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Section 1: 424B5 (424B5)

Table of Contents

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered

 

Amount to be
Registered

 

Proposed Maximum Offering
Price Per Note

 

Proposed Maximum Aggregate
Offering Price

 

Amount of
Registration Fee(1)

 

3.850% Senior Notes due 2029

 

$

325,000,000

 

98.876

%

$

321,347,000

 

$

38,947.26

 

 

 


(1) The filing fee is calculated in accordance with Rules 457(o) and 457(r) of the Securities Act of 1933, as amended.

 


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Filed Pursuant to Rule 424(b)(5)
Registration Statement No. 333-214510

 

 

PROSPECTUS SUPPLEMENT
(To prospectus dated November 8, 2016)

 

GRAPHIC

 

 

$325,000,000
3.850% Senior Notes due 2029

 

Interest payable on January 15 and July 15

 

W. P. Carey Inc. (“W. P. Carey”) is offering $325,000,000 aggregate principal amount of its 3.850% Senior Notes due 2029 (the “notes”). We will pay interest semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2020. The notes will mature on July 15, 2029. However, W. P. Carey may, at its option, redeem the notes, in whole at any time or in part from time to time at the applicable redemption price described in this prospectus supplement under the caption “Description of the notes—Optional redemption.” The notes will be senior unsecured obligations of W. P. Carey and will rank equally in right of payment with all of its other senior unsecured indebtedness from time to time outstanding. The notes will not be entitled to the benefits of, or be subject to, any sinking fund.

 

The notes will be a new issue of securities with no established trading market. We do not intend to apply for listing of the notes on any securities exchange or for quotation of the notes on any automated dealer quotation system.

 

Investing in the notes involves risks. Before making a decision to invest in the notes, you should carefully read the information under the caption “Risk factors” beginning on page S-9 of this prospectus supplement and in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission (the “SEC”) on February 25, 2019, as well as the other information in this prospectus supplement and the accompanying prospectus and in the reports that we file with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are incorporated by reference in this prospectus supplement and the accompanying prospectus.

 

Neither the SEC nor any state or other securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

Public offering price(1)

 

Underwriting discount

 

Proceeds, before
expenses, to us

 

Per note

 

98.876

%

0.650

%

98.226

%

Total

 

$

321,347,000

 

$

2,112,500

 

$

319,234,500

 

 


(1)   Plus accrued interest, if any, from June 14, 2019, if settlement occurs after that date.

 

The underwriters expect to deliver the notes in book-entry form only through the facilities of The Depository Trust Company for the accounts of its participants on or about June 14, 2019.

 

Joint Book-Running Managers

 

Wells Fargo Securities

BofA Merrill Lynch

J.P. Morgan

 

US Bancorp

 

 

 

Co-Managers

 

 

 

 

Fifth Third Securities

Regions Securities LLC

BNY Mellon Capital Markets, LLC

 

The date of this prospectus supplement is June 10, 2019.

 


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Table of contents

 

 

Page

PROSPECTUS SUPPLEMENT

 

ABOUT THIS PROSPECTUS SUPPLEMENT

S-1

FORWARD-LOOKING STATEMENTS

S-3

PROSPECTUS SUPPLEMENT SUMMARY

S-4

THE OFFERING

S-6

RISK FACTORS

S-9

OUR PORTFOLIOS

S-15

DEBT MATURITY SCHEDULE

S-18

USE OF PROCEEDS

S-20

DESCRIPTION OF THE NOTES

S-21

ADDITIONAL MATERIAL FEDERAL INCOME TAX CONSIDERATIONS

S-31

UNDERWRITING (CONFLICTS OF INTEREST)

S-37

LEGAL MATTERS

S-42

EXPERTS

S-43

WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE

S-44

 

 

PROSPECTUS

 

ABOUT THIS PROSPECTUS

1

FORWARD LOOKING STATEMENTS

2

WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE

2

THE REGISTRANTS

4

RISK FACTORS

5

USE OF PROCEEDS

5

RATIO OF EARNINGS TO FIXED CHARGES

5

DESCRIPTION OF CAPITAL STOCK

6

DESCRIPTION OF DEPOSITARY SHARES

12

DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS

12

DESCRIPTION OF WARRANTS

12

DESCRIPTION OF COMPANY DEBT SECURITIES

13

DESCRIPTION OF WPC FINANCE DEBT SECURITIES AND THE GUARANTEE

24

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS RELEVANT TO HOLDERS OF OUR COMMON STOCK

39

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS RELEVANT TO HOLDERS OF OUR DEBT SECURITIES

55

PLAN OF DISTRIBUTION

59

EXPERTS

60

SELLING SECURITYHOLDERS

60

LEGAL MATTERS

60

 


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You should rely only on the information contained in, or incorporated, or deemed to be incorporated, by reference in, this prospectus supplement, the accompanying prospectus or any free writing prospectus prepared by us or on our behalf. We have not, and the underwriters have not, authorized anyone to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus supplement, the accompanying prospectus, any free writing prospectus or the documents incorporated, or deemed to be incorporated, by reference herein or therein is accurate as of any date other than the respective dates of such documents or such other dates as may be specified herein or therein. Our business, financial condition, liquidity, results of operations, adjusted funds from operations (“AFFO”) and prospects may have changed since those respective dates.

 


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About this prospectus supplement

 

We are providing information to you about this offering in two parts. The first part is this prospectus supplement, which gives certain information about us and describes certain terms of the notes and the offer and sale of the notes. The second part, the accompanying prospectus, gives more general information about us and the securities we may offer from time to time, some of which does not apply to the notes or this offering. If there is a conflict between the information about us or the description of the notes or this offering in this prospectus supplement and that provided in the accompanying prospectus, the information about us or the description of the notes or this offering in this prospectus supplement shall control. Additionally, we have incorporated by reference into this prospectus supplement and the accompanying prospectus specified documents that we have filed with the SEC and certain other documents that we may file with the SEC prior to the termination of this offering will be deemed to be incorporated by reference into this prospectus supplement and the accompanying prospectus. This means that we can disclose important information to you by referring you to documents filed by us with the SEC. See “Where You Can Find More Information; Incorporation by Reference” in this prospectus supplement.

 

Any information contained in this prospectus supplement, the accompanying prospectus or any document incorporated, or deemed to be incorporated, by reference herein or therein will be deemed to have been modified or superseded to the extent that a statement subsequently contained in this prospectus supplement or the accompanying prospectus, in any free writing prospectus we may provide to you in connection with this offering, or in any document we file with the SEC under or pursuant to the Exchange Act, that is also incorporated, or deemed to be incorporated, by reference into this prospectus supplement and the accompanying prospectus, modifies or supersedes the original statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to be part of this prospectus supplement or the accompanying prospectus. You should read this prospectus supplement, the accompanying prospectus and any free writing prospectus we may provide to you in connection with this offering, together with the documents incorporated, or deemed to be incorporated, by reference into this prospectus supplement and the accompanying prospectus as described under the caption “Where you can find more information; Incorporation by reference” beginning on page S-44 of this prospectus supplement.

 

You should not consider any information contained, or incorporated, or deemed to be incorporated, by reference in this prospectus supplement or the accompanying prospectus, or in any free writing prospectus, to be investment, accounting, legal or tax advice. You should consult your own counsel, accountants and other advisors for investment, accounting, legal, tax and related advice regarding an investment in the notes. We are not making any representation to you regarding the legality of an investment in the notes by you under applicable investment or similar laws.

 

Unless the context otherwise requires or as otherwise specified, references in this prospectus supplement to “W. P. Carey,” the “Company,” “we,” “us,” or “our” refers to W. P. Carey Inc. and its consolidated subsidiaries and predecessors.

 

Notice to Prospective Investors in the European Economic Area

 

None of this prospectus supplement, the accompanying prospectus nor any related free writing prospectus is a prospectus for the purposes of the Prospectus Directive (as defined below). This prospectus supplement, the accompanying prospectus and any related free writing prospectus have been prepared on the basis that any offer of notes in any Member State of the European Economic Area (the “EEA”) which has implemented the Prospectus Directive (each, a “Relevant Member State”) will only be made to a legal entity which is a qualified investor under the Prospectus Directive (“Qualified Investors”). Accordingly any person making or intending to make an offer in that Relevant Member State of notes which are the subject of the offering contemplated in this prospectus supplement, the accompanying

 

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prospectus and any related free writing prospectus may only do so with respect to Qualified Investors. Neither W. P. Carey Inc. nor the underwriters have authorized, nor do they authorize, the making of any offer of notes other than to Qualified Investors. The expression “Prospectus Directive” means Directive 2003/71/EC (as amended or superseded), and includes any relevant implementing measure in the Relevant Member State.

 

PROHIBITION OF SALES TO EEA RETAIL INVESTORS — The notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the EEA.  For these purposes, a retail investor means a person who is one (or more) of:  (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID II”); or (ii) a customer within the meaning of Directive (EU) 2016/97, as amended or superseded (the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Directive. Consequently no key information document required by Regulation (EU) No 1286/2014, as amended (the “PRIIPs Regulation”) for offering or selling the notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.

 

Notice to Prospective Investors in the United Kingdom

 

The communication of this prospectus supplement, the accompanying prospectus, any related free writing prospectus and any other document or materials relating to the issue of the notes offered hereby is not being made, and such documents and/or materials have not been approved, by an authorized person for the purposes of section 21 of the United Kingdom’s Financial Services and Markets Act 2000, as amended (the “FSMA”). Accordingly, such documents and/or materials are not being distributed to, and must not be passed on to, the general public in the United Kingdom. The communication of such documents and/or materials as a financial promotion is only being made to those persons in the United Kingdom who have professional experience in matters relating to investments and who fall within the definition of investment professionals (as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Financial Promotion Order”)), or who fall within Article 49(2)(a) to (d) of the Financial Promotion Order, or who are any other persons to whom it may otherwise lawfully be made under the Financial Promotion Order (all such persons together being referred to as “relevant persons”). In the United Kingdom, the notes offered hereby are only available to, and any investment or investment activity to which this prospectus supplement, the accompanying prospectus and any related free writing prospectus relates will be engaged in only with, relevant persons.  Any person in the United Kingdom that is not a relevant person should not act or rely on this prospectus supplement, the accompanying prospectus or any related free writing prospectus or any of their contents.

 

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Forward-looking statements

 

This prospectus supplement, the accompanying prospectus, and the documents incorporated, or deemed to be incorporated, by reference herein and therein contain statements that are based on our current expectations, our estimates and forecasts, our projections about our future performance, our expectations for our business, our beliefs and our management’s assumptions and other matters, and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act. These forward-looking statements include, but are not limited to: statements regarding: the impact of our merger with Corporate Property Associates 17 — Global Incorporated and the potential UPREIT reorganization; our expected range of AFFO; the amount and timing of any future dividends; statements regarding our corporate strategy and estimated or future economic performance and results, including our projected assets under management, underlying assumptions about our portfolio (e.g., occupancy rate, lease terms, and tenant credit quality, including our expectations about tenant bankruptcies and interest coverage), possible new acquisitions and dispositions, and our international exposure (including the effect of the United Kingdom’s planned departure from the European Union); our capital structure, future capital expenditure levels (including any plans to fund our future liquidity needs), and future leverage and debt service obligations; capital markets, including our credit ratings and ability to sell debt in the public or private markets, including the notes offered hereby and the use of proceeds therefrom; the outlook for the investment programs that we manage, including their earnings, as well as possible liquidity events for those programs; statements that we make regarding our ability to remain qualified for taxation as a REIT and the Tax Cuts and Jobs Act; the impact of recently issued accounting pronouncements; other regulatory activity, such as the General Data Protection Regulation in the European Union or other data privacy initiatives; and the general economic outlook. Forward-looking statements are generally identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result” and similar expressions. Actual results could differ materially from those contemplated by these forward-looking statements as a result of many factors

 

The information under the caption “Risk factors” beginning on page S-9 of this prospectus supplement and in our Annual Report on Form 10-K for the year ended December 31, 2018, as well as any additional information and risks that we disclose in reports and other information that we file with the SEC pursuant to the Exchange Act, which are incorporated or deemed to be incorporated by reference in this prospectus supplement and the accompanying prospectus and in any related free writing prospectus prepared by us or on our behalf, identify important factors with respect to forward-looking statements, including certain risks and uncertainties that could cause actual results to differ materially from those contemplated by such forward-looking statements. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also materially and adversely affect us. Should any known or unknown risks and uncertainties develop into actual events, those developments could have a material adverse effect on our business, financial condition, liquidity, results of operations, AFFO and prospects.

 

In light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking statements contained in this prospectus supplement, the accompanying prospectus and the documents incorporated or deemed to be incorporated by reference herein and therein will in fact transpire. Moreover, because we operate in a very competitive and rapidly changing environment, new risk factors are likely to emerge from time to time. Given these risks and uncertainties, potential investors are cautioned not to place undue reliance on forward-looking statements as a prediction of future results. We do not undertake any obligation to update or revise any forward-looking statements except as required by applicable law. All subsequent forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.

 

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Prospectus supplement summary

 

The following summary highlights information more fully described elsewhere or incorporated, or deemed to be incorporated, by reference in this prospectus supplement and the accompanying prospectus. This summary is not complete and does not contain all of the information that may be important to you. Before making a decision to invest in the notes, you should carefully read this entire prospectus supplement, including the matters set forth under the caption “Risk factors” beginning on page S-9, the accompanying prospectus, any free writing prospectus we may provide to you in connection with this offering, and the documents incorporated, or deemed to be incorporated, by reference in this prospectus supplement and the accompanying prospectus. This summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere or incorporated, or deemed to be incorporated, by reference in this prospectus supplement and the accompanying prospectus.

 

The Company

 

W. P. Carey Inc., together with its consolidated subsidiaries (“W. P. Carey”), is an internally-managed diversified REIT and a leading owner of commercial real estate, net-leased to companies located primarily in the United States and Northern and Western Europe on a long-term basis. Our revenues largely consist of lease revenue provided by our real estate portfolio. As of March 31, 2019, we owned a diversified investment portfolio that included full or partial ownership interests in 1,168 net-leased properties, with an occupancy rate of 98.2% and a weighted average lease term of 10.2 years. Our net-leased real estate portfolio is diversified by geography, tenant, asset type and tenant industry. It is primarily composed of single-tenant industrial, warehouse, office and retail facilities that are essential to our corporate tenants’ operations. The majority of W. P. Carey’s leases specifies a base rent with scheduled rent increases (either tied to inflation or fixed) and require the tenant to pay substantially all of the costs associated with operating and maintaining the property.

 

In addition to the lease revenues from our real estate portfolio, we earn fee revenue by advising certain non-traded public and private investment programs through our investment management business (the “Managed Programs”). In June 2017, we exited non-traded retail fundraising activities and no longer sponsor new investment programs. On October 31, 2018, we acquired one of our former investment programs, Corporate Property Associates 17 — Global Incorporated, for approximately $5.9 billion. As of March 31, 2019, we managed approximately $7.6 billion of total assets on behalf of the Managed Programs. We currently expect to continue to manage all existing Managed Programs through the end of their respective life cycles.

 

Recent developments

 

At-the-Market (“ATM”) equity issuance

 

In the three months ended March 31, 2019, we utilized our “at-the-market” program (“ATM”), issuing 4,053,623 shares of common stock at a weighted-average price of $76.17 per share, for net proceeds of approximately $303.8 million. Subsequent to quarter end through May 31, 2019, we issued 823,108 shares of common stock under the ATM program at a weighted-average price of $78.45 per share, for net proceeds of approximately $63.6 million. Proceeds were primarily used to repay debt, including secured mortgage debt, and to fund acquisitions.

 

Secured Debt Repayment Activity

 

In the three months ended March 31, 2019, we prepaid $199.6 million of secured mortgage debt with a weighted average interest rate of 4.93%, and repaid $18.8 million of secured mortgage debt with a weighted average interest rate of 5.99% at maturity.  Subsequent to quarter end through May 31, 2019, we prepaid $272.1

 

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million of our secured mortgage debt outstanding with a weighted average interest rate of 5.04% on certain operating and net lease properties. The total ABR associated with debt repaid during the three months ended March 31, 2019 and subsequent to quarter end through May 31, 2019 on our net lease properties was approximately $53 million. These prepayments and repayments were primarily funded with proceeds received from issuance under our ATM program and amounts drawn on our unsecured revolving credit facility, which provides for up to $1.5 billion in borrowings and matures in February 2021, subject to two six-month extension options (subject to the satisfaction of the conditions set forth in the underlying documentation) (the “Unsecured Revolving Credit Facility”).

 

As of May 31, 2019, the amount outstanding under our Unsecured Revolving Credit Facility was approximately $409 million, which included USD borrowings of $300 million, euro-denominated borrowings of $87 million and JPY borrowings of $22 million.

 

Investment and Disposition Activity

 

In the three months ended March 31, 2019, we completed investments totaling $240 million, which consisted of (i) five properties totaling approximately 1.5 million square feet for an aggregate purchase price of $188 million, and (ii) two completed capital investment projects totaling 1.1 million square feet for an aggregate cost of $52 million. The completed investments have a weighted average lease term of 20 years. Subsequent to quarter end through May 31, 2019, we completed two investments, consisting of ten properties totaling approximately 672,000 square feet, for an aggregate cost of $34.7 million, with a weighted average lease term of 20 years. Since the beginning of 2018 through May 31, 2019, we have completed investments totaling $1.2 billion.

 

As of March 31, 2019, we had eight active capital investment projects, with a total commitment of $197 million.  Subsequent to quarter end through May 31, 2019, we entered into one additional capital investment project, with a total commitment of $17 million, and completed two capital investment projects with a total development cost of approximately $26 million. All seven remaining capital investment projects are unencumbered and are expected to have a weighted average lease term of 21 years.  The commencement date, completion date and final cost of these seven capital investment projects are subject to various factors, and we can make no assurances regarding the ultimate timing, cost or terms of such projects.

 

We disposed of one property in the three months ended March 31, 2019 for approximately $5 million. Subsequent to quarter end through May 31, 2019, we disposed of an additional five properties for approximately $8 million.

 

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The offering

 

The following summary contains basic information about the notes and is not intended to be complete. It does not contain all the information that is important to you. For a more complete understanding of the notes, please refer to the sections entitled “Description of the notes” in this prospectus supplement and “Description of Company Debt Securities”  in the accompanying prospectus.

 

Issuer

 

W. P. Carey Inc.

 

 

 

Securities offered

 

$325,000,000 aggregate principal amount of 3.850% Senior Notes due 2029.

 

 

 

Stated maturity date

 

Unless redeemed earlier, the notes will mature on July 15, 2029.

 

 

 

Interest rate

 

The notes will bear interest at 3.850% per year, accruing from June 14, 2019.

 

 

 

Interest payment dates

 

January 15 and July 15 of each year, beginning on January 15, 2020.

 

 

 

Optional redemption

 

The notes will be redeemable, at the Company’s sole option, in whole at any time or in part from time to time, in each case prior to April 15, 2029 (three months prior to the stated maturity date of the notes (the “Par Call Date”)), for cash, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes to be redeemed or (ii) a “make-whole” amount, plus, in each case, unpaid interest, if any, accrued to, but not including, the date of redemption. See “Description of the notes—Optional redemption” in this prospectus supplement.

 

 

 

 

 

In addition, at any time on or after the Par Call Date, the notes will be redeemable, at the Company’s sole option, in whole at any time or in part from time to time, for cash, at a redemption price equal to 100% of the principal amount of the notes to be redeemed plus unpaid interest, if any, accrued to, but not including, the date of redemption.

 

 

 

Use of proceeds

 

We estimate that the net proceeds from the sale of the notes offered by this prospectus supplement, after deducting the underwriting discount and other estimated expenses payable by us, will be approximately $318.5 million. We intend to use the net proceeds from this offering to reduce amounts outstanding under our Unsecured Revolving Credit Facility, which was used in part to repay secured mortgage debt outstanding. See “Use of proceeds” in this prospectus supplement.

 

Certain of the underwriters or their affiliates are lenders under our Unsecured Revolving Credit Facility and will receive their proportionate share of the net proceeds from this offering used to reduce such indebtedness. See “Underwriting (Conflicts of interest)—Conflicts of interest.”

 

 

 

Restrictive covenants

 

The indenture contains covenants that require the Company to maintain at all times a specified ratio of unencumbered assets to unsecured debt and limit the Company from incurring secured and unsecured indebtedness. However, those covenants are subject to significant exceptions. In addition, our ability to consummate a merger, consolidation or a transfer of all or substantially all of our consolidated assets to another person is limited

 

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unless certain conditions are satisfied. For additional information, see “Description of the notes—Certain covenants” in this prospectus supplement and “Description of Company Debt Securities—Merger, Consolidation and Transfer of Assets” in the accompanying prospectus.

 

 

 

Information rights

 

For so long as any notes are outstanding, if we are subject to Section 13(a) or 15(d) of the Exchange Act or any successor provision, we will deliver to the trustee the annual reports, quarterly reports and other documents which we are required to file with the SEC pursuant to Section 13(a) or 15(d) or any successor provision, within 15 days after the date that we file the same with the SEC. If we are not subject to Section 13(a) or 15(d) of the Exchange Act or any successor provision, and for so long as any notes are outstanding, we will deliver to the trustee the quarterly and annual financial statements and accompanying Item 303 of Regulation S-K (“management’s discussion and analysis of financial condition and results of operations”) disclosure that would be required to be contained in annual reports on Form 10-K and quarterly reports on Form 10-Q required to be filed with the SEC if we were subject to Section 13(a) or 15(d) of the Exchange Act or any successor provision, within 15 days of the filing date that would be applicable to us at that time pursuant to applicable SEC rules and regulations.

 

 

 

 

 

Reports and other documents filed with the SEC via the EDGAR system will be deemed to be delivered to the trustee as of the time of such filing via EDGAR for purposes of this covenant; provided, however, that the trustee shall have no obligation whatsoever to determine whether or not such information, documents or reports have been filed via EDGAR. Delivery of such reports, information and documents to the trustee is for informational purposes only and the trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including its compliance with any of its covenants relating to the notes (as to which the trustee is entitled to rely exclusively on an officers’ certificate).

 

 

 

Ranking

 

The notes will be senior unsecured obligations of the Company will rank equally in right of payment with all of the Company’s other senior unsecured indebtedness from time to time outstanding and effectively junior to (i) all of the indebtedness and other liabilities, whether secured or unsecured, and any preferred equity of the Company’s subsidiaries and (ii) all of the Company’s indebtedness that is secured by the Company’s assets to the extent of the value of the collateral securing such indebtedness.

 

 

 

 

 

As of March 31, 2019, the Company had consolidated indebtedness of $6.1 billion outstanding, of which (i) $3.6  billion was senior unsecured indebtedness issued by the Company that will rank equally in right of payment with the notes; and (ii) $2.5  billion was secured indebtedness issued by certain of the Company’s subsidiaries that will rank senior in right of payment to the notes to the extent of the value of the collateral securing such indebtedness and will be structurally senior to the notes. As of such date, we did not have any outstanding preferred equity.

 

 

 

Further issuances

 

The Company may, from time to time, without notice to or the consent of the holders of the notes, increase the principal amount of the notes and issue such additional debt securities, in which case any additional debt securities so issued will have the same form and terms (other than the date of issuance, public offering price and, under certain circumstances, the date from which interest thereon will begin to accrue and the initial interest payment date), and will carry the same right to receive accrued and unpaid interest, as the notes and such additional debt securities will form a single series of debt securities under the indenture with the notes.

 

 

 

No public market

 

The notes will be a new issue of securities with no established trading market. We do not intend to apply for listing of the notes on any securities exchange or for quotation of the notes on any automated dealer quotation system. The underwriters have advised us that they intend to make a market in the notes after the offering of the notes is completed, but they are not obligated to do so and may discontinue any market-making at any time without notice to,

 

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or the consent of, the noteholders.

 

 

 

Book-entry form

 

The notes will be issued in book-entry only form and will be represented by one or more permanent global certificates deposited with a custodian for, and registered in the name of a nominee of, The Depository Trust Company, commonly known as DTC, in New York, New York. Beneficial interests in the global certificates representing the notes will be shown on, and transfers will be effected only through, records maintained by DTC and its direct and indirect participants and such interests may not be exchanged for certificated notes, except in limited circumstances.

 

 

 

Risk factors

 

You should carefully read the “Risk factors” beginning on page S-9 of this prospectus supplement and in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 25, 2019, as well as all other information, in each case included and incorporated, or deemed to be incorporated, by reference in this prospectus supplement and the accompanying prospectus, before making a decision to invest in the notes.

 

 

 

Trustee

 

U.S. Bank National Association

 

 

 

Governing law

 

State of New York

 

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Risk factors

 

In addition to the risks incorporated by reference into this prospectus supplement and the accompanying prospectus from our Annual Report on Form 10-K for the year ended December 31, 2018, which has been filed with the SEC, and the other information included or incorporated, or deemed to be incorporated, by reference in this prospectus supplement and the accompanying prospectus, you should carefully consider the following risk factors before making a decision to invest in the notes. The risks and uncertainties included or incorporated or deemed to be incorporated by reference in this prospectus supplement and the accompanying prospectus are those that we currently believe may materially affect our company. Additional risks not presently known or that are currently deemed immaterial could also materially and adversely affect our business, financial condition, liquidity, results of operations, AFFO and prospects. The realization of any of these risks could have a material adverse effect on our business, financial condition, liquidity, results of operations, AFFO and prospects, as well as our ability to service our indebtedness, including the notes. In addition, the market price of your notes could be adversely affected, potentially significantly, and you could lose all or a substantial part of your investment in the notes.

 

We may not be able to meet all of our debt service obligations, including those under the notes, and our existing debt obligations.

 

As of March 31, 2019, we had indebtedness and other liabilities of $7.1 billion outstanding, of which $6.1 billion represented our total secured and unsecured indebtedness. Our level of indebtedness and the limitations imposed on us by our debt agreements could have significant adverse consequences to holders of the notes, including the following:

 

·                  our cash flow may be insufficient to meet our debt service obligations with respect to the notes and our other indebtedness, which would enable lenders and other debtholders to accelerate the maturity of their indebtedness, or may be insufficient to fund other important business uses after meeting such obligations;

 

·                  we may violate restrictive covenants in our debt agreements, which would entitle lenders and other debtholders to accelerate the maturity of their indebtedness;

 

·                  debt service requirements and financial covenants relating to our indebtedness may limit our ability to maintain our REIT qualification;

 

·                  we may be unable to hedge our debt, counterparties may fail to honor their obligations under any of our hedge agreements, such agreements may not effectively hedge interest rate or currency fluctuation risk, and, upon the expiration of any of our hedge agreements, we would be exposed to then-existing market rates of interest or currency exchange rates and future rate volatility;

 

·                  we may be unable to refinance our indebtedness at maturity or earlier acceleration, if applicable, or the refinancing terms may be less favorable than the terms of our original indebtedness or otherwise be generally unfavorable;

 

·                  because a portion of our debt bears interest at variable rates, increases in interest rates could materially increase our interest expense;

 

·                  we may be forced to dispose of one or more of our properties, possibly on disadvantageous terms;

 

·                  upon any default on our secured indebtedness, the lenders may foreclose on our properties or our interests in the entities that own the properties that secure such indebtedness and receive an assignment of rents and leases; and

 

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·                  we may be unable to raise additional funds as needed or on favorable terms, which could, among other things, adversely affect our ability to capitalize upon acquisition opportunities or meet operational needs.

 

If any one of these events were to occur, our business, financial condition, liquidity, results of operations, AFFO and prospects, as well as our ability to satisfy our debt obligations, including those under the notes, could be materially and adversely affected. Furthermore, foreclosures could create taxable income without accompanying cash proceeds, a circumstance that could hinder the Company’s ability to meet the REIT distribution requirements imposed by the Internal Revenue Code of 1986, as amended (the “Code”).

 

The effective subordination of the notes may limit our ability to meet all of our debt service obligations, including those under the notes.

 

The notes will be our senior unsecured obligations and will rank equally in right of payment with all of our other senior unsecured indebtedness. However, the notes will be effectively junior in right of payment to all of our secured indebtedness to the extent of the value of the collateral securing such indebtedness. As of March 31, 2019, subsidiaries of the Company had $2.5 billion of secured indebtedness outstanding. While the indenture governing the notes will limit our ability to incur secured indebtedness in the future, it will not prohibit us from incurring such indebtedness if we and our subsidiaries are in compliance with certain financial ratios and other requirements at the time of its incurrence. In the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding with respect to us, the holders of any secured indebtedness will be entitled to proceed directly against the collateral that secures the secured indebtedness. Therefore, such collateral will not be available for satisfaction of any amounts owed under our unsecured indebtedness, including the notes, until such secured indebtedness is satisfied in full.

 

The notes also will be effectively junior to all indebtedness and other liabilities, whether secured or unsecured, and any preferred equity of our subsidiaries, which is particularly important since we have no significant operations or assets other than our equity interests in our subsidiaries. In the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding with respect to any of our subsidiaries, we, as a common equity owner of such subsidiary, and therefore holders of our debt, including the notes, will be subject to the prior claims of such subsidiary’s creditors, including trade creditors, and preferred equity holders. As of March 31, 2019, the subsidiaries of the Company had approximately $2.5 billion of secured indebtedness outstanding and no preferred equity. Furthermore, while the indenture governing the notes will limit the ability of our subsidiaries to incur additional indebtedness in the future, it will not prohibit our subsidiaries from incurring such indebtedness if we and our subsidiaries are in compliance with certain financial ratios and other requirements at the time of its incurrence.

 

We may not be able to generate sufficient cash flow to meet all of our debt service obligations, including those under the notes.

 

Our ability to meet all of our debt service obligations, including those under the notes, to refinance our indebtedness, including the notes, and to fund our operations, working capital, acquisitions, capital expenditures and other business uses, depends on our ability to generate sufficient cash flow in the future. To a certain extent, our cash flow is subject to general economic, industry, financial, competitive, operating, legislative, regulatory and other factors, many of which are beyond our control.

 

We cannot assure you that our business will generate sufficient cash flow from operations or that future sources of cash will be available to us on favorable terms, or at all, in an amount sufficient to enable us to meet all of our debt service obligations, including those under the notes, or to fund our other business needs. Furthermore, if we incur additional indebtedness in connection with future acquisitions or development projects or for any other purpose, our debt service obligations could increase significantly and our ability to meet those obligations could depend, in large part, on the returns from such acquisitions or projects, as to which no assurance can be given.

 

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We may need to refinance all or a portion of our indebtedness, including the notes, at or prior to maturity. Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things:

 

·                  our business, financial condition, liquidity, results of operations, AFFO and prospects, our credit ratings and outlook and market conditions at the time; and

 

·                  restrictions in the agreements governing our indebtedness.

 

As a result, we may not be able to refinance any of our indebtedness, including the notes, or obtain additional financing on favorable terms, or at all.

 

If we do not generate sufficient cash flow from operations, and additional borrowings or refinancings are not available to us, we may be unable to meet all of our debt service obligations, including those under the notes. As a result, we would be forced to take other actions to meet those obligations, such as selling properties, raising equity or delaying capital expenditures, any of which could have a material adverse effect on us. Furthermore, we cannot assure you that we will be able to effect any of these actions on favorable terms, or at all.

 

We may incur significantly more indebtedness in the future, which would exacerbate any or all of the risks described herein.

 

We may incur substantial additional indebtedness in the future. Although the agreements governing our indebtedness, including the indenture governing the notes will, limit our ability to incur additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions could be substantial. To the extent that we incur substantial additional indebtedness in the future, the risks associated with our substantial leverage described herein, including our inability to meet all of our debt service obligations, including those under the notes, would be exacerbated.

 

The indenture governing the notes contains restrictive covenants that restrict our ability to expand or fully pursue our business strategies.

 

The indenture governing the notes contains financial and operating covenants that, among other things, will restrict our ability to take specific actions, even if we believe them to be in our best interest, including (subject to various exceptions) restrictions on our ability to consummate a merger, consolidation or a transfer of all or substantially all of our consolidated assets to another person.

 

In addition, our current debt agreements require us to meet specified financial ratios and the indenture governing the notes requires us to limit the amount of our total debt and the amount of our secured debt before incurring new debt, to maintain at all times a specified ratio of unencumbered assets to unsecured debt and to meet a debt service coverage ratio before incurring new debt. These covenants may restrict our ability to expand or fully pursue our business strategies. Our ability to comply with these and other provisions of our debt agreements may be affected by changes in our operating and financial performance, changes in general business and economic conditions, adverse regulatory developments or other events beyond our control. The breach of any of these covenants could result in a default under our indebtedness, which could result in the acceleration of the maturity of such indebtedness and potentially other indebtedness. If any of our indebtedness is accelerated prior to maturity, we may not be able to repay such indebtedness or refinance such indebtedness on favorable terms, or at all.

 

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If we consummate the UPREIT Reorganization and the Operating Partnership issues a guarantee with respect to the notes, under specific circumstances, the guarantee could be void and holders of notes could be required to return any payments received from the Operating Partnership.

 

We currently intend to reorganize (the “UPREIT Reorganization”) into an umbrella partnership real estate investment trust (an “UPREIT”). In connection therewith, we intend to convert WPC Holdco LLC, our direct wholly-owned subsidiary that currently owns all or substantially all of our assets, into a limited partnership (the “Operating Partnership”). Following the consummation of the UPREIT Reorganization, we would initially own all or substantially all of the equity interests in the Operating Partnership, including all of the non-economic equity interests of the general partner thereof, and the Operating Partnership is expected to own all or substantially all of the assets that we and WPC Holdco LLC owned prior to the UPREIT Reorganization. We believe the UPREIT structure will provide us with multiple benefits, including flexibility to acquire assets using units of the Operating Partnership, which would be a tax-deferred currency. There can be no assurance if or when the UPREIT Reorganization will occur. Under certain circumstances, the Operating Partnership may be required to execute a guarantee in favor of the notes. See “Description of the notes—Possible Future Guarantee.”

 

Under U.S. federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee, such as the guarantee that may be issued by the Operating Partnership under certain circumstances in respect of the notes, could be voided, or claims in respect of a guarantee could be subordinated to all other debts of a guarantor if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by its guarantee, received less than reasonably equivalent value or fair consideration for the incurrence of the guarantee, and one of the following is true:

 

·                  it was insolvent or rendered insolvent by reason of the incurrence of the guarantee;

·                  it was engaged in a business or transaction for which the guarantor’s remaining assets constituted unreasonably small capital; or

·                  it intended to incur, or believed that it would incur, debts beyond its ability to pay those debts as they mature.

 

In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to a fund for the benefit of the creditors of the guarantor.

 

The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if:

 

·                  the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets;

·                  the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they became absolute and mature; or

·                  it could not pay its debts as they become due.

 

A court might also void such guarantee, without regard to the above factors, if it found that a guarantor entered into its guarantee with actual or deemed intent to hinder, delay, or defraud its creditors.

 

A court would likely find that a guarantor did not receive reasonably equivalent value or fair consideration for its guarantee unless it benefited from the issuance of the notes. If a court voided such guarantee, holders of the notes would no longer have a claim against such guarantor. In addition, the court might direct holders of the notes to repay any amounts already received from a guarantor. If the court were to void such guarantee, we cannot assure you that funds would be available to pay the notes from us or from any other source.

 

Accordingly, if we consummate the UPREIT Reorganization and the Operating Partnership issues a guarantee with respect to the notes, it is possible that the Operating Partnership’s obligations under the guarantee could be voided, or claims in respect of any such guarantee could be subordinated to all other debts of the Operating Partnership, or any payments made by the Operating Partnership pursuant to the guarantee could be required to be returned to the Operating Partnership. The risk that a guarantee provided by the Operating Partnership in the future may be voided or otherwise impaired may be exacerbated due to the fact that any such guarantee would be issued after the issuance of the notes and in relation to debt issued by the Operating Partnership’s parent entity, making it more likely that a court would find that the Operating Partnership did not receive reasonably equivalent value or fair consideration for its guarantee or that it did not benefit from the issuance of the notes.

 

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There is no prior market for the notes, so if an active trading market does not develop or is not maintained for the notes, you may not be able to resell them on favorable terms when desired, or at all.

 

The notes will be a new issue of securities with no established trading market. We cannot assure you that an active trading market will ever develop for the notes or, if one develops, will be maintained. Furthermore, we do not intend to apply for listing of the notes on any securities exchange or for quotation of the notes on any automated dealer quotation system. The underwriters have informed us that they currently intend to make a market in the notes after the offering of the notes is completed. However, the underwriters may cease their market making at any time without notice to or the consent of existing noteholders. The lack of an active trading market could adversely affect your ability to sell the notes when desired, or at all, and the price at which you may be able to sell the notes. The liquidity of the trading market, if any, and the future market price of the notes will depend on many factors, including, among other things, prevailing interest rates, our business, financial condition, liquidity, results of operations, AFFO and prospects, our credit ratings and outlook, the market for similar securities and the overall securities market, and may be adversely affected by unfavorable changes in these factors. It is possible that the market for the notes will be subject to disruptions, which may have a negative effect on the holders of the notes, regardless of our business, financial condition, liquidity, results of operations, AFFO or prospects.

 

The market price of the notes may be volatile.

 

The market price of the notes may be volatile and be subject to wide fluctuations. The market price of the notes may fluctuate as a result of factors that are beyond our control or unrelated to our historical and projected business, financial condition, liquidity, results of operations, AFFO and prospects. It is impossible to assure investors that the market price of the notes will not fall in the future, and it may be difficult for investors to resell the notes at prices they find attractive, or at all.

 

Volatility and disruption in capital markets could materially and adversely impact us.

 

The capital markets may experience extreme volatility and disruption, which could make it more difficult to raise capital. If we cannot access capital or if we cannot access capital upon favorable terms, we may be required to liquidate one or more investments in properties at times that may not permit us to realize the maximum return on those investments, which could also result in adverse tax consequences to us and adversely affect our ability to capitalize on acquisition opportunities and meet our operational needs. Moreover, market turmoil could lead to an increased lack of consumer confidence and widespread reduction of business activity generally, which may materially and adversely impact us, including our ability to acquire and dispose of properties.

 

An increase in interest rates could result in a decrease in the market price of the notes.

 

In general, as market interest rates rise, notes bearing interest at a fixed rate generally decline in value. Consequently, if you purchase these notes and market interest rates increase, the market price of the notes is likely to decline. We cannot predict the future level of market interest rates.

 

An adverse action to our credit ratings could have a materially adverse effect on us and the market price of the notes.

 

The credit ratings assigned to the notes could change based upon, among other things, our historical and projected business, financial condition, liquidity, results of operations, AFFO and prospects. These ratings are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any rating will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant. Moreover, these credit ratings are not recommendations to buy, sell or hold the notes or any other securities. If any credit rating agency that has rated the notes downgrades or lowers the rating it has

 

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assigned to the notes, or places such rating on a so-called “watch list” for a possible downgrading or lowering, or otherwise indicates that its outlook for such rating is negative, it could have a material adverse effect on the market price of the notes and our cost and availability of capital, which could in turn have a material adverse effect on us and on our ability to satisfy our debt service obligations, and the market price of the notes.

 

Your investment has various U.S. federal income tax risks.

 

Although the provisions of the Code generally relevant to an investment in the notes are described in “Additional material federal income tax considerations” in this prospectus supplement and “Material Federal Income Tax Considerations” in the accompanying prospectus, we urge you to consult your tax advisor concerning the effects of U.S. federal, state, local and foreign tax laws on you with regard to an investment in the notes.

 

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Our portfolio

 

As of March 31, 2019, we owned a diversified global investment portfolio that included full or partial ownership interests in 1,168 net-leased properties, with an occupancy rate of 98.2%, $1.1 billion of annualized base rent (“ABR”) and a weighted average remaining lease term of 10.2 years.

 

Geographic diversification

 

Information regarding the geographic diversification of our net-leased properties as of March 31, 2019 is set forth below:

 

(In thousands, except percentages. Pro rata(1).)

 

 

 

W. P. Carey

 

 

 

Total Net Lease

 

Unencumbered Net Lease (2)

 

Region

 

ABR

 

ABR %

 

ABR

 

ABR %

 

U.S.

 

 

 

 

 

 

 

 

 

South

 

$

209,275

 

19.4

%

$

119,211

 

19.1

%

East

 

182,560

 

16.9

%

87,935

 

14.2

%

Midwest

 

157,414

 

14.5

%

87,437

 

14.2

%

West

 

145,075

 

13.4

%

68,373

 

11.1

%

U.S. Total

 

694,324

 

64.2

%

362,956

 

58.6

%

 

 

 

 

 

 

 

 

 

 

Europe

 

 

 

 

 

 

 

 

 

Germany

 

63,690

 

5.9

%

56,264

 

9.1

%

Poland

 

49,644

 

4.6

%

23,445

 

3.8

%

Spain

 

48,948

 

4.5

%

40,686

 

6.6

%

The Netherlands

 

46,817

 

4.3

%

27,588

 

4.4

%

United Kingdom

 

39,412

 

3.6

%

35,122

 

5.7

%

Other (3)

 

120,178

 

11.2

%

53,837

 

8.7

%

Europe Total

 

368,689

 

34.1

%

236,942

 

38.3

%

 

 

 

 

 

 

 

 

 

 

Other International (4)

 

18,909

 

1.7

%

18,909

 

3.1

%

Total

 

$

1,081,922

 

100.0

%

$

618,807

 

100.0

%

 


(1)   This table contains certain metrics prepared under the pro rata consolidation method, as defined in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.

 

(2)   Represents properties unencumbered by mortgage debt.

 

(3)   Includes assets in Italy, France, Denmark, Finland, Croatia, Lithuania, Norway, Hungary, Austria, Portugal, Czech Republic, Slovakia, Latvia, Sweden, Belgium, and Estonia.

 

(4)   Includes assets in Canada, Mexico, and Japan.

 

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Property type diversification

 

Information regarding the property diversification of our net-leased properties as of March 31, 2019 is set forth below:

 

(In thousands, except percentages. Pro rata(1).)

 

 

 

W. P. Carey

 

 

 

Total Net Lease

 

Unencumbered Net Lease (2)

 

Region

 

ABR

 

ABR %

 

ABR

 

ABR %

 

U.S.

 

 

 

 

 

 

 

 

 

Office

 

$

189,064

 

17.5

%

$

71,251

 

11.5

%

Industrial

 

189,268

 

17.5

%

112,753

 

18.2

%

Warehouse

 

136,601

 

12.6

%

54,615

 

8.8

%

Retail

 

44,485

 

4.1

%

31,894

 

5.2

%

Other

 

134,906

 

12.5

%

92,443

 

14.9

%

U.S. Total

 

694,324

 

64.2

%

362,956

 

58.6

%

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

Office

 

89,712

 

8.3

%

51,968

 

8.4

%

Industrial

 

62,166

 

5.7

%

52,241

 

8.5

%

Warehouse

 

90,130

 

8.3

%

45,064

 

7.3

%

Retail

 

145,580

 

13.5

%

106,578

 

17.2

%

Other

 

10

 

0.0

%

 

0.0

%

International Total

 

387,598

 

35.8

%

255,851

 

41.4

%

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

Office

 

278,776

 

25.8

%

123,219

 

19.9

%

Industrial

 

251,434

 

23.2

%

164,994

 

26.7

%

Warehouse

 

226,731

 

20.9

%

99,679

 

16.1

%

Retail

 

190,065

 

17.6

%

138,472

 

22.4

%

Other (3)

 

134,916

 

12.5

%

92,443

 

14.9

%

Total

 

$

1,081,922

 

100.0

%

$

618,807

 

100.0

%

 


(1)   This table contains certain metrics prepared under the pro rata consolidation method, as defined in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.

 

(2)   Represents properties unencumbered by mortgage debt.

 

(3)   Includes ABR from tenants within the following property types: Education Facility, Self-storage (net lease), Hospitality (net lease), Fitness Facility, Laboratory, Theater and Student Housing (net lease).

 

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Rent escalations

 

Information regarding the contractual rent escalations in the leases relating to our net-leased properties as of March 31, 2019 is set forth below:

 

(In thousands, except percentages. Pro rata(1).)

 

 

 

W. P. Carey

 

 

 

Total Net Lease

 

Unencumbered Net Lease (2)

 

Region

 

ABR

 

ABR %

 

ABR

 

ABR %

 

CPI - Uncapped

 

$

425,992

 

39.4

%

$

252,850

 

40.8

%

Fixed

 

362,145

 

33.5

%

187,269

 

30.3

%

CPI - Capped

 

253,876

 

23.4

%

164,509

 

26.6

%

Other (3)

 

31,111

 

2.9

%

10,302

 

1.7

%

None

 

8,798

 

0.8

%

3,877

 

0.6

%

Total

 

$

1,081,922

 

100.0

%

$

618,807

 

100.0

%

 


(1)   This table contains certain metrics prepared under the pro rata consolidation method, as defined in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.

 

(2)   Represents properties unencumbered by mortgage debt.

 

(3)   Represents leases with participating rent provisions.

 

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Debt maturity schedule

 

Since achieving an investment grade rating from S&P Global Ratings and Moody’s Investors Service, Inc. in 2014, we have generally repaid all maturing mortgages and purchased all new properties unencumbered. As of December 31, 2013, our unencumbered ABR was $153 million, which was 23% of total ABR, and total consolidated mortgage debt was $3.1 billion, or 35.9% of gross assets (pro forma for our acquisition of Corporate Property Associates 16—Global Incorporated on January 31, 2014). As of December 31, 2018, our unencumbered ABR was $565 million, which was 53% of total ABR, and total consolidated mortgage debt was $2.7 billion, or 18.3% of gross assets. As of March 31, 2019, our unencumbered ABR further improved to $619 million, which was 57% of total ABR, and total consolidated mortgage debt was $2.5 billion, or 16.7% of gross assets. Our pro rata weighted average debt maturity was 4.8 years as of March 31, 2019.

 

Information regarding our debt maturities as of March 31, 2019 includes our pro rata share of our consolidated debt and debt incurred by our unconsolidated joint ventures and is set forth below:

 

(Dollars in thousands. Pro rata(1).)

 

 

 

 

W. P. Carey

 

 

 

Real Estate (2)

 

Debt

 

Year of Maturity

 

Number of
Properties

 

ABR

 

WA Interest
Rate

 

Balloon
Payments

 

Total
Outstanding
Balance (4)

 

Percent

 

Non-Recourse Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

2019 (remaining)

 

5

 

$

7,188

 

6.1

%

$

22,724

 

$

23,580

 

0.4

%

2020

 

45

 

93,525

 

4.9

%

507,081

 

533,103

 

8.3

%

2021

 

101

 

99,791

 

4.3

%

561,763

 

605,985

 

9.5

%

2022

 

57

 

100,874

 

4.5

%

537,933

 

595,325

 

9.3

%

2023

 

42

 

73,933

 

3.6

%

367,214

 

413,675

 

6.5

%

2024

 

55

 

47,262

 

4.4

%

202,600

 

267,740

 

4.2

%

2025

 

23

 

20,824

 

6.2

%

139,076

 

180,720

 

2.8

%

2026

 

9

 

12,249

 

6.1

%

31,535

 

55,485

 

0.9

%

2027

 

2

 

3,566

 

4.7

%

21,450

 

31,092

 

0.5

%

2028

 

1

 

2,983

 

7.0

%

 

10,865

 

0.2

%

2031

 

1

 

920

 

6.0

%

 

3,774

 

0.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Pro Rata Non-Recourse Debt

 

341

 

$

463,115

 

4.6

%

$

2,391,376

 

$

2,721,344

 

42.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Unsecured Notes - EUR Bond (due Jan 20, 2023)

 

 

 

 

 

2.0

%

 

 

561,750

 

 

 

Senior Unsecured Notes - USD Bond (due Apr 1, 2024)

 

 

 

 

 

4.6

%

 

 

500,000

 

 

 

Senior Unsecured Notes - EUR Bond (due July 19, 2024)

 

 

 

 

 

2.3

%

 

 

561,750

 

 

 

Senior Unsecured Notes - USD Bond (due Feb 1, 2025)

 

 

 

 

 

4.0

%

 

 

450,000

 

 

 

Senior Unsecured Notes - EUR Bond (due April 9, 2026)

 

 

 

 

 

2.3

%

 

 

561,750

 

 

 

Senior Unsecured Notes - USD Bond (due Oct 1, 2026)

 

 

 

 

 

4.3

%

 

 

350,000

 

 

 

Senior Unsecured Notes - EUR Bond (due April 15, 2027)

 

 

 

 

 

2.1

%

 

 

561,750

 

 

 

Senior Unsecured Notes

 

 

 

 

 

2.9

%

 

 

3,547,000

 

55.6

%

Senior Unsecured Credit Facility - Revolver (3)

 

 

 

 

 

1.7

%

 

 

106,899

 

1.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Recourse Debt

 

 

 

 

 

2.9

%

 

 

3,653,899

 

57.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Pro Rata Debt Outstanding

 

 

 

 

 

3.6

%

 

 

$

6,375,243

 

100.0

%

 

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(1)   This table contains certain metrics prepared under the pro rata consolidation method, as defined in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.

 

(2)   Represents the number of properties and ABR associated with the debt that is maturing in each respective year.

 

(3)   Availability under our Unsecured Revolving Credit Facility was $1.4 billion as of March 31, 2019.

 

(4)   Excludes unamortized discount, net totaling $36.1 million and unamortized deferred financing costs totaling $19.9 million as of March 31, 2019.

 

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Use of proceeds

 

We estimate that the net proceeds from the sale of the notes offered hereby, after deducting the underwriting discount and other estimated expenses payable by us, will be approximately $318.5 million.

 

We intend to use the net proceeds from this offering to reduce amounts outstanding under our Unsecured Revolving Credit Facility, which was used in part to repay secured mortgage debt outstanding, and for general corporate purposes. As of May 31, 2019, the amount outstanding under the Unsecured Revolving Credit Facility was approximately $409 million, which included USD borrowings of $300 million, euro borrowings of $87 million and JPY borrowings of $22 million; such total borrowings bore a weighted average interest rate of approximately 2.79% per annum. The Unsecured Revolving Credit Facility matures on February 22, 2021, subject to the Company’s option to extend the maturity by two additional six-month periods (subject to the conditions provided therein).

 

Certain of the underwriters or their affiliates are lenders under our Unsecured Revolving Credit Facility and will receive their proportionate share of the net proceeds from this offering used to reduce such indebtedness. See “Underwriting (Conflicts of interest)—Conflicts of interest.”

 

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Description of the notes

 

The following summary of certain terms of the notes supplements and, to the extent inconsistent, replaces the description in the accompanying prospectus of the general terms and provisions of the Company’s debt securities under the caption “Description of Company Debt Securities,” to which description reference is hereby made. The following summary of certain provisions of the notes and the indenture does not purport to be complete and is qualified in its entirety by reference to the actual provisions of the notes and the indenture. Certain terms used but not defined herein shall have the meanings given to them in the accompanying prospectus, the indenture or the notes, as the case may be. You can find definitions of certain capitalized terms used in this description under “—Certain Covenants—Definitions. As used in this section, “the Company” refers to W. P. Carey Inc., the issuer of the notes, and not to any of its subsidiaries.

 

General

 

The notes will be issued pursuant to an indenture, dated as of March 14, 2014 (the “base indenture”), between the Company and U.S. Bank National Association, as trustee (the “trustee”), as supplemented by a supplemental indenture to be dated as of June 14, 2019 (together with the base indenture, the “indenture”), between the Company and the trustee.  You may request copies of the indenture and the form of the notes from the Company.

 

The notes will be the Company’s senior unsecured obligations and will rank equally in right of payment with all of the Company’s other senior unsecured indebtedness from time to time outstanding.  However, the notes will be effectively junior in right of payment to the Company’s indebtedness that is secured by the Company’s assets to the extent of the value of the collateral securing such indebtedness and to all of the indebtedness and other liabilities, whether secured or unsecured, and any preferred equity of the Company’s subsidiaries.  As of March 31, 2019, the Company had indebtedness and other liabilities of $7.1 billion outstanding, of which $6.1 billion represented the Company’s total secured and unsecured indebtedness.  See “Risk factors” beginning on page S-9 of this prospectus supplement.

 

The notes will initially be limited to an aggregate principal amount of $325,000,000.  The Company may, from time to time, without notice to or the consent of any noteholders, create and issue additional debt securities having the same terms as the notes in all respects, except for the issue date, public offering price and, under certain circumstances, the date from which interest begins to accrue and the first payment of interest thereon, provided that (i) such issuance complies with the covenants described below under “—Certain covenants” and (ii) any additional debt securities must be fungible with the previously outstanding notes for U.S. federal income tax purposes.  Additional debt securities issued in this manner will be consolidated with, and will form a single series of debt securities under the indenture with, the notes.  The notes and any additional debt securities will rank equally and ratably in right of payment and will be treated as a single series of debt securities for all purposes under the indenture.

 

The notes will be issued only in fully registered, book-entry form (except under limited circumstances described herein or in the accompanying prospectus), in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.  The book-entry system is described under “—Book-entry system” below and in the accompanying prospectus under the caption “Description of Company Debt Securities—Book-Entry Procedures.”  The registered holder of a note will be treated as its owner for all purposes under the indenture, regardless of its beneficial ownership.

 

If any interest payment date, the stated maturity date or any redemption date is not a “New York business day,” which the Company defines as any day other than a Saturday, Sunday or other day on which banking institutions in The City of New York are authorized or obligated by law, regulation or executive order to close, the payment otherwise required to be made on such date will be made on the next New York business day without any additional payment as a result of such delay.  All payments will be made in U.S. dollars.

 

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The terms of the notes will provide that the Company is permitted to withhold from interest payments and payments upon the maturity or earlier redemption of notes any amounts it is required to withhold by law.  For example, non-U.S. holders of notes may, under some circumstances, be subject to U.S. federal withholding tax with respect to payments of interest on such notes.

 

Except as described in this prospectus supplement under the caption “—Certain covenants” and in the accompanying prospectus under the caption “Description of Company Debt Securities—Merger, Consolidation and Transfer of Assets,” the indenture will not contain any provisions that would limit the ability of the Company to incur indebtedness or substantially reduce or eliminate its consolidated assets or that would afford holders of the notes protection in the event of:

 

·                  a recapitalization or other highly leveraged or similar transaction involving the Company, any of its subsidiaries or affiliates or its management;

 

·                  a change of control involving the Company or its subsidiaries; or

 

·                  a reorganization, restructuring, merger or similar transaction involving the Company, its subsidiaries or its affiliates.

 

Accordingly, the Company’s ability to service its indebtedness (including the notes) could be materially and adversely affected in the future.  The Company or one of its affiliates may, to the extent permitted by applicable law, at any time purchase notes in the open market, by tender at any price or by private agreement.  Any notes so purchased may not be reissued or resold and will be canceled promptly.

 

Possible Future Guarantee

 

If we consummate the UPREIT Reorganization, we will form the Operating Partnership in connection therewith.  If the Operating Partnership incurs or assumes any recourse Funded Debt (as defined below), or guarantees or otherwise becomes obligated with respect to any other entity’s Funded Debt, then we will cause the Operating Partnership, within 10 business days of such incurrence, assumption, guarantee or other action, to (i) execute and deliver to the trustee a supplemental indenture, in form reasonably satisfactory to the trustee, pursuant to which the Operating Partnership will guarantee all of the payment and other obligations under the notes in a timely manner on a senior unsecured basis on terms consistent with this issuance and (ii) deliver to the trustee an officer’s certificate and an opinion of counsel to the effect that each of such supplemental indenture and such guarantee has been duly authorized, executed and delivered by, and constitutes a valid, legally binding and enforceable obligation of, the Operating Partnership, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws or by general principles of equity.  Under the terms of any such guarantee, holders of the notes will be entitled to proceed directly against the Operating Partnership without exercising their remedies against any other obligor.

 

Any guarantee of notes by the Operating Partnership would rank equally and ratably with all other existing and future unsecured and unsubordinated indebtedness of the Operating Partnership, would rank senior to any subordinated indebtedness of the Operating Partnership that is not secured, and would effectively rank junior to any secured indebtedness of the Operating Partnership to the extent of the value of the collateral securing such indebtedness and to all of the indebtedness and other liabilities, whether secured or unsecured, if any, and any preferred equity of the Operating Partnership’s subsidiaries.

 

If and for so long as the Operating Partnership guarantees the notes, it agrees that it waives and will not in any manner whatsoever claim or take the benefit or advantage of any right of reimbursement, indemnity or subrogation or any other right as a result of any payment by the Operating Partnership under its guarantee until the notes have been paid in full.

 

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The Operating Partnership’s guarantee will be automatically released if (i) we exercise our option to discharge our obligations with respect to the supplemental indenture or the notes, as applicable, as described under “—Defeasance” in this prospectus supplement and under “Description of Company Debt Securities—Discharge, Legal Defeasance and Covenant Defeasance” in the accompanying prospectus, or (ii) the Operating Partnership is no longer obligated on any other Funded Debt.

 

The supplemental indenture will provide that the obligations of the Operating Partnership under its guarantee will be limited as necessary to prevent such guarantee from constituting a fraudulent conveyance or fraudulent transfer under applicable law.  We cannot assure you that this limitation will protect any guarantee from fraudulent conveyance or fraudulent transfer challenges or, if it does, that the remaining amount due and collectible thereunder would suffice, if necessary, to pay the notes in full when due.  See “Risk Factors—If we consummate the UPREIT Reorganization and the Operating Partnership issues a guarantee with respect to the notes, under specific circumstances, the guarantee could be void and holders of notes could be required to return any payments received from the Operating Partnership”

 

Funded Debt” means any indebtedness for borrowed money that is (i) in the form of, or represented by, bonds, notes, debentures or other debt securities and has an aggregate principal amount outstanding of at least $50 million or (ii) incurred pursuant to a credit agreement or other agreement providing for revolving credit loans, term loans or other debt and has an aggregate principal amount outstanding or committed of at least $50 million; excluding, in each instance, indebtedness of the Operating Partnership owed to the Company.

 

Interest

 

Interest on the notes will accrue at the rate of 3.850% per year, from, and including, June 14, 2019 or the most recent interest payment date to which interest has been paid or provided for, as the case may be, and will be payable semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2020 (each, an “interest payment date”).  The interest so payable will be paid to each holder in whose name a note is registered at the close of business on the December 31 or June 30 (whether or not a New York business day) immediately preceding the applicable interest payment date.  Interest on the notes will be computed on the basis of a 360-day year consisting of twelve 30-day months.

 

Principal and maturity

 

The notes will mature on July 15, 2029 (the “stated maturity date”), unless earlier redeemed by the Company at its sole option.  See “—Optional redemption” below.  The principal of each note payable at its maturity or earlier redemption will be paid against presentation and surrender of such note at the corporate trust office of the trustee, or by electronic means, in U.S. dollars.  The notes will not be entitled to the benefits of, or be subject to, any sinking fund.

 

Optional redemption

 

The notes will be redeemable, at the Company’s sole option, in whole at any time or in part from time to time, in each case prior to April 15, 2029 (three months prior to the stated maturity date of the notes (the “Par Call Date”)), for cash, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes to be redeemed or (ii) an amount equal to the sum of the present values of the remaining scheduled payments of principal and interest on the notes to be redeemed that would be due if the notes matured on the Par Call Date (exclusive of unpaid interest accrued to, but not including, the date of redemption) discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 30 basis points, plus, in each case, unpaid interest, if any, accrued to, but not including, the date of redemption.

 

In addition, at any time on or after the Par Call Date, the notes will be redeemable, at the Company’s sole option, in whole at any time or in

 

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part from time to time, for cash, at a redemption price equal to 100% of the aggregate principal amount of the notes to be redeemed, plus unpaid interest, if any, accrued to, but not including, the date of redemption.

 

Notwithstanding the foregoing, interest will be payable to holders of the notes on the regular record date applicable to an interest payment date falling on or before a redemption date.

 

The following definitions will apply with respect to the foregoing:

 

Comparable Treasury Issue” means, with respect to any redemption date for the notes, the United States Treasury security selected by the Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the notes to be redeemed (assuming, for this purpose, that the notes matured on the Par Call Date) that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the notes to be redeemed (assuming, for this purpose, that the notes matured on the Par Call Date).

 

Comparable Treasury Price” means, with respect to any redemption date for the notes, (1) the average of three Reference Treasury Dealer Quotations for such redemption date (or date of deposit with the Trustee in the case of a satisfaction and discharge), after excluding the highest and lowest of five Reference Treasury Dealer Quotations, or (2) if the Company obtains fewer than five such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations.

 

Independent Investment Banker” means one of Wells Fargo Securities, LLC, BofA Securities, Inc. and J.P. Morgan Securities LLC and their respective successors, appointed by the Company or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing appointed by the Company.

 

Reference Treasury Dealer” means each of:  (i) Wells Fargo Securities, LLC or its successors (or an affiliate that is a Primary Treasury Dealer(as defined herein)); (ii) BofA Securities, Inc. or its successors (or an affiliate that is a Primary Treasury Dealer); (iii) J.P. Morgan Securities LLC or its successors (or an affiliate that is a Primary Treasury Dealer); and (iv) two other Primary Treasury Dealers selected by the Company; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer (a “Primary Treasury Dealer”), the Company will substitute therefor another Primary Treasury Dealer.

 

Reference Treasury Dealer Quotations” means, with respect to any Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed, in each case, as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third New York business day preceding such redemption date (or date of deposit with the Trustee in the case of a satisfaction and discharge).

 

Treasury Rate” means (1) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated “H.15” or any successor publication that is published weekly by the Board of Governors of the Federal Reserve System and that establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue (provided, however, that if no maturity is within three months before or after the remaining life of the notes, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue will be determined and the Treasury Rate will be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month), or (2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per year equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, in each case

 

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as calculated on the third New York business day preceding the redemption date (or date of deposit with the Trustee in the case of a satisfaction and discharge).

 

In order to exercise its right of optional redemption, the Company (or, at the Company’s request, the trustee on its behalf) must transmit a notice of redemption to each holder of notes to be redeemed at least 30 days but not more than 60 days prior to the redemption date.  Such notice of redemption shall specify the principal amount of notes to be redeemed, the CUSIP and ISIN numbers of the notes to be redeemed, the redemption date, the redemption price, the place or places of payment and that payment will be made upon presentation and surrender of such notes.  Once notice of redemption is delivered to holders, the notes called for redemption will become due and payable on the redemption date at the redemption price.  On or before 10:00 a.m., New York City time, on the redemption date, the Company will deposit with the trustee or with one or more paying agents an amount of money sufficient to redeem on the redemption date all the notes so called for redemption at the redemption price.

 

Unless the Company defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the notes or any portion of the notes called for redemption on the redemption date.

 

If less than all of the notes are to be redeemed, the trustee, upon prior notice from the Company, will select the notes to be redeemed, which, in the case of notes in book-entry form, will be in accordance with the procedures of DTC.  The trustee may select notes and portions of notes in amounts of $2,000 and integral multiples of $1,000 in excess thereof.

 

Certain covenants

 

Limitation on the incurrence of debt

 

The Company will not, and will not permit any of its Subsidiaries to, incur any Debt if, immediately after giving effect to the incurrence of such Debt and the application of the proceeds from such Debt on a pro forma basis, the aggregate principal amount of all of its and its Subsidiaries’ outstanding Debt (determined on a consolidated basis in accordance with GAAP) is greater than 60% of its and its Subsidiaries’ Total Asset Value.

 

As of March 31, 2019, the aggregate principal amount of all of the Company’s and its Subsidiaries’ outstanding Debt (determined on a consolidated basis in accordance with GAAP) was 39.7% of its and its Subsidiaries’ Total Asset Value.

 

Limitation on the incurrence of secured debt

 

The Company will not, and will not permit any of its Subsidiaries to, incur any Debt (including, without limitation, Acquired Debt) secured by any Lien on any of its or any of its Subsidiaries’ property or assets if, immediately after giving effect to the incurrence of such Debt and the application of the proceeds from such Debt on a pro forma basis, the aggregate principal amount of all of its and its Subsidiaries’ outstanding Debt (determined on a consolidated basis in accordance with GAAP) secured by a Lien on any of its or its Subsidiaries’ property or assets is greater than 40% of its and its Subsidiaries’ Total Asset Value.

 

As of March 31, 2019, the aggregate principal amount of all of the Company’s and its Subsidiaries’ outstanding Debt (determined on a consolidated basis in accordance with GAAP) secured by a Lien on any of its or its Subsidiaries’ property or assets was 16.2% of its and its Subsidiaries’ Total Asset Value.

 

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Limitation on the incurrence of debt based on consolidated EBITDA to annual debt service charge

 

The Company will not, and will not permit any of its Subsidiaries to, incur any Debt if, immediately after giving effect to the incurrence of such Debt and the application of the proceeds from such Debt on a pro forma basis, the ratio of Consolidated EBITDA to Annual Debt Service Charge (determined on a consolidated basis in accordance with GAAP) for the period consisting of the four consecutive fiscal quarters most recently ended prior to the date on which such Debt is to be incurred (for which consolidated financial statements have been filed with the SEC on Form 10-K or Form 10-Q, as the case may be, or, if such filing is not permitted under the Exchange Act, with the Trustee) shall have been less than 1.5:1, calculated on the following assumptions:

 

·                  such Debt and any other Debt (including, without limitation, Acquired Debt) incurred by the Company or any of its Subsidiaries since the first day of such four consecutive fiscal quarterly period had been incurred, and the application of the proceeds from such Debt (including to repay or retire other Debt) had occurred, on the first day of such period;

 

·                  the repayment or retirement of any other Debt of the Company or any of its Subsidiaries since the first day of such four consecutive fiscal quarterly period had occurred on the first day of such period (except that, in making this computation, the amount of Debt under any revolving credit facility, line of credit or similar facility will be computed based upon the average daily balance of such Debt during such period); and

 

·                  in the case of any acquisition or disposition by the Company or any of its Subsidiaries of any asset or group of assets with a fair market value in excess of $1.0 million since the first day of such four consecutive fiscal quarterly period, whether by merger, stock purchase or sale or asset purchase or sale or otherwise, such acquisition or disposition 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.

 

If the Debt giving rise to the need to make the calculation described above or any other Debt incurred after the first day of the relevant four-quarter period bears interest at a floating rate, then, for purposes of calculating the Annual Debt Service Charge, the interest rate on such Debt will be computed on a pro forma basis by applying the average daily rate which would have been in effect during the entire such four consecutive fiscal quarterly period to the greater of the amount of such Debt outstanding at the end of such period or the average amount of such Debt outstanding during such period.

 

As of March 31, 2019, the Company’s ratio of Consolidated EBITDA to Annual Debt Service Charge (determined on a consolidated basis in accordance with GAAP) was 4.7x.

 

Maintenance of unencumbered asset value

 

The Company will not have at any time Total Unencumbered Asset Value of less than 150% of the aggregate principal amount of all of its and its Subsidiaries’ outstanding Unsecured Debt (determined on a consolidated basis in accordance with GAAP).

 

As of March 31, 2019, the Company’s Total Unencumbered Asset Value was 239.7% of the aggregate principal amount of all of its and its Subsidiaries’ outstanding Unsecured Debt (determined on a consolidated basis in accordance with GAAP).

 

Calculations in respect of the notes

 

Except as explicitly specified otherwise herein or in the Indenture, the Company will be responsible for making all calculations required under the notes.  The Company will make all these calculations in good faith and, absent manifest error, its calculations will be final and binding on holders of

 

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the notes.  The Company will provide a schedule of its calculations to the trustee, and absent manifest error, the trustee will be entitled to rely upon the accuracy of the Company’s calculations without independent verification.  The trustee will forward the Company’s calculations to any holder of notes upon written request.

 

Definitions

 

As used in the indenture, the following terms have the respective meanings specified below:

 

Acquired Debt” means Debt of a person:

 

·                  existing at the time such person is merged or consolidated with or into the Company or any of its Subsidiaries or becomes a Subsidiary of the Company; or

 

·                  assumed by the Company or any of its Subsidiaries in connection with the acquisition of assets from such person.

 

Acquired Debt shall be deemed to be incurred on the date the acquired person is merged or consolidated with or into the Company or any of its Subsidiaries or becomes a Subsidiary of the Company or the date of the related acquisition, as the case may be.

 

Annual Debt Service Charge” means, for any period, the interest expense of the Company and its Subsidiaries on a pro forma basis for such period (determined on a consolidated basis in accordance with GAAP).

 

Capitalization Rate” means 7.50%.

 

Consolidated EBITDA” means the Net Income (Loss) of the Company and its Subsidiaries on a pro forma basis for the applicable period, plus (a) the sum of the following amounts of the Company and its Subsidiaries on a pro forma basis for such period (determined on a consolidated basis in accordance with GAAP) to the extent included in the determination of such Net Income (Loss):  (i) depreciation expense, (ii) amortization expense and other non-cash charges, (iii) interest expense, (iv) income tax expense, (v) extraordinary losses and other non-recurring charges (and other losses on asset sales not otherwise included in extraordinary losses and other non-recurring charges), (vi) non-controlling interests, and (vii) adjustments as a result of the straight lining of rents, less (b) extraordinary gains (including, without limitation, gains on asset sales and gains resulting from the early extinguishment of indebtedness, in each case not otherwise included in extraordinary gains) of the Company and its Subsidiaries on a pro forma basis for such period (determined on a consolidated basis in accordance with GAAP) to the extent included in the determination of such Net Income (Loss).

 

Debt” means, any indebtedness of the Company or any Subsidiary, whether or not contingent, in respect of:

 

·                  borrowed money or evidenced by bonds, notes, debentures, loan agreements or similar instruments;

 

·                  indebtedness secured by any Lien on any property or asset owned by the Company or any Subsidiary, but only to the extent of the lesser of

 

·                  the amount of indebtedness so secured, and

 

·                  the fair market value (determined in good faith by the board of directors of the Company or a duly authorized committee thereof) of the property subject to such Lien;

 

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·                  reimbursement obligations, contingent or otherwise, in connection with any letters of credit actually issued or amounts representing the balance deferred and unpaid of the purchase price of any property except any such balance that constitutes an accrued expense or trade payable; or

 

·                  any lease of property by the Company or any Subsidiary as lessee which is required to be reflected on the consolidated balance sheet of the Company as a capitalized lease in accordance with GAAP,

 

and also includes, to the extent not otherwise included, any non-contingent obligation of the Company 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 the types referred to above of another person other than the Company or any Subsidiary (it being understood that Debt shall be deemed to be incurred by the Company or any Subsidiary whenever such person shall create, assume, guarantee or otherwise become liable in respect thereof).

 

GAAP” means generally accepted accounting principles in the United States of America as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States of America, that are applicable to the circumstances as of the date of determination, consistently applied.

 

Lease” means a lease, license, concession agreement or other agreement providing for the use or occupancy of any portion of any Project, including all amendments, supplements, modifications and assignments thereof and all side letters or side agreements relating thereto.

 

Lien” means any mortgage, deed of trust, lien, charge, pledge, security interest, security agreement or other encumbrance of any kind.

 

Managed REIT” means a REIT managed or advised by the Company or any of its Subsidiaries.

 

Management Contract” means a management contract or advisory agreement under which the Company or any of its Subsidiaries provides management and advisory services to a third party, consisting of management of properties or provision of advisory services on property acquisition and dispositions, equity and debt placements and related transactional matters.

 

Management Revenues” means, for any period, an amount equal to the aggregate sum of revenues for such period earned by the Company and its Subsidiaries on a pro forma basis from providing management and advisory services under Management Contracts (determined on a consolidated basis in accordance with GAAP), including asset management revenue, performance revenue, structuring revenue, advisor’s participation in cash flow (if any), interest income or any revenue earned as stipulated in a Management Contract and booked for financial reporting purposes, and distributions received for such period related to the ownership of equity in managed funds and Managed REITs but excluding revenue related to reimbursed costs; provided, however, that Management Revenues shall exclude any revenues earned under Management Contracts, or distributions received, by the Company and its Subsidiaries on a pro forma basis from a current Subsidiary that has not been a Subsidiary for the entirety of such period.

 

Net Income (Loss)” means the aggregate of net income (or loss) of the Company and its Subsidiaries on a pro forma basis for the applicable period (determined on a consolidated basis in accordance with GAAP).

 

Project” means any office, industrial/manufacturing facility, educational facility, retail facility, distribution/warehouse facility, assembly or production facility, hotel, day care center, storage facility, health care/hospital facility, restaurant, radio or TV station, broadcasting/communication facility (including

 

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any transmission facility), any combination of any of the foregoing, or any land to be developed into any one or more of the foregoing pursuant to a written agreement with respect to such land for a transaction involving a Lease (or franchise agreement, in the case of a hotel), in each case owned, directly or indirectly, by any of the Company or its Subsidiaries.

 

Property EBITDA” means, for any period, an amount equal to Consolidated EBITDA plus corporate level general and administrative expenses less Management Revenues.

 

REIT” means a domestic trust or corporation that qualifies as a real estate investment trust under the provisions of Sections 856 et seq. of the Code.

 

Subsidiary” means any person (as defined in the indenture but excluding an individual), a majority of the outstanding voting stock, partnership interests, membership interests or other equity interests, as the case may be, of which is owned or controlled, directly or indirectly, by the Company and/or by one or more other Subsidiaries of the Company, as the case may be, that is consolidated in the financial statements of the Company in accordance with GAAP and any other persons that are consolidated with the Company for purposes of GAAP; provided, however, that calculations with respect to a current Subsidiary that has not been a Subsidiary for the entire period covered by such calculation applicable to the notes will be calculated on a pro forma basis as if such Subsidiary was a Subsidiary as of the first day of such period.  For the purposes of this definition, “voting stock, partnership interests, membership interests or other equity interests” means stock or interests having voting power for the election of directors, trustees or managers (or similar members of the governing body of such person), as the case may be, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.

 

Total Asset Value” means, as of any date, the sum of, without duplication:

 

·                  in respect of Projects owned or ground-leased by the Company and its Subsidiaries for at least four fiscal quarters (whether or not the applicable Subsidiary of the Company has been a Subsidiary of the Company for at least four fiscal quarters), the Property EBITDA (excluding any EBITDA attributable to investments in unconsolidated limited partnerships, unconsolidated limited liability companies and other unconsolidated entities) for such Projects for the previous four consecutive fiscal quarters divided by the Capitalization Rate;

 

·                  in respect of Projects owned or ground-leased by the Company and its Subsidiaries for less than four fiscal quarters, the cost (original cost plus capital improvements) of such Projects and related intangibles, before depreciation and amortization, determined on a consolidated basis in accordance with GAAP; and

 

·                  for all other assets of the Company and its Subsidiaries, excluding accounts receivable and intangible assets, the value as determined in accordance with GAAP.

 

Total Unencumbered Asset Value” means, as of any date, the sum of, without duplication:

 

·                  in respect of Projects owned or ground-leased by the Company and its Subsidiaries for at least four fiscal quarters (whether or not the applicable Subsidiary of the Company has been a Subsidiary of the Company for at least four fiscal quarters) and which are not subject to a Lien, the Property EBITDA (excluding any EBITDA attributable to investments in unconsolidated limited partnerships, unconsolidated limited liability companies and other unconsolidated entities) for such Projects for the previous four consecutive fiscal quarters divided by the Capitalization Rate;

 

·                  in respect of Projects owned or ground-leased by the Company and its Subsidiaries for less than four fiscal quarters and which are not subject to a Lien, the cost (original cost plus capital improvements) of such Projects and related intangibles, before depreciation and amortization, determined on a consolidated basis in accordance with GAAP; and

 

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·                  for all other assets of the Company and its Subsidiaries not subject to a Lien, excluding accounts receivable and intangible assets, the value as determined in accordance with GAAP; all determined on a consolidated basis in accordance with GAAP; provided, however, that, all investments in unconsolidated limited partnerships, unconsolidated limited liability companies and other unconsolidated entities shall be excluded from Total Unencumbered Asset Value.

 

Unsecured Debt” means Debt of the Company or any of its Subsidiaries that is not secured by a Lien on any property or assets of the Company or any of its Subsidiaries.

 

Information Rights

 

For so long as any notes are outstanding, if we are subject to Section 13(a) or 15(d) of the Exchange Act or any successor provision, we will deliver to the trustee the annual reports, quarterly reports and other documents which we are required to file with the SEC pursuant to Section 13(a) or 15(d) or any successor provision, within 15 days after the date that we file the same with the SEC.  If we are not subject to Section 13 (a) or 15(d) of the Exchange Act or any successor provision, and for so long as any notes are outstanding, we will deliver to the trustee the quarterly and annual financial statements and accompanying Item 303 of Regulation S-K (“management’s discussion and analysis of financial condition and results of operations”) disclosure that would be required to be contained in annual reports on Form 10-K and quarterly reports on Form 10-Q required to be filed with the SEC if we were subject to Section 13(a) or 15(d) of the Exchange Act or any successor provision, within 15 days of the filing date that would be applicable to us at that time pursuant to applicable SEC rules and regulations.

 

Reports and other documents filed with the SEC via the EDGAR system will be deemed to be delivered to the trustee as of the time of such filing via EDGAR for purposes of this covenant; provided, however, that the trustee shall have no obligation whatsoever to determine whether or not such information, documents or reports have been filed via EDGAR.  Delivery of such reports, information and documents to the trustee is for informational purposes only and the trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including its compliance with any of its covenants relating to the notes (as to which the trustee is entitled to rely exclusively on an officers’ certificate).

 

Defeasance

 

The notes will be subject to legal defeasance and covenant defeasance as set forth in the indenture and described in “Description of Company Debt Securities—Discharge, Legal Defeasance and Covenant Defeasance” in the accompanying prospectus.

 

Trustee

 

U.S. Bank National Association will initially act as the trustee, registrar and paying agent for the notes, subject to replacement upon certain events specified in the indenture.

 

Book-entry system

 

The notes will be represented by one or more fully registered global notes in book-entry form without coupons. DTC will be the depositary with respect to the notes. The notes will be issued as fully registered securities in the name of Cede & Co., DTC’s partnership nominee, and will be deposited with the trustee as custodian for DTC. DTC will keep a computerized record of its participants (for example, your broker) whose clients have purchased the notes. The participant would then keep a record of its clients who purchased notes. Beneficial ownership interests in a global note will be shown on, and transfers of such interests will be effected only through, records maintained by DTC (with respect to beneficial interests of participants) or by participants or persons that hold interests through participants (with respect to interests of beneficial owners). The book-entry system is described further in the accompanying prospectus under the caption “Description of Company Debt Securities—Book-Entry Procedures.”

 

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Additional material federal income tax considerations

 

General

 

The following is a general summary of the material U.S. federal income tax consequences of the purchase, ownership, and disposition of the notes. This discussion is for Holders (as defined below) that hold the notes as capital assets within the meaning of Section 1221 of the Code, and does not purport to discuss all U.S. federal income tax consequences that may be applicable to the individual circumstances of Holders in special tax situations, including but not limited to banks, insurance companies, other financial institutions, certain former citizens or residents of the United States, tax-exempt organizations, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, brokers, dealers or traders in securities or currencies, mutual funds, regulated investment companies, REITs, S corporations, estates and trusts, a person subject to alternative minimum tax, a U.S. expatriate, Holders that hold the notes as part of a hedge, straddle, or an integrated or conversion transaction, or U.S. Holders (as defined below) whose functional currency is not the U.S. dollar, or are partnerships or other pass-through entities. In all cases, prospective investors are advised to consult their own tax advisors regarding the U.S. federal income tax consequences of purchasing, owning, and disposing of notes, as well as any tax consequences arising under the laws of any state, local, foreign, or other taxing jurisdiction. In addition, this summary of certain U.S. federal income tax consequences is for general information only and is not tax advice for any particular Holder. Additionally, this summary does not address U.S. federal estate and gift tax consequences of holding the notes, the alternative minimum tax, or the tax laws of any state, locality or other political subdivision of the United States or other countries or jurisdictions.

 

As we use the term, a “U.S. person” means any of the following:

 

· an individual who, for U.S. federal income tax purposes, is a citizen or resident of the United States;

 

· a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

 

· an estate whose income is subject to U.S. federal income taxation without regard to its source; or

 

· a trust if a court within the United States is able to exercise primary supervision over its administration and at least one U.S. person has authority to control all substantial decisions of the trust. Certain trusts in existence on August 20, 1996, that were treated as “U.S. persons” within the meaning of Section 7701(a)(30) of the Code before that date may have in effect an election to continue to be treated as U.S. persons in each case, whose status as a U.S. Holder is not overridden by an applicable tax treaty.

 

“U.S. Holder” means a U.S. person that beneficially owns a note. “Non-U.S. Holder” means a beneficial owner of a note that is an individual, a corporation, an estate, or a trust that is not a U.S. person. “Holder” means either a U.S. Holder or a Non-U.S. Holder.

 

If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds notes, the treatment of a partner will generally depend upon the status of the particular partner and the activities of the partnership. If a partnership (or other entity or arrangement treated as such) holds notes, the partnership and its partners should consult their own tax advisors regarding the U.S. federal income tax consequences of the purchase, ownership and disposition of the notes.

 

The discussion below is based upon the Code, U.S. Treasury regulations thereunder, and judicial and administrative interpretations thereof, all as in effect as of the date of this Prospectus Supplement and any of which may at any time be repealed, revoked or modified or subject to differing

 

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interpretations, potentially retroactively, so as to result in U.S. federal income tax consequences different from those discussed below.

 

The summary of the U.S. federal income tax consequences set out below is for general information only. Prospective Holders should consult their own tax advisors regarding the tax consequences to them of purchasing, owning, and disposing of notes, including the tax consequences under state, local, foreign, and other tax laws and the possible effects of changes in U.S. federal or other tax laws.

 

Certain contingent payments

 

In certain circumstances, we may redeem the notes at times earlier than the final maturity. In addition, in certain circumstances, we may be required to pay additional amounts to Non-U.S. Holders in respect of U.S. tax withholding or deductions. The possibility of such redemptions or the payment of such additional amounts may implicate the provisions of U.S. Treasury regulations relating to “contingent payment debt instruments.” Under the applicable U.S. Treasury regulations, however, the possibility of redemption of the notes or the payment of additional amounts will not affect the amount, timing or character of income recognized by a Holder with respect to the notes if, as of the date the notes are issued, there is only a remote chance that we will redeem the notes or otherwise pay additional amounts on the notes, or certain other exceptions apply. We intend to take the position that the contingencies associated with any redemption or the payment of any additional amounts should not cause the notes to be subject to the contingent payment debt instrument rules. Our determination is binding on a Holder unless such Holder discloses its contrary position in the manner required by applicable U.S. Treasury regulations. Our determination is not, however, binding on the Internal Revenue Service (“IRS”), and if the IRS were to successfully challenge this determination, a Holder might be required to accrue interest income at a higher rate than the stated interest rate on the notes, and to treat as ordinary income any gain realized on the taxable disposition of a note. The remainder of this discussion assumes that the notes will not be treated as contingent payment debt instruments. Prospective Holders should consult their own tax advisors regarding the potential application to the notes of the contingent payment debt instrument rules and the consequences thereof.

 

U.S. federal income tax consequences to U.S. holders

 

Payments of interest and principal

 

Payments of stated interest on the notes generally will be taxable to a U.S. Holder as ordinary income at the time that such payments are received or accrued, in accordance with such U.S. Holder’s usual method of accounting for U.S. federal income tax purposes.

 

Original issue discount

 

It is expected that the issue price of the notes will equal the stated principal amount of the notes or the notes will be issued with no more than a de minimis amount of original issue discount (“OID”) for U.S. federal income tax purposes.

 

OID is treated as de minimis for U.S. federal income tax purposes if it is less than 0.25% of the principal amount of the notes multiplied by the number of complete years to maturity of the notes. If the notes are in fact issued at greater than de minimis OID or are treated as having been issued with OID under the U.S. Treasury regulations, then generally, the excess of the “stated redemption price at maturity” of the notes offered hereunder (generally equal to their principal amount as of the date of original issuance plus all interest other than “qualified stated interest payments” payable prior to or at maturity) over their original issue price (in this case, the initial offering price at which a substantial amount of the notes offered hereunder are sold to the public) will constitute OID. A Holder must include OID in

 

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income over the term of the notes under a constant yield method. In general, OID must be included in income in advance of the receipt of the cash representing that income.

 

Under a provision enacted in the Tax Cut and Jobs Act applicable to taxable years beginning after December 31, 2018, a U.S. Holder using an accrual method of income tax accounting and issuing a financial statement for certain purposes may be required to accrue any OID on the notes in the manner reported on such financial statement (rather than under the provisions described above) if the financial statement reporting results in earlier inclusion of income. U.S. Holders reporting results of operations on financial statements should consult their tax advisors regarding the application of this provision to their particular circumstances.

 

Sale, exchange and redemption of notes

 

When a U.S. Holder sells, exchanges or otherwise disposes of a note in a taxable transaction, including by retirement or redemption, such U.S. Holder will recognize gain or loss equal to the difference, if any, between the amount realized on the disposition or retirement (not including any amount attributable to accrued but unpaid interest) and the U.S. Holder’s adjusted tax basis in the note. Any amount realized on the disposition that is attributable to accrued but unpaid stated interest will be taxable to a U.S. Holder as ordinary interest income to the extent not previously included in the U.S. Holder’s gross income in the manner described above under “—Payments of interest and principal”.  A U.S. Holder’s adjusted tax basis in a note generally will equal the amount paid for the note, increased by the amount of any OID (if any) included in the U.S. Holder’s income with respect to the note.  Any such gain or loss will be characterized as capital gain or loss and will be long term capital gain or loss if they note was held by the U.S. Holder for more than one year.

 

Net investment income

 

A tax of 3.8% is imposed on the “net investment income” of certain individuals, trusts and estates. Among other items, net investment income generally includes gross income from interest and net gain attributable to the disposition of certain property, less certain deductions. U.S. Holders should consult their own tax advisors regarding the possible implications of this legislation in their particular circumstances.

 

U.S. federal income tax consequences to non-U.S. holders

 

Interest

 

The notes are intended to be treated as notes issued in registered form for U.S. federal income tax purposes. Payments of interest (including accrual of OID, if any) on a note held by a Non-U.S. Holder will be subject to a 30% U.S. federal income tax withheld at source, unless:

 

· such Non-U.S. Holder meets the requirements for the portfolio interest exemption for Non-U.S. Holders described below;

 

· such Non-U.S. Holder meets the requirements for a reduced rate of or exemption from withholding under a tax treaty or other statutory exemption (e.g., Section 892 of the Code); or

 

· the interest is effectively connected with a trade or business conducted by such Non-U.S. Holder within the United States and the Non-U.S. Holder provides the required certification on IRS Form W-8ECI (or successor form).

 

In some circumstances, a Non-U.S. Holder may be able to claim amounts that are withheld as a refund or a credit against its U.S. federal income tax liability, provided the required information is timely provided to the IRS.

 

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Portfolio interest exemption for non-U.S. holders

 

Payments of interest on a note held by a Non-U.S. Holder that are not effectively connected with a trade or business of the Non-U.S. Holder within the United States (or if an income tax treaty applies, are not attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder) generally will be exempt from U.S. federal income and withholding taxes if the following conditions are satisfied:

 

· the person otherwise required to withhold (the “Withholding Agent”) receives, in the manner provided by U.S. tax authorities, a certification that the Non-U.S. Holder is not a U.S. person. A Non-U.S. Holder may provide this certification either (a) by providing a properly completed IRS Form W-8BEN, IRS Form W-8BEN-E or other documentation as may be prescribed by U.S. tax authorities, (b) by holding its note directly through a qualified intermediary (generally, a foreign financial institution having a withholding agreement with the IRS) and certain conditions are satisfied or (c) if a securities clearing organization, bank or other financial institution that holds customers’ securities in the ordinary course of its trade or business and holds the note on behalf of the Non-U.S. Holder certifies to the Withholding Agent under penalties of perjury that it, or the financial institution between it and the Non-U.S. Holder, has received from the Non-U.S. Holder a statement, under penalties of perjury, that such holder is not a United States person and provides the Withholding Agent with a copy of such statement. The appropriate documentation must be effective as to interest on the notes and be provided prior to the payment of such interest. If a change in circumstances makes any information on such documentation incorrect, then the Non-U.S. Holder must report the change within 30 days and provide new documentation to the withholding Agent.

 

· the Non-U.S. Holder (1) is not a bank that receives payments on the notes that are described in Section 881(c)(3)(A) of the Code, (2) is not a “10-percent shareholder” within the meaning of Section 871(h)(3) of the Code with respect to the Company (and WPC Holdco, if applicable), and (3) is not a controlled foreign corporation related to us within the meaning of Section 881(c)(3)(C) of the Code.

 

Payments of interest on a note held by a Non-U.S. Holder that are effectively connected with a trade or business of the Non-U.S. Holder within the United States (and if an income tax treaty applies, are attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder) may be exempt from U.S. federal withholding taxes, provided the Non-U.S. Holder provides a properly completed Form W-8ECI (or successor form) to the Withholding Agent. Although exempt from the 30% U.S. federal withholding tax, such payments may be subject to U.S. federal income tax on a net basis at graduated rates as if such Non-U.S. Holder were a U.S. Holder and, in the case of a Non-U.S. Holder that is a corporation, may also be subject to U.S. federal branch profits tax.

 

Sale, exchange and redemption of notes

 

Generally, Non-U.S. Holders will not be subject to U.S. federal income tax on gain realized on the sale, exchange, redemption, retirement or other taxable disposition of a note (other than amounts attributable to accrued interest the treatment of which is governed by the rules discussed above under “—Interest” and “—Portfolio interest exemption for non-U.S. holders”) unless:

 

· such Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of sale, exchange, redemption, retirement or other taxable disposition and meets certain conditions;

 

· such Non-U.S. Holder is subject to tax pursuant to certain provisions of U.S. federal income tax law applicable to certain expatriates; or

 

· the gain is effectively connected with a U.S. trade or business of such Non-U.S. Holder, and if an income tax treaty applies, is attributable to a permanent establishment in the United States maintained by the Non-U.S. Holder.

 

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If any gain realized on a taxable disposition of a note is effectively connected with a U.S. trade or business of a Non-U.S. Holder (and if an income tax treaty applies, is attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder), such payments may be subject to U.S. federal income tax on a net basis at graduated rates as if such Non-U.S. Holder were a U.S. Holder and, in the case of a Non-U.S. Holder that is a corporation, such gain may also be subject to U.S. federal branch profits tax.

 

Information reporting and backup withholding

 

Payments of interest (including accrual of OID, if any) on notes held by non-exempt U.S. Holders are required to be reported to the IRS and the U.S. Holders. Payments of interest (including accrual of OID, if any) on notes held by Non-U.S. Holders generally will be reported to the IRS and the Non-U.S. Holders.

 

Backup withholding of U.S. federal income tax at the applicable rate may apply to payments made on the notes and payments of proceeds from the sale of a note. Backup withholding will apply to such payments to beneficial owners who are not exempt recipients and that fail to provide certain identifying information, such as their respective taxpayer identification numbers in the manner required. Generally, individuals are not exempt recipients, while certain entities and Non-U.S. Holders who certify their status as such are exempt recipients.

 

If a Holder (other than an exempt recipient) sells a note before the stated maturity to (or through) certain brokers, the broker must report the sale to the IRS and the Holder unless, in the case of a Non-U.S. Holder, the Non-U.S. Holder certifies that it is not a U.S. person (and certain other conditions are met). The broker may be required to withhold U.S. federal income tax at the applicable rate on the entire sale price unless such Holder provides certain information and, in the case of a Non-U.S. Holder, the Non-U.S. Holder certifies that it is not a U.S. person (and certain other conditions are met).

 

Any amounts withheld under the backup withholding rules from a payment to a Holder would be allowed as a refund or credit against such Holder’s U.S. federal income tax liability, provided the required information is timely provided to the IRS.

 

FATCA withholding

 

Pursuant to Sections 1471 through 1474 of the Code and the U.S. Treasury regulations promulgated thereunder (“FATCA”), and subject to certain limitations, withholding tax of 30% will be imposed on interest paid on the notes to (i) a foreign financial institution (as the beneficial owner or as an intermediary for the beneficial owner), unless such institution (a) enters into, and is in compliance with, a withholding and information reporting agreement with the U.S. government to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution or (b) is a resident in a country that has entered into an intergovernmental agreement with the United States in relation to such withholding and information reporting and the financial institution complies with the related information reporting requirements of such country; or (ii) a foreign entity that is not a financial institution (as the beneficial owner or as an intermediary for the beneficial owner), unless such entity certifies certain information regarding its direct and indirect U.S. owners. The requirements under FATCA may be modified by an intergovernmental treaty (an “IGA”) between the United States and another country, such as the IGA between the United States and the Netherlands. Each investor is encouraged to consult with its tax advisor regarding the implications of this legislation and any applicable IGA on their investment in a note.

 

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The Tax Cuts and Jobs Act

 

On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act (the “Act”). The Act made significant changes to the U.S. federal income tax rules for taxation of individuals and corporations. In the case of individuals, the tax brackets were adjusted, the top federal income rate was reduced to 37%, special rules reduce taxation of certain business income earned directly or through pass-through entities and reduce the top effective rate applicable to ordinary dividends from REITs to 29.6% (through a 20% deduction for ordinary REIT dividends received that are not “capital gain dividends” or “qualified dividend income,” subject to complex limitations) and various deductions were eliminated or limited, including limiting the deduction for state and local taxes to $10,000 per year. Most of the changes applicable to individuals are temporary and apply only to taxable years beginning after December 31, 2017 and before January 1, 2026. The corporate income tax rate was reduced to 21%, and the corporate alternative minimum tax was repealed. Additionally, for taxable years beginning after December 31, 2017, the Act limits interest deductions for businesses, whether in corporate or pass-through form, to the sum of the taxpayer’s business interest income for the tax year and 30% of the taxpayer’s adjusted taxable income for the tax year. This limitation could apply to our operating partnership, underlying partnerships and potential taxable REIT subsidiaries. This limitation does not apply to an “electing real property trade or business.” We have not yet determined whether we or any of our subsidiaries will elect out of the new interest expense limitation or whether each of our subsidiaries is eligible to elect out. One consequence of electing to be an “electing real property trade or business” is that the certain new expensing rules will not apply to certain property used in an electing real property trade or business. In addition, in the case of an electing real property trade or business, real property and “qualified improvement property” are depreciated under the alternative depreciation system, with 40-year useful life for nonresidential real property and a 20-year useful life for qualified improvement property (although a potential drafting error makes the useful life for qualified improvement property uncertain). There are only minor changes to the REIT rules (other than the 20% deduction applicable to individuals for ordinary REIT dividends received).

 

The Act makes numerous other large and small changes to the tax rules that do not affect REITs directly but may affect our stockholders and may indirectly affect us. For example, the Act amended the rules for accrual of income so that income is taken into account no later than when it is taken into account on applicable financial statements, even if financial statements take such income into account before it would accrue under the original issue discount rules or other rules in the Internal Revenue Code. Such rules may cause us to recognize income before receiving any corresponding receipt of cash, which may make it more likely that we could be required to borrow funds or take other action to satisfy the REIT distribution requirements for the taxable year in which such income is recognized, although the precise application of this rule is unclear at this time. In addition, the Act reduced the limit for individual’s residential mortgage interest expense to interest on $750,000 of mortgages and does not permit deduction of interest on home equity loans (after grandfathering all existing mortgages). Such change and the reduction in deductions for state and local taxes (including property taxes) may potentially (and negatively) affect the markets in which we may invest.

 

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Underwriting (Conflicts of interest)

 

We have entered into an underwriting agreement relating to the notes with the underwriters named below, for whom Wells Fargo Securities, LLC, BofA Securities, Inc. and J.P. Morgan Securities LLC are acting as representatives. Subject to certain conditions, we have agreed to sell to the underwriters and each underwriter has severally, and not jointly, agreed to purchase the amount of notes indicated in the following table.

 

Underwriter

 

Principal amount
of notes

 

Wells Fargo Securities, LLC

 

$

94,250,000

 

BofA Securities, Inc.

 

60,125,000

 

J.P. Morgan Securities LLC

 

60,125,000

 

U.S. Bancorp Investments, Inc.

 

48,750,000

 

Fifth Third Securities, Inc.

 

24,375,000

 

Regions Securities LLC

 

24,375,000

 

BNY Mellon Capital Markets, LLC

 

13,000,000

 

Total

 

$

325,000,000

 

 

The underwriters are committed to take and pay for all of the notes being offered, if any are taken. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the underwriting agreement may be terminated.

 

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments they are required to make in respect thereof.

 

Notes sold by the underwriters to the public will initially be offered at the public offering price set forth on the cover of this prospectus supplement. Any notes sold by the underwriters to securities dealers may be sold at a price that represents a concession not in excess of 0.400% of the principal amount of the notes. The underwriters may allow, and these dealers may re-allow, a concession of not more than 0.250% of the principal amount of the notes to other dealers. After the notes are released for sale, the underwriters may change the offering price and the other selling terms.

 

The notes will be a new issue of securities with no established trading market. We do not intend to apply for listing of the notes on any securities exchange or for quotation of the notes on any automated dealer quotation system. We have been advised by the underwriters that the underwriters intend to make a market in the notes after the completion of the offering of the notes but are not obligated to do so and may discontinue market making at any time without notice to or the consent of existing noteholders. No assurance can be given as to the development, maintenance or liquidity of any trading market for the notes.

 

In connection with this offering, the underwriters may purchase and sell notes in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater principal amount of notes than they are required to purchase in this offering.

 

Stabilizing transactions consist of certain bids or purchases made for the purpose of preventing or retarding a decline in the market price of the notes while this offering is in progress.

 

These activities by the underwriters may stabilize, maintain or otherwise affect the market price of the notes. As a result, the price of the notes may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the underwriters at any time. These transactions may be effected in the over-the-counter market or otherwise.

 

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We have agreed that we will not offer, sell, contract to sell or otherwise dispose of any debt securities issued or guaranteed by us having a term of more than one year until one day after settlement of the notes without the prior written consent of the representatives.

 

We estimate that our share of the total expenses of this offering, excluding the underwriting discount, will be approximately $750,000 and will be payable by us.

 

It is expected that delivery of the notes will be made against payment therefor on or about June 14, 2019, which is the fourth business day following the date of this prospectus supplement (such settlement cycle being referred to as “T+4”). Under Rule 15c6-1 under the Exchange Act, trades in the secondary market generally are required to settle in two business days unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the notes prior to the second business day preceding the closing date will be required, by virtue of the fact that the notes initially will settle in T+4, to specify an alternative settlement cycle at the time of any such trade to prevent failed settlement. Purchasers of the notes who wish to trade the notes prior to the second business day preceding the closing date should consult their own advisors.

 

Other relationships

 

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities.

 

Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions. In particular, U.S. Bancorp Investments, Inc., one of the underwriters, is an affiliate of the trustee under the indenture governing the notes.

 

In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. Some of the underwriters or their affiliates have lending relationships with us. Certain of those underwriters or their affiliates routinely hedge, and certain others may hedge, their credit exposure to us consistent with their customary risk management policies. Typically, these underwriters or their affiliates would hedge such exposure by entering into transactions that consist of either the purchase of credit default swaps or the creation of short positions in our securities, including potentially the notes offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the notes offered hereby. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

 

Conflicts of interest

 

Affiliates of Wells Fargo Securities, LLC, BofA Securities, Inc., J.P. Morgan Securities LLC and U.S. Bancorp Investments, Inc., each of whom is an underwriter of this offering, and certain of the other underwriters or their affiliates, are lenders under our Unsecured Revolving Credit Facility and will receive their proportionate share of the net proceeds from this offering used to reduce such indebtedness. Due to the fact that such underwriters have an interest in the successful completion of this offering beyond the underwriting discount they will receive, a conflict of interest exists. Nonetheless, in accordance with Rule 5121 of the Financial Industry Regulatory Authority, Inc., the appointment of a qualified independent underwriter is not necessary in connection with this offering because, as a REIT, we are excluded from that requirement.

 

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Prohibition of Sales to EEA Retail Investors

 

The notes may not be offered, sold or otherwise made available to any retail investor in the EEA. For the purposes of this provision:

 

(a)                                 the expression “retail investor” means a person who is one (or more) of the following:

 

(i)                                     a retail client as defined in point (11) of Article 4(1) of MiFID II; or

 

(ii)                                  a customer within the meaning of the Insurance Distribution Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or

 

(iii)                               not a qualified investor as defined in the Prospectus Directive; and

 

(b)                                 the expression “offer” includes the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe for the notes.

 

United Kingdom

 

Any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of any notes may only be communicated or caused to be communicated in circumstances in which Section 21(1) of the FSMA does not apply to W. P. Carey Inc.

 

All applicable provisions of the FSMA must be complied with in respect to anything done by any person in relation to the notes in, from or otherwise involving the United Kingdom.

 

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Notice to prospective investors in Switzerland

 

We have not been licensed for distribution to non-qualified investors by the Swiss Financial Market Supervisory Authority FINMA (the “FINMA”) as a foreign collective investment scheme pursuant to Article 120(1) of the Swiss Collective Investment Schemes Act of June 23, 2006, as amended (the “CISA”) and no representative or paying agent in Switzerland has been appointed pursuant to Article 120(4) of the CISA. Accordingly, the notes may only be offered, advertised or otherwise distributed, directly or indirectly, in or from Switzerland, and this prospectus supplement and the accompanying prospectus and any other marketing or offering documents relating to us may only be distributed in or from Switzerland, (A) to financial intermediaries that are subject to prudential supervision as defined in Article 10(3)(a) of the CISA or insurance institutions that are subject to prudential supervision as defined in Article 10(3)(b) of the CISA and/or (B) in any other manner that does not constitute a distribution (Vertrieb/distribution/distribuzione) within the meaning of Article 3 of the CISA, its implementing ordinance and guidelines. The notes will not be listed on the SIX Swiss Exchange (the “SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This prospectus supplement and the accompanying prospectus have been prepared without regard to the disclosure standards for issuance of prospectuses under the CISA, Article 652a or 1156 of the Swiss Code of Obligations or the listing rules of the SIX or any other exchange or regulated trading facility in Switzerland. None of this prospectus supplement, the accompanying prospectus or any other offering or marketing material relating to us or the notes has been or will be filed with, or approved by, any Swiss regulatory authority. Investors in the notes do not benefit from the specific investor protection provided by the CISA and the supervision by the FINMA in connection with the licensing for distribution or the appointment of a representative and a paying agent in Switzerland.

 

Notice to prospective investors in Hong Kong

 

The notes will not be offered or sold in Hong Kong by means of any document other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the notes may be issued or may be in the possession of any person for the purpose of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

 

Notice to prospective investors in Canada

 

The notes may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the notes must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

 

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement or the accompanying prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

 

Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), none of the underwriters are required to comply

 

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with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

 

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Legal matters

 

The validity of the notes offered hereby and certain other legal matters in connection with this offering will be passed upon for us by DLA Piper LLP (US). Sidley Austin LLP will act as counsel for the underwriters.

 

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Experts

 

The financial statements and management’s assessment of the effectiveness of internal control over financial reporting (which is included in Management’s Report on Internal Control over Financial Reporting) incorporated in this Prospectus by reference to the Annual Report on Form 10-K of W. P. Carey Inc. for the year ended December 31, 2018 and the audited historical financial statements of Corporate Property Associates 17-Global Incorporated included in Exhibit 99.1 of W. P. Carey Inc.’s Current Report on Form 8-K/A dated November 19, 2018 have been so incorporated in reliance on the reports of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

 

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Where you can find more information; Incorporation by reference

 

We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public on the SEC website at http://www.sec.gov.

 

Our filings with the SEC are also available on our website at www.wpcarey.com. However, the contents of our website are not incorporated by reference into this prospectus supplement or the accompanying prospectus.

 

We have filed a registration statement on Form S-3 with the SEC. This prospectus supplement and the accompanying prospectus do not contain all of the information included in the registration statement. If a reference is made in this prospectus supplement, the accompanying prospectus, or the documents incorporated or deemed incorporated by reference to any of our contracts or other documents filed or incorporated by reference as an exhibit to the registration statement, the reference may not be complete and you should refer to the filed copy of the contract or document.

 

As described in the accompanying prospectus under the caption “Where You Can Find More Information; Incorporation by Reference,” we have incorporated by reference into this prospectus supplement and the accompanying prospectus specified documents that we have filed with the SEC, and documents that we subsequently file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of this offering shall be deemed to be incorporated by reference in this prospectus supplement and the accompanying prospectus. However, notwithstanding anything in this prospectus supplement or the accompanying prospectus to the contrary, no document, exhibit or information, or any portion thereof, that we have “furnished” or may in the future “furnish” to (rather than “file” with) the SEC is or shall be incorporated by reference into this prospectus supplement or the accompanying prospectus. This prospectus supplement incorporates by reference the documents listed below, all of which have been previously filed with the SEC:

 

· our Annual Report on Form 10-K for the year ended December 31, 2018, filed on February 25, 2019;

 

· our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, filed on May 3, 2019;

 

· our Definitive Proxy Statement filed with the SEC on April 4, 2019;

 

·  Exhibit 99.1, Exhibit 99.2 and Exhibit 99.3 of our Current Report on Form 8-K/A (excluding any information furnished therein) filed on November 19, 2018; and

 

· our Current Report on Form 8-K (excluding any information furnished therein) filed on February 28, 2019.

 

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PROSPECTUS

 

 

W. P. CAREY INC.

 

Common Stock
Preferred Stock

 

Depositary Shares
Stock Purchase Contracts
Stock Purchase Unit
Warrants

Debt Securities

Guarantee of Debt Securities

 

WPC EUROBOND B.V.

 

Debt Securities

(fully, unconditionally and irrevocably guaranteed by W. P. Carey Inc.)

 

W. P. Carey Inc. may from time to time, in one or more offerings, offer, issue and sell (i) shares of our common stock, $0.001 par value per share (“Common Stock”), (ii) one or more series of our preferred stock, $0.001 par value per share (“Preferred Stock,” and together with the Common Stock, the “Capital Stock”), (iii) depositary shares, which may represent a fractional interest in a share of a particular class or series of our Preferred Stock (the “Depositary Shares”), (iv) stock purchase contracts and stock purchase units (collectively, the “Purchase Agreements”), (v) warrants (“Warrants”), (vi) debt securities (“Company Debt Securities”), and (vii)  a guarantee (“Guarantee”) of debt securities offered and sold by WPC Eurobond B.V. (“WPC Finance”) (the Common Stock, Preferred Stock, Depositary Shares, Purchase Agreements, Warrants, Company Debt Securities and any such Guarantee, collectively, the “Company Securities”). One or more of the Company Securities, including but not limited to the Preferred Stock, Depositary Shares, Warrants and Company Debt Securities, may be convertible into or exercisable or exchangeable for shares of Common Stock, Preferred Stock or other Company Securities. WPC Finance may from time to time, in one or more offerings, offer, issue and sell securities (“WPC Finance Debt Securities,” and collectively with the Company Debt Securities, the “Debt Securities,” and collectively with the Company Securities, the “Securities”). Any WPC Finance Debt Securities will be fully, unconditionally and irrevocably guaranteed by W. P. Carey Inc., as described in this prospectus and in any applicable prospectus supplement.

 

This prospectus describes some of the general terms that may apply to the Securities. When we decide to offer the Securities, we will prepare a prospectus supplement describing the offering and the particular terms of the Securities that we are selling, which terms will include, among other things, (i) in the case of Common Stock, any public offering price, (ii) in the case of Preferred Stock, the specific title and stated value, any distribution, liquidation, redemption, conversion, voting and other rights, and any initial public offering price, (iii) in the case of Depositary Shares, the fractional Preferred Stock represented by each Depositary Share and the applicable terms of the Preferred Stock, (iv) in the case of Purchase Agreements, the particular combination of Securities constituting any Purchase Agreement, (v) in the case of Warrants, the exercise price and other specific terms of the Warrants, including a description of the underlying Security, (vi) in the case of Debt Securities, the particular terms of the Debt Securities, which will include, among other things, the specific title of the Debt Securities, the aggregate amount of the offering and the offering price, and the denominations in which the Debt Securities may be offered, and (vii) in the case of any Guarantee, the particular terms of such Guarantee.

 

The applicable prospectus supplement also will contain information, where applicable, about the material United States federal income tax considerations relating to, and any listing on a securities exchange of, the Securities covered by such prospectus supplement, not contained in this prospectus. In addition, such specific terms may include limitations on direct or beneficial ownership and restrictions on transfer of the Securities, in each case as may be appropriate to assist in maintaining our status as a real estate investment trust (a “REIT”) for federal income tax purposes. You should read carefully this prospectus and the applicable prospectus supplement before you make your investment decision.

 

Our Common Stock is listed on the New York Stock Exchange (the “NYSE”), under the symbol “WPC.” On November 7, 2016, the last reported sale price of the Common Stock on the NYSE was $58.80 per share.

 


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The Securities may be offered directly by us, through agents designated from time to time by us, or to or through underwriters or dealers. If any agents or underwriters are involved in the sale of any of the Securities, their names, and any applicable purchase price, fee, commission or discount arrangement with, between or among them, will be set forth, or will be calculable from the information set forth, in a prospectus supplement or other offering materials. See “Plan of Distribution” beginning on page 59. No Securities may be sold without delivery of a prospectus supplement describing the method and terms of the offering of such Securities.

 


 

Investing in our Securities involves risks. See “Risk Factors” beginning on page 5 of this prospectus, in the documents incorporated by reference and in any applicable prospectus supplement or free writing prospectus. This prospectus may not be used to offer or sell any Securities unless it is accompanied by the applicable prospectus supplement.

 


 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is November 8, 2016

 


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ABOUT THIS PROSPECTUS

1

FORWARD LOOKING STATEMENTS

2

WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE

2

THE REGISTRANTS

4

RISK FACTORS

5

USE OF PROCEEDS

5

RATIO OF EARNINGS TO FIXED CHARGES

5

DESCRIPTION OF CAPITAL STOCK

6

DESCRIPTION OF DEPOSITARY SHARES

12

DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS

12

DESCRIPTION OF WARRANTS

12

DESCRIPTION OF COMPANY DEBT SECURITIES

13

DESCRIPTION OF WPC FINANCE DEBT SECURITIES AND THE GUARANTEE

24

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS RELEVANT TO HOLDERS OF OUR COMMON STOCK

39

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS RELEVANT TO HOLDERS OF OUR DEBT SECURITIES

55

PLAN OF DISTRIBUTION

59

EXPERTS

60

SELLING SECURITYHOLDERS

60

LEGAL MATTERS

60

 

Unless otherwise stated or the context otherwise requires, references in this prospectus to “W. P. Carey,” “we,” “us” and “our” refer, collectively, to W. P. Carey Inc. and its consolidated subsidiaries, including WPC Eurobond B.V.; references to the “Company” refer only to W. P. Carey Inc., and not to any of its subsidiaries or affiliates; and references to the “WPC Finance” refer only to WPC Eurobond B.V., and not to its parent or subsidiaries or affiliates.

 

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We have not authorized any person to give any information or to make any representations in connection with this offering, other than those contained or incorporated, or deemed to be incorporated, by reference in this prospectus and any applicable prospectus supplement or free writing prospectus, and, if given or made, such information or representations must not be relied upon as having been so authorized. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy by anyone in any jurisdiction in which such offer or solicitation is not authorized, or in which the person is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this prospectus nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in our affairs since the date hereof, that the information contained herein is correct as of any time subsequent to its date, or that any information incorporated, or deemed to be incorporated. by reference herein is correct as of any time subsequent to its date.

 

ABOUT THIS PROSPECTUS

 

This prospectus is part of an automatic shelf registration statement that we filed with the Securities and Exchange Commission (the “SEC”) as a “well-known seasoned issuer,” as defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”). By using an automatic shelf registration statement, we may, at any time and from time to time, sell the Securities described in this prospectus or in any applicable prospectus supplement in one or more offerings. The exhibits to the registration statement contain the full text of certain contracts and other important documents we have summarized in this prospectus. Since these summaries may not contain all the information that you may find important in deciding whether to purchase the Securities we offer, you should review the full text of these documents. The registration statement and the exhibits can be obtained from the SEC as indicated under the heading “Where You Can Find More Information; Incorporation by Reference” beginning on page 2.

 

This prospectus only provides you with a general description of the Securities that we may offer. Each time we sell Securities, we will provide a prospectus supplement that will contain specific information about the terms of those Securities. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement together with the documents incorporated, or deemed to be incorporated, by reference in this prospectus and the additional information described under the heading “Where You Can Find More Information; Incorporation by Reference” beginning on page 2.

 

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FORWARD LOOKING STATEMENTS

 

This prospectus and the documents incorporated and deemed to be incorporated by reference herein and therein contain statements that are based on our current expectations, our estimates and forecasts, our projections about our future performance, our expectations for our business, our beliefs and our management’s assumptions and other matters, and are “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include, but are not limited to: statements regarding capital markets; tenant credit quality; the general economic outlook; our expected range of adjusted funds from operations (“AFFO”); our corporate strategy; our capital structure; our portfolio lease terms; our international exposure and acquisition volume, including the effects of the United Kingdom’s referendum approving an exit from the European Union; our expectations about tenant bankruptcies and interest coverage; our future economic performance and results, including our underlying assumptions regarding occupancy rate, credit ratings and possible new acquisitions and dispositions by us and for our series of non-traded publicly registered investment programs (the “Managed Programs”); the Managed Programs, including their earnings; our ability to remain qualified for taxation as a REIT; the impact of recently issued accounting pronouncements or guidance; the amount and timing of any future dividends; our existing or future leverage and debt service obligations; our ability to sell shares under our “at-the-market” program and the use of any proceeds from that program; our future prospects for growth; our projected assets under management; our future capital expenditure levels; our future financing transactions; our estimates of growth; and our plans to fund our future liquidity needs. Forward-looking statements are generally identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result” and similar expressions. Actual results could differ materially from those contemplated by these forward-looking statements as a result of many factors.

 

The cautionary statements under the caption “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2015 and in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016, as well as any additional information and risks that we disclose in reports that we have filed (since the filing of such reports, in each instance), with the SEC pursuant to the Exchange Act, which are incorporated, or deemed to be incorporated, by reference in this prospectus and other similar statements contained in or incorporated, or deemed to be incorporated, by reference in this prospectus and any related free writing prospectus prepared by us or on our behalf, identify important factors with respect to forward-looking statements, including certain risks and uncertainties that could cause actual results to differ materially from those contemplated by such forward-looking statements. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial also may materially and adversely affect us. Should any known or unknown risks and uncertainties develop into actual events, those developments could have a material adverse effect on our business, financial condition, liquidity, results of operations, AFFO and prospects.

 

In light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking statements contained in this prospectus and the documents incorporated, or deemed to be incorporated, by reference herein and therein will in fact transpire. Moreover, because we operate in a very competitive and rapidly changing environment, new risk factors are likely to emerge from time to time. Given these risks and uncertainties, potential investors are cautioned not to place undue reliance on forward-looking statements as a prediction of future results. We do not undertake any obligation to update or revise any forward-looking statements except as required by applicable law. All subsequent forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.

 

WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE

 

We are subject to the information reporting requirements of the Exchange Act, and in accordance with these requirements, we file annual, quarterly and current reports, proxy statements and other information with the SEC. Such reports, proxy statements and other information may be inspected and copied at the SEC’s Public Reference Room, 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Our filings with the SEC are available to the public at the SEC’s website at http://www.sec.gov. Our filings with the SEC are also available to the public on our website at http://www.wpcarey.com. However, the contents of our website are not incorporated by reference into this prospectus. We have filed this prospectus with the SEC as part of a registration statement on Form S-3. This prospectus does not contain all of the information set forth in the registration statement.

 

We “incorporate by reference” certain information from filings with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus, and any information contained in this prospectus or in any document incorporated, or deemed to be incorporated, by reference in this prospectus will be deemed to have been modified or superseded to the extent that a statement contained in this prospectus, or, if applicable, the accompanying prospectus supplement, or in any other document we subsequently file with the SEC that also is incorporated, or deemed to be incorporated, by reference in this prospectus, modifies or supersedes the original statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to be a part of this prospectus.

 

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We incorporate by reference the documents listed below and any future filings made by W. P. Carey with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this prospectus and the termination of the offering of Securities described in this prospectus; provided, however, that we are not incorporating by reference any documents, portions of documents, exhibits or other information that is deemed to have been “furnished” to and not “filed” with the SEC:

 

W. P. Carey SEC Filings (File No. 001-13779)

 

Period and/or Date Filed

Annual Report of W. P. Carey on Form 10-K

 

Fiscal Year ended December 31, 2014, filed on March 2, 2015 (and as amended on March 17, 2015) and Fiscal Year ended December 31, 2015, filed on February 26, 2016

Current Reports on Form 8-K

 

Filed on the following dates: January 22, 2016, February 10, 2016, April 4, 2016, June 22, 2016, September 7, 2016, September 12, 2016, September 21, 2016, September 22, 2016, and October 11, 2016

Definitive Proxy Statement on Schedule 14A

 

Filed on April 28, 2016

Definitive Additional Materials on Schedule 14A

 

Filed on April 28, 2016

Quarterly Reports on Form 10-Q

 

For the quarter ended March 31, 2016, filed on May 5, 2016; for the quarter ended June 30, 2016, filed on August 4, 2016 and for the quarter ended September 30, 2016, filed on November 3, 2016

 

You may request a copy of any documents incorporated by reference in this prospectus and any accompanying prospectus supplement, at no cost, by writing or telephoning us at the following address and telephone number:

 

W. P. Carey Inc.
Attention: Investor Relations
50 Rockefeller Plaza
New York, New York 10020
Tel: 212-492-1100

 

Exhibits to the filings will not be sent, however, unless those exhibits have specifically been incorporated by reference into this prospectus and any accompanying prospectus supplement.

 

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THE REGISTRANTS

 

W. P. Carey Inc.

 

W. P. Carey is an internally-managed REIT and a leading global owner and manager of commercial properties, primarily net leased to companies on a long-term basis. As of September 30, 2016, we owned a diversified global investment portfolio that included full or partial ownership interests in 910 net-leased properties and a weighted average remaining lease term of 9.4 years.

 

Our owned real estate portfolio is diversified by property type, tenant, geographic location and tenant industry. It is comprised primarily of single-tenant industrial, warehouse, office and retail facilities that are essential to our corporate tenants’ operations. We have 222 corporate tenants that operate in a wide variety of business sectors, providing additional diversification to the portfolio. As of September 30, 2016, approximately two-thirds of our contractual minimum annualized base rent was from properties located in the United States and approximately one-third was from properties located outside the United States, primarily in Western and Northern Europe. Our European portfolio consisted of 357 net leased properties located in 12 countries, with the largest concentrations in Germany, France, the United Kingdom, Spain and Finland.

 

Most of our net leases specify a base rent with scheduled rent increases (either fixed or tied to inflation) and require the tenant to pay substantially all of the costs associated with operating and maintaining the property. We actively manage our real estate portfolio to try to mitigate risk with respect to changes in tenant credit quality and the likelihood of lease renewal.

 

In addition to the lease revenues from our owned real estate portfolio, we earn fee revenue by advising the Managed Programs through our investment management business. As of September 30, 2016, we managed approximately $12.2 billion of total assets on behalf of the Managed Programs.

 

Our shares of Common Stock are listed on the NYSE under the symbol “WPC.” Headquartered in New York, we also have offices in Amsterdam, Dallas and London. At September 30, 2016, we employed 283 individuals globally. Our principal executive offices are located at 50 Rockefeller Plaza, New York, New York 10020. Our telephone number is (212) 492-1100. Investors can find press releases, financial filings and other information about us on our website at http://www.wpcarey.com. However, the contents of our website are not incorporated by reference into this prospectus.

 

WPC Eurobond B.V.

 

WPC Finance is an indirect, 100%-owned subsidiary of the Company. Its telephone number is +31 (0)20 333 1450. WPC Finance is a finance subsidiary and currently has no assets, operations, revenues or cash flows, other than those relating to the issuance of the WPC Finance Debt Securities being registered that are guaranteed by the Company. WPC Finance is incorporated under Dutch law as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), with its corporate seat in Amsterdam, the Netherlands and office address at Strawinskylaan 741, Tower C, 7th Floor, 1077 XX Amsterdam, the Netherlands, registered with the Trade Register under number 67078028.

 

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RISK FACTORS

 

Investing in our Securities involves risks. In evaluating an investment in our Securities, you should carefully consider the risk factors incorporated by reference to our most recent Annual Report on Form 10-K, any subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K that we file after the date of this prospectus, and all other information contained or incorporated by reference into this prospectus, as updated by our subsequent filings under the Exchange Act, and the risk factors and other information contained in the applicable prospectus supplement before acquiring any of such Securities. The risks and uncertainties included or incorporated, or deemed to be incorporated, by reference in this prospectus are those that we currently believe may materially affect our company. Additional risks not presently known or that are currently deemed immaterial could also materially and adversely affect our business, financial condition, liquidity, results of operations, AFFO and prospects. The realization of any of these risks could have a material adverse effect on our business, financial condition, liquidity, results of operations, AFFO and prospects as well as our ability to service our existing and future indebtedness. The occurrence of any of these risks might cause you to lose all or part of your investment in the offered Securities. Please also refer to the section above entitled “Forward Looking Statements.”

 

USE OF PROCEEDS

 

Unless otherwise indicated in an applicable prospectus supplement, we intend to use the net proceeds from the sale of the Securities offered by us for working capital and other general business purposes, which may include, among other things, the repayment, redemption or refinancing of all or a portion of any indebtedness or other securities outstanding at a particular time, acquisitions, investments, share repurchases and capital expenditures. We may provide additional information on the use of the net proceeds from the sale of securities in an applicable prospectus supplement. Pending the application of the net proceeds, we may invest the proceeds in short-term, interest-bearing instruments or other investment-grade Securities.

 

RATIO OF EARNINGS TO FIXED CHARGES

 

For purposes of calculating the ratio of earnings to fixed charges, the term “earnings” is the amount resulting from adding (i) pre-tax income from continuing operations, (ii) fixed charges, (iii) distributed income of equity investments, and (iv) amortization of capitalized interest, reduced by (i) equity in earnings of equity method investments and (ii) pre-tax income from continuing operations attributable to noncontrolling interests that have not incurred fixed charges. “Fixed charges” consist of (i) interest expensed and capitalized, (ii) amortized premiums, discounts, and capitalized expenses related to indebtedness, and (iii) an estimate of the interest within rental expense.

 

 

 

Nine months
ended
September 30,

 

Years ended December 31,

 

 

 

2016

 

2015

 

2014

 

2013

 

2012

 

2011

 

Ratio of earnings to fixed charges

 

2.53

 

2.10

 

2.24

 

1.74

 

2.45

 

8.95

 

 

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DESCRIPTION OF CAPITAL STOCK

 

The following contains a summary of certain material provisions of the W. P. Carey’s Articles of Amendment and Restatement (as amended, the “Charter”) and W. P. Carey’s Third Amended and Restated Bylaws (as amended, the “Bylaws”) relating to the shares of our Common Stock that are incorporated by reference into this Prospectus. The following description of the shares of Common Stock does not purport to be complete and is qualified in its entirety by reference to the Charter and Bylaws.

 

General

 

Our Charter provides that we have authority to issue 500,000,000 shares of Capital Stock, consisting of 450,000,000 shares of Common Stock, $0.001 par value per share, and 50,000,000 shares of Preferred Stock, $0.001 par value per share. A majority of our entire board of directors, without any action by our stockholders, may amend our Charter from time to time to increase or decrease the aggregate number of shares of our capital stock or the number of shares of our capital stock of any class or series that we have authority to issue.

 

Common Stock

 

Subject to the provisions of our Charter restricting the transfer and ownership of shares of our stock, each outstanding share of Common Stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including one vote for each director to be elected in the election of directors, and, except as provided with respect to any other class or series of shares of our stock, the holders of our Common Stock possess exclusive voting power. There is no cumulative voting in the election of directors, which means that the holders of a majority of the outstanding shares of Common Stock can elect all of the directors then standing for election (and the holders of the remaining shares will not be able to elect any directors).

 

In accordance with Maryland law, a Maryland corporation generally cannot dissolve, amend its charter, merge, sell all or substantially all of its assets, engage in a share exchange or engage in similar transactions outside the ordinary course of business unless declared advisable by the board of directors and approved by the affirmative vote of stockholders entitled to cast at least two-thirds of all votes entitled to be cast on the matter, unless a lesser percentage (but not less than a majority of all the votes entitled to be cast on the matter) is set forth in the corporation’s charter. Our Charter requires the affirmative vote of the holders of not less than a majority of all of the votes entitled to be cast on the matter to approve such matters, except that any amendment to the sections of the Charter concerning the removal of directors, restrictions on transfer and ownership of shares, and the voting requirements for the amendment of such provisions must be declared advisable by the board of directors and approved by the affirmative vote of stockholders entitled to cast at least two-thirds of all the votes entitled to be cast on the matter.

 

Maryland law permits the merger of a 90% or more owned subsidiary with or into its parent without stockholder approval provided (i) the charter of the successor is not amended other than in certain minor respects and (ii) the contract rights of any stock of the successor issued in the merger in exchange for stock of the other corporation are identical to the contract rights of the stock for which it is exchanged.  Also, because Maryland law may not require the stockholders of a parent corporation to approve a merger or sale of all or substantially all of the assets of a subsidiary entity, including where a substantial number of operating assets are held by the subsidiary, as in our situation, our subsidiaries may be able to merge or sell all or substantially all of their assets without a vote of our stockholders.

 

Holders of shares of our Common Stock are entitled to receive distributions paid ratably on the Common Stock if and when authorized by our board of directors and declared by us out of assets legally available for the payment of distributions. They also are entitled to share ratably in our assets legally available for distribution to our stockholders in the event of our liquidation, dissolution or winding up, after payment of or adequate provision has been made for all of our known debts and liabilities. These rights are subject to the preferential rights in respect of distributions or upon liquidation, dissolution or winding up of any other class or series of our stock that we may subsequently classify or reclassify, and to the provisions of our Charter regarding restrictions on transfer and ownership of our stock.

 

Holders of shares of our Common Stock generally have no appraisal, preference, conversion, exchange, sinking fund, redemption or preemptive rights to subscribe for any of our Securities, except as may be provided under the terms of any class or series of stock that we may subsequently classify or reclassify. Subject to the restrictions on transfer and ownership of stock contained in our Charter and the rights of any other class or series of stock that we may subsequently classify or reclassify, each share of Common Stock has equal distribution, liquidation and other rights.

 

We may offer additional shares of our Common Stock for sale, in which case, we will describe the aggregate number of shares of Common Stock offered and the offering price or prices of the shares in a prospectus supplement.

 

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Preferred Stock; Power to Reclassify Shares of Our Stock

 

Our Charter authorizes our board of directors to classify any unissued shares of Common Stock or Preferred Stock and to reclassify any previously classified, but unissued, shares of Common Stock or Preferred Stock into one or more classes or series of stock. Prior to the issuance of shares of any class or series of stock, our board of directors is required by Maryland law and our Charter to fix the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series of stock, in all cases, subject to the restrictions on transfer and ownership set forth in our Charter. Therefore, our board of directors could authorize the issuance of shares of Common Stock or Preferred Stock with terms and conditions that could have the effect of delaying, deferring or preventing a transaction or a change of control of our company that might involve a premium price for you or otherwise be in your best interests.

 

We may sell shares of Preferred Stock in one or more class or series. In a prospectus supplement, we will describe the specific designation; the aggregate number of shares offered; the dividend rate or manner of calculating the dividend rate; the dividend periods or manner of calculating the dividend periods; the ranking of the shares of the series with respect to dividends; liquidation and dissolution; the stated value of the shares of the series; the voting rights of the shares of the series; if any, whether and on what terms the shares of the series will be convertible or exchangeable; whether and on what terms we can redeem the shares of the series; whether we will list the shares of Preferred Stock on a securities exchange and any other specific terms of the class or series of Preferred Stock.

 

Power to Increase or Decrease Authorized Stock and Issue Additional Shares of Common Stock and Preferred Stock

 

Our board of directors has the power (i) to amend our Charter from time to time to increase or decrease the aggregate number of shares of our stock or the number of shares of stock of any class or series that we have authority to issue, (ii) to issue additional shares of Common Stock or Preferred Stock and (iii) to classify unissued shares of our Common Stock or Preferred Stock or reclassify any previously classified, but unissued, shares of Common Stock or Preferred Stock into other classes or series of stock, and thereafter to issue the classified or reclassified shares of stock. We believe this ability provides us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs that might arise. The additional classes or series of stock, as well as our Common Stock, are available for issuance without further action by our stockholders (unless stockholder action is required by applicable law, or the rules of any stock exchange on which our securities may be listed, or the terms of any classes or series of stock that we may subsequently classify or reclassify). Although our board of directors does not currently intend to do so, it could authorize us to issue a class or series of Common Stock or Preferred Stock that could, depending upon the terms of the particular class or series, delay, defer or prevent a transaction or a change in control of our company that might involve a premium price for you or otherwise be in your best interests.

 

Restrictions on Ownership and Transfer

 

Our Charter provides that our board of directors may decide whether it is in the best interests of our company to qualify and maintain status as a REIT under the Internal Revenue Code, as amended (the “Code”). In order to qualify as a REIT under the Code, our shares of stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months, or during a proportionate part of a shorter taxable year. Also, no more than 50% of the value of our outstanding shares of stock may be owned, directly or indirectly, by five or fewer individuals (as defined by the Code to include certain entities) during the last half of any taxable year. Neither the requirement to be held by 100 or more persons or the provision disallowing ownership by five or fewer individuals apply to the first taxable year of a REIT.

 

To help us qualify as a REIT, among other purposes, our Charter, contains restrictions on the number of shares of our stock that a person may own, subject to certain exceptions. Our Charter provides that generally no person may beneficially own, or be deemed to own by virtue of the attribution provisions of the Code, either (i) more than 7.9% in value or in number of shares, whichever is more restrictive, of the aggregate outstanding shares of our stock excluding any outstanding shares of our stock not treated as outstanding for federal income tax purposes, or (ii) more than 7.9% in value or in number of shares, whichever is more restrictive, of the aggregate outstanding shares of our Common Stock, excluding any outstanding shares of Common Stock not treated as outstanding for federal income tax purposes.

 

Our Charter also prohibits any person from (i) beneficially or constructively owning shares of our stock that would result in our being “closely held” under Section 856(h) of the Code; (ii) transferring shares of our stock if such transfer would result in our stock being beneficially owned by fewer than 100 persons; (iii) beneficially or constructively owning shares of our stock that would cause us to own, directly or indirectly; 10% or more of the ownership interests in a tenant of our company (or a tenant of any entity owned or controlled by us); (iv) beneficially or constructively owning shares of our stock that would cause any independent contractor to not be treated as such under Section 856(d)(3) of the Code; or (v) beneficially or constructively owning shares of stock that will otherwise cause us to fail to qualify as a REIT. Any person who (i) acquires or attempts or intends to acquire beneficial or constructive ownership of shares of our stock that will or may violate any of the foregoing restrictions on transferability and ownership, or (ii) who would have owned shares of our stock that resulted in a transfer of shares to a charitable trust (as described below), will be required to (A) give written notice immediately to us, or in the case of a proposed or attempted transaction, to give at least 15 days’ prior written

 

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notice to us, and (B) provide us with such other information as we may request in order to determine the effect of such transfer on our status as a REIT. The foregoing restrictions on transferability and ownership will not apply if our board of directors determines that it is no longer in our best interests to continue to qualify as a REIT or that compliance is no longer required for us to qualify as a REIT.

 

Our board of directors, in its sole discretion, may exempt (prospectively or retroactively) a person from the above ownership limits and the restrictions described in clauses (iii) and (iv) above. However, the board of directors may not grant an exemption to any person unless the board of directors obtains such representations, covenants and undertakings as the board of directors may deem appropriate in order to determine that granting the exemption would not result in losing our status as a REIT. As a condition of granting the exemption, our board of directors may require a ruling from the IRS or an opinion of counsel, in either case in form and substance satisfactory to the board of directors in its sole discretion, in order to determine or ensure our status as a REIT.

 

Our board of directors may increase or decrease the Common Stock ownership limit and/or the aggregate stock ownership limit so long as the change would not result in five or fewer persons beneficially owning more than 49.9% in value of our outstanding stock. Any decrease in the Common Stock ownership limit and/or the aggregate stock ownership limit shall not apply to any person whose percentage ownership of stock is in excess of the decreased ownership limits, until such time as such person’s percentage ownership of stock equals or falls below the decreased ownership limits. Absent an exemption from the ownership limits, any further acquisition of shares of our stock by such person will be in violation of the ownership limits, unless and until such person’s percentage ownership of stock falls below the ownership limit (in which case such person may acquire shares up to such ownership limits).

 

Pursuant to our Charter, if any transfer of our shares of stock occurs that, if effective, would result in any person beneficially or constructively owning shares of stock in excess, or in violation, of the above ownership limitations or restrictions on transfer (a “Prohibited Owner”), then that number of shares of stock, the beneficial or constructive ownership of which would otherwise cause such person to violate the ownership limitations or restrictions on transfer (rounded up to the nearest whole share), will be automatically transferred to a charitable trust for the exclusive benefit of a charitable beneficiary and the Prohibited Owner will not acquire any rights in such shares. This automatic transfer will be considered effective as of the close of business on the business day before the violative transfer. If the transfer to the charitable trust would not be effective for any reason to prevent the violation of the above transfer or ownership limitations, then the transfer of that number of shares of stock that would otherwise cause any person to violate the above limitations will be null and void. Shares of stock held in the charitable trust will continue to constitute issued and outstanding shares of our stock. The Prohibited Owner will not benefit economically from ownership of any shares of stock held in the charitable trust, will have no rights to distributions and will not possess any rights to vote or other rights attributable to the shares of stock held in the charitable trust. The trustee of the charitable trust will be designated by us and must be unaffiliated with us or any Prohibited Owner and will have all voting rights and rights to distributions with respect to the shares of stock held in the charitable trust, and these rights will be exercised for the exclusive benefit of the trust’s charitable beneficiary. Any dividend or other distribution paid before our discovery that shares of stock have been transferred to the trustee will be paid by the recipient of such dividend or distribution to the trustee upon demand, and any dividend or other distribution authorized but unpaid will be paid when due to the trustee. Any dividend or distribution so paid to the trustee will be held in trust for the trust’s charitable beneficiary. The Prohibited Owner will have no voting rights with respect to shares of stock held in the charitable trust, and, subject to Maryland law, effective as of the date that such shares of stock have been transferred to the trustee, the trustee, in its sole discretion, will have the authority to:

 

·                  rescind as void any vote cast by a Prohibited Owner prior to our discovery that such shares have been transferred to the trustee; and

 

·                  recast such vote in accordance with the desires of the trustee acting for the benefit of the trust’s beneficiary.

 

However, if we have already taken irreversible corporate action, then the trustee will not have the authority to rescind and recast such vote.

 

Within 20 days of receiving notice from us that shares of stock have been transferred to the charitable trust, and unless we buy the shares first as described below, the trustee will sell the shares of stock held in the charitable trust to a person, designated by the trustee, whose ownership of the shares will not violate the ownership limitations in our Charter. Upon the sale, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the Prohibited Owner and to the charitable beneficiary. The Prohibited Owner will receive the lesser of:

 

·                  the price paid by the Prohibited Owner for the shares or, if the Prohibited Owner did not give value for the shares in connection with the event causing the shares to be held in the charitable trust (for example, in the case of a gift or devise), the market price of the shares on the day of the event causing the shares to be held in the charitable trust; and

 

·                  the price per share received by the trustee from the sale or other disposition of the shares held in the charitable trust (less any commission and other expenses of a sale).

 

The trustee may reduce the amount payable to the Prohibited Owner by the amount of dividends and other distributions paid to the Prohibited Owner and owed by the Prohibited Owner to the trustee. Any net sale proceeds in excess of the amount payable to the

 

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Prohibited Owner will be paid immediately to the charitable beneficiary. If, before our discovery that shares of stock have been transferred to the charitable trust, such shares are sold by a Prohibited Owner, then:

 

·                  such shares will be deemed to have been sold on behalf of the charitable trust; and

 

·                  to the extent that the Prohibited Owner received an amount for such shares that exceeds the amount that the Prohibited Owner was entitled to receive as described above, the excess must be paid to the trustee upon demand.

 

In addition, shares of stock held in the charitable trust will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of:

 

·                  the price per share in the transaction that resulted in such transfer to the charitable trust (or, in the case of a gift or devise, the market price at the time of the gift or devise); and

 

·                  the market price on the date we, or our designee, accept such offer.

 

We may reduce the amount payable to the Prohibited Owner by the amount of dividends and other distributions paid to the Prohibited Owner and owed by the Prohibited Owner to the trustee. We may pay the amount of such reduction to the trustee for the benefit of the charitable beneficiary. We will have the right to accept the offer until the trustee has sold the shares of stock held in the charitable trust. Upon such a sale to us, the interest of the charitable beneficiary in the shares sold will terminate, the trustee will distribute the net proceeds of the sale to the Prohibited Owner and any distributions held by the trustee will be paid to the charitable beneficiary.

 

All certificates, if any, representing shares of our stock will bear a legend referring to the restrictions described above.

 

Every owner of more than 5% (or such lower percentage as required by the Code or the regulations promulgated thereunder) in value of the outstanding shares of our stock, within 30 days after the end of each taxable year, must give written notice to us stating the name and address of such owner, the number of shares of each class and series of shares of our stock that the owner beneficially owns, and a description of the manner in which the shares are held. Each such owner must also provide to us such additional information as we may request in order to determine the effect, if any, of the owner’s beneficial ownership on our status as a REIT and to ensure compliance with our ownership limitations. In addition, each of our stockholders, whether or not an owner of 5% or more of our stock, must, upon demand, provide to us such information as we may request, in good faith, in order to determine our status as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance and to ensure our compliance with the ownership restrictions in our Charter.

 

The ownership and transfer limitations in our Charter could delay, defer or prevent a transaction or a change in control of us that might involve a premium price for holders of our stock or might otherwise be in the best interests of our stockholders.

 

Business Combinations

 

Maryland law prohibits “business combinations” between us and an interested stockholder or an affiliate of an interested stockholder for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or transfer of equity securities, liquidation plan or reclassification of equity securities. Maryland law defines an interested stockholder as:

 

·                  any person or entity who beneficially owns 10% or more of the voting power of our outstanding voting stock; or

 

·                  an affiliate or associate of ours who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then-outstanding stock.

 

A person is not an interested stockholder if our board of directors approves the transaction by which the person otherwise would have become an interested stockholder in advance. However, in approving a transaction, our board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by our board of directors.

 

After the five-year prohibition and in addition to any vote otherwise required by Maryland law and our Charter, any business combination between us and an interested stockholder or an affiliate of an interested stockholder generally must be recommended by our board of directors and approved by the affirmative vote of stockholders entitled to cast at least:

 

·                  80% of the votes entitled to be cast by holders of our then-outstanding shares of voting stock; and

 

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·                  two-thirds of the votes entitled to be cast by holders of our voting stock, other than stock held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or stock held by an affiliate or associate of the interested stockholder.

 

These super-majority vote requirements do not apply if our common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its stock.

 

The statute permits various exemptions from its provisions, including business combinations that are approved or exempted by the board of directors before the time that the interested stockholder becomes an interested stockholder.

 

Pursuant to the statute, our board of directors, by resolution, has exempted any business combinations between us and any person who is an existing, or becomes in the future an, “interested stockholder.” Consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between us and any such person. As a result, such persons may be able to enter into business combinations with us that may not be in the best interest of our stockholders, without compliance with the super-majority vote requirements and the other provisions of the statute. Additionally, this resolution may be altered, revoked or repealed in whole or in part at any time and we may opt back into the business combination provisions of the Maryland General Corporation Law (the “MGCL”). If this resolution is revoked or repealed, the statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.

 

Control Share Acquisitions

 

Maryland law provides that holders of “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights, except to the extent approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquiror or by officers or by employees who are also our directors are excluded from the shares entitled to vote on the matter. “Control shares” are voting shares of stock that, if aggregated with all other shares of stock currently owned by the acquiring person, or in respect of which the acquiring person is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiring person to exercise voting power in electing directors within one of the following ranges of voting power:

 

·                  one-tenth or more but less than one-third;

 

·                  one-third or more but less than a majority; or

 

·                  a majority or more of all voting power.

 

Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition of issued and outstanding control shares, subject to certain exceptions. A person who has made or proposes to make a control share acquisition may compel our board of directors to call a special meeting of stockholders to be held within 50 days of the demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, we may present the question of the voting rights of the shares at any stockholders’ meeting.

 

If voting rights are not approved at the stockholders’ meeting or if the acquiring person does not deliver the statement required by Maryland law, then, subject to certain conditions and limitations, we may redeem any or all of the control shares for fair value, except those for which voting rights have previously been approved. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquiror or of any meeting of stockholders at which the voting rights of the shares were considered and not approved. If voting rights for control shares are approved at a stockholders’ meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares for purposes of these appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition. The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if we are a party to the transaction, nor does it apply to acquisitions approved by or exempted by our Charter or Bylaws.

 

Our Bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of our stock and, consequently, the control share acquisition statute will not apply to us unless our board of directors later amends our Bylaws to modify or eliminate this provision, which it may do without stockholder approval, and which it may make effective prospectively or retrospectively.

 

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Maryland Unsolicited Takeovers Act

 

Subtitle 8 of Title 3 of the MGCL permits a Maryland corporation with (i) a class of equity securities registered under the Exchange Act and (ii) at least three independent directors, to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions:

 

·                  a classified board;

 

·                  a two-thirds vote requirement for removing a director;

 

·                  a requirement that the number of directors be fixed only by vote of directors;

 

·                  a requirement that a vacancy on the board of directors be filled only by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred; and

 

·                  a majority requirement for the calling of a special meeting of stockholders.

 

In our Charter, we have elected under Section 3-804(c) of the MGCL that vacancies on our board of directors be filled only by the remaining directors, even if the remaining directors do not constitute a quorum, and for the remainder of the full term of the directorship in which the vacancy occurred. In January 2015, our board of directors resolved to opt out of Section 3-803 of the MGCL, permitting our directors to elect a classified board pursuant to Title 3, Subtitle 8 of the MGCL. Consistent with the MGCL, we filed Articles Supplementary to our Charter relating to this resolution with the State Department of Assessments and Taxation of Maryland on January 27, 2015. Any amendment or repeal of this resolution must be approved in the same manner as an amendment to our Charter.

 

Through provisions in our Charter and Bylaws unrelated to Subtitle 8 of Title 3 of the MGCL, we (i) require the affirmative vote of the stockholders entitled to cast at least two-thirds of all votes entitled to be cast generally in the election of directors for the removal of any director from the board of directors, (ii) vest in the board of directors the exclusive power to fix the number of directorships and (iii) provide that unless called by the Chairman of our board of directors, our President, our Chief Executive Officer or our board of directors, a special meeting of stockholders may only be called by our Secretary upon the written request of (and satisfaction of certain procedural and information requirements by) the stockholders entitled to cast not less than a majority of all the votes entitled to be cast on any matter that may be properly considered at the meeting.

 

Transfer Agent and Registrar

 

The transfer agent and registrar for our Common Stock is Computershare Investor Services.

 

Authorized but Unissued Capital Stock

 

The listing requirements of the NYSE, which applies so long as our shares of Common Stock are listed on the NYSE, require stockholder approval of certain issuances equal to or exceeding 20% of the then-outstanding voting power or then-outstanding number of shares of our Common Stock.

 

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DESCRIPTION OF DEPOSITARY SHARES

 

We may issue Depositary Shares, each of which will represent a fractional interest in a share of a particular class or series of our Preferred Stock, as specified in the applicable prospectus supplement. Shares of a class or series of Preferred Stock represented by Depositary Shares will be deposited under a separate deposit agreement that we will enter into with a bank or trust company named therein, as depositary (such depositary receipts will evidence the Depositary Shares). Subject to the terms of the deposit agreement, each owner of a depositary receipt will be entitled, in proportion to the fractional interest in a share of a particular class or series of Preferred Stock represented by the Depositary Shares evidenced by that depositary receipt, to the rights and preferences of, and will be subject to the limitations and restrictions on, the class or series of Preferred Stock represented by those Depositary Shares (including, if applicable, dividend, voting, conversion, redemption and liquidation rights).

 

Some of the particular terms of the Depositary Shares offered by the applicable prospectus supplement, as well as some of the terms of the related deposit agreement, will be described in the prospectus supplement, which may also include a discussion of certain U.S. federal income tax consequences.

 

Copies of the applicable form of deposit agreement and depositary receipt will be filed with the SEC as an exhibit to, or incorporated by reference in, the registration statement of which this prospectus is a part. The statements in this prospectus relating to any deposit agreement, the depositary receipts to be issued thereunder and the related Depositary Shares are summaries of certain anticipated provisions thereof and do not purport to be complete and are subject to, and qualified in their entirety by reference to, all of the provisions of the applicable deposit agreement and related depositary receipts. Accordingly, you should read the form of deposit agreement and depositary receipt in their entirety before making an investment decision.

 

In a prospectus supplement, we will describe the particular combination of Securities constituting any Depositary Shares and any other specific terms.

 

DESCRIPTION OF STOCK PURCHASE CONTRACTS

 

AND STOCK PURCHASE UNITS

 

The following summarizes the general terms of stock purchase contracts and stock purchase units that we may issue. The particular terms of any stock purchase contracts or stock purchase units that we offer will be described in the applicable prospectus supplement. This description is subject to the stock purchase contracts, and any collateral arrangements and depositary arrangements, relating to the stock purchase contracts or stock purchase units.

 

We may issue stock purchase contracts, including contracts obligating holders to purchase from us, and obligating us to sell to the holders, a specified number of shares of Common Stock or Preferred Stock at a future date or dates. We may fix the consideration per share of our Common Stock or Preferred Stock at the time we issue the stock purchase contracts, or the consideration may be determined by referring to a specific formula stated in the stock purchase contracts. We may issue the stock purchase contracts separately or as  part of stock purchase units consisting of a stock purchase contract and Company Debt Securities, preferred securities, Warrants or debt obligations of third parties, including U.S. Treasury securities, which secure the holders’ obligations to purchase the Common Stock or Preferred Stock under the stock purchase contracts. The stock purchase contracts may require us to make periodic payments to the holders of the stock purchase units or vice versa. These payments may be unsecured or prefunded on some basis. The stock purchase contracts may require holders to secure their obligations in a specified manner.

 

In a prospectus supplement, we will describe the particular combination of Securities constituting any Purchase Agreement and any other specific terms.

 

DESCRIPTION OF WARRANTS

 

We may issue separately, or together with shares of our Preferred Stock or Common Stock offered by any prospectus supplement, Warrants for the purchase of additional shares of Preferred Stock or Common Stock. The Warrants may be issued under warrant agreements to be entered into between us and a bank or trust company, as warrant agent, and may be represented by certificates evidencing the Warrants, all as set forth in the applicable prospectus supplement relating to the particular series of Warrants.

 

The following summaries of certain provisions of the Warrants are not complete and are subject to, and are qualified in their entirety by reference to, all the provisions of any related Warrant agreement and Warrant certificate, which will be filed with the SEC as an exhibit to, or incorporated by reference in, the registration statement of which this prospectus is a part. A prospectus supplement will describe the terms of the Warrants in respect to which this prospectus is being delivered including, where applicable, the following:

 

·                  the title of the Warrants;

 

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·                  the aggregate number of the Warrants;

 

·                  the price or prices at which the Warrants will be issued;

 

·                  the designation, terms and number of shares of our Common Stock or Preferred Stock that may be purchased upon exercise of the Warrants;

 

·                  the designation and terms of the Securities, if any, with which the Warrants are issued and the number of the Warrants issued with each such offered Security;

 

·                  the date, if any, on and after which the Warrants and related shares of our Common Stock or Preferred Stock with which the Warrants are issued will be separately transferable;

 

·                  the price (or manner of calculation of the price) at which each share of our Common Stock or Preferred Stock may be purchased upon exercise of the Warrant;

 

·                  the date on which the right to exercise the Warrants will commence and the date on which the right will expire;

 

·                  the minimum or maximum amount of the Warrants that may be exercised at any one time;

 

·                  information with respect to book-entry procedures, if any;

 

·                  a discussion of material federal income tax considerations; and

 

·                  any other terms of the Warrants, including terms, procedures and limitations relating to the exchange and exercise of the Warrants.

 

The exercise of any Warrants will be subject to, and limited by, the transfer and ownership restrictions in our Charter. See “Description of Capital Stock — Restriction on Ownership and Transfer.”

 

We may sell Warrants to purchase our Common Stock or Preferred Stock. In a prospectus supplement, we will inform you of the exercise price and other specific terms of the Warrants, including whether our or your obligations, if any, under any Warrants may be satisfied by delivering or purchasing the underlying Securities or their cash value.

 

DESCRIPTION OF COMPANY DEBT SECURITIES

 

The Company Debt Securities will be issued in one or more series under an indenture, to be entered into between the Company and U.S. Bank National Association, as trustee. References herein to the “Company Indenture” refer to such indenture and references to the “Trustee” in this “Description of Company Debt Securities” refer to such trustee or any other trustee for any particular series of Company Debt Securities issued under the Company Indenture. The terms of the Company Debt Securities of any series will be those specified in or pursuant to the Company Indenture and in the applicable Company Debt Securities of that series and those made part of the Company Indenture by the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”).

 

The following description of Company Debt Securities describes general terms and provisions of the series of Company Debt Securities to which any prospectus supplement may relate. When the Company Debt Securities of a particular series are offered for sale, the specific terms of such Company Debt Securities will be described in the applicable prospectus supplement. If any terms of such Company Debt Securities described in a prospectus supplement are inconsistent with any of the terms of the Company Debt Securities generally described in this prospectus, then the terms described in the applicable prospectus supplement will supersede the terms described in this prospectus.

 

The following description of selected provisions of the Company Indenture and the Company Debt Securities is not complete, and the description of selected terms of the Company Debt Securities of a particular series included in the applicable prospectus supplement also will not be complete. You should review the form of the Company Indenture and the form of the applicable Company Debt Securities, which forms have been or will be filed as exhibits to the registration statement of which this prospectus is a part or as exhibits to documents that have been or will be incorporated by reference in this prospectus. To obtain a copy of the form of the Company Indenture or the form of the applicable Company Debt Securities, see “Where You Can Find More Information; Incorporation by Reference” in this prospectus. The following description of Company Debt Securities and the description of the Company Debt Securities of a particular series in the applicable prospectus supplement are qualified in their entirety by reference to all of the provisions of the Company Indenture and the applicable Company Debt Securities, which provisions, including defined terms, are, or will be, incorporated by reference in this prospectus, and to those made part of the Company Indenture by the Trust

 

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Indenture Act. Capitalized terms used but not defined in the following description shall have the meanings assigned to those terms in the Company Indenture or, if applicable, the Company Debt Securities.

 

The Company Debt Securities will be obligations solely of the Company and will not be obligations of, or directly or indirectly guaranteed by, any of its subsidiaries or any other entity. Accordingly, the Company Debt Securities are structurally subordinated to the liabilities of, and any preferred equity in, its subsidiaries and, as a result, the Company’s right to participate as a common equity holder of a subsidiary in any distribution of assets of such subsidiary upon such subsidiary’s liquidation or otherwise, and thus the ability of the holders of the Company Debt Securities to benefit from such distribution, is junior to creditors and any preferred equity holders of such subsidiary, except to the extent that any claims the Company may have as a creditor or preferred equity holder of such subsidiary are recognized. The Company may also guarantee obligations of its direct or indirect subsidiaries. Any liability the Company may have for its subsidiaries’ obligations could reduce its assets that are available to satisfy its direct creditors, including holders of the Company Debt Securities. In addition, the Company Debt Securities will rank junior to the Company’s secured debt to the extent of the value of the collateral security securing the same.

 

General

 

The Company Debt Securities will constitute the unsecured and unsubordinated obligations of the Company and will rank on parity in right of payment among themselves and with all of the Company’s other existing and future unsecured and unsubordinated indebtedness. The Company may issue an unlimited principal amount of the Company Debt Securities under the Company Indenture. The Company Indenture provides that the Company Debt Securities of any series may be issued up to the aggregate principal amount that may be authorized from time to time by the Company. Please read the applicable prospectus supplement relating to the Company Debt Securities of the particular series being offered thereby for selected terms of such Company Debt Securities, including, without limitation, where applicable:

 

·                  the title of such series of the Company Debt Securities;

 

·                  the aggregate principal amount of the Company Debt Securities of such series and any limit thereon;

 

·                  the date or dates on which the Company will pay the principal of, and premium, if any, on, the Company Debt Securities of such series, or the method or methods, if any, used to determine such date or dates;

 

·                  the rate or rates, which may be fixed or variable, at which the Company Debt Securities of such series will bear interest, if any, or the method or methods, if any, used to determine such rate or rates;

 

·                  the basis used to calculate interest, if any, on the Company Debt Securities of such series if other than a 360-day year of twelve 30-day months;

 

·                  the date or dates, if any, from which interest on the Company Debt Securities of such series will accrue, or the method or methods, if any, used to determine such date or dates;

 

·                  the date or dates, if any, on which interest on the Company Debt Securities of such series will be payable and the record dates for any such payment of interest;

 

·                  the terms and conditions, if any, upon which the Company is required to, or may, at its option, redeem the Company Debt Securities of such series;

 

·                  the terms and conditions, if any, upon which the Company will be required to repurchase the Company Debt Securities of such series at the option of holders of the Company Debt Securities of such series;

 

·                  the terms of any sinking fund or analogous provision applicable to the Company Debt Securities of such series;

 

·                  the portion of the principal amount of the Company Debt Securities of such series payable upon acceleration of the maturity thereof, if other than the full principal amount;

 

·                  the authorized denominations in which the Company Debt Securities of such series will be issued, if other than minimum denominations of $2,000 and any integral multiple of $1,000 in excess thereof;

 

·                  the place or places where (i) amounts due on the Company Debt Securities of such series will be payable, (ii) the Company Debt Securities of such series may be surrendered for registration of transfer and exchange and (iii) notices or demands to or upon the Company or the Trustee in respect of the Company Debt Securities of such series or the Company Indenture may be served, if different than the corporate trust office of the Trustee;

 

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·                  if other than U.S. dollars, the currency or currencies in which purchases of, and payments on, the Company Debt Securities of such series must be made;

 

·                  whether the amount of payments due on the Company Debt Securities of such series may be determined with reference to an index, formula, or other method or methods (any of those Company Debt Securities being referred to as Indexed Securities) and the manner used to determine those amounts;

 

·                  any addition to, modification of, or deletion of, any covenant or Event of Default (as defined below) with respect to the Company Debt Securities of such series;

 

·                  the identity of the depositary for the global Company Debt Securities if other than The Depository Trust Company and the terms of the depositary arrangement if other than as specified below;

 

·                  the circumstances under which the Company will pay additional amounts on the Company Debt Securities of such series in respect of any tax, assessment, or other governmental charge (“Additional Amounts”) and whether the Company will have the option to redeem such Company Debt Securities rather than pay the Additional Amounts; and

 

·                  any other terms of the Company Debt Securities of such series.

 

As used in this prospectus, references to the principal of, and premium, if any, and interest, if any, on, the Company Debt Securities of a series include Additional Amounts, if any, payable on the Company Debt Securities of such series in that context.

 

The Company may issue the Company Debt Securities as original issue discount securities to be sold at a substantial discount below their principal amount. In the event of an acceleration of the maturity of any original issue discount security, the amount payable to the holder upon acceleration will be determined in the manner described in the applicable prospectus supplement. Important federal income tax and other considerations applicable to original issue discount securities will be described in the applicable prospectus supplement.

 

The terms of the Company Debt Securities of any series may be inconsistent with the terms of the Company Debt Securities of any other series. Unless otherwise specified in the applicable prospectus supplement, the Company may, without the consent of, or notice to, the holders of the Company Debt Securities of any series, reopen an existing series of the Company Debt Securities and issue additional Company Debt Securities of that series.

 

Other than to the extent provided in “ - Merger, Consolidation and Transfer of Assets” below or to the extent provided with respect to the Company Debt Securities of a particular series and described in the applicable prospectus supplement, the Company Indenture will not contain any provisions that would limit the Company’s ability to incur indebtedness or to substantially reduce or eliminate its consolidated assets or that would afford holders of the Company Debt Securities protection in the event of:

 

·                  a recapitalization or other highly leveraged or similar transaction involving the Company, any of its subsidiaries or affiliates or its management;

 

·                  a change of control involving the Company or its subsidiaries or affiliates; or

 

·                  a reorganization, restructuring, merger, or similar transaction involving the Company, its subsidiaries or its affiliates.

 

Accordingly, the Company’s ability to service its indebtedness (including the Company Debt Securities) could be materially and adversely affected in the future.

 

Registration, Transfer, Payment and Paying Agent

 

Unless otherwise specified in the applicable prospectus supplement, each series of the Company Debt Securities will be issued in registered form only, without coupons.

 

Unless otherwise specified in the applicable prospectus supplement, the Company Debt Securities will be payable and may be surrendered for registration of transfer or exchange at an office of the Company or an agent of the Company in The City of New York. However, the Company, at its option, may make payments of interest on any interest payment date for a Company Debt Security by check mailed to the address of the person entitled to receive that payment or by wire transfer to an account maintained by the payee with a bank located in the United States.

 

Any interest not punctually paid, or duly provided for, on any interest payment date with respect to the Company Debt Securities of any series will forthwith cease to be payable to the holders of those Company Debt Securities on the applicable regular record date and may be paid to the persons in whose names those Company Debt Securities are registered at the close of business on a special record

 

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date for the payment of the interest not punctually paid or duly provided for to be fixed by the Trustee or the Company, notice whereof shall be given to the holders of those Company Debt Securities not less than 10 days prior to the special record date, or may be paid at any time in any other lawful manner, all as completely set forth in the Company Indenture.

 

Subject to certain limitations imposed on the Company Debt Securities issued in book-entry form, the Company Debt Securities of any series will be exchangeable for other Company Debt Securities of the same series and of a like aggregate principal amount and tenor of different authorized denominations, upon surrender of those Company Debt Securities at the designated place or places. In addition, subject to certain limitations imposed upon the Company Debt Securities issued in book-entry form, the Company Debt Securities of any series may be surrendered for registration of transfer or exchange thereof at the designated place or places if duly endorsed or accompanied by a written instrument of transfer. No service charge shall be made for any registration of transfer or exchange, redemption or repurchase of the Company Debt Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with certain of those transactions.

 

Unless otherwise specified in the applicable prospectus supplement, the Company will not be required to:

 

·                  issue, register the transfer of, or exchange the Company Debt Securities of any series during a period beginning at the opening of business 15 days before any selection of the Company Debt Securities of that series of like tenor and terms to be redeemed and ending at the close of business on the day of that selection;

 

·                  register the transfer of or exchange any Company Debt Security, or portion of any Company Debt Security, called for redemption, except the unredeemed portion of any Company Debt Security being redeemed in part; or

 

·                  issue, register the transfer of or exchange a Company Debt Security that has been surrendered for repurchase at the option of the holder, except the portion, if any, of the Company Debt Security not to be repurchased.

 

Outstanding Company Debt Securities

 

In determining whether the holders of the requisite principal amount of outstanding Company Debt Securities have given any request, demand, authorization, direction, notice, consent or waiver under the Company Indenture:

 

·                  the principal amount of an original issue discount security that shall be deemed to be outstanding for these purposes shall be that portion of the principal amount of the original issue discount security that would be due and payable upon acceleration of the maturity of such original issue discount security as of the date of the determination;

 

·                  the principal amount of any Indexed Security that shall be deemed to be outstanding for these purposes shall be the principal amount of the Indexed Security determined on the date of its original issuance;

 

·                  the principal amount of a Company Debt Security denominated in a currency other than U.S. Dollars shall be the U.S. dollar equivalent, determined on the date of its original issuance, of the principal amount of such Company Debt Security; and

 

·                  a Debt Security owned by the Company or any other obligor of such Company Debt Security or any affiliate of the Company or such other obligor shall be deemed not to be outstanding.

 

Redemption and Repurchase

 

The Company Debt Securities of any series may be redeemable at the Company’s option or may be subject to mandatory redemption by the Company as required by a sinking fund or otherwise. In addition, the Company Debt Securities of any series may be subject to repurchase by the Company at the option of the holders thereof. The applicable prospectus supplement will describe the terms and conditions regarding any optional or mandatory redemption or optional repurchase of the Company Debt Securities of the particular series.

 

Merger, Consolidation and Transfer of Assets

 

The Company Indenture provides that the Company may not, in any transaction or series of related transactions, (i) consolidate or amalgamate with or merge into any other person or (ii) sell, lease, assign, transfer or otherwise convey all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to any other person, in each case, unless:

 

·                  in such transaction or transactions, either (i) the Company shall be the continuing person (in the case of a merger) or (ii) the successor person (if other than the Company) formed by or resulting from the consolidation, amalgamation or merger or to which such assets shall have been sold, leased, assigned, transferred or otherwise conveyed (A) is a corporation, limited liability company, partnership or trust organized and existing under the laws of the United States of America, any

 

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state thereof or the District of Columbia or any territory thereof, and (B) shall, by a supplemental indenture, expressly assume the due and punctual performance of all of the Company’s payment and other obligations under the Company Indenture and all of the Company Debt Securities outstanding thereunder;

 

·                  immediately after giving effect to such transaction or transactions, no Event of Default under the Company Indenture, and no event which, after notice or lapse of time or both would become an Event of Default under the Company Indenture, shall have occurred and be continuing; and

 

·                  the Trustee shall have received an officer’s certificate and opinion of counsel from the Company to the effect that all conditions precedent to such transaction or transactions have been satisfied.

 

Upon any consolidation or amalgamation by the Company with, or the Company’s merger into, any other person or any sale, lease, assignment, transfer or other conveyance of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to any person, in each case in accordance with the provisions of the Company Indenture described above, the successor person formed by the consolidation or amalgamation or into which the Company is merged or to which such sale, lease, assignment, transfer or other conveyance is made, as applicable, shall succeed to, and be substituted for, the Company and may exercise every right and power of the Company under the Company Indenture with the same effect as if such successor person had been named as the Company in the Company Indenture; and thereafter, the predecessor person shall be released from all of its obligations and covenants under the Company Indenture and the outstanding Company Debt Securities.

 

Events of Default

 

Unless otherwise specified in the applicable prospectus supplement, an Event of Default with respect to the Company Debt Securities of any series is defined in the Company Indenture as being:

 

i.                  default for 30 days in the payment of any interest on, or any Additional Amounts payable in respect of any interest on, any Company Debt Security of that series;

 

ii.                default in payment of any principal of, or premium, if any, on, or any Additional Amounts payable in respect of any principal of, or premium, if any, on, any Company Debt Security of that series when due, whether at stated maturity, upon redemption, upon repurchase at the option of the holder or otherwise;

 

iii.            default in the deposit of any sinking fund payment or payment under any analogous provision when due with respect to any Company Debt Security of that series;

 

iv.           default in the performance or observance, or breach, of any covenant or other agreement of the Company in the Company Indenture or any Company Debt Security of that series not covered elsewhere in this section, other than a covenant or other agreement included in the Company Indenture solely for the benefit of a series of the Company Debt Securities other than that series, which shall not have been remedied for a period of 60 days after written notice to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the Company Debt Securities of that series then outstanding;

 

v.              default by the Company to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise), in respect of any indebtedness for money borrowed by the Company in excess of $50,000,000 principal amount, or a default under any such indebtedness resulting in the acceleration prior to the stated maturity of the principal amount of such indebtedness in excess of $50,000,000, and such indebtedness is not discharged or such acceleration is not rescinded or annulled within 30 days thereafter;

 

vi.           specified events of bankruptcy, insolvency, or reorganization with respect to the Company or its significant subsidiaries (as defined in Regulation S-X under the Securities Act); or

 

vii.        any other Event of Default established for the Company Debt Securities of that series.

 

No Event of Default with respect to any particular series of the Company Debt Securities necessarily constitutes an Event of Default with respect to any other series of the Company Debt Securities. The Trustee is required to give notice to holders of the Company Debt Securities of the applicable series within 90 days after a responsible officer of the Trustee has actual knowledge of a default relating to such Company Debt Securities.

 

If an Event of Default specified in clause (vi) above occurs, then the principal amount of all the outstanding Company Debt Securities and unpaid interest, if any, accrued thereon shall automatically become immediately due and payable. If any other Event of Default with respect to the outstanding Debt Securities of the applicable series occurs and is continuing, either the Trustee or the holders of at least 25% in aggregate principal amount of the Company Debt Securities of that series then outstanding may declare the principal amount of, or if the Company Debt Securities of that series are original issue discount securities such lesser amount as may be

 

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specified in the terms of, the Company Debt Securities of that series, and unpaid interest, if any, accrued thereon to be due and payable immediately. However, upon specified conditions, the holders of a majority in aggregate principal amount of the Company Debt Securities of that series then outstanding may rescind and annul any such declaration of acceleration and its consequences.

 

The Company Indenture provides that no holders of the Company Debt Securities of any series may institute any proceedings, judicial or otherwise, with respect to the Company Indenture, or for the appointment of a receiver or Trustee, or for any remedy thereunder, except in the case of failure of the Trustee, for 60 days, to act after it has received a written request to institute proceedings in respect of an Event of Default from the holders of at least 25% in aggregate principal amount of the outstanding Company Debt Securities of that series, as well as an offer of indemnity or security reasonably satisfactory to it, and no inconsistent direction has been given to the Trustee during such 60 day period by the holders of a majority in aggregate principal amount of the outstanding Company Debt Securities of that series. Notwithstanding any other provision of the Company Indenture, each holder of a Company Debt Security will have the right, which is absolute and unconditional, to receive payment of principal of, and premium, if any, and interest, if any, and any Additional Amounts on, that Company Debt Security on the respective due dates for those payments and to institute suit for the enforcement of those payments, and this right shall not be impaired without the consent of such holder.

 

Subject to the provisions of the Trust Indenture Act requiring the Trustee, during the continuance of an Event of Default under the Company Indenture, to act with the requisite standard of care, the Trustee is under no obligation to exercise any of its rights or powers under the Company Indenture at the request or direction of any of the holders of the Company Debt Securities of any series unless those holders have offered the Trustee indemnity or security reasonably satisfactory to it. The holders of a majority in aggregate principal amount of the outstanding Company Debt Securities of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or of exercising any trust or power conferred upon the Trustee, provided that the direction would not conflict with any rule or law or with the Company Indenture or with any series of the Company Debt Securities, such direction would not be unduly prejudicial to the rights of any other holder of the Company Debt Securities of that series (or the Company Debt Securities of any other series), and the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.

 

Within 120 days after the close of each fiscal year, the Company must deliver to the Trustee an officer’s certificate stating whether or not the certifying officer has knowledge of any Event of Default or default which, with notice or lapse of time or both, would become an Event of Default under the Company Indenture and, if so, specifying each such default and the nature and status thereof.

 

Modification, Waivers and Meetings

 

The Company Indenture permits the Company and the Trustee, with the consent of the holders of a majority in aggregate principal amount of the outstanding Company Debt Securities of each series issued under the Company Indenture and affected by a modification or amendment (voting as separate classes), to modify or amend any of the provisions of the Company Indenture or of the Company Debt Securities of the applicable series or the rights of the holders of the Company Debt Securities of the applicable series under the Company Indenture. However, no modification or amendment shall, without the consent of the holder of each outstanding Company Debt Security affected thereby:

 

·                  change the stated maturity of the principal of, or premium, if any, or any installment of interest, if any, on, or any Additional Amounts, if any, with respect to, any Company Debt Security; or

 

·                  reduce the principal of, or premium, if any, on, any Company Debt Security or reduce the rate (or modify the calculation of such rate) of interest, if any, on, or the redemption or repurchase price of, or any Additional Amounts with respect to, any Company Debt Security or change the Company’s obligation to pay Additional Amounts; or

 

·                  reduce the amount of principal of any original issue discount security that would be due and payable upon acceleration of the maturity thereof; or

 

·                  change the date(s) on which, or period(s) in which, any Company Debt Security is subject to redemption or repurchase or otherwise alter the provisions with respect to the redemption or repurchase of any Company Debt Security in a manner that is adverse to the interests of the holder of such Company Debt Security; or

 

·                  change any place where, or the currency in which, any Company Debt Security is payable; or

 

·                  impair the holder’s right to institute suit to enforce the payment of any Company Debt Security on or after their stated maturity, or in the case of redemption, on or after the redemption date, or in the case of repurchase, on or after the date for repurchase; or

 

·                  reduce the percentage of the outstanding Company Debt Securities of any series whose holders must consent to any modification or amendment or any waiver of compliance with specific provisions of such Company Indenture or specified defaults under the Company Indenture and their consequences; or

 

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·                  modify the provisions relating to the requirements for the modification or amendment of the Company Indenture with the consent of each holder, of the waiver of compliance with specific provisions of the Company Indenture or specified defaults under the Company Indenture, except to increase the percentage of holders of the Company Debt Securities of any series outstanding under the Company Indenture required to effect that action or to provide that certain other provisions of the Company Indenture may not be modified or waived without the consent of the holder of each outstanding Company Debt Security affected thereby; or

 

·                  reduce the requirements for a quorum or voting at a meeting of holders of the applicable Company Debt Securities.

 

The Company Indenture also contains provisions permitting the Company and the Trustee, without the consent of the holders of any Company Debt Securities, to modify or amend the Company Indenture, among other things:

 

·                  to add to the Events of Default for all or any series of the Company Debt Securities;

 

·                  to add to the covenants for the benefit of the holders of all or any series of the Company Debt Securities;

 

·                  to provide for security of the Company Debt Securities of all or any series or to add guarantees in favor of the Company Debt Securities of all or any series;

 

·                  to establish the form or terms of the Company Debt Securities of any series, and the form of the guarantees, if any, of the Company Debt Securities of any series;

 

·                  to cure any mistake or ambiguity or correct or supplement any provision in the Company Indenture which may be defective or inconsistent with other provisions in the Company Indenture, or to make any other provisions with respect to matters or questions arising under the Company Indenture, or to make any change necessary to comply with any requirement of the SEC in connection with the Company Indenture under the Trust Indenture Act, in each case which shall not adversely affect the interests of the holders of any Company Debt Securities;

 

·                  to amend or supplement any provision contained in the Company Indenture, provided that the amendment or supplement does not apply to any outstanding Company Debt Securities issued before the date of the amendment or supplement and entitled to the benefits of that provision;

 

·                  to conform the terms of the Company Indenture or the Company Debt Securities of a series to the description thereof contained in any prospectus, prospectus supplement or other offering document relating to the offer and sale of those Company Debt Securities; or

 

·                  to modify, alter, amend or supplement the Company Debt Securities in any other respect that shall not adversely affect the interests of any of the holders of any the Company Debt Securities.

 

The holders of a majority in aggregate principal amount of the outstanding Company Debt Securities of any series may, on behalf of all holders of the Company Debt Securities of that series, waive any continuing default under the Company Indenture with respect to the Company Debt Securities of that series and its consequences, except a default (i) in the payment of principal of, or premium, if any, or interest, if any, on, the Company Debt Securities of that series, or (ii) in respect of a covenant or provision that cannot be modified or amended without the consent of the holder of each outstanding Company Debt Security of the affected series.

 

The Company Indenture contains provisions for convening meetings of the holders of the Company Debt Securities. A meeting may be called at any time by the Trustee, the Company or the holders of at least 10% in aggregate principal amount of the outstanding Company Debt Securities of any series. Notice of a meeting must be given in accordance with the provisions of the Company Indenture. Except for any consent or waiver that must be given by the holder of each outstanding Company Debt Security affected in the manner described above, any resolution presented at a meeting or adjourned meeting duly reconvened at which a quorum, as described below, is present may be adopted by the affirmative vote of the holders of a majority in aggregate principal amount of the outstanding Company Debt Securities of the applicable series. However, 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, other than a majority, in aggregate principal amount of the outstanding Company 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 that specified percentage in aggregate principal amount of the outstanding Company Debt Securities of that series. Any resolution passed or decision taken at any meeting of holders of the Company Debt Securities of any series duly held in accordance with the Company Indenture will be binding on all holders of the Company 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 aggregate principal amount of the outstanding Company Debt Securities of the applicable series, subject to exceptions; provided, however, that if any action is to be taken at that meeting with respect to a consent or waiver that may be given by the holders of a supermajority in aggregate principal

 

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amount of the outstanding Company Debt Securities of a series, the persons holding or representing that specified supermajority percentage in aggregate principal amount of the outstanding Company Debt Securities of that series will constitute a quorum.

 

Book-Entry Procedures

 

Global Notes

 

Company Debt Securities of a series may be represented by one or more Company Debt Securities of such series in global form.  References to “global note” in this “Description of Company Debt Securities” refer to such global note(s). Unless otherwise provided in the applicable prospectus supplement, global notes will be deposited upon issuance with the Trustee as custodian for DTC, in New York, New York, and registered in the name of DTC or its nominee. Each global note will be credited to the account of a direct or indirect participant in DTC as described below.

 

Except as set forth below, a global note may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in a global note may not be exchanged for Company Debt Securities in certificated form except as described below under “Exchanges of Global Note for Certificated Company Debt Securities.”

 

Exchanges of Global Note for Certificated Company Debt Securities

 

A beneficial ownership interest in a global note may not be exchanged for the Company Debt Securities of the same series in certificated form unless:

 

·                  DTC notifies the Company that it is unwilling or unable to continue as depositary for the global note or has ceased to be a clearing agency registered under the Exchange Act and, in either case, the Company fails to appoint a successor depositary within 60 days;

 

·                  the Company, at its option, notifies the Trustee in writing that it has elected to issue the Company Debt Securities in certificated form; or

 

·                  an Event of Default with respect to the Company Debt Securities represented by the global note has occurred and is continuing.

 

Book-Entry Procedures

 

DTC has indicated that it intends to use the following procedures for the global notes. DTC may change these procedures from time to time. Neither the Company nor WPC Finance is responsible for these procedures. You should contact DTC or its participants directly to discuss these matters.

 

DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This system eliminates the need for physical movement of securities certificates. Direct participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a direct participant, either directly or indirectly (“Indirect Participants”). DTC rules applicable to its participants are on file with the SEC. More information about DTC can be found at www.dtcc.com and www.dtc.org.

 

Purchases of the Company Debt Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the securities on DTC’s records. The beneficial ownership interest of each actual purchaser (“Beneficial Owner”) is in turn to be recorded on the direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct Participants or Indirect Participants through which the Beneficial Owner entered into the transaction. Transfers of beneficial ownership interests in a global note are to be accomplished by entries made on the books of Direct Participant and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their Beneficial Ownership interests in a global note, except in the event that use of the book-entry system for their Company Debt Securities are discontinued.

 

To facilitate subsequent transfers, all global notes deposited by Direct Participants with DTC will be registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of global notes with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in

 

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Beneficial Ownership. DTC has no knowledge of the actual beneficial owners of global notes; DTC’s records reflect only the identity of the Direct Participants to whose accounts a global note is credited, which may or may not be the Beneficial Owners. The Direct Participants and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

 

AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL NOTE, DTC OR ITS NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE OWNER AND HOLDER OF THE COMPANY DEBT SECURITIES REPRESENTED BY THE GLOBAL NOTE FOR ALL PURPOSES UNDER THE INDENTURE AND THE COMPANY DEBT SECURITIES.

 

The laws of some U.S. states require that persons take physical delivery in definitive form of securities that they own. The ability to transfer beneficial ownership interests in a global note to such persons may be limited to that extent. Because DTC can act only on behalf of its Direct Participants, which in turn act on behalf of Indirect Participants and banks, the ability of a person having a beneficial ownership interest in a global note to pledge such interest to persons that do not participate in the DTC system, or take other actions in respect of such interest, may be affected by the lack of a physical certificate.

 

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

 

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to a global note unless authorized by a Direct Participant in accordance with DTC’s procedures. Under its usual procedures, DTC will mail an omnibus proxy to the Company as soon as possible after the record date. The omnibus proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts a global note is credited on the record date (identified in a listing attached to the omnibus proxy).

 

Payments of principal of, and premium, if any, and interest, if any, on, global notes will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds on the payment date in accordance with their respective holdings shown on DTC’s records. Payments by participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of each participant and not of DTC, the Trustee or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of, and premium, if any, and interest, if any, on the global notes to DTC will be the responsibility of the Company, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of the Direct Participants and the Indirect Participants.

 

The Company will send any redemption or repurchase notices to DTC. If less than all of the Company Debt Securities of a particular series are being redeemed or repurchased, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed or repurchased.

 

DTC may discontinue providing its services as depositary with respect to global notes at any time by giving reasonable notice to the Company or the Trustee. Under such circumstances, in the event that a successor depositary is not obtained, Company Debt Securities in certificated form are required to be printed and delivered.

 

The Company may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depositary). In that event, the Company Debt Securities in certificated form will be printed and delivered to DTC.

 

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Company believes to be reliable, but it takes no responsibility for the accuracy or completeness thereof.

 

Neither the Company, the Trustee nor their respective agents are responsible for the performance by DTC or its Direct Participants or Indirect Participants of their obligations under the rules and procedures governing their operations.

 

Discharge, Legal Defeasance and Covenant Defeasance

 

Satisfaction and Discharge

 

Upon the Company’s direction, the Company Indenture shall cease to be of further effect with respect to the Company Debt Securities of any series specified by the Company, subject to the survival of specified provisions of the Company Indenture, including (unless the accompanying prospectus supplement provides otherwise) the Company’s obligation to repurchase such Company Debt Securities at the option of the holders thereof, if applicable, and the Company’s obligation to pay Additional Amounts in respect of such Company Debt Securities to the extent described below, when:

 

·                  either

 

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i.                  all outstanding Company Debt Securities of that series have been delivered to the Trustee for cancellation, subject to exceptions, or

 

ii.               all Company Debt Securities of that series have become due and payable or will become due and payable at their maturity within one year or are to be called for redemption within one year, and the Company has deposited with the Trustee, in trust, funds in the currency in which the Company Debt Securities of that series are payable in an amount sufficient to pay and discharge the entire indebtedness on the Company Debt Securities of that series, including the principal thereof and, premium, if any, and interest, if any, thereon, and, to the extent that (x) the Company Debt Securities of that series provide for the payment of Additional Amounts and (y) the amount of any Additional Amounts that are or will be payable is at the time of deposit reasonably determinable by the Company, in the exercise of its sole discretion, those Additional Amounts, to the date of such deposit, if the Company Debt Securities of that series have become due and payable, or to the stated maturity or redemption date of the Company Debt Securities of that series, as the case may be;

 

·                  the Company has paid all other sums payable under the Company Indenture with respect to the Company Debt Securities of that series (including amounts payable to the Trustee); and

 

·                  the Trustee has received an officer’s certificate and an opinion of counsel from the Company to the effect that all conditions precedent to the satisfaction and discharge of the Company Indenture in respect of the Company Debt Securities of such series have been satisfied.

 

If the Company Debt Securities of any series provide for the payment of Additional Amounts, the Company will remain obligated, following the deposit described above, to pay Additional Amounts on those Company Debt Securities to the extent that they exceed the amount deposited in respect of those Additional Amounts as described above.

 

Legal Defeasance and Covenant Defeasance

 

Unless otherwise specified in the applicable prospectus supplement, the Company may elect with respect to the Company Debt Securities of the particular series either:

 

·                  to defease and discharge itself from any and all obligations with respect to those Company Debt Securities (“Company Legal Defeasance”), except for, among other things:

 

i.                  the obligation to pay Additional Amounts, if any, upon the occurrence of specified events of taxation, assessment, or governmental charge with respect to payments on those Company Debt Securities to the extent that those Additional Amounts exceed the amount deposited in respect of those amounts as provided below,

 

ii.               the obligations to register the transfer or exchange of those Company Debt Securities,

 

iii.            the obligation to replace temporary or mutilated, destroyed, lost, or stolen Company Debt Securities,

 

iv.           the obligation to maintain an office or agent of the Company in The City of New York in respect of those Company Debt Securities,

 

v.              the obligation to hold moneys for payment in respect of those Company Debt Securities in trust, and

 

vi.           the obligation, if applicable, to repurchase those Company Debt Securities at the option of the holders thereof; or

 

·                  to be released from its obligations with respect to those Company Debt Securities under any covenants as may be specified in the applicable prospectus supplement, and any omission to comply with those obligations shall not constitute a default or an Event of Default with respect to those Company Debt Securities (“Company Covenant Defeasance”), in either case upon the irrevocable deposit with the Trustee, or other qualifying Trustee, in trust for that purpose, of funds in the currency in which those Company Debt Securities are payable at maturity or, if applicable, upon redemption, and/or government obligations (as defined in the Company Indenture) in an amount that, through the payment of principal and interest in accordance with their terms, will provide money, in an amount sufficient, in the written opinion of a nationally recognized firm of independent public accountants or a nationally recognized investment bank, to pay the principal thereof and premium, if any, and interest, if any, thereon, and, to the extent that (x) those Company Debt Securities provide for the payment of Additional Amounts and (y) the amount of any Additional Amounts that are or will be payable is at the time of deposit reasonably determinable by the Company, in the exercise of its sole discretion, the Additional Amounts with respect to those Company Debt Securities, and any mandatory sinking fund or analogous payments on those Company Debt Securities, on the due dates for those payments, whether at stated maturity, upon redemption, upon repurchase at the option of the holder or otherwise.

 

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The Company Legal Defeasance or Company Covenant Defeasance described above shall only be effective if, among other things:

 

·                  it shall not result in a breach or violation of, or constitute a default under, the Company Indenture or any other agreement or instrument to which the Company or any significant subsidiary is a party or is bound;

 

·                  in the case of Company Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel confirming that:

 

i.                  the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or

 

ii.               since the date of the Company Indenture, there has been a change in applicable federal income tax law;

 

in either case to the effect that, and based on this ruling or change the opinion of counsel shall confirm that, the holders of the Company Debt Securities of the applicable series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the Company Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Company Legal Defeasance had not occurred;

 

·                  in the case of Company Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel to the effect that the holders of the Company Debt Securities of the applicable series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the Company Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Company Covenant Defeasance had not occurred;

 

·                  if the cash and government obligations deposited are sufficient to pay the outstanding Company Debt Securities of the applicable series on a particular redemption date, the Company shall have given the Trustee irrevocable instructions to redeem those Company Debt Securities on that date;

 

·                  no Event of Default or default that with notice or lapse of time or both would become an Event of Default with respect to the Company Debt Securities of the applicable series shall have occurred and be continuing on the date of the deposit into trust; and, solely in the case of Company Legal Defeasance, no Event of Default arising from specified events of bankruptcy, insolvency, or reorganization with respect to the Company or default which with notice or lapse of time or both would become such an Event of Default shall have occurred and be continuing during the period ending on the 91st day after the date of the deposit into trust; and

 

·                  the Company shall have delivered to the Trustee an officer’s certificate and opinion of counsel to the effect that all conditions precedent to the Company Legal Defeasance or Company Covenant Defeasance, as the case may be, have been satisfied.

 

In the event the Company effects Company Covenant Defeasance with respect to the Company Debt Securities of any series and those Company Debt Securities are declared due and payable because of the occurrence of any Event of Default other than an Event of Default with respect to the covenants as to which Company Covenant Defeasance has been effected, which covenants would no longer be applicable to the Company Debt Securities of that series after Company Covenant Defeasance, the amount of monies and/or government obligations deposited with the Trustee to effect Company Covenant Defeasance may not be sufficient to pay amounts due on the Company Debt Securities of that series at the time of any acceleration resulting from that Event of Default. However, the Company would remain liable to make payment of those amounts due at the time of acceleration.

 

The applicable prospectus supplement may further describe the provisions, if any, permitting or restricting Company Legal Defeasance or Company Covenant Defeasance with respect to the Company Debt Securities of a particular series.

 

Concerning the Trustee

 

There may be more than one Trustee under the Company Indenture, each with respect to one or more series of the Company Debt Securities. If there are different Trustees for different series of the Company Debt Securities, each Trustee will be a trustee separate and apart from any other Trustee under the Company Indenture. Unless otherwise specified in the applicable prospectus supplement, any action permitted to be taken by a Trustee may be taken by such Trustee only with respect to the one or more series of Debt Securities for which it is the trustee under the Company Indenture. Any Trustee under the Company Indenture may resign or be removed with respect to one or more series of the Company Debt Securities. All payments of principal of, and premium, if any, and interest, if any, on, and all registration, transfer, exchange, authentication and delivery (including authentication and delivery on original issuance of the Company Debt Securities) of, the Company Debt Securities of a series will be effected by the Trustee with respect to that series at an office designated by the Trustee.

 

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U.S. Bank National Association is the trustee under the Company Indenture. The Company may maintain corporate trust relationships in the ordinary course of business with the Trustee. The Trustee shall have and be subject to all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act. Subject to the provisions of the Trust Indenture Act, the Trustee is under no obligation to exercise any of the powers vested in it by the Company Indenture at the request of any holder of the Company Debt Securities unless offered indemnity or security reasonably acceptable to it by the holder against the costs, expense and liabilities which might be incurred thereby.

 

Under the Trust Indenture Act, the Company Indenture is deemed to contain limitations on the right of the Trustee, should it become a creditor of the Company, to obtain payment of claims in some cases or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee may engage in other transactions with the Company. If it acquires any conflicting interest relating to any of its duties with respect to the Company Debt Securities, however, it must eliminate the conflict or resign as Trustee.

 

Governing Law

 

The Company Indenture and the Company Debt Securities will be governed by, and construed in accordance with, the laws of the State of New York.

 

Notices

 

All notices to holders of Company Debt Securities shall be validly given if in writing and mailed, first-class postage prepaid, to them at their respective addresses in the register maintained by the Trustee or by electronic means in the case of global securities.

 

DESCRIPTION OF WPC FINANCE DEBT SECURITIES AND THE GUARANTEE

 

The WPC Finance Debt Securities will be issued in one or more series under an indenture, to be entered into between WPC Finance, as issuer, the Company, as guarantor, and U.S. Bank National Association, as trustee. References herein to the “WPC Finance Indenture” refer to such indenture and references to the “Trustee” in this “Description of WPC Finance Debt Securities and the Guarantee” refer to such trustee or any other trustee for any particular series of WPC Finance Debt Securities issued under the WPC Finance Indenture. The terms of the WPC Finance Debt Securities of any series will be those specified in or pursuant to the WPC Finance Indenture and in the applicable WPC Finance Debt Securities of that series and those made part of the WPC Finance Indenture by the Trust Indenture Act.

 

The following description of WPC Finance Debt Securities describes general terms and provisions of the series of WPC Finance Debt Securities to which any prospectus supplement may relate. When the WPC Finance Debt Securities of a particular series are offered for sale, the specific terms of such WPC Finance Debt Securities will be described in the applicable prospectus supplement. If any terms of such WPC Finance Debt Securities described in a prospectus supplement are inconsistent with any of the terms of the WPC Finance Debt Securities generally described in this prospectus, then the terms described in the applicable prospectus supplement will supersede the terms described in this prospectus.

 

The following description of selected provisions of the WPC Finance Indenture and the WPC Finance Debt Securities is not complete, and the description of selected terms of the WPC Finance Debt Securities of a particular series included in the applicable prospectus supplement also will not be complete. You should review the form of the WPC Finance Indenture and the form of the applicable WPC Finance Debt Securities, which forms have been or will be filed as exhibits to the registration statement of which this prospectus is a part, or as exhibits to documents that have been or will be incorporated by reference in this prospectus. To obtain a copy of the form of the WPC Finance Indenture or the form of the applicable WPC Finance Debt Securities, see “Where You Can Find More Information; Incorporation by Reference” in this prospectus. The following description of WPC Finance Debt Securities and the description of the WPC Finance Debt Securities of a particular series in the applicable prospectus supplement are qualified in their entirety by reference to all of the provisions of the WPC Finance Indenture and the applicable WPC Finance Debt Securities, which provisions, including defined terms, are, or will be, incorporated by reference in this prospectus, and to those made part of the WPC Finance Indenture by the Trust Indenture Act. Capitalized terms used but not defined in the following description will have the meanings assigned to those terms in the WPC Finance Indenture or, if applicable, the WPC Finance Debt Securities.

 

WPC Finance may also guarantee obligations of its direct or indirect subsidiaries. Any liability WPC Finance may have for its subsidiaries’ obligations could reduce its assets that are available to satisfy its direct creditors, including holders of the WPC Finance Debt Securities. In addition, any unsecured WPC Finance Debt Securities will be effectively junior to WPC Finance’s secured debt to the extent of the value of the collateral security securing the same.

 

General

 

The WPC Finance Debt Securities will constitute the unsecured and unsubordinated obligations of WPC Finance and will rank on parity in right of payment among themselves and with all of WPC Finance’s other existing and future unsecured and unsubordinated

 

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indebtedness. WPC Finance may issue an unlimited principal amount of WPC Finance Debt Securities under the WPC Finance Indenture. The WPC Finance Indenture provides that WPC Finance Debt Securities of any series may be issued up to the aggregate principal amount that may be authorized from time to time by WPC Finance. Please read the applicable prospectus supplement relating to the WPC Finance Debt Securities of the particular series being offered thereby for selected terms of such WPC Finance Debt Securities, including, without limitation, where applicable:

 

·                  the title of such series of the WPC Finance Debt Securities;

 

·                  the aggregate principal amount of the WPC Finance Debt Securities of such series and any limit thereon;

 

·                  the date or dates on which WPC Finance will pay the principal of, and premium, if any, on, the WPC Finance Debt Securities of such series, or the method or methods, if any, used to determine such date or dates;

 

·                  the rate or rates, which may be fixed or variable, at which the WPC Finance Debt Securities of such series will bear interest, if any, or the method or methods, if any, used to determine such rate or rates;

 

·                  the basis used to calculate interest, if any, on the WPC Finance Debt Securities of such series if other than a 360-day year of twelve 30-day months;

 

·                  the date or dates, if any, from which interest on the WPC Finance Debt Securities of such series will accrue, or the method or methods, if any, used to determine such date or dates;

 

·                  the date or dates, if any, on which interest on the WPC Finance Debt Securities of such series will be payable and the record dates for any such payment of interest;

 

·                  the terms and conditions, if any, upon which WPC Finance is required to, or may, at its option, redeem WPC Finance Debt Securities of such series;

 

·                  the terms and conditions, if any, upon which WPC Finance will be required to repurchase WPC Finance Debt Securities of such series at the option of holders of WPC Finance Debt Securities of such series;

 

·                  the terms of any sinking fund or analogous provision applicable to the WPC Finance Debt Securities of such series;

 

·                  the portion of the principal amount of the WPC Finance Debt Securities of such series payable upon acceleration of the maturity thereof if other than the full principal amount;

 

·                  the authorized denominations in which the WPC Finance Debt Securities of such series will be issued;

 

·                  the place or places where (i) amounts due on the WPC Finance Debt Securities of such series will be payable (ii) the WPC Finance Debt Securities of such series may be surrendered for registration of transfer and exchange and (iii) notices or demands to or upon WPC Finance or the Trustee in respect of the WPC Finance Debt Securities of such series or the WPC Finance Indenture may be served;

 

·                  the currency or currencies in which purchases of, and payments on, the WPC Finance Debt Securities of such series must be made;

 

·                  whether the amount of payments due on the WPC Finance Debt Securities of such series may be determined with reference to an index, formula, or other method or methods (any of those WPC Finance Debt Securities being referred to as Indexed Securities) and the manner used to determine those amounts;

 

·                  any addition to, modification of, or deletion of, any covenant or Event of Default (as defined below) with respect to the WPC Finance Debt Securities of such series;

 

·                  the identity of the depositary for the global WPC Finance Debt Securities and the terms of the depositary arrangement if other than as specified below;

 

·                  the circumstances under which WPC Finance will pay additional amounts on the WPC Finance Debt Securities of such series in respect of any Additional Amounts and whether WPC Finance will have the option to redeem such WPC Finance Debt Securities rather than pay the Additional Amounts; and

 

·                  any other terms of the WPC Finance Debt Securities of such series.

 

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As used in this prospectus, references to the principal of, and premium, if any, and interest, if any, on, the WPC Finance Debt Securities of a series include Additional Amounts, if any, payable on the WPC Finance Debt Securities of such series in that context.

 

WPC Finance may issue WPC Finance Debt Securities as original issue discount securities to be sold at a substantial discount below their principal amount. In the event of an acceleration of the maturity of any original issue discount security, the amount payable to the holder upon acceleration will be determined in the manner described in the applicable prospectus supplement. Important federal income tax and other considerations applicable to original issue discount securities will be described in the applicable prospectus supplement.

 

The terms of the WPC Finance Debt Securities of any series may be inconsistent with the terms of the WPC Finance Debt Securities of any other series. Unless otherwise specified in the applicable prospectus supplement, WPC Finance may, without the consent of, or notice to, the holders of the WPC Finance Debt Securities of any series, reopen an existing series of WPC Finance Debt Securities and issue additional WPC Finance Debt Securities of that series.

 

Other than to the extent provided in “-Merger, Consolidation and Transfer of Assets” below or to the extent provided with respect to the WPC Finance Debt Securities of a particular series and described in the applicable prospectus supplement, the WPC Finance Indenture will not contain any provisions that would limit WPC Finance’s ability to incur indebtedness or to substantially reduce or eliminate its consolidated assets, or that would afford holders of the WPC Finance Debt Securities protection in the event of:

 

·                  a recapitalization or other highly leveraged or similar transaction involving the Company, any of its subsidiaries (including WPC Finance) or affiliates or its management;

 

·                  a change of control involving the Company or its subsidiaries (including WPC Finance) or affiliates; or

 

·                  a reorganization, restructuring, merger, or similar transaction involving the Company, its subsidiaries (WPC Finance) or its affiliates.

 

Accordingly, WPC Finance’s ability to service its indebtedness (including the WPC Finance Debt Securities) could be materially and adversely affected in the future.

 

Guarantee of the WPC Finance Debt Securities

 

The Company will fully, unconditionally and irrevocably guarantee to each holder and the Trustee the full and punctual payment of principal of, premium, if any, and interest on the WPC Finance Debt Securities and any of the other obligations of WPC Finance under the WPC Finance Indenture with respect to the WPC Finance Debt Securities, when and as the same become due and payable, whether at maturity, upon redemption or repurchase, of acceleration or otherwise, including any Additional Amounts required to be paid in connection with certain taxes. Any obligation of the Company to make a payment may be satisfied by causing WPC Finance to make such payment.

 

The Company’s Guarantee will be an unsecured and unsubordinated obligation of the Company and will rank equally in right of payment with all of the Company’s other senior unsecured and unsubordinated indebtedness and guarantees from time to time outstanding.

 

The WPC Finance Indenture provides that in the event of a default in payment of principal of, premium, if any, and interest on senior WPC Finance Debt Securities of a particular series, the holder of such series of WPC Finance Debt Securities may institute legal proceedings directly against the Company to enforce the applicable Guarantee without first proceeding against WPC Finance.

 

Registration, Transfer, Payment and Paying Agent

 

Unless otherwise specified in the applicable prospectus supplement, each series of WPC Finance Debt Securities will be issued in registered form only, without coupons.

 

Unless otherwise specified in the applicable prospectus supplement, the WPC Finance Debt Securities may be surrendered for registration of transfer or exchange at an office of WPC Finance or an agent of WPC Finance in the City of New York. Unless otherwise specified in the applicable prospectus supplement, the WPC Finance Debt Securities will be payable at the office of the paying agent named in the applicable prospectus supplement. However, WPC Finance, at its option, may make payments of interest on any interest payment date for a WPC Finance Debt Security by check mailed to the address of the person entitled to receive that payment or by wire transfer to an account maintained by the payee with a bank located in the United States.

 

Any interest not punctually paid or duly provided for on any interest payment date with respect to the WPC Finance Debt Securities of any series will forthwith cease to be payable to the holders of those WPC Finance Debt Securities on the applicable regular record date. Such interest may be paid to the persons in whose names those WPC Finance Debt Securities are registered at the close of

 

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business on a special record date for the payment of the interest not punctually paid or duly provided for to be fixed by the Trustee or WPC Finance, notice whereof will be given to the holders of those WPC Finance Debt Securities not less than 10 days prior to the special record date, or may be paid at any time in any other lawful manner, all as completely set forth in the WPC Finance Indenture.

 

Subject to certain limitations imposed on WPC Finance Debt Securities issued in book-entry form, the WPC Finance Debt Securities of any series will be exchangeable for other WPC Finance Debt Securities of the same series and of a like aggregate principal amount and tenor of different authorized denominations, upon surrender of those WPC Finance Debt Securities at the designated place or places. In addition, subject to certain limitations imposed upon WPC Finance Debt Securities issued in book-entry form, the WPC Finance Debt Securities of any series may be surrendered for registration of transfer or exchange thereof at the designated place or places if duly endorsed or accompanied by a written instrument of transfer. No service charge will be made for any registration of transfer or exchange, redemption or repurchase of WPC Finance Debt Securities, but WPC Finance may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with certain of those transactions.

 

Unless otherwise specified in the applicable prospectus supplement, WPC Finance will not be required to:

 

·                  issue, register the transfer of, or exchange WPC Finance Debt Securities of any series during a period beginning at the opening of business 15 days before any selection of WPC Finance Debt Securities of that series of like tenor and terms to be redeemed and ending at the close of business on the day of that selection;

 

·                  register the transfer of or exchange any WPC Finance Debt Security, or portion of any WPC Finance Debt Security, called for redemption, except the unredeemed portion of any WPC Finance Debt Security being redeemed in part; or

 

·                  issue, register the transfer of or exchange a WPC Finance Debt Security that has been surrendered for repurchase at the option of the holder, except the portion, if any, of the WPC Finance Debt Security not to be repurchased.

 

Outstanding WPC Finance Debt Securities

 

In determining whether the holders of the requisite principal amount of outstanding WPC Finance Debt Securities have given any request, demand, authorization, direction, notice, consent or waiver under the WPC Finance Indenture:

 

·                  the principal amount of an original issue discount security that will be deemed to be outstanding for these purposes will be that portion of the principal amount of the original issue discount security that would be due and payable upon acceleration of the maturity of such original issue discount security as of the date of the determination;

 

·                  the principal amount of any Indexed Security that will be deemed to be outstanding for these purposes will be the principal amount of the Indexed Security determined on the date of its original issuance;

 

·                  the principal amount of a WPC Finance Debt Security denominated in a currency other than U.S. Dollars will be the U. S. Dollar equivalent, determined on the date of its original issuance, of the principal amount of such WPC Finance Debt Security; and

 

·                  a WPC Finance Debt Security owned by WPC Finance or any other obligor of such WPC Finance Debt Security or any affiliate of WPC Finance or such other obligor will be deemed not to be outstanding.

 

Payment of Additional Amounts

 

All payments in respect of the WPC Finance Debt Securities will be made by WPC Finance or the Company, as applicable without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature, imposed or levied by the Netherlands or the United States or any taxing authority thereof or therein, as applicable, unless such withholding or deduction is required by law. If such withholding or deduction is required by law, WPC Finance or the Company, as applicable, will pay to a holder who is not United States person such Additional Amounts on such WPC Finance Debt Securities as are necessary in order that the net payment by WPC Finance or the Company, as applicable, of principal of, and premium, if any, and interest on, such WPC Finance Debt Securities to such holder, after such withholding or deduction, will not be less than the amount provided in such WPC Finance Debt Securities to be then due and payable; provided, however, that the foregoing obligation to pay Additional Amounts will not apply:

 

i.                  to any tax, assessment or other governmental charge that would not have been imposed but for the holder, or a fiduciary, settlor, beneficiary, member or shareholder of the holder if the holder is an estate, trust, partnership or corporation, or a person holding a power over an estate or trust administered by a fiduciary holder, being considered as:

 

A.            being or having been engaged in a trade or business in the United States, or having had a permanent establishment in the United States, or having had a qualified business unit which has the United States dollar as its functional

 

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currency;

 

B.            having a current or former connection with the United States (other than a connection arising solely as a result of the ownership of such WPC Finance Debt Securities, the receipt of any payment or the enforcement of any rights thereunder) or being considered as having such relationship, including being or having been a citizen or resident of the United States;

 

C.            being or having been a personal holding company, a passive foreign investment company or a controlled foreign corporation with respect to the United States or a foreign personal holding company that has accumulated earnings to avoid United States federal income tax;

 

D.            being or having been a “10-percent shareholder” of the guarantor under the notes within the meaning of Section 871(h)(3) of the Code or any successor provision; or

 

E.             being a bank receiving payments on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business.

 

ii.               to any holder that is not the sole beneficial owner of a WPC Finance Debt Security, or a portion of such WPC Finance Debt Security, or that is a fiduciary, partnership or limited liability company, but only to the extent that a beneficiary or settlor with respect to the fiduciary, a beneficial owner or member of the partnership or limited liability company would not have been entitled to the payment of an additional amount had the beneficiary, settlor, beneficial owner or member received directly its beneficial or distributive share of the payment;

 

iii.            to any tax, assessment or other governmental charge that would not have been imposed but for the failure of the holder or any other person to comply with certification, identification or information reporting requirements concerning the nationality, residence, identity or connection with the United States, of the holder or beneficial owner of a WPC Finance Debt Security, if compliance is required by statute, by regulation of the United States or any taxing authority therein or by an applicable income tax treaty to which the United States is a party as a precondition to exemption from such tax, assessment or other governmental charge;

 

iv.           to any tax, assessment or other governmental charge that is imposed otherwise than by withholding by us or a paying agent from the payment;

 

v.              to any tax, assessment or other governmental charge that would not have been imposed but for a change in law, regulation, or administrative or judicial interpretation that becomes effective more than 15 days after the payment becomes due or is duly provided for, whichever occurs later;

 

vi.           to any estate, inheritance, gift, sales, excise, transfer, wealth, capital gains or personal property tax or similar tax, assessment or other governmental charge;

 

vii.        to any tax, assessment or other governmental charge that would not have been imposed but for the presentation by the holder of any WPC Finance Debt Security, where presentation is required, for payment on a date more than 30 days after the date on which payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later;

 

viii.     to any withholding or deduction that is imposed on a payment pursuant to Sections 1471 through 1474 of the Code and related Treasury regulations and pronouncements (the Foreign Account Tax Compliance Act) or any successor provisions and any regulations or official law, agreement or interpretations thereof implementing an intergovernmental approach thereto; or

 

ix.           in the case of any combination of items (i), (ii), (iii), (iv), (v), (vi), (vii), and (viii).

 

The WPC Finance Debt Securities are subject in all cases to any tax, fiscal or other law or regulation or administrative or judicial interpretation applicable to the WPC Finance Debt Securities. Except as specifically provided under this heading “—Payment of Additional Amounts,” neither WPC Finance nor the Company, as applicable, will be required to make any payment for any tax, duty, assessment or governmental charge of whatever nature imposed by any government or a political subdivision or taxing authority of or in any government or political subdivision.

 

As used under this heading “—Payment of Additional Amounts” and under the heading “—Redemption for Tax Reasons,” the term “United States” means the United States of America (including the states and the District of Columbia and any political subdivision thereof), and the term “United States person” means any individual who is a citizen or resident of the United States for U.S. federal income tax purposes; a corporation, partnership or other entity created or organized in or under the laws of the United States, any state of the United States or the District of Columbia, including an entity treated as a corporation for Unites States income tax purposes; or any estate or trust the income of which is subject to United States federal income taxation regardless of its source.

 

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Redemption and Repurchase

 

The WPC Finance Debt Securities of any series may be redeemable at WPC Finance’s option or may be subject to mandatory redemption by WPC Finance as required by a sinking fund or otherwise. In addition, the WPC Finance Debt Securities of any series may be subject to repurchase by WPC Finance at the option of the holders thereof. The applicable prospectus supplement will describe the terms and conditions regarding any optional or mandatory redemption or optional repurchase of the WPC Finance Debt Securities of the particular series.

 

Redemption for Tax Reasons

 

If, as a result of any change in, or amendment to, the laws (or any regulations or rulings promulgated under the laws) of the Netherlands or the United States or any taxing authority thereof or therein, as applicable, or any change in, or amendments to, an official position regarding the application or interpretation of such laws, regulations or rulings, which change or amendment is announced or becomes effective on or after the date of the issuance of the WPC Finance Debt Securities of a series, WPC Finance or the Company becomes or, based upon a written opinion of independent counsel selected by them, will become obligated to pay Additional Amounts as described herein under the heading “—Payment of Additional Amounts” with respect to the WPC Finance Debt Securities of such series, then WPC Finance may at any time at its option, having given not less than 30 nor more than 60 days prior notice to holders, redeem, in whole, but not in part, such WPC Finance Debt Securities at a redemption price equal to 100% of their principal amount of such WPC Finance Debt Securities, together with accrued and unpaid interest on such WPC Finance Debt Security to, but not including, the date fixed for redemption.

 

Merger, Consolidation and Transfer of Assets

 

The WPC Finance Indenture provides that neither WPC Finance nor the Company may, in any transaction or series of related transactions, (i) consolidate or amalgamate with or merge into any other person or (ii) sell, lease, assign, transfer or otherwise convey all or substantially all of the assets of WPC Finance or the Company, as applicable, and its subsidiaries, taken as a whole, to any other person, in each case, unless:

 

·                  in such transaction or transactions, either (i) WPC Finance or the Company, as applicable, will be the continuing person (in the case of a merger) or (ii) the successor person (if other than WPC Finance or the Company, as applicable) formed by or resulting from the consolidation, amalgamation or merger or to which such assets will have been sold, leased, assigned, transferred or otherwise conveyed (A) is a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) under the laws of the Netherlands or a corporation, limited liability company, partnership or trust organized and existing under the laws of the United States of America, any state thereof or the District of Columbia or any territory thereof, as applicable, and (B) will, by a supplemental indenture to the WPC Finance Indenture, expressly assume the due and punctual performance of all of WPC Finance’s or the Company’s, as applicable, payment and other obligations under the WPC Finance Indenture and all of the WPC Finance Debt Securities and Guarantee outstanding thereunder;

 

·                  immediately after giving effect to such transaction or transactions, no Event of Default under the WPC Finance Indenture, and no event which, after notice or lapse of time or both would become an Event of Default under the WPC Finance Indenture, will have occurred and be continuing; and

 

·                  the Trustee will have received an officer’s certificate and opinion of counsel from WPC Finance or the Company, as applicable, to the effect that all conditions precedent to such transaction or transactions have been satisfied.

 

Upon any consolidation or amalgamation by WPC Finance or the Company, as applicable, with, or WPC Finance’s or the Company’s, as applicable, merger into, any other person or any sale, lease, assignment, transfer or other conveyance of all or substantially all of the assets of WPC Finance or the Company, as applicable, and its subsidiaries, taken as a whole, to any person, in each case in accordance with the provisions of the WPC Finance Indenture described above, the successor person formed by the consolidation or amalgamation or into which WPC Finance or the Company, as applicable, is merged or to which such sale, lease, assignment, transfer or other conveyance is made, as applicable, will succeed to, and be substituted for, WPC Finance or the Company, as applicable, and may exercise every right and power of WPC Finance or the Company, as applicable, under the WPC Finance Indenture with the same effect as if such successor person had been named as WPC Finance or the Company, as applicable, in the WPC Finance Indenture; and thereafter, the predecessor person will be released from all of its obligations and covenants under the WPC Finance Indenture and the outstanding WPC Finance Debt Securities and the Guarantee, as applicable.

 

Events of Default

 

Unless otherwise specified in the applicable prospectus supplement, an Event of Default with respect to the WPC Finance Debt Securities of any series is defined in the WPC Finance Indenture as being:

 

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i.                  default for 30 days in the payment of any interest on, or any Additional Amounts payable in respect of any interest on, any WPC Finance Debt Security of that series;

 

ii.               default in payment of any principal of, or premium, if any, on, or any Additional Amounts payable in respect of any principal of, or premium, if any, on, any WPC Finance Debt Security of that series when due, whether at stated maturity, upon redemption, upon repurchase at the option of the holder or otherwise;

 

iii.            default in the deposit of any sinking fund payment or payment under any analogous provision when due with respect to any WPC Finance Debt Security of that series;

 

iv.           default in the performance or observance, or breach, of any covenant or other agreement of WPC Finance or the Company, as applicable, in the WPC Finance Indenture or any WPC Finance Debt Security of that series not covered elsewhere in this section, other than a covenant or other agreement included in the WPC Finance Indenture solely for the benefit of a series of WPC Finance Debt Securities other than that series, which will not have been remedied for a period of 60 days after written notice to WPC Finance and the Company by the Trustee or to WPC Finance, the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the WPC Finance Debt Securities of that series then outstanding;

 

v.              default by WPC Finance or the Company, as applicable, to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise), in respect of any indebtedness for money borrowed by WPC Finance or the Company, as applicable, in excess of $50,000,000 principal amount, or a default under any such indebtedness resulting in the acceleration prior to the stated maturity of the principal amount of such indebtedness in excess of $50,000,000, and such indebtedness is not discharged or such acceleration is not rescinded or annulled within 30 days thereafter;

 

vi.           specified events of bankruptcy, insolvency, or reorganization with respect to WPC Finance or the Company, as applicable, or their respective significant subsidiaries (as defined in Regulation S-X under the Securities Act);

 

vii.        the Guarantee ceasing to be in full force and effect or the taking of any action by WPC Finance or the Company to question the validity of the Guarantee; or

 

viii.     any other Event of Default established for the WPC Finance Debt Securities of that series.

 

No Event of Default with respect to any particular series of WPC Finance Debt Securities necessarily constitutes an Event of Default with respect to any other series of WPC Finance Debt Securities. The Trustee is required to give notice to holders of the WPC Finance Debt Securities of the applicable series within 90 days after a responsible officer of the Trustee has actual knowledge of a default relating to such WPC Finance Debt Securities.

 

If an Event of Default specified in clause (vi) above occurs, then the principal amount of all the outstanding WPC Finance Debt Securities and unpaid interest, if any, accrued thereon will automatically become immediately due and payable. If any other Event of Default with respect to the outstanding WPC Finance Debt Securities of the applicable series occurs and is continuing, either the Trustee or the holders of at least 25% in aggregate principal amount of the WPC Finance Debt Securities of that series then outstanding may declare the principal amount of, or if WPC Finance Debt Securities of that series are original issue discount securities such lesser amount as may be specified in the terms of, the WPC Finance Debt Securities of that series, and unpaid interest, if any, accrued thereon to be due and payable immediately. However, upon specified conditions, the holders of a majority in aggregate principal amount of the WPC Finance Debt Securities of that series then outstanding may rescind and annul any such declaration of acceleration and its consequences.

 

The WPC Finance Indenture provides that no holders of WPC Finance Debt Securities of any series may institute any proceedings, judicial or otherwise, with respect to the WPC Finance Indenture, or for the appointment of a receiver or Trustee, or for any remedy thereunder, except in the case of failure of the Trustee, for 60 days, to act after it has received a written request to institute proceedings in respect of an Event of Default from the holders of at least 25% in aggregate principal amount of the outstanding WPC Finance Debt Securities of that series, as well as an offer of indemnity or security reasonably satisfactory to it, and no inconsistent direction has been given to the Trustee during such 60 day period by the holders of a majority in aggregate principal amount of the outstanding WPC Finance Debt Securities of that series. Notwithstanding any other provision of the WPC Finance Indenture, each holder of a WPC Finance Debt Security will have the right, which is absolute and unconditional, to receive payment of principal of, and premium, if any, and interest, if any, and any Additional Amounts on, that WPC Finance Debt Security on the respective due dates for those payments and to institute suit for the enforcement of those payments, and this right will not be impaired without the consent of such holder.

 

Subject to the provisions of the Trust Indenture Act requiring the Trustee, during the continuance of an Event of Default under the WPC Finance Indenture, to act with the requisite standard of care, the Trustee is under no obligation to exercise any of its rights or powers under the WPC Finance Indenture at the request or direction of any of the holders of WPC Finance Debt Securities of any

 

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series unless those holders have offered the Trustee indemnity or security reasonably satisfactory to it. The holders of a majority in aggregate principal amount of the outstanding WPC Finance Debt Securities of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or of exercising any trust or power conferred upon the Trustee, provided that the direction would not conflict with any rule or law or with the WPC Finance Indenture or with any series of WPC Finance Debt Securities, such direction would not be unduly prejudicial to the rights of any other holder of WPC Finance Debt Securities of that series (or the WPC Finance Debt Securities of any other series), and the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.

 

Within 120 days after the close of each fiscal year, WPC Finance and the Company must deliver to the Trustee an officer’s certificate stating whether or not the certifying officer has knowledge of any Event of Default or default which, with notice or lapse of time or both, would become an Event of Default under the WPC Finance Indenture and, if so, specifying each such default and the nature and status thereof.

 

Modification, Waivers and Meetings

 

The WPC Finance Indenture permits WPC Finance, the Company and the Trustee, with the consent of the holders of a majority in aggregate principal amount of the outstanding WPC Finance Debt Securities of each series issued under the WPC Finance Indenture and affected by a modification or amendment (voting as separate classes), to modify or amend any of the provisions of the WPC Finance Indenture or of the WPC Finance Debt Securities of the applicable series or the rights of the holders of the WPC Finance Debt Securities of the applicable series under the WPC Finance Indenture. However, no modification or amendment will, without the consent of the holder of each outstanding WPC Finance Debt Security affected thereby:

 

·                  change the stated maturity of the principal of, or premium, if any, or any instalment of interest, if any, on, or any Additional Amounts, if any, with respect to, any WPC Finance Debt Security; or

 

·                  reduce the principal of, or premium, if any, on, any WPC Finance Debt Security or reduce the rate (or modify the calculation of such rate) of interest, if any, on, or the redemption or repurchase price of, or any Additional Amounts with respect to, any WPC Finance Debt Security or change WPC Finance’s obligation to pay Additional Amounts; or

 

·                  reduce the amount of principal of any original issue discount security that would be due and payable upon acceleration of the maturity thereof; or

 

·                  change the date(s) on which, or period(s) in which, any WPC Finance Debt Security is subject to redemption or repurchase or otherwise alter the provisions with respect to the redemption or repurchase of any WPC Finance Debt Security in a manner that is adverse to the interests of the holder of such WPC Finance Debt Security; or

 

·                  change any place where, or the currency in which, any WPC Finance Debt Security is payable; or

 

·                  impair the holder’s right to institute suit to enforce the payment of any WPC Finance Debt Security on or after their stated maturity, or in the case of redemption, on or after the redemption date, or in the case of repurchase, on or after the date for repurchase; or

 

·                  reduce the percentage of the outstanding WPC Finance Debt Securities of any series whose holders must consent to any modification or amendment or any waiver of compliance with specific provisions of such WPC Finance Indenture or specified defaults under the WPC Finance Indenture and their consequences; or

 

·                  modify the provisions relating to the requirements for the modification or amendment of the WPC Finance Indenture with the consent of each holder, of the waiver of compliance with specific provisions of the WPC Finance Indenture or specified defaults under the WPC Finance Indenture, except to increase the percentage of holders of WPC Finance Debt Securities of any series outstanding under the WPC Finance Indenture required to effect that action or to provide that certain other provisions of the WPC Finance Indenture may not be modified or waived without the consent of the holder of each outstanding WPC Finance Debt Security affected thereby; or

 

·                  reduce the requirements for a quorum or voting at a meeting of holders of the applicable WPC Finance Debt Securities.

 

The WPC Finance Indenture also contains provisions permitting WPC Finance, the Company and the Trustee, without the consent of the holders of any WPC Finance Debt Securities, to modify or amend the WPC Finance Indenture, among other things:

 

·                  to add to the Events of Default for all or any series of WPC Finance Debt Securities;

 

·                  to add to the covenants for the benefit of the holders of all or any series of WPC Finance Debt Securities;

 

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·                  to provide for security of WPC Finance Debt Securities of all or any series or to add guarantees (in addition to the Guarantee) in favor of WPC Finance Debt Securities of all or any series;

 

·                  to establish the form or terms of WPC Finance Debt Securities of any series, and the form of the Guarantee of any series of WPC Finance Debt Securities;

 

·                  to cure any mistake or ambiguity or correct or supplement any provision in the WPC Finance Indenture which may be defective or inconsistent with other provisions in the WPC Finance Indenture, or to make any other provisions with respect to matters or questions arising under the WPC Finance Indenture, or to make any change necessary to comply with any requirement of the SEC in connection with the WPC Finance Indenture under the Trust Indenture Act, in each case which will not adversely affect the interests of the holders of any WPC Finance Debt Securities;

 

·                  to amend or supplement any provision contained in the WPC Finance Indenture, provided that the amendment or supplement does not apply to any outstanding WPC Finance Debt Securities issued before the date of the amendment or supplement and entitled to the benefits of that provision;

 

·                  to conform the terms of the WPC Finance Indenture or the WPC Finance Debt Securities of a series to the description thereof contained in any prospectus, prospectus supplement or other offering document relating to the offer and sale of those WPC Finance Debt Securities; or

 

·                  to modify, alter, amend or supplement the WPC Finance Debt Securities in any other respect that will not adversely affect the interests of any of the holders of any WPC Finance Debt Securities.

 

The holders of a majority in aggregate principal amount of the outstanding WPC Finance Debt Securities of any series may, on behalf of all holders of WPC Finance Debt Securities of that series, waive any continuing default under the WPC Finance Indenture with respect to the WPC Finance Debt Securities of that series and its consequences, except a default (i) in the payment of principal of, or premium, if any, or interest, if any, on, the WPC Finance Debt Securities of that series, or (ii) in respect of a covenant or provision that cannot be modified or amended without the consent of the holder of each outstanding WPC Finance Debt Security of the affected series.

 

The WPC Finance Indenture contains provisions for convening meetings of the holders of WPC Finance Debt Securities. A meeting may be called at any time by the Trustee, WPC Finance or the holders of at least 10% in aggregate principal amount of the outstanding WPC Finance Debt Securities of any series. Notice of a meeting must be given in accordance with the provisions of the WPC Finance Indenture. Except for any consent or waiver that must be given by the holder of each outstanding WPC Finance Debt Security affected in the manner described above, any resolution presented at a meeting or adjourned meeting duly reconvened at which a quorum, as described below, is present may be adopted by the affirmative vote of the holders of a majority in aggregate principal amount of the outstanding WPC Finance Debt Securities of the applicable series. However, 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, other than a majority, in aggregate principal amount of the outstanding WPC Finance 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 that specified percentage in aggregate principal amount of the outstanding WPC Finance Debt Securities of that series. Any resolution passed or decision taken at any meeting of holders of WPC Finance Debt Securities of any series duly held in accordance with the WPC Finance Indenture will be binding on all holders of WPC Finance 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 aggregate principal amount of the outstanding WPC Finance Debt Securities of the applicable series, subject to exceptions; provided, however, that if any action is to be taken at that meeting with respect to a consent or waiver that may be given by the holders of a supermajority in aggregate principal amount of the outstanding WPC Finance Debt Securities of a series, the persons holding or representing that specified supermajority percentage in aggregate principal amount of the outstanding WPC Finance Debt Securities of that series will constitute a quorum.

 

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Book-entry Procedures, Delivery and Form

 

Global Clearance and Settlement

 

Unless otherwise provided in the applicable prospectus supplement, the WPC Finance Debt Securities will be issued in the form of one or more global notes in fully registered form, without coupons, and will be deposited with, or on behalf of, a common depositary, and registered in the name of the nominee of the common depositary for, and in respect of interests held through, Euroclear Bank S.A./N.A as operator (the “Euroclear Operator”) of the Euroclear system (“Euroclear”) and Clearstream. References to “global note(s)” in this “Description of WPC Finance Debt Securities and Guarantee” refer to such global note(s). Except as described herein, certificates will not be issued in exchange for beneficial interests in the global notes.

 

Except as set forth below, the global notes may be transferred, in whole and not in part, only to Euroclear, Clearstream or their respective nominees.

 

Beneficial interests in the global notes will be represented, and transfers of such beneficial interests will be effected, through accounts of financial institutions acting on behalf of beneficial owners as direct or indirect participants in Euroclear or Clearstream. Those beneficial interests will be in denominations specified in the applicable prospectus supplement. Investors may hold WPC Finance Debt Securities directly through Euroclear or Clearstream, if they are participants in such systems, or indirectly through organizations that are participants in such systems.

 

Owners of beneficial interests in the global notes will not be entitled to have the WPC Finance Debt Securities registered in their names, and, except as described herein, will not receive or be entitled to receive physical delivery of such WPC Finance Debt Securities in definitive form. So long as the common depositary for Euroclear and Clearstream is the registered owner of the global notes, the common depositary for all purposes will be considered the sole holder of the WPC Finance Debt Security represented by the global notes under the WPC Finance Indenture and the global notes. Except as provided below, beneficial owners will not be considered the owners or holders of a WPC Finance Debt Security under the WPC Finance Indenture, including for purposes of receiving any reports delivered by us or the Trustee pursuant to the WPC Finance Indenture. Accordingly, each beneficial owner must rely on the procedures of the clearing systems and, if such person is not a participant of the clearing systems, on the procedures of the participant through which such person owns its interest, to exercise any rights of a holder under the WPC Finance Indenture. Under existing industry practices, if WPC Finance requests any action of holders or a beneficial owner desires to give or take any action which a holder is entitled to give or take under the WPC Finance Indenture, the clearing systems would authorize their participants holding the relevant beneficial interests to give or take action and the participants would authorize beneficial owners owning through the participants to give or take such action or would otherwise act upon the instructions of beneficial owners. Conveyance of notices and other communications by the clearing systems to their participants, by the participants to indirect participants and by the participants and indirect participants to beneficial owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in certificated form. These limits and laws may impair the ability to transfer beneficial interests in global notes.

 

Clearstream and Euroclear have indicated that they intend to use the following respective procedures for global notes. Clearstream and Euroclear may change these procedures from time to time. Neither the Company nor WPC Finance is responsible for these procedures. You should contact Clearstream and Euroclear or their respective participants directly to discuss these matters.

 

Clearstream

 

Clearstream has advised that it is incorporated under the laws of Luxembourg and licensed as a bank and professional depositary. Clearstream holds securities for its participating organizations and facilitates the clearance and settlement of securities transactions among its participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Clearstream provides to its participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in several countries. Clearstream has established an electronic bridge with the Euroclear Operator (as defined below) to facilitate the settlement of trades between the nominees of Clearstream and Euroclear. As a registered bank in Luxembourg, Clearstream is subject to regulation by the Luxembourg Commission for the Supervision of the Financial Sector. Clearstream customers are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations and may include the underwriters. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust companies that clear through, or maintain a custodial relationship with, a Clearstream participant, either directly or indirectly.

 

Distributions with respect to WPC Finance Debt Securities held beneficially through Clearstream will be credited to cash accounts of Clearstream participants in accordance with its rules and procedures.

 

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Euroclear

 

Euroclear has advised that it was created in 1968 to hold securities for its participants and to clear and settle transactions between Euroclear participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Euroclear includes various other services, including securities lending and borrowing and interfaces with domestic markets in several countries. Euroclear is operated by Euroclear Bank S.A./N.V. (the “Euroclear Operator”). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator. Euroclear participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries and may include the underwriters. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly.

 

Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related operating procedures of Euroclear, and applicable Belgian law (collectively, the “Terms and Conditions”). The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear participants and has no records of or relationship with persons holding through Euroclear participants.

 

Distributions with respect to a WPC Finance Debt Security held beneficially through Euroclear will be credited to the cash accounts of Euroclear participants in accordance with the Terms and Conditions.

 

Euroclear and Clearstream Arrangements

 

So long as Euroclear or Clearstream or their nominee or their common depositary is the registered holder of the global notes, Euroclear, Clearstream or such nominee, as the case may be, will be considered the sole owner or holder of the WPC Finance Debt Securities represented by such global notes for all purposes under the WPC Finance Indenture and the WPC Finance Debt Securities. Payments of principal, premium, if any, interest and Additional Amounts, if any, in respect of the global notes will be made to Euroclear, Clearstream, such nominee or such common depositary, as the case may be, as registered holder thereof. None of WPC Finance, the Company, the Trustee, any underwriter and any affiliate of any of the above or any person by whom any of the above is controlled (as such term is defined in the Securities Act) will have any responsibility or liability for any records relating to or payments made on account of, beneficial ownership interests in the global notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

 

Distributions of principal, premium, if any, and interest with respect to the global notes will be credited in euro to the extent received by Euroclear or Clearstream from the paying agent to the cash accounts of Euroclear or Clearstream customers in accordance with the relevant system’s rules and procedures.

 

Due to the fact that Euroclear and Clearstream can only act on behalf of participants, who in turn act on behalf of indirect participants, the ability of a person having an interest in the global notes to pledge such interest to persons or entities that do not participate in the relevant clearing system, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate in respect of such interest.

 

Initial Settlement

 

WPC Finance understands that investors that hold WPC Finance Debt Securities through Clearstream or Euroclear accounts will follow the settlement procedures that are applicable to conventional eurobonds in registered form. Subject to applicable procedures of Clearstream and Euroclear, the WPC Finance Debt Securities will be credited to the securities custody accounts of Clearstream and Euroclear participants on the business day following the settlement date, for the value on the settlement date.

 

Secondary Market Trading

 

Due to the fact that the purchaser determines the place of delivery, it is important to establish at the time of trading of any WPC Finance Debt Securities where both the purchaser’s and seller’s accounts are located to ensure that settlement can be made on the desired value date.

 

WPC Finance understands that secondary market trading between Clearstream and/or Euroclear participants will occur in the ordinary way following the applicable rules and operating procedures of Clearstream and Euroclear. Secondary market trading will be settled using procedures applicable to conventional eurobonds in global registered form.

 

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Investors will only be able to make and receive deliveries, payments and other communications involving the WPC Finance Debt Securities through Clearstream and Euroclear on days when those systems are open for business. Those systems may not be open for business on days when banks, brokers and other institutions are open for business in the United States or the Netherlands.

 

In addition, because of time-zone differences, there may be problems with completing transactions involving Clearstream and Euroclear on the same business day as in the United States. U.S. investors who wish to transfer their interests in the WPC Finance Debt Securities, or to make or receive a payment or delivery of the WPC Finance Debt Securities, on a particular day, may find that the transactions will not be performed until the next business day in Luxembourg or Brussels, depending on whether Clearstream or Euroclear is used.

 

Clearstream or Euroclear will credit payments to the cash accounts of Clearstream customers or Euroclear participants, as applicable, in accordance with the relevant system’s rules and procedures, to the extent received by its depositary. Clearstream or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a holder under the Indenture on behalf of a Clearstream customer or Euroclear participant only in accordance with its relevant rules and procedures.

 

Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of the WPC Finance Debt Securities among participants of Clearstream and Euroclear. However, they are under no obligation to perform or continue to perform those procedures, and they may discontinue those procedures at any time.

 

Exchange of Global Notes for Certificated Notes

 

Subject to certain conditions, WPC Finance Debt Securities represented by global notes may not be exchanged for certificated notes in definitive form unless:

 

·                  the common depositary notifies us that it is unwilling, unable or no longer qualified to continue as depositary for the global notes and WPC Finance fails to appoint a successor depositary within 60 days;

 

·                  WPC Finance, at its option, notifies the Trustee in writing that it elects to cause the issuance of certificated notes; or

 

·                  there has occurred and is continuing an Event of Default with respect to the WPC Finance Debt Securities.

 

In all cases, certificated notes delivered in exchange for any global note or beneficial interest therein will be registered in the names, and issued in any approved denominations, requested by or on behalf of the common depositary (in accordance with its customary procedures).

 

Payments (including principal, premium and interest and Additional Amounts) and transfers with respect to WPC Finance Debt Securities in certificated form may be executed at the office or agency maintained for such purpose in London (initially the corporate trust office of the paying agent specified in the applicable prospectus supplement) or, at WPC Finance’s option, by check mailed to the holders thereof at the respective addresses set forth in the register of holders of the WPC Finance Debt Securities (maintained by the registrar specified in the applicable prospectus supplement), provided that all payments (including principal, premium, interest and Additional Amounts) on WPC Finance Debt Securities in certificated form, for which the holders thereof have given wire transfer instructions, will be required to be made by wire transfer of immediately available funds to the accounts specified by the holders thereof. No service charge will be made for any registration of transfer, but payment of a sum sufficient to cover any tax or governmental charge payable in connection with that registration may be required.

 

Discharge, Legal Defeasance and Covenant Defeasance

 

Satisfaction and Discharge

 

Upon WPC Finance’s direction, the WPC Finance Indenture will cease to be of further effect with respect to the WPC Finance Debt Securities of any series specified by WPC Finance, subject to the survival of specified provisions of the WPC Finance Indenture, including (unless the accompanying prospectus supplement provides otherwise) WPC Finance’s obligation to repurchase such WPC Finance Debt Securities at the option of the holders thereof, if applicable, and WPC Finance’s obligation to pay Additional Amounts in respect of such WPC Finance Debt Securities to the extent described below, when:

 

·                  either

 

i.                  all outstanding WPC Finance Debt Securities of that series have been delivered to the Trustee for cancellation, subject to exceptions, or

 

ii.               all WPC Finance Debt Securities of that series have become due and payable or will become due and payable at their maturity within one year or are to be called for redemption within one year, and WPC Finance or the Company, as applicable,

 

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has irrevocably deposited with the Trustee, in trust, funds in the currency in which the WPC Finance Debt Securities of that series are payable in an amount sufficient to pay and discharge the entire indebtedness on the WPC Finance Debt Securities of that series, including the principal thereof and, premium, if any, and interest, if any, thereon, and, to the extent that (x) the WPC Finance Debt Securities of that series provide for the payment of Additional Amounts and (y) the amount of any Additional Amounts that are or will be payable is at the time of deposit reasonably determinable by WPC Finance, in the exercise of its sole discretion, those Additional Amounts, to the date of such deposit, if the WPC Finance Debt Securities of that series have become due and payable, or to the stated maturity or redemption date of the WPC Finance Debt Securities of that series, as the case may be;

 

·                  WPC Finance or the Company, as applicable, has paid all other sums payable under the WPC Finance Indenture with respect to the WPC Finance Debt Securities of that series (including amounts payable to the Trustee); and

 

·                  the Trustee has received an officer’s certificate and an opinion of counsel from WPC Finance and the Company to the effect that all conditions precedent to the satisfaction and discharge of the WPC Finance Indenture in respect of the WPC Finance Debt Securities of such series have been satisfied.

 

If the WPC Finance Debt Securities of any series provide for the payment of Additional Amounts, WPC Finance or the Company, as applicable, will remain obligated, following the deposit described above, to pay Additional Amounts on those WPC Finance Debt Securities to the extent that they exceed the amount deposited in respect of those Additional Amounts as described above.

 

Legal Defeasance and Covenant Defeasance

 

Unless otherwise specified in the applicable prospectus supplement, WPC Finance may elect with respect to the WPC Finance Debt Securities of the particular series either:

 

·                  to defease and discharge each of itself and the Company, as applicable, from any and all obligations with respect to those WPC Finance Debt Securities (“WPC Finance Legal Defeasance”), except for, among other things:

 

i.                  the obligation to pay Additional Amounts, if any, upon the occurrence of specified events of taxation, assessment, or governmental charge with respect to payments on those WPC Finance Debt Securities to the extent that those Additional Amounts exceed the amount deposited in respect of those amounts as provided below,

 

ii.               the obligations to register the transfer or exchange of those WPC Finance Debt Securities,

 

iii.            the obligation to replace temporary or mutilated, destroyed, lost, or stolen WPC Finance Debt Securities,

 

iv.           the obligation to maintain an office or agent of WPC Finance in The City of New York or London, as applicable, in respect of those WPC Finance Debt Securities,

 

v.              the obligation to hold moneys for payment in respect of those WPC Finance Debt Securities in trust, and

 

vi.           the obligation, if applicable, to repurchase those WPC Finance Debt Securities at the option of the holders thereof, or

 

·                  to be released from their obligations with respect to those WPC Finance Debt Securities under any covenants as may be specified in the applicable prospectus supplement, and any omission to comply with those obligations will not constitute a default or an Event of Default with respect to those WPC Finance Debt Securities (“WPC Finance Covenant Defeasance”), in either case upon the irrevocable deposit with the Trustee, or other qualifying Trustee, in trust for that purpose, of funds in the currency in which those WPC Finance Debt Securities are payable at maturity or, if applicable, upon redemption, and/or government obligations (as defined in the WPC Finance Indenture) in an amount that, through the payment of principal and interest in accordance with their terms, will provide money, in an amount sufficient, in the written opinion of a nationally recognized firm of independent public accountants or a nationally recognized investment bank, to pay the principal thereof and premium, if any, and interest, if any, thereon, and, to the extent that (x) those WPC Finance Debt Securities provide for the payment of Additional Amounts and (y) the amount of any Additional Amounts that are or will be payable is at the time of deposit reasonably determinable by WPC Finance, in the exercise of its sole discretion, the Additional Amounts with respect to those WPC Finance Debt Securities, and any mandatory sinking fund or analogous payments on those WPC Finance Debt Securities, on the due dates for those payments, whether at stated maturity, upon redemption, upon repurchase at the option of the holder or otherwise.

 

The WPC Finance Legal Defeasance or WPC Finance Covenant Defeasance described above will only be effective if, among other things:

 

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·                  it will not result in a breach or violation of, or constitute a default under, the WPC Finance Indenture or any other agreement or instrument to which WPC Finance or the Company or any of their respective significant subsidiaries is a party or is bound;

 

·                  in the case of WPC Finance Legal Defeasance, WPC Finance and the Company will have delivered to the Trustee an opinion of counsel confirming that:

 

i.                  WPC Finance (or the Company as guarantor) has received from, or there has been published by, the Internal Revenue Service a ruling; or

 

ii.               since the date of the WPC Finance Indenture, there has been a change in applicable federal income tax law,

 

in either case to the effect that, and based on this ruling or change the opinion of counsel will confirm that, the holders of the WPC Finance Debt Securities of the applicable series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the WPC Finance Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the WPC Finance Legal Defeasance had not occurred;

 

·                  in the case of WPC Covenant Defeasance, WPC Finance and the Company will have delivered to the Trustee an opinion of counsel to the effect that the holders of the WPC Finance Debt Securities of the applicable series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the WPC Finance Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the WPC Finance Covenant Defeasance had not occurred;

 

·                  if the cash and government obligations deposited are sufficient to pay the outstanding WPC Finance Debt Securities of the applicable series on a particular redemption date, WPC Finance will have given the Trustee irrevocable instructions to redeem those WPC Finance Debt Securities on that date;

 

·                  no Event of Default or default that with notice or lapse of time or both would become an Event of Default with respect to WPC Finance Debt Securities of the applicable series will have occurred and be continuing on the date of the deposit into trust; and, solely in the case of WPC Finance Legal Defeasance, no Event of Default arising from specified events of bankruptcy, insolvency, or reorganization with respect to WPC Finance or the Company, as applicable, or default which with notice or lapse of time or both would become such an Event of Default will have occurred and be continuing during the period ending on the 91st day after the date of the deposit into trust; and

 

·                  WPC Finance and the Company will have delivered to the Trustee an officer’s certificate and opinion of counsel to the effect that all conditions precedent to the WPC Finance Legal Defeasance or WPC Finance Covenant Defeasance, as the case may be, have been satisfied.

 

In the event WPC Finance effects a WPC Finance Covenant Defeasance with respect to WPC Finance Debt Securities of any series and those WPC Finance Debt Securities are declared due and payable because of the occurrence of any Event of Default other than an Event of Default with respect to the covenants as to which the WPC Finance Covenant Defeasance has been effected, which covenants would no longer be applicable to the WPC Finance Debt Securities of that series after the WPC Covenant Defeasance, the amount of monies and/or government obligations deposited with the Trustee to effect the WPC Covenant Defeasance may not be sufficient to pay amounts due on the WPC Finance Debt Securities of that series at the time of any acceleration resulting from that Event of Default. However, WPC Finance and the Company, as guarantor, would remain liable to make payment of those amounts due at the time of acceleration.

 

The applicable prospectus supplement may further describe the provisions, if any, permitting or restricting legal defeasance or covenant defeasance with respect to the WPC Finance Debt Securities of a particular series.

 

Concerning the Trustee

 

There may be more than one Trustee under the WPC Finance Indenture, each with respect to one or more series of WPC Finance Debt Securities. If there are different Trustees for different series of WPC Finance Debt Securities, each Trustee will be a trustee separate and apart from any other Trustee under the WPC Finance Indenture. Unless otherwise specified in the applicable prospectus supplement, any action permitted to be taken by a Trustee may be taken by such Trustee only with respect to the one or more series of WPC Finance Debt Securities for which it is the trustee under the WPC Finance Indenture. Any Trustee under the WPC Finance Indenture may resign or be removed with respect to one or more series of WPC Finance Debt Securities. All payments of principal of, and premium, if any, and interest, if any, on, and all registration, transfer, exchange, authentication and delivery (including authentication and delivery on original issuance of the WPC Finance Debt Securities) of, the WPC Finance Debt Securities of a series will be effected by the Trustee with respect to that series at an office designated by the Trustee.

 

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U.S. Bank National Association is the trustee under the WPC Finance Indenture. WPC Finance or the Company may maintain corporate trust relationships in the ordinary course of business with the Trustee. The Trustee will have and be subject to all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act. Subject to the provisions of the Trust Indenture Act, the Trustee is under no obligation to exercise any of the powers vested in it by the WPC Finance Indenture at the request of any holder of WPC Finance Debt Securities unless offered indemnity or security reasonably acceptable to it by the holder against the costs, expense and liabilities which might be incurred thereby.

 

Under the Trust Indenture Act, the WPC Finance Indenture is deemed to contain limitations on the right of the Trustee, should it become a creditor of WPC Finance (and the Company, as guarantor), to obtain payment of claims in some cases or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee may engage in other transactions with WPC Finance and the Company. If it acquires any conflicting interest relating to any of its duties with respect to the WPC Finance Debt Securities, however, it must eliminate the conflict or resign as Trustee.

 

Unless otherwise specified in the applicable prospectus supplement, the Trustee will be the initial paying agent. WPC Finance may at any time designate additional paying agents, rescind the designation of any paying agent or approve a change in the office through which any paying agent acts, except that WPC Finance must maintain a paying agent in each place of payment for each series of WPC Finance Debt Securities.

 

Governing Law

 

The WPC Finance Indenture and the WPC Finance Debt Securities will be governed by, and construed in accordance with, the laws of the State of New York.

 

Notices

 

All notices to holders of WPC Finance Debt Securities will be validly given if in writing and mailed, first-class postage prepaid, to them at their respective addresses in the register maintained by the Trustee or by electronic means in the case of global securities.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

 

RELEVANT TO HOLDERS OF OUR COMMON STOCK

 

The following is a summary of the material U.S. federal income tax considerations of holding shares of our Common Stock. The law firm of DLA Piper LLP (US) has acted as counsel and reviewed this summary. For purposes of this section, references to “we,” “our” and “us” mean only W. P. Carey Inc. and not its subsidiaries or other lower-tier entities, except as otherwise indicated. This summary is based upon the Code, the regulations promulgated by the U.S. Department of Treasury, rulings and other administrative pronouncements issued by the United States Internal Revenue Service (the “IRS”), and judicial decisions, all as currently in effect, and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. We have not sought and do not currently expect to seek an advance ruling from the IRS regarding any matter discussed in this prospectus. This summary is also based upon the assumption that we will operate our Company and our subsidiaries and affiliated entities in accordance with their applicable organizational documents. This summary is for general information only and does not purport to discuss all aspects of federal income taxation that may be important to a particular investor in light of its investment or tax circumstances or to investors subject to special tax rules, such as:

 

·                  financial institutions;

 

·                  insurance companies;

 

·                  broker-dealers;

 

·                  regulated investment companies;

 

·                  partnerships and trusts;

 

·                  persons subject to the alternative minimum tax;

 

·                  persons who hold our stock on behalf of other persons as nominees;

 

·                  persons who receive our stock through the exercise of employee stock options (if we ever have employees) or otherwise as compensation;

 

·                  persons holding our stock as part of a “straddle,” “hedge,” “conversion transaction,” “constructive ownership transaction,” “synthetic security” or other integrated investment;

 

·                  “S” corporations;

 

and, except to the extent discussed below:

 

·                  tax-exempt organizations; and

 

·                  foreign investors.

 

This summary assumes that investors will hold their shares of our Common Stock as a capital asset, which generally means as property held for investment.

 

The holding of shares of our Common Stock depends in some instances on determinations of fact and interpretations of complex provisions of federal income tax law for which no clear precedent or authority may be available. In addition, the tax consequences to any particular stockholder holding our common stock will depend on the stockholder’s particular tax circumstances. You are urged to consult your tax advisor regarding the federal, state, and local and foreign income and other tax consequences to you in light of your particular investment or tax circumstances of acquiring, holding, exchanging, or otherwise disposing of our Common Stock.

 

Taxation of W. P. Carey Inc.

 

We elected to be taxed as a REIT commencing with our taxable year ended December 31, 2012. We believe that we have been organized and operated in such a manner as to qualify for taxation as a REIT.

 

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The law firm of DLA Piper LLP (US) is acting as our tax counsel and has provided an opinion that we have been organized in conformity with the requirements for qualification and taxation as a REIT under the Code from February 15, 2012, our date of incorporation, through our taxable year ended December 31, 2015 and that our present and proposed organization, ownership and method of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT. It must be emphasized that the opinion of DLA Piper LLP (US) is based on various assumptions relating to our organization and operation and conditioned upon fact-based representations and covenants made by our management regarding our organization, assets, and income, and the future conduct of our business operations. While we believe that we have been organized and operated and intend to continue to operate so that we qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given by DLA Piper LLP (US) or by us that we will qualify as a REIT for any particular year. The opinion of DLA Piper LLP (US) is expressed as of the date issued. DLA Piper LLP (US) has no obligation to advise us or our stockholders of any subsequent change in the matters stated, represented or assumed, or of any subsequent change in the applicable law. You should be aware that opinions of counsel are not binding on the IRS, and no assurance can be given that the IRS will not challenge the conclusions set forth in such opinions.

 

Qualification and taxation as a REIT depends on our ability to meet on a continuing basis, through actual operating results, distribution levels, and diversity of stock and asset ownership, various qualification requirements imposed upon REITs by the Code. Our ability to qualify as a REIT also requires that we satisfy certain asset tests, some of which depend upon the fair market values of assets that we own directly or indirectly. Such values may not be susceptible to a precise determination. Accordingly, no assurance can be given that the actual results of our operations for any taxable year will satisfy such requirements for qualification and taxation as a REIT.

 

Taxation of REITs in General

 

As indicated above, our qualification and taxation as a REIT depends upon our ability to meet, on a continuing basis, various qualification requirements imposed upon REITs by the Code. The material qualification requirements are summarized below under the section titled “ — Requirements for REIT Qualification — General.” While we intend to operate so that we qualify as a REIT, no assurance can be given that the IRS will not challenge our qualification, or that we will be able to operate in accordance with the REIT requirements in the future. See the section below titled “ — Failure to Qualify.”

 

Provided that we qualify as a REIT, generally we will be entitled to a deduction for dividends that we pay and therefore will not be subject to federal corporate income tax on our taxable income that is currently distributed to our stockholders. This treatment substantially eliminates the “double taxation” at the corporate and stockholder levels that generally results from investment in a corporation. In general, the income that we generate and distribute currently is taxed only at the stockholder level upon distribution to our stockholders.

 

Domestic stockholders that are individuals, trusts or estates are generally taxed on qualified corporate dividends at a maximum rate of 20% (the same as long-term capital gains). With limited exceptions, however, dividends from us or from other entities that are taxed as REITs are generally not eligible for this rate and will continue to be taxed at rates applicable to ordinary income. See the section titled “ — Taxation of Stockholders — Taxation of Taxable Domestic Stockholders — Distributions.”

 

Any net operating losses and other tax attributes of ours generally do not pass through to our stockholders, subject to special rules for certain items such as the capital gains that we recognize. See the section titled “ — Taxation of Stockholders.”

 

If we qualify as a REIT, we will nonetheless be subject to U.S. federal tax in the following circumstances:

 

·                  We will be taxed at regular corporate rates on any undistributed taxable income, including undistributed net capital gains;

 

·                  We may be subject to the “alternative minimum tax” on our items of tax preference, including any deductions of net operating losses;

 

·                  If we have net income from prohibited transactions, which are, in general, sales or other dispositions of inventory or property held primarily for sale to customers in the ordinary course of business, other than foreclosure property, such income will be subject to a 100% tax. See “ — Prohibited Transactions” and “ — Foreclosure Property” below;

 

·                  If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or certain leasehold terminations as “foreclosure property,” we may thereby avoid the 100% tax on gain from a resale of that property (if the sale would otherwise constitute a prohibited transaction), but the income from the sale or operation of the property may be subject to corporate income tax at the highest applicable rate (currently 35%);

 

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·                  If we should fail to satisfy the 75% gross income test or the 95% gross income test, as discussed below, but nonetheless maintain our qualification as a REIT because we satisfy other requirements, we will be subject to a 100% tax on an amount based on the magnitude of the failure, as adjusted to reflect the profit margin associated with our gross income;

 

·                  If we should violate the asset tests (other than certain de minimis violations) or other requirements applicable to REITs, as described below, and yet maintain our qualification as a REIT because there is reasonable cause for the failure and other applicable requirements are met, we would be subject to an excise tax. In that case, the amount of the excise tax will be at least $50,000 per failure, and, in the case of certain asset test failures, will be determined as the amount of net income generated by the assets in question multiplied by the highest corporate tax rate (currently 35%) if that amount exceeds $50,000 per failure;

 

·                  If we should fail to distribute during a calendar year at least the sum of (i) 85% of our REIT ordinary income for such year, (ii) 95% of our REIT capital gain net income for such year, and (iii) any undistributed taxable income from prior periods, we would be subject to a nondeductible 4% excise tax on the excess of the required distribution over the sum of (A) the amounts that we actually distributed and (B) the amounts of income from the taxable year we retained and upon which we paid income tax at the corporate level;

 

·                  We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record keeping requirements intended to monitor our compliance with rules relating to the composition of a REIT’s stockholders, as described below in “ — Requirements for REIT Qualification — General”;

 

·                  A 100% tax may be imposed on transactions between us and a taxable REIT subsidiary (“TRS”) (as described below) that do not reflect arm’s-length terms;

 

·                  If we acquire appreciated assets from a corporation that is not a REIT and is taxable under subchapter C of the Code in a transaction in which the adjusted tax basis of the assets in our hands is determined by reference to the adjusted tax basis of the assets in the hands of the subchapter C corporation, we may be subject to tax on such appreciation at the highest corporate income tax rate then applicable if we subsequently recognize gain on a disposition of any such assets during a ten-year period  following their acquisition from the subchapter C corporation (for acquisitions prior to August 8, 2016, the look back period is five years); and

 

·                  The earnings of our subsidiaries, including any subsidiary we may elect to treat as a TRS, are subject to federal corporate income tax to the extent that such subsidiaries are taxable as subchapter C corporations.

 

In addition, we and our subsidiaries may be subject to a variety of taxes, including payroll taxes and state and local and foreign income, property and other taxes on our assets and operations. We could also be subject to tax in situations and on transactions not presently contemplated.

 

Requirements for REIT Qualification — General

 

The Code defines a REIT as a corporation, trust or association:

 

1.              that is managed by one or more trustees or directors;

 

2.              the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest;

 

3.              that would be taxable as a domestic corporation but for its election to be subject to tax as a REIT;

 

4.              that is neither a financial institution nor an insurance company subject to specific provisions of the Code;

 

5.              the beneficial ownership of which is held by 100 or more persons;

 

6.              in which, during the last half of each taxable year, not more than 50% in value of the outstanding stock is owned, directly or indirectly, by five or fewer “individuals” (as defined in the Code to include specified tax-exempt entities); and

 

7.              which meets other tests described below, including with respect to the nature of its income and assets.

 

The Code provides that conditions (1) through (4) must be met during the entire taxable year, and that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a shorter taxable year. Conditions (5) and (6) need not be met during a corporation’s initial tax year as a REIT. In our case, we elected to be taxed as a REIT commencing with our taxable year ended December 31, 2012. Our Charter provides restrictions regarding the ownership and transfer of our shares, which are intended to assist us in satisfying the share ownership requirements described in conditions (5) and (6) above.

 

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To monitor compliance with the share ownership requirements, we generally are required to maintain records regarding the actual ownership of our shares of Common Stock. To do so, we must demand written statements each year from the record holders of significant percentages of our Common Stock pursuant to which the record holders must disclose the actual owners of the shares (i.e., the persons required to include our distributions in their gross income). We must maintain a list of those persons failing or refusing to comply with this demand as part of our records. We could be subject to monetary penalties if we fail to comply with these record-keeping requirements. If you fail or refuse to comply with the demands, you will be required by U.S. Department of Treasury Regulations to submit a statement with your tax return disclosing your actual ownership of our shares and other information.

 

In addition, a corporation generally may not elect to become a REIT unless its taxable year is the calendar year. We have adopted December 31 as our taxable year-end, and thereby satisfy this requirement.

 

The Code provides relief from violations of the REIT gross income requirements, as described below under “ — Income Tests,” in cases where a violation is due to reasonable cause and not to willful neglect, and other requirements are met, including the payment of a penalty tax that is based upon the magnitude of the violation. In addition, certain provisions of the Code extend similar relief in the case of certain violations of the REIT asset requirements and other REIT requirements, again provided that the violation is due to reasonable cause and not willful neglect, and other conditions are met, including the payment of a penalty tax. If we fail to satisfy any of the various REIT requirements, there can be no assurance that these relief provisions would be available to enable us to maintain our qualification as a REIT, and, if such relief provisions are available, the amount of any resultant penalty tax could be substantial.

 

Subsidiary Entities

 

Ownership of Partnership Interests

 

If we are a partner in an entity that is treated as a partnership for federal income tax purposes, U.S. Department of Treasury Regulations provide that we are deemed to own our proportionate share of the partnership’s assets, and to earn our proportionate share of the partnership’s income, for purposes of the asset and gross income tests applicable to REITs. Our proportionate share of a partnership’s assets and income is based on our capital interest in the partnership (except that for purposes of the 10% value test, our proportionate share of the partnership’s assets is based on our proportionate interest in the equity and certain debt securities issued by the partnership). In addition, the assets and gross income of the partnership are deemed to retain the same character in our hands. Thus, our proportionate share of the assets and items of income of any of our subsidiary partnerships will be treated as our assets and items of income for purposes of applying the REIT requirements.

 

The recently enacted Bipartisan Budget Act of 2015 changes the rules applicable to U.S. federal income tax audits of partnerships. Under the new rules (which generally are effective for taxable years beginning after December 31, 2017), among other changes and subject to certain exceptions, any audit adjustment to items of income, gain, loss, deduction, or credit of a partnership (and any partner’s distributive share thereof) is determined, and taxes, interest, or penalties attributable thereto are assessed and collected, at the partnership level. Although it is uncertain how these new rules will be implemented, it is possible that they could result in the operating partnership being required to pay additional taxes, interest and penalties as a result of an audit adjustment, and we could be required to bear the economic burden of those taxes, interest, and penalties even though we, as a REIT, may not otherwise have been required to pay additional corporate-level taxes as a result of the related audit adjustment. The changes created by these new rules are sweeping and in many respects dependent on the promulgation of future regulations or other guidance by the U.S. Treasury. Stockholders are urged to consult their tax advisors with respect to these changes and their potential impact on their investment in our common stock.

 

Disregarded Subsidiaries

 

If we own a corporate subsidiary that is a qualified REIT subsidiary (a “QRS”), that subsidiary is generally disregarded for federal income tax purposes, and all of the subsidiary’s assets, liabilities and items of income, deduction and credit are treated as our assets, liabilities and items of income, deduction and credit, including for purposes of the gross income and asset tests applicable to REITs. A QRS is any corporation, other than a TRS (as described below), that is directly or indirectly (through other disregarded entities) wholly owned by a REIT. Other entities that are wholly owned by us, including single member, domestic limited liability companies that have not elected to be taxed as corporations for federal income tax purposes, are also generally disregarded as separate entities for federal income tax purposes, including for purposes of the REIT income and asset tests. Disregarded subsidiaries, along with any partnerships in which we hold an equity interest, are sometimes referred to herein as “pass-through subsidiaries.”

 

In the event that a disregarded subsidiary of ours ceases to be wholly owned — for example, if any equity interest in the subsidiary is acquired by a person other than us or another disregarded subsidiary of ours — the subsidiary’s separate existence would no longer be disregarded for federal income tax purposes. Instead, the subsidiary would have multiple owners and would be treated as either a partnership or a taxable corporation. Such an event could, depending on the circumstances, adversely affect our ability to satisfy the various asset and gross income requirements applicable to REITs, including the requirement that REITs generally may not own, directly or indirectly, more than 10% of the securities of another corporation.

 

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Foreign Assets and Subsidiaries

 

With respect to any foreign properties, we have maintained, and will continue to maintain, appropriate books and records for our foreign properties in local currencies. Accordingly, for federal income tax purposes, including the 75% and 95% gross income tests summarized herein, our income, gains and losses from our foreign operations that are not held in TRSs will generally be calculated first in the applicable local currency, and then translated into United States dollars at appropriate exchange rates. On the periodic repatriation of monies from such foreign operations to the United States, we will be required to recognize foreign exchange gains or losses; however, any foreign exchange gains we recognize from repatriation are expected to constitute “real estate foreign exchange gains” under Section 856(n)(2) of the Code, and will thus be excluded from the 75% and 95% gross income tests summarized above.

 

In addition, we own interests in entities that are both TRSs and “controlled foreign corporations” for federal income tax purposes, and we are deemed to receive our allocable share of certain income, referred to as Subpart F Income, earned by such controlled foreign corporations whether or not that income is actually distributed to us. Numerous exceptions apply in determining whether an item of income is Subpart F Income, including exceptions for rent received from an unrelated person and derived in the active conduct of a trade or business. Rents from real property are generally treated as earned in an active trade or business if the landlord/licensor regularly performs active and substantial management and operational functions with respect to the property while it is leased, but only if such activities are performed through the landlord/licensor’s own officers or staff of employees. We believe our controlled foreign corporations generally do not satisfy this active rental exception however, and as a result we may recognize material amounts of Subpart F Income. Based on advice of counsel, we believe that that the types of Subpart F Income most likely to be recognized by us qualify under the 95% gross income test. However, we do not believe our Subpart F income qualifies under the 75% gross income test.

 

REIT Subsidiaries

 

Some of our subsidiaries may also be taxable as REITs. Provided such entities qualify as REITs under the Code, our equity in such entities will be a qualifying REIT asset under the quarterly REIT asset tests described below, and any dividends and/or gain on disposition of such equity will be qualifying REIT gross income under both the 75% and 95% gross income tests discussed below.

 

Taxable REIT Subsidiaries

 

We will jointly elect with certain of our U.S. and non-U.S. subsidiary corporations, whether or not wholly owned, to treat such subsidiary corporations as TRSs. We generally may not own more than 10% of the securities of a taxable corporation, as measured by voting power or value, unless we and such corporation elect to treat such corporation as a TRS. The separate existence of a TRS or other taxable corporation is not ignored for federal income tax purposes. Accordingly, a TRS or other taxable corporation generally would be subject to corporate income tax on its earnings, which may reduce the cash flow that we and our subsidiaries generate in the aggregate, and may reduce our ability to make distributions to our stockholders.

 

We are not generally treated as holding the assets of a TRS or other taxable subsidiary corporation or as receiving any income that the subsidiary earns. Rather, the stock issued by a taxable subsidiary to us is an asset in our hands, and we treat the distributions paid to us from such taxable subsidiary, if any, as income, gain, or return of capital, as applicable. This treatment can affect our income and asset test calculations, as described below. Because we do not generally include the assets and income of TRSs or other taxable subsidiary corporations in determining our compliance with the REIT requirements, we will use such entities to undertake indirectly activities that the REIT rules might otherwise preclude us from doing directly or through pass-through subsidiaries. For example, we may use TRSs or other taxable subsidiary corporations to conduct activiti