have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for the then current dividend period, no dividends (other than in Common Shares or other capital shares ranking junior to the Preferred Shares of such series as to dividends and upon liquidation) shall be declared or paid or set aside for payment or other distribution shall be declared or made upon the Common Shares or any other capital shares of PTR ranking junior to or on a parity with the Preferred Shares of such series as to dividends or upon liquidation, nor shall any Common Shares or any other capital shares of PTR ranking junior to or on a parity with the Preferred Shares of such series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such shares) by PTR (except by conversion into or exchange for other capital shares of PTR ranking junior to the Preferred Shares of such series as to dividends and upon liquidation). Any dividend payment made on a series of Preferred Shares shall first be credited against the earliest accrued but unpaid dividend due with respect to shares of such series which remains payable. REDEMPTION If so provided in the applicable Prospectus Supplement, the Preferred Shares will be subject to mandatory redemption or redemption at the option of PTR, as a whole or in part, in each case upon the terms, at the times and at the redemption prices set forth in such Prospectus Supplement. 20 The Prospectus Supplement relating to a series of Preferred Shares that is subject to mandatory redemption will specify the number of such Preferred Shares that shall be redeemed by PTR in each year commencing after a date to be specified, at a redemption price per share to be specified, together with an amount equal to all accrued and unpaid dividends thereon (which shall not, if such series of Preferred Shares does not have a cumulative dividend, include any cumulation in respect of unpaid dividends for prior dividend periods) to the date of redemption. The redemption price may be payable in cash or other property, as specified in the applicable Prospectus Supplement. If the redemption price for Preferred Shares of any series is payable only from the net proceeds of the issuance of capital shares of PTR, the terms of such series of Preferred Shares may provide that, if no such capital shares shall have been issued or to the extent the net proceeds from any issuance are insufficient to pay in full the aggregate redemption price then due, such Preferred Shares shall automatically and mandatorily be converted into shares of the applicable capital shares of PTR pursuant to conversion provisions specified in the applicable Prospectus Supplement. Notwithstanding the foregoing, unless (i) if such series of Preferred Shares has a cumulative dividend, full cumulative dividends on all shares of any series of Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period and (ii) if such series of Preferred Shares does not have a cumulative dividend, full dividends on the Preferred Shares of any series have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for the then current dividend period, no shares of any series of Preferred Shares shall be redeemed unless all outstanding Preferred Shares of such series are simultaneously redeemed; provided, however, that the foregoing shall not prevent the purchase or acquisition of Preferred Shares of such series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Preferred Shares of such series, and, unless (i) if such series of Preferred Shares has a cumulative dividend, full cumulative dividends on all outstanding shares of any series of Preferred Shares have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period and (ii) if such series of Preferred Shares does not have a cumulative dividend, full dividends on the Preferred Shares of any series have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for the then current dividend period, PTR shall not purchase or otherwise acquire directly or indirectly any shares of Preferred Shares of such series (except by conversion into or exchange for capital shares of PTR ranking junior to the Preferred Shares of such series as to dividends and upon liquidation). If fewer than all of the outstanding Preferred Shares of any series are to be redeemed, the number of shares to be redeemed will be determined by PTR and such shares may be redeemed pro rata from the holders of record of such shares in proportion to the number of such shares held by such holders (with adjustments to avoid redemption of fractional shares) or by lot in a manner determined by PTR. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of record of Preferred Shares of any series to be redeemed at the address shown on the share transfer books of PTR. Each notice shall state: (i) the redemption date; (ii) the number of shares and series of the Preferred Shares to be redeemed; (iii) the redemption price; (iv) the place or places where certificates for such Preferred Shares are to be surrendered for payment of the redemption price; (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date; and (vi) the date upon which the holder's conversion rights, if any, as to such shares shall terminate. If fewer than all the Preferred Shares of any series are to be redeemed, the notice mailed to each such holder thereof shall also specify the number of Preferred Shares to be redeemed from each such holder. If notice of redemption of any Preferred Shares has been given and if the funds necessary for such redemption have been set aside by PTR in trust for the benefit of the holders of any Preferred Shares so called for redemption, then from and after the redemption date dividends will cease to accrue on such Preferred Shares, and all rights of the holders of such shares will terminate, except the right to receive the redemption price. 21 LIQUIDATION PREFERENCE Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of PTR, then, before any distribution or payment shall be made to the holders of any Common Shares or any other class or series of capital shares of PTR ranking junior to the Preferred Shares in the distribution of assets upon any liquidation, dissolution or winding up of PTR, the holders of each series of Preferred Shares shall be entitled to receive out of assets of PTR legally available for distribution to shareholders liquidating distributions in the amount of the liquidation preference per share (set forth in the applicable Prospectus Supplement), plus an amount equal to all dividends accrued and unpaid thereon (which shall not include any cumulation in respect of unpaid dividends for prior dividend periods if such series of Preferred Shares does not have a cumulative dividend). After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Preferred Shares will have no right or claim to any of the remaining assets of PTR. In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the available assets of PTR are insufficient to pay the amount of the liquidating distributions on all outstanding Preferred Shares and the corresponding amounts payable on all shares of other classes or series of capital shares of PTR ranking on a parity with the Preferred Shares in the distribution of assets, then the holders of the Preferred Shares and all other such classes or series of capital shares shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. If liquidating distributions shall have been made in full to all holders of Preferred Shares, the remaining assets of PTR shall be distributed among the holders of any other classes or series of capital shares ranking junior to the Preferred Shares upon liquidation, dissolution or winding up, according to their respective rights and preferences and in each case according to their respective number of shares. For such purposes, the consolidation or merger of PTR with or into any other corporation, or the sale, lease or conveyance of all or substantially all of the property or business of PTR, shall not be deemed to constitute a liquidation, dissolution or winding up of PTR. VOTING RIGHTS Holders of the Preferred Shares will not have any voting rights, except as set forth below or as otherwise from time to time required by law or as indicated in the applicable Prospectus Supplement. The following is a summary of the voting rights applicable to the Series A Preferred Shares, which, unless provided otherwise in the applicable Prospectus Supplement, will apply to each series of Preferred Shares. If six quarterly dividends (whether or not consecutive) payable on the Series A Preferred Shares or any other Parity Shares are in arrears, whether or not earned or declared, the number of Trustees then constituting the Board of Trustees of PTR will be increased by two, and the holders of Series A Preferred Shares, voting together as a class with the holders of any other series of Parity Shares (any such other series, the "Voting Preferred Shares"), will have the right to elect two additional trustees to serve on PTR's Board of Trustees at any annual meeting of shareholders or a properly called special meeting of the holders of Series A Preferred Shares and such Voting Preferred Shares and at each subsequent annual meeting of shareholders until all such dividends and dividends for the current quarterly period on the Series A Preferred Shares and such other Voting Preferred Shares have been paid or declared and set aside for payment. Such voting rights will terminate when all such accrued and unpaid dividends have been declared and paid or set aside for payment. The term of office of all trustees so elected will terminate with the termination of such voting rights. For so long as Security Capital Realty and certain of its affiliates beneficially own in excess of 10% of the outstanding Common Shares, in any such vote by holders of Series A Preferred Shares, Security Capital Realty and certain of its affiliates shall vote their Series A Preferred Shares, if any, in the same respective percentages as the Series A Preferred Shares and Voting Preferred Shares that are not held by such persons. The approval of two-thirds of the outstanding Series A Preferred Shares and all other series of Voting Preferred Shares similarly affected, voting as a single class, is required in order to (i) amend PTR's Declaration of Trust to affect materially and adversely the rights, preferences or voting power of the holders 22 of the Series A Preferred Shares or the Voting Preferred Shares, (ii) enter into a share exchange that affects the Series A Preferred Shares, consolidate with or merge into another entity, or permit another entity to consolidate with or merge into PTR, unless in each such case each Series A Preferred Share remains outstanding without a material and adverse change to its terms and rights or is converted into or exchanged for convertible preferred stock of the surviving entity having preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms or conditions of redemption thereof identical to that of a Series A Preferred Share (except for changes that do not materially and adversely affect the holders of the Series A Preferred Shares) or (iii) authorize, reclassify, create, or increase the authorized amount of any class of stock having rights senior to the Series A Preferred Shares with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up. However, PTR may create additional classes of Parity Shares and Junior Shares, increase the authorized number of Parity Shares and Junior Shares and issue additional series of Parity Shares and Junior Shares without the consent of any holder of Series A Preferred Shares. Except as provided above and as required by law, the holders of Series A Preferred Shares are not entitled to vote on any merger or consolidation involving PTR or a sale of all or substantially all of the assets of PTR. CONVERSION RIGHTS The terms and conditions, if any, upon which shares of any series of Preferred Shares are convertible into Common Shares will be set forth in the applicable Prospectus Supplement relating thereto. Such terms will include the number of Common Shares into which the Preferred Shares are convertible, the conversion price (or manner of calculation thereof), the conversion period, provisions as to whether conversion will be at the option of the holders of the Preferred Shares or PTR, the events requiring an adjustment of the conversion price and provisions affecting conversion in the event of the redemption of such Preferred Shares. RESTRICTIONS ON OWNERSHIP As discussed above under "Description of Common Shares--Restriction on Size of Holdings," for PTR to qualify as a REIT under the Code, not more than 50% in value of its outstanding capital shares may be owned by five or fewer individuals at any time during the last half of a taxable year, and the capital stock must be beneficially owned by 100 or more persons during at least 335 days of PTR's taxable year of 12 months. Therefore, the Articles Supplementary for each series of Preferred Shares will contain certain provisions restricting the ownership and transfer of the Preferred Shares (the "Preferred Shares Ownership Limit Provision"). Except as otherwise described in the applicable Prospectus Supplement relating thereto, the provisions of each Articles Supplementary relating to the Preferred Shares Ownership Limit will provide (as in the case of the Series A Preferred Shares) as summarized below. The Preferred Shares Ownership Limit Provision will provide that, subject to certain exceptions contained in such Articles Supplementary, no person, or persons acting as a group, may beneficially own more than 25% of any series of Preferred Shares outstanding at any time, except as a result of PTR's redemption of Preferred Shares. Shares acquired in excess of the Preferred Shares Ownership Limit Provision must be redeemed by PTR at a price equal to the average daily per share closing sale price during the 30-day period ending on the business day prior to the redemption date. Such redemption is not applicable if a person's ownership exceeds the limitations due solely to PTR's redemption of Preferred Shares; provided that thereafter any additional Preferred Shares acquired by such person shall be Excess Shares. See "Description of Common Shares--Restriction on Size of Holdings." From and after the date of notice of such redemption, the holder of the Preferred Shares thus redeemed shall cease to be entitled to any distribution (other than distributions declared prior to the date of notice of redemption), voting rights and other benefits with respect to such shares except the right to receive payment of the redemption price determined as described above. The Preferred Shares Ownership Limit Provision may not be waived with respect to certain affiliates of PTR. 23 All certificates representing shares of Preferred Shares will bear a legend referring to the restrictions described above. FEDERAL INCOME TAX CONSIDERATIONS This section is a summary of certain federal income tax matters of general application pertaining to REITs under the Code. The discussion is based on current law and does not purport to deal with all aspects of federal income taxation that may be relevant to investors subject to special treatment under federal income tax laws, such as investors subject to the Employee Retirement Income Security Act of 1974, as amended, other tax exempt investors, dealers in securities or foreign persons. The provisions of the Code pertaining to REITs are highly technical and complex and sometimes involve mixed questions of fact and law. In addition, this section does not discuss foreign, state or local taxation. PTR has not requested and will not request a ruling from the Internal Revenue Service (the "Service") with respect to any of the federal income tax issues discussed below. Prospective investors should consult, and must depend on, their own tax advisors regarding the federal, state, local, foreign and other tax consequences of holding and disposing of Common Shares, Preferred Shares or Debt Securities. TAXATION OF PTR PTR believes that it has been organized and operated, and it intends to continue to operate, in a manner qualifying it as a REIT under Sections 856 through 860 of the Code, but no assurance can be given that it will at all times so qualify. PTR's ability to qualify as a REIT under the requirements of the Code and the regulations promulgated thereunder is dependent upon actual operating results. To qualify as a REIT under the Code for a taxable year, PTR must meet certain organizational and operational requirements, which generally require it to be a passive investor in operating real estate and to avoid excessive concentration of ownership of its capital stock. First, its principal activities must be real estate related. Generally, at least 75% of the value of the total assets of PTR at the end of each calendar quarter must consist of real estate assets, cash or governmental securities and for each taxable year at least 75% of its gross income must be from real estate sources, including rents from real property and interest on mortgage obligations. PTR may not own more than 10% of the outstanding voting securities of any corporation; shares of qualified REITs, qualified temporary investments and shares of certain wholly owned subsidiaries are exempt from this prohibition. PTR holds assets through certain wholly owned subsidiary corporations that it believes qualify for the exemption. Additionally, gross income from the sale or other disposition of stock and securities held for less than one year and of real property held for less than four years must constitute less than 30% of the gross income for each taxable year of a REIT. For each taxable year, at least 75% of a REIT's gross income must be derived from specified real estate sources and 95% must be derived from such real estate sources plus certain other permitted sources. Real estate income for purposes of these requirements includes gains from the sale of real property not held primarily for sale to customers in the ordinary course of business, dividends on REIT shares, interest on loans secured by mortgages on real property, certain rents from real property and income from foreclosure property. For rents to qualify, they may not be based on the income or profits of any person, except that they may be based on a percentage or percentages of gross income or receipts, and, subject to certain limited exceptions, the REIT may not manage the property or furnish services to tenants except through an independent contractor which is paid an arm's-length fee and from which the REIT derives no income. PTR must satisfy certain ownership restrictions that limit (i) concentration of ownership of capital stock by a few individuals and (ii) ownership by PTR of its tenants. The outstanding capital stock of PTR must be held by at least 100 shareholders. No more than 50% in value of the outstanding capital stock, including in some circumstances capital stock into which outstanding securities might be converted, may be owned actually or constructively by five or fewer individuals or certain other entities at any time during the last half of PTR's taxable year. Accordingly, PTR's Restated Declaration of Trust restricts the transfer of Common 24 Shares, Preferred Shares and any other outstanding securities convertible into Common Shares when necessary to maintain PTR's qualification as a REIT under the Code. However, because the Code imposes broad attribution rules in determining constructive ownership, no assurances can be given that the restrictions of PTR's Restated Declaration of Trust will be effective in maintaining PTR's REIT status. See "Description of Common Shares--Restriction on Size of Holdings" and "Description of Preferred Shares--Restrictions on Ownership." Because Security Capital Realty is a corporation, its ownership is attributed proportionally to all of its shareholders. So long as PTR qualifies for taxation as a REIT and distributes at least 95% of its real estate investment trust taxable income (computed without regard to net capital gains or the dividends-paid deduction) for its taxable year to its shareholders annually, PTR itself will not be subject to federal income tax on that portion of such income distributed to shareholders. PTR will be taxed at regular corporate rates on all income not distributed to shareholders. PTR's policy is to distribute at least 95% of its taxable income. REITs may also incur taxes for certain other activities or to the extent distributions do not satisfy certain other requirements. Failure of PTR to qualify during any taxable year as a REIT could, unless certain relief provisions were available, have a material adverse effect upon its shareholders. If disqualified for taxation as a REIT for a taxable year, PTR would also be disqualified for taxation as a REIT for the next four taxable years, unless the failure was due to reasonable cause and not willful neglect. PTR would be subject to federal income tax at corporate rates on all of its taxable income and would not be able to deduct the dividends paid, which could result in a discontinuation of or substantial reduction in dividends to shareholders. Dividends would also be subject to the regular tax rules applicable to dividends received by shareholders of corporations. Should the failure to qualify be determined to have occurred retroactively in an earlier tax year of PTR, the imposition of a substantial federal income tax liability on PTR attributable to such nonqualifying tax years may adversely affect PTR's ability to pay dividends. In the event that PTR fails to meet certain income tests of the tax law, it may, generally, nonetheless retain its qualification as a REIT if it pays a 100% tax on the amount by which it failed to meet the income tests so long as its failure was due to reasonable cause and not willful neglect. Any such taxes would adversely affect PTR's ability to pay dividends. TAXATION OF THE SHAREHOLDERS OF PTR As long as PTR qualifies as a REIT, distributions made to its shareholders out of current or accumulated earnings and profits of PTR (which are not designated as capital gain dividends) will generally be taxed to shareholders as ordinary income either in the year of payment or, with respect to distributions declared in the last quarter of any year and paid by January 31 of the following year, in the year of declaration and will not be eligible for the dividends received deduction for corporations. PTR's earnings and profits will first be allocated to any outstanding Preferred Shares. A distribution of net capital gains by PTR will generally be treated as a long term capital gain to shareholders to the extent properly designated by PTR as a capital gain dividend and regardless of the length of time a shareholder has held his shares of capital stock. Under Section 291 of the Code, however, corporate shareholders may be required to treat up to 20% of any such capital gain as ordinary income. Section 291 of the Code provides, in general, that if a corporation sells or disposes of depreciable real property in a taxable transaction, it must, to the extent of gain, include as ordinary income up to 20% of the depreciation previously taken on such property. Corporate shareholders of a REIT are required to treat the portion of a capital gain dividend attributable to the gain from the REIT's sale or exchange of depreciable real property as subject to the 20% ordinary income rule. Capital gains distributions are not eligible for the dividends-received deduction for corporations. A dividend in excess of current or accumulated earnings and profits will constitute a nontaxable return of capital, to the extent of the shareholder's basis in his shares of capital stock, and is applied to reduce the shareholder's basis in the shares of capital stock. To the extent such a dividend is greater than such basis, it will be treated as capital gain to those shareholders holding their shares of capital stock as capital assets. PTR will notify shareholders as to the portions of each dividend which, in its judgment, constitute ordinary income, capital gain dividends or return of capital. Should PTR incur ordinary or capital losses, shareholders will not be entitled to include such losses in their own income tax returns. 25 BACKUP WITHHOLDING PTR will report to its U.S. shareholders and the Service the amount of distributions paid during each calendar year, and the amount of tax withheld, if any. Under the backup withholding rules, a shareholder may be subject to backup withholding at applicable rates with respect to distributions paid unless such shareholder (a) is a corporation or falls within certain other exempt categories and, when required, demonstrates this fact, or (b) provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A shareholder that does not provide PTR with his correct taxpayer identification number may also be subject to penalties imposed by the Service. Any amount paid as backup withholding will be creditable against the shareholder's income tax liability. In addition, PTR may be required to withhold a portion of capital gain distributions to any shareholders who fail to certify their nonforeign status to PTR. PLAN OF DISTRIBUTION PTR may sell the Offered Securities to one or more underwriters for public offering and sale by them or may sell the Offered Securities to investors directly or through agents, which agents may be affiliated with PTR. Direct sales to investors may be accomplished through subscription offerings or concurrent rights offerings to PTR shareholders and direct placements to third parties. Any such underwriter or agent involved in the offer and sale of the Offered Securities will be named in the applicable Prospectus Supplement. Underwriters may offer and sell the Offered Securities at a fixed price or prices, which may be changed, at prices related to the prevailing market prices at the time of sale or at negotiated prices. PTR also may, from time to time, authorize underwriters acting as PTR's agents to offer and sell the Offered Securities upon the terms and conditions as set forth in the applicable Prospectus Supplement. In connection with the sale of Offered Securities, underwriters may be deemed to have received compensation from PTR in the form of underwriting discounts or commissions and may also receive commissions from purchasers of Offered Securities for whom they may act as agent. Underwriters may sell Offered Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agent. Any underwriting compensation paid by PTR to underwriters or agents in connection with the offering of Offered Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in the applicable Prospectus Supplement. Underwriters, dealers and agents participating in the distribution of the Offered Securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Offered Securities may be deemed to be underwriting discounts and commissions, under the Securities Act. Underwriters, dealers and agents may be entitled, under agreements entered into with PTR, to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act. Any such indemnification agreements will be described in the applicable Prospectus Supplement. If so indicated in the applicable Prospectus Supplement, PTR will authorize dealers acting as PTR's agents to solicit offers by certain institutions to purchase Offered Securities from PTR at the public offering price set forth in such Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts") providing for payment and delivery on the date or dates stated in such Prospectus Supplement. Each Contract will be for an amount not less than, and the aggregate principal amount of Offered Securities sold pursuant to Contracts shall be not less nor more than, the respective amounts stated in the applicable Prospectus Supplement. Institutions with whom Contracts, when authorized, may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions, and other institutions but will in all cases be subject to the approval of PTR. Contracts will not be subject to any conditions except (i) the purchase by an institution of the Offered Securities covered by its Contracts shall not at the time of delivery be prohibited under the laws of any jurisdiction in the United 26 States to which such institution is subject, and (ii) if the Offered Securities are being sold to underwriters, PTR shall have sold to such underwriters the total principal amount of the Offered Securities less the principal amount thereof covered by Contracts. Certain of the underwriters and their affiliates may be customers of, engage in transactions with and perform services for PTR and its subsidiaries in the ordinary course of business. EXPERTS The financial statements of PTR as of December 31, 1993 and 1992 and for each of the years in the three-year period ended December 31, 1993; the combined statements of revenues and certain expenses for certain multifamily properties acquired, or to be acquired, by PTR; and the statement of revenues and certain expenses of Brompton Court Apartments, incorporated by reference herein, have been incorporated by reference herein in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. With respect to the unaudited interim financial information incorporated by reference herein, the independent certified public accountants have reported that they applied limited procedures in accordance with professional standards for a review of such information. However, their separate reports included in PTR's quarterly reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 1994, incorporated by reference herein, state that they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their reports on such information should be restricted in light of the limited nature of the review procedures applied. The accountants are not subject to the liability provisions of section 11 of the Securities Act for their reports on the unaudited interim financial information because such reports are not a "report" or a "part" of the registration statement prepared or certified by the accountants within the meaning of sections 7 and 11 of the Securities Act. KPMG Peat Marwick LLP has not examined, compiled, or otherwise applied agreed-upon procedures to the prospective financial information presented or incorporated herein and, accordingly, does not express an opinion or any other form of assurance on it. LEGAL MATTERS The validity of the Offered Securities will be passed upon for PTR by Mayer, Brown & Platt, Chicago, Illinois. 27 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE- SENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMA- TION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SE- CURITIES TO WHICH THEY RELATE OR ANY OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SO- LICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AF- FAIRS OF PTR SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION CON- TAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION. ---------------- TABLE OF CONTENTS
PAGE ---- PROSPECTUS SUPPLEMENT Prospectus Supplement Summary............................................. S-3 Property Trust of America................................................. S-14 The Merger................................................................ S-14 Use of Proceeds........................................................... S-15 Capitalization............................................................ S-16 Price Range of Common Shares and Distributions............................ S-17 Business.................................................................. S-18 REIT Management........................................................... S-24 Properties................................................................ S-31 Selected Historical Financial Data........................................ S-33 Recent Operating Results.................................................. S-34 Selected Pro Forma Financial Data......................................... S-34 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................... S-36 The Offering.............................................................. S-44 Validity of Common Shares................................................. S-49 PROSPECTUS Available Information..................................................... 2 Incorporation by Reference................................................ 2 Property Trust of America................................................. 2 Use of Proceeds........................................................... 3 Description of Debt Securities............................................ 3 Description of Common Shares.............................................. 16 Description of Preferred Shares........................................... 18 Federal Income Tax Considerations......................................... 24 Plan of Distribution...................................................... 26 Experts................................................................... 27 Legal Matters............................................................. 27
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 17,800,000 COMMON SHARES OF BENEFICIAL INTEREST LOGO A REAL ESTATE INVESTMENT TRUST ---------------- PROSPECTUS SUPPLEMENT ---------------- FEBRUARY 10, 1995 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- APPENDIX On the inside front cover of the prospectus supplement, above the stabilization legend, are a large map and two smaller bar graphs. Above the map is an introduction: "PTR's Target Market is currently characterized by . . ." and below the introduction is a title for the map: "Multifamily Portfolio Target Market(1)". Footnote (1) is below the map and reads "Pro Forma December 31, 1994". Also below the map are keys to three symbols used on the map: a star, referring to "Primary Target Market Cities"; a solid triangle, referring to "Existing Properties"; and a hollow triangle, referring to "Properties Under Development". The map is a map of the United States, with the following states outlined and highlighted: Washington, Oregon, Idaho, California, Nevada, Utah, Colorado, Arizona, New Mexico, Oklahoma and Texas. The following cities and county are named on the map, with accompanying stars, solid triangles and hollow triangles (if any) as follows: Seattle (a star and three solid triangles); Portland (a star, seven solid triangles and one hollow triangle); Boise; Sacramento; San Francisco; Fresno; Los Angeles; Orange County; San Diego (two solid triangles); Reno (one hollow triangle); Las Vegas (five solid triangles); Salt Lake City (a star, four solid triangles and one hollow triangle); Denver (a star, seven solid triangles and three hollow triangles); Colorado Springs; Phoenix (a star, seventeen solid triangles and three hollow triangles); Tucson (a star, nine solid triangles and two hollow triangles); Santa Fe (a star, three solid triangles and two hollow triangles); Albuquerque (a star, eight solid triangles and four hollow triangles); Tulsa (one solid triangle); Oklahoma City (two solid triangles); El Paso (a star, twelve solid triangles and two hollow triangles); Dallas (fourteen solid triangles and five hollow triangles); Austin (a star, eight solid triangles and seven hollow triangles); Houston (fifteen solid triangles and seven hollow triangles); and San Antonio (a star, sixteen solid triangles and eight hollow triangles). Below the map and above the two bar graphs is an introduction to the bar graphs: ". . . favorable population and job growth forecasts." Below the introduction is a title for the two bar graphs: "PTR's Pro Forma Primary Target Market Versus U.S. Total". One bar graph is titled "Population Growth Forecast 1994-2015", is marked from 0% to 50% on the left in 5% increments and has two bars labeled "U.S. Total" and "PTR Primary Target Market". The "U.S. Total" bar extends up to 19.2% and has that number written above it. The "PTR Primary Target Market" bar extends up to 39.5% and has that number written above it. The second bar graph is titled "Employment Growth Forecast 1994-2015", is marked from 0% to 50% on the left in 5% increments and has two bars labeled "U.S. Total" and "PTR Primary Target Market". The "U.S. Total" bar extends up to 22.4% and has that number written above it. The "PTR Primary Target Market" bar extends up to 31.5% and has that number written above it. Below the two bar graphs are lines reading "Source: Woods & Poole Economics, Inc. December 1994" and "Pro Forma Primary Target Market: Albuquerque, Austin, Denver, El Paso, Phoenix, Portland, Salt Lake City, San Antonio, Santa Fe, Seattle and Tucson". -----END PRIVACY-ENHANCED MESSAGE-----