Filed Pursuant to Rule 424(b)(5)
Registration File No. 333-140978

 

Prospectus Supplement

(To prospectus dated February 27, 2007)

 

 

3,000,000 Shares

 

 

 

 

Entertainment Properties Trust

 

 

9.00% Series E cumulative convertible preferred shares

liquidation preference $25.00 per share

 

We are offering 3,000,000 shares of our 9.00% Series E cumulative convertible preferred shares of beneficial interest, par value $0.01 per share, or the Series E preferred shares, in this offering. We will pay cumulative distributions on the Series E preferred shares from and including the date of original issuance in the amount of $2.25 per share each year, which is equivalent to 9.00% of the $25.00 liquidation preference per share. Distributions on the Series E preferred shares will be payable quarterly in arrears, beginning on July 15, 2008. Our only other preferred shares outstanding as of the date of this prospectus supplement are 3,200,000 shares of our 7.75% Series B cumulative redeemable preferred shares with a liquidation preference of $25.00 per share, or Series B preferred shares, 5,400,000 shares of our 5.75% Series C cumulative convertible preferred shares with a liquidation preference of $25.00 per share, or Series C preferred shares, and 4,600,000 shares of our 7.375% Series D cumulative redeemable preferred shares with a liquidation preference of $25.00 per share, or Series D preferred shares. The Series E preferred shares will rank on a parity with the Series B, Series C and Series D preferred shares.

 

You may convert the Series E preferred shares into our common shares subject to certain conditions. The conversion rate will initially be 0.4512 common shares per $25.00 liquidation preference, which is equivalent to an initial conversion price of approximately $55.41 per common share. The conversion rate will be subject to adjustment upon the occurrence of specified events. On or after April 20, 2013, we may, at our option, convert some or all of the Series E preferred shares into common shares in certain circumstances based on the market price of our common shares. Upon any conversion of Series E preferred shares, we will have the option to deliver either (1) a number of common shares based upon the applicable conversion rate, or (2) an amount of cash and common shares, as described in this prospectus supplement.

 

If you elect to convert your Series E preferred shares in connection with a fundamental change that occurs on or prior to April 20, 2018, we will increase the conversion rate for the Series E preferred shares surrendered for conversion to the extent disclosed in this prospectus supplement. In addition, upon a fundamental change, when the actual applicable price of our common shares is less than $48.18 per share, you may require us to convert some or all of your Series E preferred shares at a conversion rate equal to the liquidation preference of the Series E preferred shares being converted plus accrued and unpaid distributions divided by 98% of the market price of our common shares. We will have the right to repurchase for cash some or all of the Series E preferred shares that would otherwise be required to be converted, as described in this prospectus supplement.

 

We have filed an application to list the Series E preferred shares on the New York Stock Exchange, or NYSE, under the symbol “EPR PrE.” If the application is approved, trading of the Series E preferred shares on the NYSE is expected to begin within 30 days after the date of initial delivery of the Series E preferred shares. Our common shares are listed on the NYSE under the symbol “EPR”. The last reported sale price of our common shares on March 27, 2008 was $48.18 per share.

 

Investing in our Series E preferred shares involves risks. Before buying any Series E preferred shares you should carefully read this entire prospectus supplement and the accompanying prospectus and the documents incorporated by reference herein and therein, including the section of this prospectus supplement entitled “Risk factors” beginning on page S-14, the section of the accompanying prospectus entitled “Risk Factors” on page 3 and the “Risk Factors” section of our annual report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission, or SEC, on February 26, 2008, and, to the extent applicable, our quarterly reports on Form 10-Q.

 

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

 

 

 

The underwriters have an option to purchase up to an additional 450,000 Series E preferred shares from us to cover over-allotments, if any.

 

The Series E preferred shares are subject to certain restrictions on ownership and transfer designed to preserve our qualification as a real estate investment trust for federal income tax purposes. See “Description of the Series E Preferred Shares — Restrictions on Ownership and Transfer” on page S-52 of this prospectus supplement and “Description of Certain Provisions of Maryland Law and EPR’s Declaration of Trust and Bylaws — Restrictions on Ownership and Transfer of Shares” on page 29 of the accompanying prospectus for more information about these restrictions.

 

The underwriters expect that the Series E preferred shares will be ready for delivery in book-entry form through the facilities of The Depository Trust Company on or about April 2, 2008.

 

Joint Book-Running Managers

 

 

Co-Manager

 

RBC Capital Markets

 

The date of this prospectus supplement is March 27, 2008

 

You should rely only on the information contained in or incorporated by reference into this prospectus supplement and the accompanying prospectus. Neither we nor the underwriters have authorized any person 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. The information contained in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein is accurate only as of their respective dates or as of other dates which are specified in those documents. Our business, financial condition, results of operations and prospects may have changed since those dates.

 

Table of contents

 

 

We are providing information to you about this offering of our Series E preferred shares in two parts. The first part is this prospectus supplement, which provides the specific details regarding this offering. The second part is the accompanying prospectus, which provides general information, including information about our common shares. Generally, when we refer to this “prospectus,” we are referring to both documents combined. Some of the information in the accompanying prospectus may not apply to this offering. If information in this prospectus supplement is inconsistent with the accompanying prospectus, you should rely on the information contained in this prospectus supplement.

 

References to “we,” “us,” “our,” “EPR” or the “Company” refer to Entertainment Properties Trust. When we refer to our “Declaration of Trust” we mean Entertainment Properties Trust’s Amended and Restated Declaration of Trust, including the articles supplementary for each series of preferred shares, as amended. When we refer to our “Bylaws” we mean Entertainment Properties Trust’s Bylaws, as amended. The term “you” refers to a prospective investor.

 

The SEC allows us to “incorporate by reference” the information we file with the SEC, which means we can disclose important information to you by referring to those documents. The information incorporated by reference is an important part of this prospectus supplement and the accompanying prospectus. Any statement contained in a document which is incorporated by reference in this prospectus supplement or the accompanying prospectus is automatically updated and superseded if information contained in this prospectus supplement, the accompanying prospectus, or information we later file with the SEC, modifies or replaces that information.

 

The documents listed below have been filed by us under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (File No. 1-13561) and are incorporated by reference in this prospectus supplement:

 

1. Our annual report on Form 10-K for the year ended December 31, 2007, filed on February 26, 2008.

 

2. Our current report on Form 8-K filed on March 27, 2008 (only as to Item 8.01).

 

3. The description of our common shares included in our registration statement on Form 8-A filed on November 4, 1997.

 

4. The description of our Series B Preferred Shares included in our registration statement filed on Form 8-A/A filed on January 14, 2005.

 

5. The description of our Series C Preferred Shares included in our registration statement filed on Form 8-A filed on December 21, 2006.

 

6. The description of our Series D Preferred Shares included in our registration statement filed on Form 8-A filed on May 4, 2007.

 

In addition, all documents filed by us under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (excluding any information that is deemed to have been “furnished” and not “filed” with the SEC) after the date of this prospectus supplement and prior to the termination of the offering of the securities covered by this prospectus supplement, are incorporated by reference herein.

 

To obtain a free copy of any of the documents incorporated by reference in this prospectus supplement (other than exhibits, unless they are specifically incorporated by reference in the documents) please contact us at:

 

Investor Relations Department

Entertainment Properties Trust

30 W. Pershing Road, Suite 201

Kansas City, Missouri 64108

(816) 472-1700/FAX (816) 472-5794

Email info@eprkc.com

 

Our SEC filings also are available on our Internet website at www.eprkc.com. The information on our website is not, and you must not consider the information to be, a part of this prospectus supplement or the accompanying prospectus.

 

As you read these documents, you may find some differences in information from one document to another. You should assume that the information appearing in the prospectus supplement or the accompanying prospectus is accurate only as of the date on their respective covers, and you should assume the information appearing in any document incorporated or deemed to be incorporated by reference in this prospectus supplement or the accompanying prospectus is accurate only as of the date that document was filed with the SEC. Our business, financial condition, results of operations and prospects may have changed since those dates.

 

With the exception of historical information, this prospectus supplement and the accompanying prospectus and our reports filed under the Exchange Act and incorporated by reference in this prospectus supplement and the accompanying prospectus and other offering materials and documents deemed to be incorporated by reference herein or therein may contain 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, such as those pertaining to our acquisition or disposition of properties, our capital resources, future expenditures for development projects and our results of operations. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of actual events. There is no assurance the events or circumstances reflected in the forward-looking statements will occur. You can identify forward-looking statements by use of words such as “will be,” “intend,” “continue,” “believe,” “may,” “expect,” “hope,” “anticipate,” “goal,” “forecast,” or other comparable terms, or by discussions of strategy, plans or intentions. Forward-looking statements necessarily are dependent on assumptions, data or methods that may be incorrect or imprecise.

 

Factors that could materially and adversely affect us include, but are not limited to, the factors listed below:

 

 

You should consider the risks described in the “Risk factors” section on page S-14 of this prospectus supplement, the “Risk Factors” section on page 3 of the accompanying prospectus and the “Risk Factors” section of our annual report on Form 10-K for the year ended December 31, 2007, filed with the SEC on February 26, 2008, and, to the extent applicable, our quarterly reports on Form 10-Q, in evaluating any forward-looking statements included or incorporated by reference in this prospectus supplement and the accompanying prospectus.

 

Given these uncertainties, you should not place undue reliance on these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference in this prospectus supplement or the accompanying prospectus, whether as a result of new information, future events or otherwise. In light of the factors referred to above, the future events discussed or incorporated by reference in this prospectus supplement or the accompanying prospectus may not occur and actual results, performance or achievements could differ materially from those anticipated or implied in the forward-looking statements.

 

This summary may not contain all of the information that is important to you. Before making a decision to purchase our Series E preferred shares, you should carefully read this entire prospectus supplement and the accompanying prospectus, especially the “Risk factors” section on page S-14 of this prospectus supplement, the “Risk Factors” section on page 3 of the accompanying prospectus and the “Risk Factors” section of our annual report on Form 10-K for the year ended December 31, 2007, filed on February 26, 2008, and incorporated by reference herein, as well as the “Risk Factors” section in our quarterly reports on Form 10-Q, to the extent applicable, and the other documents incorporated by reference in this prospectus supplement and in the accompanying prospectus. Unless otherwise indicated, financial information included in this prospectus supplement is presented on a historical basis.

 

About EPR

 

We are a self-administered real estate investment trust, or “REIT,” that develops, owns, acquires and finances properties for consumer preferred high-quality businesses, including megaplex movie theatres, entertainment retail centers and other destination recreational and specialty properties.

 

Our real estate portfolio is comprised of over $1.9 billion in assets (before accumulated depreciation) and consists of:

 

 

As of March 25, 2008, we had invested approximately $19.6 million in development land and construction in progress for real-estate development.

 

Also, as of March 25, 2008, we had the following mortgage notes receivable:

 

 

 

The theatre project under development has been pre-leased to the prospective tenant under a long-term triple-net lease. The cost of development will be paid by us in periodic draws. The related timing and amount of rental payments to be received by us from the tenant under the lease correspond to the timing and amount of funding by us of the cost of development. This theatre will have 12 screens and we anticipate that the total development cost will be approximately $13.2 million. Through March 25, 2008, we had not yet invested any funds in this project but have commitments to fund the $13.2 million in improvements. We plan to fund development primarily with funds generated by debt financing and/or equity offerings. If we determine that construction is not being completed in accordance with the terms of the development agreement, we can discontinue funding construction draws.

 

We generally lease our single-tenant properties to tenants on a long-term triple-net basis that requires the tenant to assume the primary risks involved in operating the property and to pay substantially all expenses associated with the operation and maintenance of the property. We also provide secured mortgage financing and we own multi-tenant properties which are managed for us by third-party management companies.

 

Our theatre properties are leased to prominent theatre operators, including American Multi-Cinema, Inc. (referred to in this prospectus as “AMC”), Muvico Entertainment LLC, Regal Cinemas, Consolidated Theatres, Loews Cineplex Entertainment (now part of AMC), Rave Motion Pictures, Wallace Theatres, Southern Theatres, Cobb Theatres and Kerasotes Showplace Theatres. As of March 25, 2008, approximately 51% of our megaplex theatre properties were leased to AMC as a result of a series of sale-leaseback transactions relating to a number of AMC megaplex theatres, and approximately 51% of our total annual lease revenues were derived from rental payments by AMC under these leases.

 

Approximately 15% of our total annual revenue is derived from our four entertainment retail centers in Ontario, Canada and a mortgage note receivable secured by an additional property under development in Ontario, Canada. The Canadian entertainment retail centers combined with the carrying value of our mortgage note receivable represent approximately 23% of the Company’s net assets as of March 25, 2008.

 

Beginning with our taxable year ended December 31, 1997, we elected to be treated as a REIT for U.S. federal income tax purposes. In order to maintain our status as a REIT, we must comply with a number of requirements under federal income tax law that are discussed in “Additional U.S. federal income tax considerations” on page S-53 of this prospectus supplement and “U.S. Federal Income Tax Considerations” on page 32 of the accompanying prospectus.

 

Our executive offices are located at 30 W. Pershing Road, Suite 201, Kansas City, Missouri 64108. Our telephone number is (816) 472-1700.

 

Growth Strategies

 

As a part of our growth strategies, we will consider developing or acquiring additional megaplex theatre properties, and developing or acquiring single-tenant entertainment, entertainment-related, recreational or specialty properties. We will also consider developing or

acquiring additional entertainment retail centers. In lieu of acquisition or development, we may also pursue opportunities to provide mortgage financing for these same property types.

 

Our investing strategies center on certain guiding principles, which we refer to as our “Five Star Principles”:

 

Inflection Opportunity

 

We look for a new generation of facilities emerging as a result of age, technology, or change in the lifestyle of consumers which create development, renewal or restructuring opportunities requiring significant capital.

 

Enduring Value

 

We look for real estate that supports activities that are commercially successful and have a reasonable basis for continued and sustainable customer demand in the future. Further, we seek circumstances where the magnitude of change in the new generation of facilities adds substantially to the customer experience.

 

Excellent Execution

 

We seek attractive locations and best-of-class executions that create market-dominant properties which we believe create a competitive advantage and enhance sustainable customer demand within the category despite a potential change in tenant. We minimize the potential for turnover by seeking quality tenants with a reliable track record of customer service and satisfaction.

 

Attractive Economics

 

We seek investments that provide accretive returns initially and increasing returns over time with rent escalators and percentage rent features that allow participation in the financial performance of the property. Further, we are interested in investments that provide a depth of opportunity to invest sufficient capital to be meaningful to our total financial results and also provide a diversity by market, geography or tenant operator.

 

Advantageous Position

 

In combination with the preceding principles, when investing we look for a competitive advantage such as unique knowledge of the category, access to industry information, a preferred tenant relationship, or other relationships that provide access to sites and development projects.

 

Recent Developments

 

The following are principal recent developments since January 1, 2008:

 

Debt Financing

 

On January 11, 2008, the Company obtained a $17.5 million non-recourse mortgage loan maturing on February 1, 2018 and secured by a theatre property located in Garland, Texas,

which bears interest at 6.19% per year, and requires monthly principal and interest payments of $127 thousand and a final principal payment at maturity of $11.6 million.

 

On March 13, 2008, the Company’s subsidiary VinREIT, LLC entered into a $65.0 million term loan and revolving credit facility with Bank of the West and various lenders. The credit facility is evidenced by a Credit Agreement dated as of March 4, 2008 and includes pricing of LIBOR plus 1.5% on loans advanced against real property and LIBOR plus 1.75% on loans advanced against fixtures and equipment. The Credit Agreement provides for an aggregate advance rate of 65% based on the lesser of cost or appraised value. Term loans against real property may be drawn on through March 14, 2010. These loans are amortized over a 25-year period and mature on the earlier of ten years after disbursement or the maturity of the related real property lease. The equipment and fixture loans have a maturity date that is the earlier of ten years or the maturity of the related lease and require full principal amortization over the term of the loan. The Credit Agreement contains an accordion feature whereby, subject to lender approval, VinREIT, LLC may obtain additional revolving credit and term loan commitments in an aggregate principal amount not to exceed $35.0 million. The Credit Agreement is secured by the existing and future personal property of VinREIT, LLC, and is jointly and severally guaranteed by two wholly-owned subsidiaries of VinREIT, LLC, Havens VinREIT, LLC and Duncan Peak VinREIT LLC. Each of these subsidiaries granted a lien on its existing real estate and its existing and future personal property to secure its guaranty. The initial disbursement under the Credit Agreement consisted of two term loans in the aggregate principal amount of approximately $9.5 million with maturity dates of December 1, 2017 and March 13, 2018, respectively, and we simultaneously entered into interest rate swap agreements that fixed the interest rates at an average of 5.52%. On March 24, 2007, we obtained $3.2 million of equipment loans that mature on December 1, 2017. Other wholly-owned subsidiaries of VinREIT, LLC may subsequently become eligible to join in the credit facility as secured guarantors, thus facilitating credit extensions under the Credit Agreement.

 

The net proceeds from the above-referenced loans were used to pay down outstanding indebtedness under our unsecured revolving credit facility.

 

Investments

 

As previously announced, on October 30, 2007, we acquired, through our wholly-owned subsidiary, EPT Schoolhouse, LLC (“EPT Schoolhouse”), a 50% ownership interest in CS Fund I for $39.3 million. CS Fund I currently owns 12 public charter school properties located in Nevada, Arizona, Ohio, Georgia, Missouri, Michigan, Florida and Washington D.C. and leases them under a long-term triple net master lease. Our partner in CS Fund I is JERIT CS Fund I Member (“JERIT Fund Member”). On March 25, 2008, EPT Schoolhouse entered into a membership purchase agreement with JERIT Fund Member, pursuant to which EPT Schoolhouse will purchase all of JERIT Fund Member’s 50% ownership interest in CS Fund I for approximately $39.5 million. Upon completion of this transaction, CS Fund I will become a wholly-owned subsidiary of the Company. The member purchase agreement provides that EPT Schoolhouse shall pay JERIT Fund Member a monthly asset management fee of 1.875% of the monthly rent for the public charter school properties, for the six month period following the closing. The membership purchase agreement also contains an option pursuant to which JERIT Fund Member may re-acquire its 50% interest in CS Fund I within six months after the acquisition of such interest by EPT Schoolhouse. We anticipate that the acquisition of JERIT Fund Member’s 50% interest in CS Fund I by EPT Schoolhouse will be completed in early April; however, we cannot assure you that this transaction will be completed or completed for the amount or on the terms summarized above. Depending on the timing of this acquisition, we may finance the purchase price

with a portion of the proceeds from this offering and the concurrent offering of our common shares, or we may finance the purchase price with borrowings under our unsecured revolving credit facility which would be repaid using a portion of the proceeds from this offering and the concurrent common shares offering.

 

CS Fund I currently has an option to purchase an additional $120 million of public charter school properties, of which $60 million of properties would be scheduled to close within the next 60 to 90 days if such option is exercised. We cannot offer any assurance that this option will be exercised or as to the timing or terms of the transaction or that the transaction will be completed.

 

Concurrent Offering of Common Shares

 

Concurrently with this offering, we are offering 2,100,000 common shares pursuant to a separate offering registered under the Securities Act. We have granted the underwriters for the common shares offering an over-allotment option to purchase up to 315,000 additional common shares. If we complete the offering of the common shares, we expect to use the proceeds from that offering and from this offering as described in “Use of Proceeds.” The completion of this offering of Series E preferred shares is not subject to the completion of the concurrent offering of common shares and the completion of the concurrent offering of common shares is not subject to the completion of this offering of Series E preferred shares.

 

For a description of the common shares, please see the prospectus supplement and other offering materials for the common shares, all of which have been or will be filed with the SEC.

 

This prospectus supplement shall not be deemed to be an offer to sell or a solicitation of an offer to buy any common shares and we cannot assure you that the concurrent offering of our common shares will be completed or completed for the amount or on the terms contemplated.

 

The following is a brief summary of certain terms of this offering and is not intended to be complete. It does not contain all of the information that will be important to a holder or the issuer of the Series E preferred shares. For a more complete description of the terms of the Series E preferred shares, see “Description of the Series E Preferred Shares” in this prospectus supplement and “Description of Shares of Beneficial Interest” and “Description of Certain Provisions of Maryland Law and EPR’s Declaration of Trust and Bylaws” in the accompanying prospectus.

 

 

The table below presents our ratio of earnings to combined fixed charges and preferred share distributions by dividing earnings by combined fixed charges and preferred share distributions. For this purpose, “earnings” is the sum of net income before discontinued operations, equity in earnings of unconsolidated subsidiaries, minority interest in earnings (excluding those that have not incurred fixed charges) and fixed charges (excluding capitalized interest) plus distributed income from unconsolidated subsidiaries. “Fixed charges” consist of interest incurred on all indebtedness related to continuing operations (including amortization of original issue discount, if any). The ratios are based solely on historical financial information and no pro forma adjustments have been made.

 

 

Before you decide to purchase our Series E preferred shares, you should be aware that there are risks in making this investment. You should carefully consider the risks described below, in the “Risk Factors” section on page 3 of the accompanying prospectus, in the “Risk Factors” section of our annual report of on Form 10-K for the year ended December 31, 2007 filed on February 26, 2008, and to the extent applicable, in our quarterly reports on Form 10-Q, together with all other information included or incorporated by reference in this prospectus supplement and the accompanying prospectus, before you decide to invest in our Series E preferred shares.

 

The trading price for the Series E preferred shares will be directly affected by the trading price for our common shares, which is impossible to predict.

 

The trading price of the Series E preferred shares will be affected by the trading price for our common shares. Our common share trading price may depend on many factors, including prevailing interest rates, general economic conditions, capital market conditions (which may not be related to the operating performance of companies), the market for similar securities, our financial condition, performance and prospects, variations from analysts’ expectations and our issuance of additional debt or equity securities, and may be more volatile than the general trading prices of preferred shares that are not convertible.

 

The price of our common shares could be affected by possible sales of our common shares by investors who view the Series E preferred shares as a more attractive means of equity participation in us and by hedging or arbitrage trading activity that may develop involving our common shares. The hedging or arbitrage trading activity could, in turn, affect the trading prices of the Series E preferred shares.

 

The trading price for the Series E preferred shares could be substantially affected by various other factors.

 

As with other publicly-traded securities, the trading price for the Series E preferred shares will depend on many factors other than the trading price of our common shares, which may change from time to time, including:

 

The Conversion Rate of the Series E preferred shares may not be adjusted for all dilutive events. Accordingly, we may engage in transactions that could dilute the value of the common shares into which your Series E preferred shares may be convertible.

 

As described under “Description of the Series E Preferred Shares — Conversion Rate Adjustments”, we will adjust the Conversion Rate of the Series E preferred shares only for certain events. We will not adjust the Conversion Rate, among other things, for:

 

 

If we engage in any of these types of transactions, the value of the common shares into which your Series E preferred shares may be convertible may be diluted.

 

The adjustment to the conversion rate of the Series E preferred shares upon a conversion in connection with certain fundamental changes may not adequately compensate you for the lost option value of the Series E preferred shares as a result of that fundamental change.

 

If a Fundamental Change occurs on or prior to April 20, 2018, we will under certain circumstances adjust the Conversion Rate to provide for the issuance of additional common shares upon any conversion of Series E preferred shares in connection with such Fundamental Change. See “Description of the Series E Preferred Shares — Adjustment to the Conversion Rate upon the Occurrence of a Fundamental Change.” This adjustment to the Conversion Rate is only an approximation of the lost option value of the Series E preferred shares as a result of the Fundamental Change and may not adequately compensate shareholders for the loss. In addition, if a Fundamental Change occurs after April 20, 2018, or if the applicable price is less than $48.18 per share or greater than $125.00 per share (in each case, subject to adjustment), we will not make an adjustment to the Conversion Rate.

 

We may not have the ability to raise the funds necessary to purchase for cash Series E preferred shares upon a fundamental change or otherwise.

 

Following a Fundamental Change, you may, in addition to other conversion rights, exercise a special right, which we refer to as the Fundamental Change Conversion Right, to convert your shares of Series E preferred shares as described under “Description of the Series E Preferred Shares — Special Conversion Right of Series E Preferred Shares upon a Fundamental Change; Company Repurchase Right.” Upon conversion of the Series E preferred shares, pursuant to the Fundamental Change Conversion Right or otherwise, we may elect instead to repurchase all or some of your Series E preferred shares to be converted for cash. If we elect to repurchase some or all of your Series E preferred shares in that circumstance, such Series E preferred shares will no longer be entitled to be converted into common shares, and you will be entitled to receive the cash repurchase price from us. We cannot assure you that we will have sufficient financial resources, or will be able to arrange financing, to pay the repurchase price in cash with respect to any Series E preferred shares tendered by holders for conversion upon a Fundamental Change or otherwise. In addition, our then existing indebtedness could provide that a Fundamental Change would constitute an event of default or prepayment event under, and result in the acceleration of the maturity of, such indebtedness or could otherwise contain restrictions which would not allow us to repurchase your Series E preferred shares.

 

Your right to receive common shares upon conversion of the Series E preferred shares in connection with a fundamental change may be limited.

 

The aggregate number of our common shares issuable in connection with an exercise of the Fundamental Change Conversion Right may not exceed the number of common shares as shall then be authorized and available for issuance. If the number of common shares issuable upon such conversion would exceed shares (or if the underwriters’ over-allotment option is exercised, shares) or such other number of common shares as shall then be authorized and available for issuance, we will have the option to satisfy the remainder of such conversion in common shares that are authorized for issuance in the future. We will use our best efforts to have any such additional number of common shares authorized for issuance within 180 days of the conversion date but we cannot assure you that we will be able to do so. If we are unable to do so, you will not receive all of the common shares that you would otherwise be entitled to receive.

 

You should consider the United States federal income tax consequences of owning Series E preferred shares.

 

The U.S. federal income tax consequences of acquiring, owning and disposing of Series E preferred shares and any common shares received upon conversion are summarized under “Additional U.S. Federal Income Tax Considerations.” Certain of our actions, including an increase in the cash distribution on our common shares, may result in an adjustment to the Conversion Rate that could cause you to be deemed to receive a taxable distribution subject to U.S. federal income tax without the receipt of any cash. If you are a non-U.S. shareholder (as defined in the “Additional U.S. Federal Income Tax Considerations”), such deemed distribution may be subject to U.S. federal withholding tax at a 30% rate or any lower rate as may be specified by an applicable treaty. See “Additional U.S. Federal Income Tax Considerations.” Also, federal tax may be imposed on the gain realized by a non-U.S. shareholder on the sale, repurchase or conversion of Series E preferred shares, depending on whether those shares

constitute United States real property interests, all as more fully explained under “Additional U.S. Federal Income Tax Considerations.”

 

Moreover, prospective investors should be aware that as of January 1, 2011, absent legislative action, the maximum capital gains federal income tax rate for U.S. shareholders who are individuals will revert to 20% and the maximum ordinary income tax rate will revert to 39.6%.

 

An active trading market for Series E preferred shares may not develop, which may negatively impact their market value and your ability to transfer or sell your shares, and the Series E preferred shares have no stated maturity date.

 

The Series E preferred shares are a new issue of securities for which there is currently no public market. Because the Series E preferred shares do not have a stated maturity date, investors seeking liquidity will be limited to selling their shares in the secondary market. Although we will apply to list the Series E preferred shares on the NYSE under the symbol “EPR PrE”, we cannot assure you that an active or sustained trading market for the Series E preferred shares will develop or that the holders will be able to sell their Series E preferred shares. The underwriters have informed us that they intend to make a market in the Series E preferred shares after this offering is completed. However, the underwriters may cease their market making activities at any time. Moreover, even if you are able to sell your Series E preferred shares, we cannot assure you as to the price at which any sales will be made. Future trading prices of the Series E preferred shares will depend on many factors, including, among other things, prevailing interest rates, our operating results, the price of our common shares, and the market for similar securities. Historically, the market for convertible preferred securities has been subject to disruptions that have caused volatility in prices. It is possible that the market for the Series E preferred shares will be subject to disruptions which may have a negative effect on the holders of the Series E preferred shares, regardless of our prospects or financial performance.

 

If you hold Series E preferred shares, you will not be entitled to any rights with respect to our common shares, but you will be subject to all changes made with respect to our common shares.

 

If you hold Series E preferred shares, you will not be entitled to any rights with respect to our common shares (including, without limitation, voting rights and rights to receive any distributions on our common shares), but you will be subject to all changes affecting the common shares. You will have rights with respect to our common shares only if and when we deliver common shares to you upon conversion of your Series E preferred shares and, in limited cases, under the conversion rate adjustments applicable to the Series E preferred shares. For example, in the event that an amendment is proposed to our Declaration of Trust or bylaws requiring shareholder approval and the record date for determining the shareholders of record entitled to vote on the amendment occurs prior to delivery of the common shares to you following a conversion, you will not be entitled to vote on the amendment, although you will nevertheless be subject to any changes in the powers, preferences or special rights of our common shares.

 

We may issue additional securities and thereby materially and adversely affect the price of our common shares and Series E preferred shares.

 

We are not restricted from issuing additional common shares, preferred shares, or securities convertible into or exchangeable for our common shares, except that we may not authorize equity securities ranking senior to the Series E preferred shares with respect to distribution

rights or payments upon our liquidation, dissolution or winding up without the affirmative vote of the holders of at least two-thirds of the Series E preferred shares (and the affirmative vote of the requisite number of holders of any other class or series of preferred shares which are entitled to similar voting rights). If we issue additional common shares, preferred shares or convertible or exchangeable securities, the price of our common shares and, in turn, the price of the Series E preferred shares may be materially and adversely affected.

 

The value of the conversion right associated with the Series E preferred shares may be substantially lessened or eliminated if we are party to a merger, consolidation, or other similar transaction.

 

If we are party to a consolidation, merger, share exchange or sale or lease of all or substantially all of our assets pursuant to which our common shares are converted into the right to receive cash, securities or other property, at the effective time of the transaction, the right to convert the Series E preferred shares into our common shares will be changed into a right to convert such shares into the kind and amount of cash, securities, or other property which the holder would have received if the holder had converted its shares of Series E preferred shares immediately prior to the transaction. This change could substantially lessen or eliminate the value of the conversion privilege associated with the Series E preferred shares in the future. For example, if all of our outstanding common shares were acquired for cash in a merger transaction, each Series E preferred share would become convertible solely into cash and would no longer be convertible into securities whose value would vary depending on our future prospects and other factors.

 

Conversion of Series E preferred shares will dilute the ownership interest of existing shareholders.

 

The conversion of some or all of the Series E preferred shares, including a conversion upon exercise of the Fundamental Change Conversion Right, will dilute the ownership interests of existing shareholders. Any sales in the public market of the common shares issuable upon such conversion could adversely affect prevailing market prices of our common shares. In addition, the existence of the Series E preferred shares may encourage short selling by market participants because the conversion of the Series E preferred shares could depress the price of our common shares.

 

The Series E preferred shares have not been rated and are subordinated to our existing and future debt, and there is no restriction on the issuance of parity preferred securities.

 

The Series E preferred shares have not been rated by any nationally recognized statistical rating organization, which may negatively affect their market value and your ability to sell them. The payment of amounts due on the Series E preferred shares will be subordinated to all of our existing and future debt, including our unsecured revolving credit facility, and will be structurally subordinated to the obligations of our subsidiaries. The Series E preferred shares will be on a parity with our existing Series B, Series C, and Series D preferred shares. We may also issue additional preferred shares in the future which are on a parity with (or, upon the affirmative vote or consent of the holders of two-thirds of the outstanding Series E preferred shares and each other class or series of preferred shares ranking on a parity with the Series E preferred shares which are entitled to similar voting rights, voting as a single class, senior to) the Series E preferred shares with respect to the payment of distributions and the distribution of assets upon

liquidation, dissolution or winding up. Any of these factors may affect the trading price for the Series E preferred shares.

 

We may not be able to pay distributions upon events of default under our financing documents.

 

Some of our financing documents contain restrictions on distributions upon the occurrence of events of default thereunder. If such an event of default occurs, such as our failure to pay principal at maturity or interest when due for a specified period of time, we would be prohibited from making payments on our shares, including the Series E preferred shares and our common shares.

 

If our common shares are delisted, your ability to transfer or sell the Series E preferred shares, or common shares upon conversion, may be limited and the market value of the Series E preferred shares will be materially adversely affected.

 

The Series E preferred shares do not contain provisions that protect you if our common shares are delisted. Since the Series E preferred shares have no stated maturity date, you may be forced to elect between converting your Series E preferred shares into illiquid shares of our common shares or holding your Series E preferred shares and receiving stated distributions on the shares when, as and if authorized by our board of trustees and declared by us with no assurance as to ever receiving the liquidation preference. In addition, if our common shares are delisted and the Series E preferred shares are then listed, it is likely that the Series E preferred shares will be delisted as well. Accordingly, if our common shares are delisted, your ability to transfer or sell your Series E preferred shares, or common shares upon conversion, may be limited and the market value of the Series E preferred shares will be materially adversely affected.

 

We may continue to acquire, develop or finance ski properties, vineyards and wineries, and public charter school properties or real estate related companies focused on those types of properties and this may create risks.

 

We have made, and expect to continue to make, acquisition, development and financing investments in ski properties, vineyard and wineries, and public charter school properties, as well as, real estate related companies focused on those types of properties. These investments are subject to various risks, including those specifically attributable to the type of property involved. For instance, ski properties and vineyards and wineries are subject to risks related to weather conditions impacting such properties and the ability of the tenant or mortgagor to satisfy its obligations owed to the Company with respect to such properties. In addition, our investments in public charter schools are subject to various risks including the ability of a school to satisfy the accreditation requirements to receive or maintain its charter, as well as the potential of decreasing enrollment, all of which may impact the ability of the tenant to meet its obligations to the Company.

 

The net proceeds to us from the sale of Series E preferred shares offered hereby are expected to be approximately $72.53 million ($83.44 million if the underwriters exercise their over-allotment option in full), after deducting the underwriting discount and commissions and our estimated offering expenses.

 

We are concurrently offering our common shares pursuant to a separate offering registered under the Securities Act. The net proceeds to us from the concurrent offering of our common shares are expected to be approximately $96.65 million ($111.18 million if the underwriters exercise their over-allotment option in full), after deducting the underwriting discount and commissions and our estimated offering expenses.

 

We intend to use the net proceeds from this offering and the concurrent offering of our common shares for general business purposes, which may include funding the acquisition, development or financing of properties or the repayment of debt. We are continuously seeking acquisition, development and financing opportunities relating to megaplex movie theatres, entertainment retail centers and other destination recreational and specialty properties. We believe we have a strong pipeline of development, acquisition and financing transaction opportunities and we are a party to several letters of intent and have entered into other commitments in furtherance of these efforts, including our agreement to purchase the remaining 50% interest in CS Fund I for approximately $39.5 million. Depending on the timing of this acquisition, we may finance the purchase price with a portion of the proceeds from this offering and the concurrent offering of our common shares or we may finance the purchase price with borrowings under our unsecured revolving credit facility which would then be repaid using a portion of the proceeds from this offering and the concurrent common shares offering.

 

For a description of this transaction see, “Prospectus Supplement Summary — Recent Developments — Investments.” There can be no assurance as to the completion, timing or terms of any of these potential transactions.

 

Pending application of net proceeds from this offering and the concurrent offering of our common shares to the uses described above, we intend to use a portion of the net proceeds from this offering and the concurrent offering of our common shares to reduce indebtedness under our unsecured revolving credit facility and to invest any remaining net proceeds in interest-bearing accounts and short-term interest-bearing securities which are consistent with our qualification as a REIT under the Code.

 

The unsecured revolving credit facility bears interest at LIBOR plus 1.30% to 1.75% or the Applicable Base Rate plus 0.00% to 0.20% depending on our leverage ratio at the time of each advance. The unsecured revolving credit facility matures on January 31, 2009 and may be extended for an additional year at our option subject to certain terms and conditions, including payment of an extension fee. JPMorgan Chase Bank, N.A., an affiliate of one of the underwriters, J.P. Morgan Securities, Inc., is a lender under this credit facility and will receive approximately 15% of any proceeds from this offering and the concurrent offering of our common shares that are used to repay indebtedness under the credit facility. In addition, a holding company of JPMorgan Chase Bank, N.A. has entered into a merger agreement with a holding company of Bear Stearns Corporate Lending Inc. Bear Stearns Corporate Lending, Inc. is a lender under the credit facility and will receive approximately 4% of any proceeds from this offering and the concurrent offering of our common shares that are used to repay indebtedness under the credit facility. Royal Bank of Canada, an affiliate of one of the underwriters, RBC

Capital Markets Corporation, is also a lender under the credit facility and will receive approximately 15% of the proceeds of this offering and the concurrent offering of our common shares that are used to repay indebtedness under the credit facility.

 

The proceeds we ultimately receive from this offering of Series E preferred shares and the concurrent offering of our common shares are dependent upon numerous factors and subject to general market conditions. We may not consummate the offering of the common shares or we may not consummate it for the amount or on the terms planned. Accordingly, the amounts described above may differ materially from the actual amounts we receive. This offering of Series E preferred shares is not conditioned on completion of the concurrent offering of our common shares and the concurrent offering of our common shares is not conditioned on the completion of this offering of Series E preferred shares.

 

The following table describes our actual capitalization as of December 31, 2007, and our capitalization on an as adjusted basis to reflect (1) the issuance and sale of the 3,000,000 Series E preferred shares offered by this prospectus supplement (assuming no exercise of the underwriters’ over-allotment option) and the application of the net proceeds from this offering as described in “Use of Proceeds” and (2) the issuance and sale of both the 3,000,000 Series E preferred shares offered by this prospectus supplement (assuming no exercise of the underwriters’ over-allotment option) and the 2,100,000 common shares pursuant to a separate offering registered under the Securities Act (assuming no exercise of the underwriters’ over-allotment option) and the application of the net proceeds from both offerings as described in “Use of Proceeds.” The proceeds we ultimately receive from this offering of Series E preferred shares and the concurrent offering of our common shares are dependent upon numerous factors and subject to general market conditions. We may not consummate the concurrent offering of our common shares or we may not consummate it for the amount or on the terms planned. The completion of this offering of Series E preferred shares is not subject to the completion of the concurrent offering of the common shares and the completion of the concurrent offering of the common shares is not subject to the completion of this offering of Series E preferred shares. Accordingly, the actual amounts shown in the “As Adjusted” columns may differ materially from those shown below.

 

This information should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and schedules and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2007, incorporated by reference in this prospectus supplement.

 

 

 

This table includes selected historical financial data of EPR. You should read carefully the consolidated financial statements and schedules, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our annual report on Form 10-K for the year ended December 31, 2007 and our quarterly reports on Form 10-Q, to the extent applicable. The selected financial data in this table are not intended to replace the consolidated financial statements and schedules included in our annual report on Form 10-K for the year ended December 31, 2007 or our quarterly reports on Form 10-Q, which are incorporated by reference herein. This operating data for each of the five years ended December 31, 2007 reflects the reclassification of discontinued operations related to the June 2007 sale of property. Figures are in thousands except per share data.

 

Operating Data

 

 

Balance Sheet Data

 

 

The following is a summary of the material terms and provisions of the Series E preferred shares. This description supplements the description of the general terms and provisions of our preferred shares contained in the accompanying prospectus. To the extent the terms described herein differ from the terms described in the accompanying prospectus, you should rely on the terms set forth below. This is a summary and does not completely describe our Series E preferred shares. For a complete description, we refer you to our Declaration of Trust, the Articles Supplementary designating the Series E preferred shares and our Bylaws, each of which is incorporated by reference in this prospectus supplement and the accompanying prospectus and is available from us upon request.

 

General

 

Under our Declaration of Trust, we are authorized to issue up to 50,000,000 common shares and up to 25,000,000 preferred shares. As of March 25, 2008, a total of 28,209,974 common shares were issued and outstanding and 836,647 common shares were held in treasury, 3,200,000 Series B preferred shares (liquidation preference $25.00 per share) were outstanding, 5,400,000 shares of our 5.75% Series C preferred shares (liquidation preference of $25.00 per share) were outstanding, and 4,600,000 shares of our 7.375% Series D preferred shares (liquidation preference of $25.00 per share) were outstanding. See “Capitalization.” See the Articles Supplementary relating to the Series B preferred shares attached as Exhibit 4.6 to our Form 8-K filed with the SEC on January 14, 2005, Series C preferred shares attached as Exhibit 3.2 to our Form 8-K filed with the SEC on December 21, 2006 and Series D preferred shares attached as Exhibit 3.2 to our Form 8-K filed with the SEC on May 4, 2007 for information regarding our Series B, Series C and Series D preferred shares.

 

We are authorized to issue preferred shares in one or more series, with such designations, preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption, in each case as permitted by Maryland law and determined by our board of trustees. See “Description of Shares of Beneficial Interest” and “Description of Certain Provisions of Maryland Law and EPR’s Declaration of Trust and Bylaws” in the accompanying prospectus.

 

Prior to completing this offering, we will adopt articles supplementary establishing the Series E preferred shares. You may obtain a complete copy of the articles supplementary describing the Series E preferred shares by contacting us. The articles supplementary will initially authorize 3,450,000 Series E preferred shares. Our board of trustees may authorize additional Series E preferred shares from time to time.

 

The transfer agent, registrar and distribution disbursing agent for the Series E preferred shares will be Computershare Trust Company, N.A. Shares will be subject to the transfer restrictions described below in “— Restrictions on Ownership and Transfer” and in “Description of Certain Provisions of Maryland Law and EPR’s Declaration of Trust and Bylaws — Restrictions on Ownership and Transfer of Shares” in the accompanying prospectus.

 

We have filed an application to list the Series E preferred shares on the NYSE. If the application is approved, trading of the Series E preferred shares on the NYSE is expected to begin within 30 days after the date of initial delivery of the Series E preferred shares.

 

We expect that the Series E preferred shares initially will be issued in uncertificated, book-entry form.

 

Ranking

 

The Series E preferred shares will rank, with respect to distribution rights and rights upon our liquidation, dissolution or winding up:

 

 

Distributions

 

Subject to the rights of holders of any senior securities we may authorize and designate in the future, holders of the Series E preferred shares will be entitled to receive, when, as and if authorized by our board of trustees and declared by us, out of funds legally available for the payment of distributions, cumulative cash distributions at the rate of 9.00% of the liquidation preference per year (equivalent to $2.25 per Series E preferred share per year).

 

Distributions on the Series E preferred shares issued in this offering will accrue and be cumulative from and including the date of original issue by us and will be payable quarterly in arrears on the 15th day of each January, April, July and October (except that the first distribution will be paid on July 15, 2008) or, if not a business day, the next business day, referred to in each case as a Distribution Payment Date. The term “business day” means each day, other than a Saturday or a Sunday, which is not a day on which banks in New York are required to close.

 

Distributions payable on the Series E preferred shares for any partial period will be computed on the basis of a 360-day year consisting of twelve 30-day months. We will pay distributions to holders of record as they appear in our share records at the close of business on the applicable record date, which will be the same date set for any quarterly distribution payable to holders of our common shares and Series B, Series C and Series D preferred shares, or on such other date designated by our board of trustees for the payment of distributions that is not more than 30 nor less than 10 days prior to the Distribution Payment Date, each referred to as a Distribution Record Date. A holder’s right to receive distributions upon conversion of Series E preferred shares is limited. For a description of these limitations, see “—Payment of Distributions Upon Conversion.”

 

The first distribution on the Series E preferred shares will be paid on July 15, 2008, and will be a pro rata distribution from and including the original issue date to and including July 15, 2008 in the amount of $0.65 per share.

 

We will not authorize or pay any distributions on the Series E preferred shares or set aside funds for the payment of distributions if restricted or prohibited by law, or if the terms of any of our agreements, including agreements relating to our indebtedness or our other series of preferred shares, prohibit that authorization, payment or setting aside of funds or provide that the authorization, payment or setting aside of funds is a breach of or a default under that agreement. We are, and may in the future become, a party to agreements which restrict or prevent the payment of distributions on, or the purchase of, shares. These restrictions may include indirect covenants which require us to maintain specified levels of net worth or assets. We do not believe that these restrictions currently have any adverse impact on our ability to pay distributions on the Series E preferred shares.

 

Notwithstanding the foregoing, distributions on the Series E preferred shares will be cumulative and will accrue whether or not we have earnings, whether or not there are funds legally available for the payment of distributions and whether or not distributions are authorized or declared. Accrued but unpaid distributions on the Series E preferred shares will accumulate as of the due date on which each such distribution payment first becomes payable. Accrued but unpaid distributions on the Series E preferred shares will not bear interest, and holders of the Series E preferred shares will not be entitled to any distributions, whether payable in cash, property or shares, in excess of full cumulative distributions as described above. All of our distributions on the Series E preferred shares, including any capital gain distributions, will be credited first to the earliest accrued and unpaid distribution due with respect to those shares which remain payable.

 

Unless full cumulative distributions on the Series E preferred shares for all past distribution periods and the then current distribution period have been or contemporaneously are declared and paid in cash or declared and contemporaneously a sum sufficient to pay them in full in cash is set apart for payment, we will not directly or indirectly:

 

 

When we do not pay distributions in full (or we do not set apart a sum sufficient to pay them in full) upon the Series E preferred shares and any other class or series of preferred shares or other equity securities ranking on a parity as to distributions with the Series E preferred shares, we

will declare any distributions upon the Series E preferred shares and any other class or series of preferred shares or other equity securities ranking on a parity as to distributions with the Series E preferred shares proportionately so that the distributions declared per share of Series E preferred shares and those other classes or series of preferred shares or other equity securities will in all cases bear to each other the same ratio that accumulated, accrued and unpaid distributions per share on the Series E preferred shares and those other classes or series of preferred shares or other equity securities (which will not include any accumulation in respect of unpaid distributions on such other classes or series of preferred shares or other equity securities for prior distribution periods if those other classes or series of preferred shares or other equity securities do not have cumulative distributions) bear to each other. No interest, or sum of money in lieu of interest, will be payable in respect of any distribution payment or payments on the Series E preferred shares which may be in arrears.

 

If, for any taxable year, we elect to designate any portion of the distributions, within the meaning of the Code, paid or made available for the year to holders of all classes of our shares of beneficial interest as “capital gain dividends,” as defined in Section 857 of the Code, then the portion of the distributions designated as capital gain dividends that will be allocable to the record holders of our Series E preferred shares will be the portion of the distributions designated as capital gain dividends multiplied by a fraction, the numerator of which will be the total distributions paid or made available to such record holders of our Series E preferred shares for the year and the denominator of which will be the total distributions paid or made available for the year to holders of all classes of our shares of beneficial interest.

 

Liquidation Rights

 

In the event of our voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of the Series E preferred shares will be entitled to be paid out of our assets legally available for distribution to our shareholders, after payment of or provision for our debts and other liabilities, a liquidation preference of $25.00 per share, plus any accrued and unpaid distributions (whether or not authorized or declared) through the date of the payment. The holders of Series E preferred shares will be entitled to receive this liquidating distribution before we distribute any assets to holders of our common shares or any other equity securities that rank junior to the Series E preferred shares as to payments upon our liquidation, dissolution or winding up. If, upon our voluntary or involuntary liquidation, dissolution or winding up, our available assets are insufficient to pay the amount of the liquidation distributions on all outstanding Series E preferred shares and the corresponding amounts payable on all other equity securities ranking on a parity with the Series E preferred shares as to liquidation rights, then the record holders of the Series E preferred shares and all other equity securities ranking on a parity with the Series E preferred shares as to liquidation rights will share proportionately in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. The rights of holders of Series E preferred shares to receive their liquidation preference would be subject to the preferential rights of the holders of any equity securities which are senior to the Series E preferred shares as to liquidation rights.

 

Holders of the Series E preferred shares will be entitled to notice of any event triggering the right to receive a distribution in connection with any voluntary or involuntary liquidation, dissolution or winding up of our affairs. After payment of the full amount of the liquidating distributions to which they are entitled, holders of our Series E preferred shares will have no right or claim to any of our remaining assets. The consolidation or merger of us with or into any other corporation, trust or entity, or the voluntary sale, lease, transfer or conveyance of all or

substantially all of our properties or business, will not be deemed to constitute a liquidation, dissolution or winding up of our affairs. In determining whether a distribution (other than upon voluntary or involuntary liquidation), by redemption or other acquisition of shares or otherwise, is permitted under Maryland law, amounts that would be needed, if we were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of the holders of Series E preferred shares will not be added to our total liabilities.

 

Voting Rights

 

Holders of Series E preferred shares generally will have no voting rights, except as described below.

 

If full cumulative distributions are not paid on the Series E preferred shares for six or more quarterly periods (whether or not consecutive), a preferred distribution default will exist, and holders of the Series E preferred shares, voting together as a class with the holders of all other classes or series of our preferred shares ranking on a parity with the Series E preferred shares upon which like voting rights have been conferred and are exercisable, will be entitled to elect two additional trustees to our board of trustees, referred to as preferred share trustees. The election will take place at the next annual meeting of shareholders, or at a special meeting of the holders of Series E preferred shares and any other class or series of preferred shares upon which like voting rights have been conferred and are exercisable called for that purpose and each subsequent annual meeting (or special meeting held in its place) unless and until all distributions accumulated on the Series E preferred shares and on any other class or series of preferred shares upon which like voting rights have been conferred and are exercisable have been paid in full for all past distribution periods and the distribution for the then current distribution period shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment. Each preferred share trustee will be elected by a plurality of the votes cast in the election to serve until the trustee’s successor is duly elected and qualifies or until the trustee’s right to hold the office terminates, whichever occurs earlier, and will be entitled to one vote on any matter.

 

Upon such election, the size of our board of trustees will be increased by two trustees. So long as a preferred distribution default continues, any vacancy in the office of a preferred distribution trustee elected under this paragraph may be filled by written consent of the other preferred distribution trustee who remains in office or by a vote of the holders of the outstanding Series E preferred shares when they have the voting rights described above (voting together as a class with all other classes or series of preferred shares ranking on a parity with the Series E preferred shares upon which like voting rights have been conferred and are exercisable). If and when all such accumulated distributions shall have been paid in full on the Series E preferred shares and all other classes or series of preferred shares ranking on a parity with the Series E preferred shares upon which like voting rights have been conferred and are exercisable, the voting rights set forth above will terminate (subject to reinstatement in the event of each and every preferred distribution default) the term of office of each of the preferred share trustees so elected will terminate and the size of our board of trustees will be reduced accordingly.

 

In addition, so long as any Series E preferred shares remain outstanding, the affirmative vote or consent of the holders of at least two-thirds of the outstanding Series E preferred shares (voting separately as a class) will be required to:

 

 

Holders of the Series E preferred shares will not have any voting rights with respect to, and the consent of the holders of the Series E preferred shares is not required for, the taking of any corporate action, including any merger or consolidation involving us or a sale of all or substantially all of our assets, regardless of the effect that such merger, consolidation or sale may have upon the powers, preferences, voting power or other rights or privileges of our Series E preferred shares, except as set forth above.

 

In addition, the voting provisions above will not apply if, at or prior to the time when the act with respect to which the vote would otherwise be required would occur, we have converted, repurchased or otherwise reacquired or called for conversion or repurchase upon proper procedures all outstanding Series E preferred shares.

 

In any matter in which the Series E preferred shares are entitled to vote, each Series E preferred share will be entitled to one vote. If the holders of Series E preferred shares and another class or series of preferred shares are entitled to vote together as a single class on any matter, the Series E preferred shares and the shares of the other class or series will have one vote for each $25.00 of liquidation preference.

 

Conversion Rights

 

The holders of the Series E preferred shares, at their option, may, at any time and from time to time, convert some or all of their outstanding Series E preferred shares, by following the procedures described under “Voluntary Conversion Procedures” below, initially at a Conversion Rate of 0.4512 common shares per $25.00 liquidation preference, which is equivalent to an initial conversion price of approximately $55.41 per common share (subject to adjustment in certain events). The Series E preferred shares will be convertible, at our option, into either (1) a number of common shares equal to the applicable Conversion Rate, or (2) an amount of cash and common shares as described under “Conversion Settlement” below. In addition, at any time we may irrevocably waive, in our sole discretion, our right to satisfy our obligation to convert the Series E preferred shares (our “conversion obligation”) solely into our common shares.

 

We may elect not to issue fractional common shares upon the conversion of Series E preferred shares, in which case we will pay the cash value of such fractional shares based upon the Closing Sale Price of our common shares on the Trading Day immediately prior to the Conversion Date or the Company Conversion Option Date, as the case may be (each as defined below).

 

Holders of Series E preferred shares are not entitled to any rights of a common shareholder until such holder of Series E preferred shares has converted its Series E preferred shares or unless we have exercised the Company Conversion Option, and only to the extent the Series E preferred shares are deemed to have been converted into common shares under the articles supplementary establishing the Series E preferred shares.

 

Company Conversion Option

 

On or after April 20, 2013, we may, at our option, convert some or all of the Series E preferred shares into that number of common shares that are issuable at the then applicable Conversion Rate. We refer to this as the Company Conversion Option. We may exercise the Company Conversion Option only if:

 

 

If we convert less than all of the outstanding Series E preferred shares, the transfer agent will select the shares to be converted by lot, on a pro rata basis or in accordance with any other method the transfer agent considers fair and appropriate. We may convert the Series E preferred shares only in a whole number of shares. If a portion of a holder’s Series E preferred shares is selected for partial conversion by us and the holder converts a portion of such Series E preferred shares, the number of Series E preferred shares subject to conversion by us will be reduced by the number of shares that the holder converted.

 

The Closing Sale Price of our common shares on any date means the closing sale price per share (or, if no closing sale price is reported, the average of the bid and asked prices or, if more than

one in either case, the average of the average bid and the average asked prices) on such date as reported by the NYSE or, if our common shares are not reported by the NYSE, in composite transactions for the principal other U.S. national or regional securities exchange on which our common shares are traded. If our common shares are not listed for trading on a U.S. national or regional securities exchange on the relevant date, the Closing Sale Price will be the last quoted bid price for our common shares in the over-the-counter market on the relevant date as reported by the National Quotation Bureau Incorporated or similar organization. If our common shares are not so quoted, the Closing Sale Price will be the average of the mid-point of the last bid and asked prices for our common shares on the relevant date from each of at least three independent nationally recognized investment banking firms selected by us for this purpose.

 

A Trading Day is any day during which trading in our common shares generally occurs, and there is no market disruption event. For purposes of the definition of Trading Day, “market disruption event” means the occurrence or existence during the one-half hour period ending on the scheduled close of trading on the principal U.S. national or regional securities exchange on which our common shares is listed for trading of any material suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the stock exchange or otherwise) in our common shares or in any options contracts or future contracts relating to our common shares.

 

To exercise our Company Conversion Option described above, we must issue a press release for publication on the Dow Jones & Company, Inc., Business Wire or Bloomberg Business News (or, if such organizations are not in existence at the time of issuance of such press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public) prior to the opening of business on the first Trading Day following any date on which the conditions to our exercise of the Company Conversion Option described above are met, announcing such conversion and our form of payment. We will also give notice by mail or by publication (with subsequent prompt notice by mail) to holders of our Series E preferred shares (not more than four Trading Days after the date of the press release) and, if required by the rules and regulations of the SEC, we will file a Current Report on Form 8-K (or make such other filing on an appropriate form as may be permitted by the rules and regulations of the SEC), of our exercise of the Company Conversion Option announcing our intention to convert the Series E preferred shares. The effective date for any Company Conversion Option, referred to as the Company Conversion Option Date, will be the date that is selected by us that is no later than five Trading Days after the date on which we issue such press release.

 

In addition to any information required by applicable law or regulation, the press release and notice of our exercise of the Company Conversion Option will state, as appropriate:

 

Voluntary Conversion Procedures

 

Holders of Series E preferred shares may convert some or all of their shares by surrendering to us at our principal office or at the office of our transfer agent, as may be designated by our board of trustees, the certificate or certificates, if any, for the Series E preferred shares to be converted accompanied by a written notice stating that the holder of Series E preferred shares elects to convert all or a specified whole number of those shares in accordance with the provisions described in this prospectus supplement and the articles supplementary for the Series E preferred shares and specifying the name or names in which the holder of the Series E preferred shares wishes the certificate or certificates, if any, for any common shares to be issued. In case the notice specifies a name or names other than the name of the holder of Series E preferred shares, the notice must be accompanied by payment of all transfer taxes payable upon the issuance of any common shares in that name or names. Other than such transfer taxes, we will pay any documentary, stamp or similar issue or transfer taxes that may be payable in respect of any issuance or delivery of common shares upon conversion of the Series E preferred shares.

 

The voluntary conversion of any Series E preferred share by a holder of such share will be deemed to have been made at the close of business on the date, referred to as the Conversion Date, on which we have received all of the certificates, if any, to be surrendered, the notice relating to the conversion and payment of all required transfer taxes, if any, or the demonstration to our satisfaction that those taxes have been paid. At the close of business on the Conversion Date, the rights of a holder of Series E preferred shares as to the shares being converted will cease except for the right to receive the conversion payment as described under “Conversion Settlement” below, and, if applicable, the person entitled to receive common shares will be treated for all purposes as having become the record holder of those common shares at that time.

 

In addition to the foregoing procedures, if the Series E preferred shares are held in global form, the holder of Series E preferred shares must comply with applicable procedures of The Depository Trust Company or any successor entity (which we collectively refer to as DTC) to convert such holder’s Series E preferred shares.

 

In case any Series E preferred shares are to be converted pursuant to the Company Conversion Option, the right of a holder of Series E preferred shares to voluntarily convert those shares of Series E preferred shares will terminate if we have not received from such holder of Series E preferred shares its conversion notice by 5:00 p.m., New York City time, on the business day immediately preceding the Company Conversion Option Date.

 

If we have elected to repurchase your Series E preferred shares as described under “Description of the Series E Preferred Shares — Special Conversion Right of Series E preferred shares upon a Fundamental Change; Company Repurchase Right”, your conversion rights (other than the Fundamental Change Conversion Right) as a holder of Series E preferred shares with respect to the Series E preferred shares so subject to repurchase will expire if we have not received your conversion notice by 5:00 p.m., New York City time, on the business day immediately preceding the repurchase date, unless we default on the payment of the Fundamental Change Repurchase Price (as defined below), and your Fundamental Change Conversion Right will automatically not be exercisable but instead you will be entitled to receive the Fundamental Change Repurchase Price from us unless you have converted your Series E preferred shares other than by exercise of the Fundamental Change Conversion Right.

 

If more than one share of our Series E preferred shares is surrendered for conversion by the same shareholder at the same time, the number of whole common shares issuable upon conversion of those Series E preferred shares will be computed on the basis of the total number of Series E preferred shares so surrendered.

 

We will at all times reserve and keep available, free from preemptive rights, out of our authorized but unissued shares of beneficial interest, for issuance upon the conversion of Series E preferred shares, a number of our authorized but unissued common shares that will from time to time be sufficient to permit the conversion of all outstanding Series E preferred shares as described above.

 

Conversion Settlement

 

Upon conversion (whether upon a Company Conversion Option or a voluntary conversion by a holder of Series E preferred shares), we will deliver, at our option, either (1) a number of common shares based upon the applicable Conversion Rate, or (2) an amount of cash and common shares as follows:

 

 

The Conversion Value for each Series E preferred share to be converted is an amount equal to the then applicable Conversion Rate multiplied by the average of the Closing Sale Price of our common shares during the Cash Settlement Averaging Period.

 

The Cash Settlement Averaging Period for each Series E preferred share is the 20 consecutive Trading Days (including the last Trading Day of such period), starting on, and including the third Trading Day following the Company Conversion Date or the Conversion Date, as the case may be.

 

At any time, we may irrevocably waive, in our sole discretion, by notice to the holders of the Series E preferred shares, our right to satisfy our conversion obligation solely in common shares pursuant to clause (1) above. We will not be permitted to elect the payment option in clause (1) above if we have made the election to waive our right to do so. If we decide in our sole discretion to irrevocably waive such right, then we will give notice of such waiver by mail or publication (with subsequent prompt notice by mail) to our holders of our Series E preferred shares, and such waiver shall be effective as of the date specified in such notice, or if no date is specified, then as of the date of such notice.

 

If we exercise the Company Conversion Option, then the press release and notice of our exercise of the Company Conversion Option will state the form of payment we elect to deliver upon conversion (unless we have irrevocably elected to waive our right to satisfy our conversion obligation solely in our common shares), as described above under “Company Conversion Option,” and such payment election shall apply to all such Series E preferred shares to be converted pursuant to the such Company Conversion Option.

 

If we receive proper notice of conversion by a holder in accordance with the conversion procedures described under “Voluntary Conversion Procedures” above, then we will notify the relevant holders of Series E Preferred Stock within two scheduled Trading Days following the Conversion Date of the form of payment we elect to deliver upon conversion (unless we have irrevocably elected to waive our right to satisfy our conversion obligation solely in our common shares). We will treat all holders converting on the same Trading Day in the same manner. We will not, however, have any obligation to satisfy our conversion obligation arising on different Trading Days in the same manner. That is, we may elect to choose on one Trading day to settle our conversion obligation solely in common shares pursuant to clause (1) above, and choose on another Trading Day to settle in cash and/or common shares pursuant to clause (2) above.

 

On settlement of our conversion obligation, we will:

 

 

To the extent that we elect to settle our conversion obligation solely in common shares, we will deliver payment as promptly as practicable after the Company Conversion Option Date or the Conversion Date as the case may be (after giving of any requisite notice and surrender of the certificate or certificates, if any, evidencing the shares of the Series E preferred shares to be converted). To the extent that we elect to settle our conversion obligation in cash and/or common shares, we will deliver payment as promptly as practicable following the third Trading Day after the Cash Settlement Averaging Period (after giving of any requisite notice and surrender of the certificate or certificates, if any, evidencing the shares of the Series E preferred shares to be converted). If less than the full number of Series E preferred shares evidenced by the surrendered certificate or certificates are being converted, we will issue a new certificate or certificates, of like tenor, for the number of shares evidenced by the surrendered certificate or certificates, less the number of shares being converted.

 

Before the delivery of any common shares upon conversion of the Series E preferred shares, we will comply with all applicable federal and state laws and regulations. All common shares delivered upon conversion of the Series E preferred shares will upon delivery be duly and validly issued, fully paid and non-assessable, free of all liens and charges and not subject to any preemptive rights.

 

Payment of Distributions Upon Conversion

 

Voluntary Conversion

 

General.  If a holder of Series E preferred shares exercises its conversion rights, upon delivery of the Series E preferred shares for conversion, those Series E preferred shares will cease to cumulate distributions as of the end of the Conversion Date and the holder of those Series E preferred shares will not receive any cash payment representing accrued and unpaid

distributions on the Series E preferred shares, except in those limited circumstances discussed below. Except as provided below, we will make no payment for accrued and unpaid distributions, whether or not in arrears, on Series E preferred shares converted at the election of the holder of Series E preferred shares, or for distributions on the common shares issued upon such conversion.

 

Conversion On or Before Record Date.  If we receive a conversion notice before the close of business on a Distribution Record Date, the holder of Series E preferred shares will not be entitled to receive any portion of the distribution payable on such converted shares on the corresponding Distribution Payment Date.

 

Conversion After Record Date and Prior to Payment Date.  If we receive a conversion notice after the Distribution Record Date but prior to the corresponding Distribution Payment Date, the holder of Series E preferred shares on the record date will receive on that Distribution Payment Date accrued distributions on those Series E preferred shares, notwithstanding the conversion of those Series E preferred shares prior to that Distribution Payment Date, because that holder of Series E preferred shares will have been the holder of record of the Series E preferred shares on the corresponding record date. At the time that such holder of the Series E preferred shares surrenders Series E preferred shares for conversion, however, it must pay to us an amount equal to the distribution that has accrued and that will be paid on the related Distribution Payment Date.

 

Conversion On or After Distribution Payment Date and On or Prior to the Immediately Succeeding Record Date.  If the holder of Series E preferred shares is a holder of Series E preferred shares on a Distribution Record Date and converts such shares of Series E preferred shares into common shares on or after the corresponding Distribution Payment Date, such holder of Series E preferred shares will be entitled to receive the distribution payable on such shares of Series E preferred shares on such Distribution Payment Date, and the holder of Series E preferred shares will not need to include payment of the amount of such distribution upon surrender for conversion of shares of the Series E preferred shares.

 

Fundamental Change Conversion Right.  The provisions described in the three preceding paragraphs do not apply to Series E preferred shares which are converted into common shares pursuant to the Fundamental Change Conversion Right or which are repurchased by us in lieu of such conversion. The rights of the holders of such Series E preferred shares to receive accrued and unpaid distributions are described below under “— Special Conversion Right of Series E preferred shares upon a Fundamental Change; Company Repurchase Right.”

 

Company Conversion Option

 

General.  If we convert Series E preferred shares pursuant to the Company Conversion Option, whether prior to, on, or after the Distribution Record Date for the current period, all unpaid distributions that are in arrears as of the Company Conversion Option Date will be payable to the holders of Series E preferred shares.

 

Conversion After a Payment Date and Prior to the next Record Date.  If we exercise the Company Conversion Option and the Company Conversion Option Date is a date and time that is after the close of business on a Distribution Payment Date and prior to the close of business on the next Distribution Record Date, the holder of Series E preferred shares will not be entitled to receive any portion of the distribution payable for such period on such converted shares on the corresponding Distribution Payment Date.

 

Conversion On or After Record Date and Prior to Payment Date.  If we exercise the Company Conversion Option and the Company Conversion Option Date is a date and time that is on or after the close of business on any Distribution Record Date and prior to the close of business on the corresponding Distribution Payment Date, all distributions, including accrued and unpaid distributions, whether or not in arrears, with respect to the Series E preferred shares called for a conversion on such date, will be payable on such Distribution Payment Date to the holder of Series E preferred shares if the holder of Series E preferred shares is the record holder of such shares on such Distribution Record Date.

 

Conversion Rate Adjustments

 

Subject to and in accordance with the terms of the articles supplementary establishing the Series E preferred shares, we will adjust the Conversion Rate from time to time as follows:

 

(1) If we issue our common shares as a distribution on our common shares to all holders of our common shares, or if we effect a share split or share combination, we will adjust the Conversion Rate based on the following formula:

 

CR¹ = CR_O × OS₁/OS_O

 

Where

 

CR_O = the Conversion Rate in effect immediately prior to the ex-dividend date for such distribution, or the effective date of such share split or share combination;

 

CR₁ = the Conversion Rate in effect immediately on and after the ex-dividend date for such distribution, or the effective date of such share split or share combination;

 

OS₁ = the number of our common shares outstanding immediately after such distribution, or the effective date of such share split or share combination; and

 

OS_O = the number of our common shares outstanding immediately prior to such distribution, or the effective date of such share split or share combination.

 

Any adjustment made pursuant to this paragraph (1) shall become effective at the open of business on (a) the ex-dividend date for such distribution or (b) the date on which such split or combination becomes effective, as applicable. If any distribution described in this paragraph (1) is declared but not so paid or made, the new Conversion Rate shall be readjusted to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

 

(2) If we distribute to all holders of our common shares any rights, warrants or options entitling them, for a period expiring not more than 45 days after the date of issuance of such rights, warrants or options, to subscribe for or purchase our common shares at a price per share that is less than the Closing Sale Price of our common shares on the business day immediately preceding the time of announcement of such distribution, we will adjust the Conversion Rate based on the following formula:

 

CR¹ = CR_O × (OS_O+X)/(OS_O+Y)

 

Where

CR_O = the Conversion Rate in effect immediately prior to the ex-dividend date for such distribution;

 

CR¹ = the Conversion Rate in effect immediately on and after the ex-dividend date for such distribution;

 

OS_O = the number of our common shares outstanding immediately prior to the ex-dividend date for such distribution;

 

X = the total number of our common shares issuable pursuant to such rights, warrants or options; and

 

Y = the number of our common shares equal to the quotient of (A) the aggregate price payable to exercise such rights, warrants or options and (B) the average of the Closing Sale Prices of our common shares for the 10 consecutive Trading Days ending on the business day immediately preceding the date of announcement for the issuance of such rights, warrants or options

 

For purposes of this paragraph (2), in determining whether any rights, warrants or options entitle the holders of our common shares to subscribe for or purchase our common shares at less than the applicable Closing Sale Price of our common shares, and in determining the aggregate exercise or conversion price payable for such common shares, there shall be taken into account any consideration we receive for such rights, warrants or options and any amount payable on exercise or conversion thereof, with the value of such consideration, if other than cash, to be determined by our board of trustees. If any right, warrant or option described in this paragraph (2) is not exercised or converted prior to the expiration of the exercisability or convertibility thereof, we will adjust the new Conversion Rate to the Conversion Rate that would then be in effect if such right, warrant or option had not been so issued.

 

(3) If we distribute shares of our beneficial interest, evidence of indebtedness or other assets or property to all holders of our common shares, excluding:

 

 

then we will adjust the Conversion Rate based on the following formula:

 

CR¹ = CR_O × SP_O/(SP_O — FMV)

 

Where

 

CR_O = the Conversion Rate in effect immediately prior to the ex-dividend date for such distribution;

 

CR¹ = the Conversion Rate in effect immediately on and after the ex-dividend date for such distribution;

SP_O = the average of the Closing Sale Prices of our common shares for the 10 consecutive Trading Days ending on the business day immediately preceding the ex-dividend date for such distribution; and

 

FMV = the fair market value (as determined in good faith by our board of trustees) of such shares of beneficial interest, evidences of indebtedness or other assets or property distributed with respect to each of our outstanding common shares on the earlier of the record date or the ex-dividend date for such distribution.

 

An adjustment made pursuant to the immediately preceding paragraph shall become effective on the ex-dividend date for such distribution.

 

If we distribute to all of our common shareholders beneficial interests of any class or series, or similar equity interests, of or relating to one of our subsidiaries or other business units, which we refer to as a spin-off, we will adjust the Conversion Rate in effect immediately before the tenth Trading Day from and including the effective date of the spin-off based on the following formula:

 

CR¹ = CR_O × (FMV_O+MP_O)/MP_O

 

Where

 

CR_O = the Conversion Rate in effect immediately prior to the tenth Trading Day immediately following, and including, the effective date of the spin-off;

 

CR¹ = the Conversion Rate in effect immediately on and after the tenth Trading Day immediately following, and including, the effective date of the spin-off;

 

FMV_O = the average of the Closing Sale Prices of the beneficial interest or similar equity interest distributed to holders of our common shares applicable to one share of our common shares over the first 10 consecutive Trading Days after the effective date of the spin-off; and

 

MP_O = the average of the Closing Sale Prices of our common shares over the first 10 consecutive Trading Days after the effective date of the spin-off.

 

Any adjustment to the Conversion Rate made pursuant to the immediately preceding paragraph will occur on the tenth consecutive Trading Day from, and including, the effective date of the spin-off; provided that in respect of any conversion within the 10 Trading Days following the effective date of any spin-off, references within this paragraph (3) to 10 Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed between the effective date of such spin-off and the conversion date in determining the applicable Conversion Rate.

 

If any such distribution described in this paragraph (3) is declared but not paid or made, the new Conversion Rate shall be re-adjusted to be the Conversion Rate that would then be in effect if such distribution had not been declared.

 

(4) If we make a cash distribution to all holders of our common shares (excluding any distribution in connection with our liquidation, dissolution or winding up) during any of our quarterly fiscal periods in an aggregate amount that, together with other cash distributions made during such quarterly fiscal period, exceeds the product of $0.84, which we refer to as the reference distribution, multiplied by the number of our common shares outstanding on

the record date for such distribution, we will adjust the Conversion Rate based on the following formula:

 

CR¹ = CR_O × SP_O/(SP_O−C)

 

Where

 

CR_O = the Conversion Rate in effect immediately prior to the ex-dividend date for such distribution;

 

CR₁ = the Conversion Rate in effect immediately after the ex-dividend date for such distribution;

 

SP_O = the average of the Closing Sale Prices of our common shares for the 10 consecutive Trading Days ending on the business day immediately preceding the earlier of the record date or the day prior to the ex-dividend date for such distribution; and

 

C = the amount in cash per share we distribute to holders of our common shares that exceeds the reference distribution.

 

An adjustment to the Conversion Rate made pursuant to this paragraph (4) shall become effective on the ex-dividend date for such distribution. If any distribution described in this paragraph (4) is declared but not so paid or made, the new Conversion Rate shall be re-adjusted to the Conversion Rate that would then be in effect if such distribution had not been declared.

 

The reference distribution is subject to adjustment in a manner inversely proportional to adjustments to the Conversion Rate; provided that no adjustment will be made to the reference distribution amount for any adjustment made to the Conversion Rate under this paragraph (4).

 

Notwithstanding the foregoing, if an adjustment is required to be made under this paragraph (4) as a result of a distribution that is not a quarterly dividend, the reference distribution amount will be deemed to be zero.

 

(5) If we or any of our subsidiaries make a payment in respect of a tender offer or exchange offer for our common shares to the extent that the cash and value of any other consideration included in the payment per share of our common shares exceeds the Closing Sale Price of our common shares on the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender offer or exchange offer, we will adjust the Conversion Rate based on the following formula:

 

CR¹ = CR_O × (AC + (SP₁ × OS₁))/(OS_O × SP₁)

 

Where

 

CR_O = the Conversion Rate in effect on the date immediately following the date such tender or exchange offer expires;

 

CR₁ = the Conversion Rate in effect on the second day immediately following the date such tender or exchange offer expires;

 

AC = the aggregate value of all cash and any other consideration (as determined by our board of trustees) paid or payable for our common shares purchased in such tender or exchange offer;

OS_O = the number of our common shares outstanding immediately prior to the date such tender or exchange offer expires;

 

OS₁ = the number of our common shares outstanding immediately after the date such tender or exchange offer expires (after giving effect to the purchase or exchange of shares pursuant to such tender or exchange offer); and

 

SP₁ = the Closing Sale Price of our common shares for the Trading Day commencing on the Trading Day next succeeding the date such tender or exchange offer expires.

 

If the application of the foregoing formula would result in a decrease in the Conversion Rate, no adjustment to the Conversion Rate will be made.

 

Any adjustment to the conversion rate made pursuant to this paragraph (5) shall become effective on the second day immediately following the date such tender offer or exchange offer expires. If we or one of our subsidiaries is obligated to purchase our common shares pursuant to any such tender or exchange offer but is permanently prevented by applicable law from effecting any such purchase or all such purchases are rescinded, we will re-adjust the new Conversion Rate to be the Conversion Rate that would be in effect if such tender or exchange offer had not been made.

 

If we have in effect a rights plan while any of the Series E preferred shares remain outstanding, holders of the Series E preferred shares will receive, upon a conversion of such shares in respect of which we have elected to deliver our common shares, in addition to such common shares, rights under our shareholder rights agreement unless, prior to conversion, the rights have expired, terminated or been redeemed or unless the rights have separated from our common shares. If the rights provided for in any rights plan that our board of trustees may adopt have separated from the common shares in accordance with the provisions of the applicable shareholder rights agreement so that holders of the Series E preferred shares would not be entitled to receive any rights in respect of our common shares that we elect to deliver upon conversion of the Series E preferred shares, we will adjust the Conversion Rate at the time of separation as if we had distributed to all holders of our capital shares, evidences of indebtedness or other assets or property pursuant to paragraph (3) above, subject to readjustment upon the subsequent expiration, termination or redemption of the rights.

 

Notwithstanding the foregoing, in no event will the Conversion Price be reduced below $0.01, subject to adjustment for share splits and combinations and similar events.

 

We will not make any adjustment to the Conversion Rate if holders of our Series E preferred shares are permitted to participate, on an as-converted basis, in the transactions described above.

 

The Conversion Rate will not be adjusted except as specifically set forth in this subsection entitled “— Conversion Rate Adjustments” and in “— Special Conversion Right of Series E Preferred Shares upon a Fundamental Change; Company Repurchase Right.” Without limiting the foregoing, the conversion rate will not be adjusted for:

 

 

No adjustment in the Conversion Rate pursuant to the numbered paragraphs above will be required unless the adjustment would require an increase or decrease of at least 1% of the Conversion Rate. If the adjustment is not made because the adjustment does not change the Conversion Rate by at least 1%, then the adjustment that is not made will be carried forward and taken into account in any future adjustment. In addition, at the end of each fiscal year, beginning with the fiscal year ending on December 31, 2008, we will give effect to any adjustments that we have otherwise deferred pursuant to this provision, and those adjustments, if any, will no longer be carried forward and taken into account in any subsequent adjustment. All required calculations will be made to the nearest cent or 1/1000th of a share, as the case may be. Notwithstanding the foregoing, if the Series E preferred shares are called for redemption, all adjustments not previously made will be made on the applicable redemption date. If certain of the possible adjustments to the Conversion Price of the common shares of the Series E preferred shares are made (or if failures to make certain adjustments occur), a holder of such shares may be deemed to have received a distribution from us even though such holder has not received any cash or property as a result of such adjustments. We intend to withhold federal income tax (in the case of a non-United States holder) with respect to any deemed distribution from us from cash payments of distributions and any payments in redemption, repurchase or conversion of the shares of the Series E preferred shares. See “Additional U.S. Federal Income Tax Considerations” in this prospectus supplement.

 

In the case of the following events, each of which we refer to as a Business Combination:

 

 

in each case, as a result of which our common shareholders are entitled to receive stock, other securities, other property or assets (including cash or any combination thereof) with respect to or in exchange for our common shares, a holder of Series E preferred shares will be entitled

thereafter to convert such Series E preferred shares into the kind and amount of stock, other securities or other property or assets (including cash or any combination thereof) which a holder of Series E preferred shares would have owned or been entitled to receive upon such Business Combination as if such holder of Series E preferred shares held a number of our common shares equal to the Conversion Rate in effect on the effective date for such Business Combination, multiplied by the number of Series E preferred shares held by such holder of Series E preferred shares, except that, for a Business Combination that also constitutes a Fundamental Change, a holder of Series E preferred shares will not receive the Make-Whole Premium (as defined below) if a holder of Series E preferred shares does not convert its Series E preferred shares in connection with such Fundamental Change. See “— Adjustment to the Conversion Rate upon the Occurrence of a Fundamental Change”. In the event that our common shareholders have the opportunity to elect the form of consideration to be received in such Business Combination, we will make adequate provision whereby the holders of Series E preferred shares shall have a reasonable opportunity to determine the form of consideration into which all of the Series E preferred shares, treated as a single class, shall be convertible from and after the effective date of such Business Combination. Such determination shall be based on the weighted average of elections made by the holders of Series E preferred shares who participate in such determination, shall be subject to any limitations to which all of our common shareholders are subject, such as pro rata reductions applicable to any portion of the consideration payable in such Business Combination, and shall be conducted in such a manner as to be completed by the date which is the earliest of (1) the deadline for elections to be made by our common shareholders, and (2) two business days prior to the anticipated effective date of the Business Combination.

 

We will provide notice of the opportunity to determine the form of such consideration, as well as notice of the determination made by the holders of our Series E preferred shares (and the weighted average of elections), by posting such notice with DTC and providing a copy of such notice to the transfer agent. If the effective date of a Business Combination is delayed beyond the initially anticipated effective date, holders of Series E preferred shares will be given the opportunity to make subsequent similar determinations in regard to such delayed effective date. We may not become a party to any such transaction unless its terms are consistent with the foregoing. None of the foregoing provisions shall affect the rights of the holders of Series E preferred shares to convert Series E preferred shares into our common shares prior to the effective date.

 

To the extent permitted by law, we may, from time to time, increase the Conversion Rate by any amount for a period of at least 20 days or any longer period required by law, so long as the increase is irrevocable during that period and our board of trustees determines that the increase is in our best interests. Such a determination by our board of trustees shall be conclusive. We will mail a notice of the increase to holders at least 15 business days before the day the increase commences. In addition, we may also increase the Conversion Rate as we determine to be advisable in order to avoid taxes to recipients of certain distributions.

 

Except as described above in this section, we will not adjust the Conversion Rate for any issuance of our common shares or any securities convertible into or exchangeable or exercisable for our common shares or rights to purchase our common shares or such convertible, exchangeable or exercisable securities.

 

Adjustment to the Conversion Rate upon the Occurrence of a Fundamental Change

 

If, on or prior to April 20, 2018, a Fundamental Change takes place (See ‘‘— Special Conversion Right of Series E Preferred Shares upon a Fundamental Change; Company Repurchase Right”), and a holder converts the Series E preferred shares in connection with such Fundamental Change, we will increase, as described below under “— The Increase in the Conversion Rate”, the Conversion Rate applicable to shares that are surrendered for conversion. A conversion of the Series E preferred shares will be deemed for these purposes to be “in connection with” a Fundamental Change if the notice of conversion of the Series E preferred shares is received by the conversion agent from and including the effective date of such Fundamental Change to, and including, the Fundamental Change Conversion Date (as defined below under “— Special Conversion Right of Series E Preferred Shares upon a Fundamental Change; Company Repurchase Right) for that Fundamental Change.

 

We will also give notice by mail or by publication (with subsequent prompt notice by mail) to holders of our Series E preferred shares of the anticipated effective date of any proposed Fundamental Change which will occur on or prior to April 20, 2018. We must make this mailing or publication at least 15 days before the anticipated effective date of the Fundamental Change. In addition, no later than the third business day after the completion of such Fundamental Change, we must make an additional notice announcing such completion.

 

If a holder surrenders Series E preferred shares for conversion in connection with such Fundamental Change we have announced, but such Fundamental Change is not consummated, then the holder will not be entitled to the increased Conversion Rate referred to above in connection with the conversion.

 

The Increase in the Conversion Rate

 

If a holder elects to convert in connection with a Fundamental Change on or prior to April 20, 2018, we will increase the Conversion Rate by reference to the table below, based on the date when the Fundamental Change becomes effective, which we refer to as the effective date, and the applicable price. If the Fundamental Change is a transaction or series of related transactions and the consideration (excluding cash payments for fractional shares or pursuant to statutory appraisal rights) for our common shares in the Fundamental Change consists solely of cash, then the applicable price will be the cash amount paid per share of our common shares in the transaction. If the transaction is an asset sale and the consideration paid for our property and assets (or for the property and assets of us and our subsidiaries on a consolidated basis) consists solely of cash, then the applicable price will be the cash amount paid for our property and assets, expressed as an amount per share of our common shares outstanding on the effective date of the asset sale. In all other cases, the applicable price will be the average of the Closing Sale Price of our common shares for the ten consecutive Trading Days immediately preceding the effective date. Our board of trustees will make appropriate adjustments, in its good faith determination, to account for any adjustment to the Conversion Rate that becomes effective, or any event requiring an adjustment to the Conversion Rate where the ex-dividend date of the event occurs, at any time during those ten consecutive Trading Days.

 

The following table sets forth the number of additional common shares per $25.00 liquidation preference per Series E preferred share that will be added to the Conversion Rate applicable to Series E preferred shares that are converted in connection with a Fundamental Change, which

we refer to as the Make-Whole Premium. If an event occurs that requires an adjustment to the Conversion Rate, we will, on the date we must adjust the Conversion Rate, adjust each applicable price set forth in the first column of the table below by multiplying the applicable price in effect immediately before the adjustment by a fraction:

 

 

In addition, we will adjust the number of additional shares in the table below in the same manner in which, and for the same events for which, we must adjust the Conversion Rate as described under “— Conversion Rate Adjustments.”

 

Number of Additional Common Shares Issuable

per $25.00 Liquidation Preference

 

 

The exact applicable price and effective date may not be as set forth in the table above, in which case:

 

However, we will not increase the Conversion Rate as described above to the extent the increase will cause the Conversion Rate to exceed 0.5188. We will adjust this maximum Conversion Rate in the same manner in which, and for the same events for which, we must adjust the Conversion Rate as described under ‘‘— Conversion Rate Adjustments.”

 

Our obligation to satisfy the additional share requirement could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness of economic remedies.

 

Special Conversion Right of Series E preferred shares upon a Fundamental Change; Company Repurchase Right

 

In the event of a Fundamental Change described below, when the applicable price of our common shares described under “— The Increase in the Conversion Rate” is less than $48.18 per share, then each holder of Series E preferred shares will have the special right, referred to as the Fundamental Change Conversion Right, in addition to any other applicable conversion right, to convert some or all of its Series E preferred shares on the relevant Fundamental Change Conversion Date into a number of our common shares per $25.00 liquidation preference equal to such liquidation preference plus accrued and unpaid distributions to, but not including, such Fundamental Change Conversion Date divided by 98% of the Market Price of our common shares, referred to as the Fundamental Change Conversion Rate. The Market Price of our common shares will be determined prior to the applicable Fundamental Change Conversion Date. The determination of the Market Price is described below under ‘‘— Determination of Market Price”. A holder of Series E preferred shares which has elected to convert such shares otherwise than pursuant to the Fundamental Change Conversion Right will not be able to exercise the Fundamental Change Conversion Right.

 

If a holder of Series E preferred shares elects to convert Series E preferred shares as described in the preceding paragraph, we may elect, in lieu of that conversion, to repurchase for cash some or all of such Series E preferred shares at a repurchase price equal to 100% of the liquidation preference of the Series E preferred shares to be repurchased plus accrued and unpaid distributions to, but not including, such Fundamental Change Conversion Date, referred to as the Fundamental Change Repurchase Price; provided that if the relevant Fundamental Change Conversion Date is on a date that is after a Distribution Record Date and on or prior to the corresponding Distribution Payment Date, we will pay such distributions to the holder of record on the corresponding Distribution Record Date, which may or may not be the same person to whom we will pay the Fundamental Change Repurchase Price, and the Fundamental Change Repurchase Price will be equal to 100% of the liquidation preference of the Series E preferred shares to be repurchased.

 

In the event we elect to repurchase Series E preferred shares that would otherwise be converted into common shares on a Fundamental Change Conversion Date, such Series E preferred shares shall not be converted into common shares and the holder of such shares will be entitled to receive the Fundamental Change Repurchase Price in cash from us.

 

Subject to the next sentence, the aggregate number of our common shares issuable in connection with the exercise of the Fundamental Change Conversion Right may not exceed 2,223,804 shares (or if the underwriters’ over-allotment option is exercised, 2,557,375 shares) or such other number of common shares as shall then be authorized and available for issuance. If the number of common shares issuable upon such conversion would exceed 2,223,804 shares (or

if the underwriters’ over-allotment option is exercised, 2,557,375 shares) or such other number of common shares as shall then be authorized and available for issuance, we will have the option to satisfy the remainder of such conversion in common shares that are authorized for issuance in the future. We will use our best efforts to have any such additional number of common shares authorized for issuance within 180 days of the Fundamental Change Conversion Date.

 

Within 15 days after the occurrence of a Fundamental Change, we will provide to the holder of Series E preferred shares and the transfer agent a notice of the occurrence of the Fundamental Change and of the resulting repurchase right. Such notice will state:

 

 

We will also issue a press release for publication on the Dow Jones & Company, Inc., Business Wire or Bloomberg Business News (or, if such organizations are not in existence at the time of issuance of such press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public) prior to the opening of business on the first Trading Day following any date on which we provide such notice to the holders of Series E preferred shares.

 

The Fundamental Change Conversion Date will be a date no less than 20 days nor more than 35 days after the date on which we give the above notice. To exercise the Fundamental Change Conversion Right, the holder of Series E preferred shares must deliver, on or before the close of

business on the Fundamental Change Conversion Date, the Series E preferred shares to be converted, duly endorsed for transfer, together with a written conversion notice completed, to our transfer agent. The conversion notice will state:

 

 

If the Series E preferred shares are held in global form, the conversion notice must comply with applicable DTC procedures.

 

Holders of Series E preferred shares may withdraw any notice of exercise of its Fundamental Change Conversion Right (in whole or in part) by a written notice of withdrawal delivered to our transfer agent prior to the close of business on the business day prior to the Fundamental Change Conversion Date. The notice of withdrawal shall state:

 

 

If the Series E preferred shares are held in global form, the notice of withdrawal must comply with applicable DTC procedures.

 

Series E preferred shares as to which the Fundamental Change Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn will be converted into common shares in accordance with the Fundamental Change Conversion Right on the Fundamental Change Conversion Date, unless we have elected to repurchase such Series E preferred shares.

 

The holder of any Series E preferred share which we have elected to repurchase and as to which the conversion election has not been properly withdrawn will receive payment of the Fundamental Change Repurchase Price promptly following the later of the Fundamental Change Conversion Date or the time of book-entry transfer or delivery of the Series E preferred shares. If the paying agent holds cash sufficient to pay the Fundamental Change Repurchase Price of the Series E preferred shares on the business day following the Fundamental Change Conversion Date, then:

 

 

A Fundamental Change generally will be deemed to occur upon the occurrence of a “change in control” or a “termination of trading”.

 

A “change in control” generally will be deemed to occur at such time as:

 

 

 

 

Notwithstanding the foregoing, a transaction described in the second and third bullet points above will not constitute a change in control if at least 90% of the consideration (other than cash payments for fractional shares or pursuant to statutory appraisal rights) in such transaction consists of common shares and any associated rights traded on a U.S. national securities exchange (or which will be so traded when issued or exchanged in connection with such transaction).

 

A “termination of trading” is deemed to occur if our common shares (or other common shares into which the Series E preferred shares are then convertible) are neither listed for trading on a United States national securities exchange nor approved for trading on an established automated over-the-counter trading market in the United States.

 

There is no precise, established definition of the phrase “all or substantially all” under applicable law. Accordingly, there may be uncertainty as to whether a sale, transfer, lease, conveyance or other disposition of less than all of our property or assets, or of less than all of the property or assets of us and our subsidiaries on a consolidated basis, would permit a holder to exercise the Fundamental Change Conversion Right above.

 

In connection with a Fundamental Change repurchase, we will comply with all U.S. federal and state securities laws in connection with any offer by us to repurchase the Series E preferred shares upon a Fundamental Change.

 

This Fundamental Change conversion and repurchase feature may make more difficult or discourage a party from taking over our company and removing incumbent management. We are not aware, however, of any specific effort to accumulate our shares of beneficial interest with the intent to obtain control of our company by means of a merger, tender offer, solicitation or otherwise. In addition, the Fundamental Change repurchase feature is not part of a plan by management to adopt a series of anti-takeover provisions. Instead, the Fundamental Change conversion and repurchase feature is a result of negotiations between us and the underwriters.

 

We could, in the future, enter into certain transactions, including recapitalizations that would not constitute a Fundamental Change but would increase the amount of debt outstanding or otherwise adversely affect the holders of Series E preferred shares. The incurrence of significant amounts of additional debt could adversely affect our ability to service our debt, and to permit us to elect to repurchase the Series E preferred shares upon a Fundamental Change.

 

If a Fundamental Change were to occur, we may not have enough funds to pay the Fundamental Change Repurchase Price. In addition, we may in the future incur indebtedness with similar change in control provisions permitting the holders thereof to accelerate or to require us to purchase such indebtedness upon the occurrence of similar events or on some specific dates. Our option to make a repurchase upon a Fundamental Change may be exercised by a third party that effects the payment of the Fundamental Change Repurchase Price in the manner, at the times and otherwise in compliance in all material respects with the requirements hereof and purchases all Series E preferred shares as to which the Fundamental Change Conversion Right was properly exercised and not withdrawn and which we elected to repurchase and otherwise complies with the obligations in connection therewith.

 

Determination of Market Price

 

Market Price means, with respect to any Fundamental Change Conversion Date, the average of the Closing Sale Prices of our common shares for the ten consecutive Trading Days ending on the third Trading Day prior to the Fundamental Change Conversion Date, appropriately adjusted to take into account the occurrence, during the period commencing on the first Trading Day of such ten Trading Day period and ending on the Fundamental Change Conversion Date of any event requiring an adjustment of the Conversion Rate as described under “— Conversion Rate Adjustments”; provided that in no event shall the Market Price be less than $0.01, subject to adjustment for share splits and combinations, reclassifications and similar events.

 

Because the Market Price of our common shares is determined prior to the Fundamental Change Conversion Date, you will bear the market risk with respect to the value of our common shares, if any, to be received from the date as of which the Market Price is determined to the date on which you receive such shares. In addition, the Market Price of our common shares is an average price rather than the price as of a single date.

 

No Maturity; Redemption

 

The Series E preferred shares have no maturity date and will not be subject to any sinking fund. We are not required to redeem or repurchase the Series E preferred shares, and, except in certain circumstances described above under “— Special Conversion Right of Series E Preferred Shares upon a Fundamental Change; Company Repurchase Right”, we may not repurchase or redeem Series E preferred shares except to the extent necessary to preserve the company’s qualification as a real estate investment trust. Accordingly, the Series E preferred shares will remain outstanding indefinitely unless Series E preferred shareholders or we decide to convert them or we decide to purchase them in connection with a Fundamental Change. See “— Conversion Rights”, “— Company Conversion Option” and “— Special Conversion Right of Series E Preferred Shares upon a Fundamental Change; Company Repurchase Right”.

 

Subject to applicable law, we may purchase Series E preferred shares in the open market, by tender or by private agreement. Any Series E preferred shares that we reacquire will be returned to the status of authorized but unissued Series E preferred shares, unless determined otherwise by our board of trustees.

 

Restrictions on Ownership and Transfer

 

Our Declaration of Trust restricts the number of shares which may be owned by shareholders. Generally, for us to qualify as a REIT under the Code, not more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals (defined in the Code to include certain entities and constructive ownership among specified family members) at any time during the last half of a taxable year. The shares must also be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or a proportionate part of a shorter taxable year. In order to maintain our qualification as a REIT, our Declaration of Trust contains restrictions on the acquisition of shares intended to ensure compliance with these requirements.

 

Our Declaration of Trust generally provides that any person (not just individuals) holding more than 9.8% in number of shares or value, of the outstanding shares of any class or series of our common shares or preferred shares (the “Ownership Limit”) may be subject to forfeiture of the shares (including common shares and preferred shares) owned in excess of the Ownership Limit (“Excess Shares”). The Excess Shares may be transferred to a trust for the benefit of one or more charitable beneficiaries. The trustee of that trust would have the right to vote the voting Excess Shares, and distributions on the Excess Shares would be payable to the trustee for the benefit of the charitable beneficiaries. Holders of Excess Shares would be entitled to compensation for their Excess Shares, but that compensation may be less than the price they paid for the Excess Shares. Persons who hold Excess Shares or who intend to acquire Excess Shares must provide written notice to us.

 

Our Ownership Limit may also act to deter an unfriendly takeover of the Company.

 

The Series E preferred shares will be subject to provisions of our Declaration of Trust, including the articles supplementary for the Series E preferred shares, under which any Series E preferred shares owned by a shareholder in excess of the Ownership Limit, will automatically be designated Excess Shares and transferred to a trust for the exclusive benefit of a charitable beneficiary which we will designate. Owners of Excess Shares are entitled to compensation for their Excess Shares in accordance with the terms of our Declaration of Trust, but such compensation may be less than the amount they paid for those Excess Shares.

 

The articles supplementary for the Series E preferred shares and our Declaration of Trust contain provisions that allow our board of trustees to waive this ownership limit, subject to certain conditions.

 

Form and Book-Entry System

 

The Series E preferred shares will initially be issued and maintained in the form of global securities held in book-entry form. DTC or its nominee will be the sole registered holder of the Series E preferred shares. Owners of beneficial interests in the Series E preferred shares represented by the global securities will hold their interests pursuant to the procedures and practices of DTC. As a result, beneficial interests in any such securities will be shown on, and transfers will be effected only through, records maintained by DTC and its direct and indirect participants and any such interest may not be exchanged for certificated securities, except in limited circumstances. Owners of beneficial interests must exercise any rights in respect of other interests, including any right to convert or require repurchase of their interests in the Series E preferred shares, in accordance with the procedures and practices of DTC. Owners of such beneficial interests will not be holders and will not be entitled to any rights provided to the holders of the Series E preferred shares under the global securities or the articles supplementary. We and any of our agents may treat DTC as the sole holder and registered owner of the global securities.

 

Any holder of Series E preferred shares will have the right to request a certificate therefor and upon such request made in writing to the Transfer Agent and Registrar for the Series E preferred Shares, we will cause to be issued a duly executed certificate for such Series E preferred shares registered in the name in which the Series E preferred shares were held in book-entry form or such other name(s) as specified by the holder in writing. In addition, the Series E preferred shares, represented by one or more global securities, will be exchangeable for certificated securities with the same terms if:

 

 

DTC has advised us as follows: DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Uniformed Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC facilitates the settlement of transactions amongst participants through electronic computerized book-entry changes in participants’ accounts, eliminating the need for physical movement of securities certificates. DTC’s participants include securities brokers and dealers, including the underwriters, banks, trust companies, clearing corporations and other organizations, some of whom and/or their representatives own DTC. Access to DTC’s book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly.

 

Please read the prospectus under the heading “U.S. Federal Income Tax Considerations” on page 32 of the accompanying prospectus for additional U.S. federal income tax considerations that apply to this offering.

 

The following summary describes certain material U.S. federal income tax consequences relating to the acquisition, ownership and disposition of the Series E preferred shares. This summary supplements and updates the more detailed description of these matters in the “U.S. Federal Income Tax Considerations” section of the accompanying prospectus. Stinson Morrison Hecker LLP will render a legal opinion that the discussions in this section and in the “U.S. Federal Income Tax Considerations” section of the accompanying prospectus are accurate in all material respects and, taken together, fairly summarize the federal income tax consequences discussed in those sections. Specifically, subject to qualifications and assumptions contained in its opinion, Stinson Morrison Hecker LLP will give opinions to the effect that we have been organized and have qualified as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), for our 1997 taxable year through the date hereof, and that our actual operation through the date hereof and current investments and proposed plan of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the Code. Investors should be aware, however, that opinions of counsel are not binding upon the Internal Revenue Service or any court.

 

In providing its opinion, Stinson Morrison Hecker LLP is relying, without independent investigation, as to certain factual matters upon the statements and representations contained in an officer’s certificate provided by the Company.

 

This summary is based on current law and does not address all aspects of taxation that may be relevant to particular shareholders in light of their personal investment or tax circumstances, or to certain types of shareholders (including, without limitation, dealers or traders in securities, insurance companies, financial institutions, partnerships, broker-dealers, and shareholders that hold our shares as part of a hedge, straddle, conversion transaction or other arrangement) subject to special treatment under U.S. federal income tax laws.

 

It should be noted that the current tax rates referenced in this discussion are set to expire at the end of 2010. Absent legislative action, the maximum capital gains federal income tax rate for U.S. Shareholders who are individuals will revert to 20% at that time and the maximum ordinary income tax rate will revert to 39.6%.

 

You should consult your own tax advisor regarding the specific tax consequences of the purchase, ownership and sale or conversion of the Series E preferred shares.

 

Taxation of the Company

 

As a REIT, the Company generally will not have to pay Federal corporate income taxes on its net income that it currently distributes to shareholders. This treatment substantially eliminates the “double taxation” at the corporate and shareholder levels that generally results from investment in a regular corporation, subject to general exceptions that result in corporate level tax. See “U.S. Federal Income Tax Consequences — Taxation of the Company — General” in the prospectus. In order to maintain its status as a REIT, the Company must meet certain asset and income tests. See “U.S. Federal Income Tax Consequences — Taxation of the Company — Requirements for Qualification” in the prospectus.

 

Foreign investments

 

We and our subsidiaries may hold investments in, and pay taxes to, foreign countries. Taxes we pay in foreign jurisdictions may not be passed through to, or used by, our U.S. Shareholders as a foreign tax credit or otherwise. However, such taxes would create a tax deduction which would reduce REIT taxable income. Our foreign investments might also generate foreign currency gains and losses. According to recent guidance provided by the IRS, to the extent that a REIT incurs foreign currency gain which is attributable to income recognized by a REIT that is qualifying income under the 95% and 75% income tests, then the foreign currency gain is also qualifying income under the 95% and 75% income tests. No assurance can be given that foreign currency gains that we recognize directly or through pass-through subsidiaries will be qualifying income under the 95% or 75% income tests. Furthermore, no assurance can be given that a combination of non-qualifying income, such as certain foreign currency gains, personal property rents, and other non-qualifying income, will not adversely affect our ability to satisfy the REIT qualification requirements.

 

Taxation of shareholders

 

Taxation of taxable domestic shareholders

 

As used herein, the term “U.S. Shareholder” means a holder of Series E preferred shares who (for U.S. federal income tax purposes) (i) is a citizen or resident of the United States, (ii) is a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof (except, in the case of a partnership, the Treasury provides otherwise by regulations), (iii) is an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) is a trust whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust, or has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

 

As long as EPR qualifies as a REIT, we generally will not be subject to federal income tax on our net income distributed to our shareholders. As long as EPR qualifies as a REIT, distributions made out of our current or accumulated earnings and profits (and not designated as capital gain distributions) will generally constitute dividends taxable to our taxable corporate U.S. Shareholders as ordinary income taxed at a maximum rate of 35% and such U.S. Shareholders will not be eligible for the dividends received deduction otherwise available with respect to distributions received by corporate U.S. Shareholders. Because we are a REIT for federal income tax purposes, ordinary dividend income paid to individual U.S. Shareholders generally will not constitute “qualified dividend income” eligible for the current reduced tax rate of 15%. Dividends received from a REIT generally are treated as “qualified dividend income” eligible for the reduced tax rate only to the extent that the REIT has received “qualified dividend income” from other non-REIT corporations, such as taxable REIT subsidiaries. In addition, if a REIT pays U.S. federal income tax on its undistributed net taxable income or on certain gains from the disposition of assets acquired from C corporations, the excess of the income subject to tax over the taxes paid will be treated as “qualified dividend income” in the subsequent taxable year.

 

Distributions made by us that are properly designated as capital gain dividends will be taxable to U.S. Shareholders as gains (to the extent they do not exceed our actual net capital gain for the taxable year) from the sale or disposition of a capital asset. Depending on the period of time we held the assets which produced the gains, and on certain designations, if any, which

may be made by us, such gains may be taxable to noncorporate U.S. Shareholders at a 15% or 25% rate (through 2010 under current law), without regard to the period for which the U.S. Shareholder has held the Series E preferred shares. U.S. Shareholders that are corporations may, however, be required to treat up to 20% of certain capital gain dividends as ordinary income. To the extent we make distributions (not designated as capital gain dividends) in excess of our current and accumulated earnings and profits, such distributions will be treated first as a tax-free return of capital to each U.S. Shareholder, reducing the adjusted basis which such U.S. Shareholder has in his Series E preferred shares for tax purposes by the amount of such distribution (but not below zero). Distributions in excess of a U.S. Shareholder’s adjusted basis in his shares will be taxable as capital gain (provided that the shares have been held as a capital asset) and will be taxable as long-term capital gain if the Series E preferred shares have been held for more than one year. Dividends declared by us in October, November or December of any year and payable to a shareholder of record on a specified date in any such month shall be treated as both paid by us and received by the shareholder on December 31st of that year; provided the dividend is actually paid by us on or before January 31st of the following calendar year. Shareholders may not include in their own income tax returns any net operating losses or capital losses of EPR.

 

Distributions made by us and gain arising from the sale or exchange by a U.S. Shareholder of shares will not be treated as passive activity income, and, as a result, U.S. Shareholders generally will not be able to apply any “passive losses” against such income or gain. Distributions made by us (to the extent they do not constitute a return of capital) generally will be treated as investment income for purposes of computing the investment interest limitation. Gain arising from the sale or other disposition of Series E preferred shares and certain qualifying distributions (or distributions treated as such), will not be treated as investment income under certain circumstances.

 

Redemption of Series E preferred shares

 

Redemption of Series E preferred shares for cash will be treated under Section 302 of the Code as a dividend taxable as a distribution (to the extent of our current and accumulated earnings and profits) unless the redemption satisfies one of the tests set forth in Section 302(b) of the Code and is therefore treated as a sale or exchange of the redeemable shares. A redemption characterized as a dividend distribution would not be eligible for the dividends received deduction for corporate shareholders. The redemption will be treated as a sale or exchange if it (i) is “substantially disproportionate” with respect to you, (ii) results in a “complete termination” of your share interest in EPR, or (iii) is “not essentially equivalent to a dividend” with respect to you, all within the meaning of Section 302(b) of the Code. In determining whether any of these tests have been met, common shares considered to be owned by you by reason of certain constructive ownership rules set forth in the Code, as well as common shares actually owned by you, must generally be taken into account. If you do not own (actually or constructively) any common shares of EPR, or an insubstantial percentage of our outstanding common shares, a redemption of your Series E preferred shares is likely to qualify for sale or exchange treatment because the redemption would not be “essentially equivalent to a dividend.” However, because the determination as to whether any of the alternative tests of Section 302(b) of the Code will be satisfied with respect to your Series E preferred shares depends upon the facts and circumstances at the time the determination must be made, you are advised to consult your own tax advisor to determine such tax treatment.

 

If a redemption of Series E preferred shares is treated as a sale or exchange to you, it will be treated as a taxable sale or exchange of the shares. As a result, you will recognize gain or loss for federal income tax purposes in an amount equal to the difference between (i) the amount of cash and the fair market value of any property received (less any portion thereof attributable to accumulated and declared but unpaid dividends, which will be taxable as a dividend to the extent of our current and accumulated earnings and profits), and (ii) your adjusted basis in the Series E preferred shares for tax purposes. Such gain or loss will be capital gain or loss if the Series E preferred shares have been held as a capital asset, and will be long-term gain or loss if the Series E preferred shares have been held for more than one year. The deductibility of capital losses are subject to limitations. If a redemption of Series E preferred shares is treated as a distribution taxable as a dividend, the amount of the dividend will be measured by the amount of cash and the fair market value of any property received by you and your adjusted basis in the redeemable Series E preferred shares will be transferred to your remaining shares in EPR. If you do not own any of our other shares, such basis may, under certain circumstances, be transferred to a related person or it may be lost entirely.

 

Disposition of Series E preferred shares

 

If you are a U.S. Shareholder (as defined below) and you sell or dispose of your Series E preferred shares, you will recognize gain or loss for federal income tax purposes in an amount equal to the difference between the amount of cash and the fair market value of any property you receive on the sale or other disposition and your adjusted basis in the Series E preferred shares for tax purposes. This gain or loss will be capital gain or loss if you have held the Series E preferred shares as a capital asset and, if you are a U.S. Shareholder, will be long-term capital gain or loss if you have held the Series E preferred shares for more than one year at the time of disposition. Long term capital gains of an individual U.S. Shareholder are generally taxed at preferential rates.

 

In general, if you are a U.S. Shareholder and you recognize loss upon the sale or other disposition of Series E preferred shares that you have held for six months or less, after applying the holding period rules set forth in the Code, the loss you recognize will be treated as a long-term capital loss to the extent you received distributions from us which were required to be treated as long-term capital gains.

 

Capital losses recognized by a U.S. Shareholder upon disposition of our Series E preferred shares that were held more than one year at the time of disposition will be considered long term capital losses and are generally available only to offset capital gain income of the U.S. Shareholder but not ordinary income (except in the case of individuals who may apply up to $3,000 per year of the excess, if any, of capital losses over capital gains to offset ordinary income).

 

Conversion of Series E preferred shares

 

If you receive a number of our common shares as a result of a conversion or repurchase of our Series E preferred shares, then the transaction will be treated as a recapitalization. As such, you would recognize income or gain only to the extent of the lesser of (1) the excess, if any, of the value of the cash and common shares you receive over your adjusted tax basis in your Series E preferred shares surrendered or (2) the cash you receive. Any cash you receive, up to the amount of income or gain recognized, would generally be characterized as a dividend to the extent that a surrender of your Series E preferred shares to us for cash only would be taxable as a dividend,

taking into account your continuing actual or constructive ownership interest in our shares, if any, as discussed above, and the balance of the recognized amount, if any, will be gain. Your basis in your common shares received would be equal to your basis for your Series E preferred shares surrendered, less any cash received, plus any income or gain recognized. Your holding period in your common shares received would be the same as your holding period for the Series E preferred shares surrendered. Non-U.S. shareholders may not be eligible for the foregoing partial nonrecognition rules and may instead be subject to special rules discussed below.

 

Under Section 305 of the Code, convertible preferred stock that may be redeemed at a premium (that is, a price higher than its issue price) may have this “redemption premium” treated as a constructive distribution.

 

Under applicable Treasury Regulations, constructive distribution treatment is required in the case of callable preferred stock only if, based on all of the facts and circumstances as of the issue date, redemption pursuant to this call right is more likely than not to occur. Even if this redemption is more likely than not to occur, constructive distribution treatment is not required if the redemption premium is solely in the nature of a penalty for premature redemption, i.e., it is a premium paid as a result of changes in economic conditions over which neither we nor you have control. The Treasury Regulations also provide a safe harbor pursuant to which an issuer’s right to redeem will not be treated as more likely than not to occur. While there can be no assurance in this regard, we believe that constructive distribution treatment on the Series E preferred shares will not be required.

 

You generally will not recognize any income, gain or loss upon conversion of Series E preferred shares into common shares except with respect to cash, if any, you receive in lieu of a fractional common share. Your income tax basis in the common shares you receive on the conversion generally will be the same as your adjusted tax basis in the Series E preferred shares just prior to the time of conversion, reduced by any basis allocable to any fractional share. Your holding period for the common shares you receive will generally include the holding period of the Series E preferred shares converted. Any cash you receive in lieu of a fractional common share upon conversion will be treated as a payment in exchange for the fractional common share. Accordingly, your receipt of cash in lieu of a fractional share generally will result in capital gain or loss, measured by the difference between the cash you receive for the fractional share and your adjusted tax basis attributable to the fractional share. Non-U.S. shareholders may not be eligible for the foregoing rules and may instead be subject to special rules discussed below.

 

Your rights to convert your Series E preferred shares into common shares allow for the conversion price to be adjusted under a number of circumstances, generally to ensure that you receive an economically equivalent number of shares from a conversion following stock splits and stock dividends of our common shares, and also following certain cash distributions on common shares in excess of threshold amounts. Section 305 of the Code treats some of these adjustments as constructive taxable distributions. In general, you would be deemed to receive a constructive distribution if the conversion price is adjusted for a taxable distribution to the holders of common shares. Constructive distributions so treated would be taxable first as dividends to the extent paid out of our allocable current or accumulated earnings and profits, next as a nontaxable return of capital to the extent of your basis in your Series E preferred shares, and finally as gain from the sale or exchange of your Series E preferred shares. Your adjusted tax basis in your Series E preferred shares would be increased by constructive distributions to you taxable as dividends or gain, and would be unaffected by constructive distributions

that were nontaxable returns of capital. Conversely, a failure to appropriately adjust the conversion price of your Series E preferred shares could result in a constructive distribution to holders of common shares that would be taxable to them in a similar manner.

 

As more fully explained in the section “Taxation of Non-U.S. Shareholders” below, nonrecognition treatment may not apply at all, and a non-U.S. shareholder may be subject to federal income tax, increased United States tax filing requirements, and possibly a branch profits tax, in respect of all the gain realized on the sale, repurchase or conversion of our Series E preferred shares, if those shares constitute United States real property interests under Section 897 of the Code and related Treasury regulations. The Series E preferred shares will not constitute such United States real property interests if we are a “domestically controlled REIT”. A domestically controlled REIT is a REIT in which at all times during the preceding five-year period less than 50% in value of its shares is held directly or indirectly by foreign persons. We believe that we are and will be a domestically controlled REIT and thus a non-U.S. shareholder’s gain on sale, repurchase or conversion of our Series E preferred shares will not be subject to United States federal income taxation. However, because our shares are publicly traded, we can provide no assurance that we will be a domestically controlled REIT. If we are not a domestically controlled REIT, but the Series E preferred shares are “regularly traded”, as defined by applicable Treasury regulations, on an “established securities market” like the NYSE, then a non-U.S. shareholder’s gain on sale, repurchase or conversion of our Series E preferred shares will not be subject to United States federal income taxation as a sale of a United States real property interest, if the non-U.S. shareholder has at all times during the preceding five years owned 5% or less by value of that class of shares. In this regard, because the Series E preferred shares of others may be repurchased and are convertible, your percentage interest in the Series E preferred shares may increase even if you acquire no additional Series E preferred shares.

 

Backup withholding

 

We will report to our domestic shareholders and to the IRS the amount of distributions paid during each calendar year, and the amount of tax withheld, if any from those distributions. Under the backup withholding rules, a shareholder may be subject to backup withholding at the rate equal to the fourth lowest rate of tax under Section 1(c) of the Code (which is currently 28%) with respect to distributions paid and redemption proceeds unless the shareholder (a) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact, or (b) provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with applicable requirements of the backup withholding rules. Notwithstanding the foregoing, we will institute backup withholding with respect to a shareholder when instructed to do so by the IRS. A shareholder that does not provide us with his correct taxpayer identification number may also be subject to penalties imposed by the IRS. Any amount paid as backup withholding will be creditable against the shareholder’s U.S. federal income tax liability.

 

Taxation of tax-exempt shareholders

 

The IRS has issued a revenue ruling in which it held that amounts distributed by a REIT to a tax-exempt employees’ pension trust do not constitute unrelated business taxable income (“UBTI”). Revenue rulings, however, are interpretive in nature and are subject to revocation or modification by the IRS. Based upon the ruling and the analysis therein, distributions by us to a shareholder that is a tax-exempt entity should not constitute UBTI, provided the tax exempt

entity has not financed the acquisition of its Series E preferred shares with “acquisition indebtedness” within the meaning of the Code, and the Series E preferred shares are not otherwise used in an unrelated trade or business of the tax-exempt entity. In addition, REITs generally treat the beneficiaries of qualified pension trusts as the beneficial owners of REIT shares owned by such pension trusts for purposes of determining if more than 50% of the REIT’s shares are owned by five or fewer individuals. However, if a pension trust owns more than 10% of the REIT’s shares (by value), it can be subject to UBTI on all or a portion of REIT distributions made to it, if the REIT is treated as a “pension-held REIT.” A pension-held REIT is any REIT if more than 25% (by value) of its shares are owned by one pension trust, or one or more pension trusts each owns 10% (by value) of such shares, and in the aggregate, such pension trusts own more than 50% (by value) of its shares. We do not expect to be treated as a “pension-held REIT.” However, because our common shares are publicly traded, and it is anticipated the Series E preferred shares will be publicly traded, no assurance can be given in this regard.

 

For social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans exempt from U.S. federal income tax under Section 501(c)(7), (9), (17) and (20) of the Code, respectively, income from an investment in EPR will constitute UBTI. However, income from an investment in EPR will not constitute UBTI for voluntary employee benefit associations, supplemental unemployment trusts and qualified group legal services plans if the organization is able to deduct amounts “set aside” or placed in reserve for certain purposes so as to offset the UBTI generated by its investment in EPR. Such prospective shareholders should consult with their own tax advisors concerning these “set aside” and reserve requirements.

 

Taxation of Non-U.S. shareholders

 

The rules governing U.S. federal income taxation of the ownership and disposition of Series E preferred shares by persons who are not U.S. Shareholders (“Non-U.S. Shareholders”) are complex and no attempt is made in this prospectus supplement to provide more than a summary of these rules. Prospective Non-U.S. Shareholders should consult with their own tax advisors to determine the impact of federal, state, local and any foreign income tax laws with regard to an investment in EPR, including any reporting requirements.

 

Distributions that are not attributable to gain from sales or exchanges by us of “United States real property interests” (“USRPIs”), as defined in the Code, and not designated by us as capital gain distributions will be treated as distributions of ordinary income to the extent they are made out of our current or accumulated earnings and profits. Unless such distributions are effectively connected with the Non-U.S. Shareholder’s conduct of a U.S. trade or business (or, if an income tax treaty applies, are attributable to a U.S. permanent establishment of the Non-U.S. Shareholder), the gross amount of the distributions will ordinarily be subject to U.S. withholding tax at a 30% or lower treaty rate, if applicable. In general, Non-U.S. Shareholders will not be considered engaged in a U.S. trade or business (or, in the case of an income tax treaty, as having a U.S. permanent establishment) solely by reason of their ownership of Series E preferred shares. If income on Series E preferred shares is treated as effectively connected with the Non-U.S. Shareholder’s conduct of a U.S. trade or business (or, if an income tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. Shareholder), the Non-U.S. Shareholder generally will be subject to a tax at graduated rates, in the same manner as U.S. Shareholders are taxed with respect to such distributions (and may also be subject to the 30% branch profits tax in the case of a shareholder that is a foreign corporation). We expect to withhold U.S. income tax at the rate of 30% on the gross amount of any distributions of

ordinary income made to a Non-U.S. Shareholder unless the Non-U.S. Shareholder provides us with a (i) properly executed IRS Form W-8BEN claiming an exemption from or reduction in the rate of withholding under the benefit of a tax treaty, or (ii) IRS Form W-8ECI claiming that the distribution is not subject to withholding because it is effectively connected with the Non-U.S. Shareholder’s conduct of a U.S. trade or business (or, if an income tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. Shareholder).

 

Unless the Series E preferred shares constitute USRPIs, distributions in excess of our current and accumulated earnings and profits will not be taxable to a shareholder to the extent such distributions do not exceed the adjusted basis of the shareholder’s Series E preferred shares but rather will reduce the adjusted basis of the shares. To the extent such distributions exceed the adjusted basis of a Non-U.S. Shareholder’s Series E preferred shares, such distributions will give rise to tax liability if the Non-U.S. Shareholder would otherwise be subject to tax on any gain from the sale or disposition of his shares, as described below. If it cannot be determined at the time a distribution is made whether or not the distribution will be in excess of our current and accumulated earnings and profits, the distributions will be subject to withholding at the same rate as distributions. If, however, Series E preferred shares are treated as USRPIs, then, unless otherwise treated as a distribution for withholding tax purposes as described below, any distributions in excess of our current or accumulated earnings and profits will generally be subject to 10% withholding and to the extent such distributions also exceed the adjusted basis of a Non-U.S. Shareholder’s Series E preferred shares, they will also give rise to gain from the sale or exchange of the shares, the tax treatment of which is described below.

 

Distributions that are designated by us at the time of distribution as capital gain distributions (other than those arising from the disposition of a USRPI) generally will not be subject to taxation, unless (i) investment in the Series E preferred shares is effectively connected with the Non-U.S. Shareholder’s U.S. trade or business (or, if an income tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. Shareholder), in which case the Non-U.S. Shareholder will be subject to the same treatment as U.S. Shareholders with respect to such gain (except that a shareholder that is a foreign corporation may also be subject to the 30% branch profits tax), or (ii) the Non-U.S. Shareholder is a non-resident alien individual who is present in the U.S. for 183 days or more during the taxable year and either has a “tax home” in the U.S. or sold his shares under circumstances in which the sale was attributable to a U.S. office, in which case the non-resident alien individual will be subject to a 30% tax on the individual’s capital gains.

 

Under the provisions of the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”), a distribution made to a non-U.S. Shareholder, to the extent attributable to gains from dispositions of USRPIs held by us directly or through pass-through subsidiaries (“USRPI capital gains”), will be considered effectively connected with a U.S. trade or business of the non-U.S. Shareholder and will be subject to U.S. federal income tax at the rates applicable to U.S. Shareholders, without regard to whether the distribution is designated as a capital gain dividend. In addition, we will be required to withhold tax equal to 35% of the amount of capital gain dividends to the extent the dividends constitute USRPI capital gains. Distributions subject to FIRPTA may also be subject to a 30% branch profits tax in the hands of a non-U.S. Shareholder that is a corporation. However, the 35% withholding tax will not apply to any capital gain dividend with respect to any class of our stock which is regularly traded on an established securities market located in the U.S. if the non-U.S. Shareholder did not own more than 5% of such class of stock at any time during the taxable year. Instead any capital gain dividend will be treated as a

distribution subject to the rules discussed under the paragraph above. Also, the branch profits tax will not apply to such a distribution.

 

Gain recognized by a Non-U.S. Shareholder upon a sale, repurchase or conversion of Series E preferred shares will generally not be taxed under FIRPTA if the shares do not constitute USRPIs. Series E preferred shares will not be considered USRPIs if we qualify as a “domestically controlled REIT,” or if the Series E preferred shares are part of a class that is regularly traded on an established securities market and the holder owned less than 5% of the class sold during a specified testing period. A “domestically controlled REIT” is defined generally as a real estate investment trust in which at all times during a specified testing period less than 50% in value of its shares was held directly or indirectly by foreign persons. We believe we are a “domestically controlled REIT,” and therefore the sale of Series E preferred shares will not be subject to taxation under FIRPTA. If the gain on the sale of Series E preferred shares were to be subject to taxation under FIRPTA, the Non-U.S. Shareholder would be subject to the same treatment as U.S. Shareholders with respect to such gain (subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals), and the purchaser of the shares may be required to withhold 10% of the purchase price and remit such amount to the IRS. However, since our common shares are publicly traded and it is anticipated our Series E preferred shares will be publicly traded as well, no assurance can be given in this regard.

 

Gain not subject to FIRPTA will be taxable to a Non-U.S. Shareholder if (i) investment in the Series E preferred shares is effectively connected with a U.S. trade or business of the Non-U.S. Shareholder (or, if an income tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. Shareholder), in which case the Non-U.S. Shareholder will be subject to the same treatment as U.S. Shareholders with respect to such gain, or (ii) the Non-U.S. Shareholder is a nonresident alien individual who was present in the U.S. for 183 days or more during the taxable year and has a “tax home” in the U.S., in which case the nonresident alien individual will be subject to a 30% tax on the individual’s capital gains. If the gain on the sale of Series E preferred shares were to be subject to taxation under FIRPTA, the Non-U.S. Shareholder would be subject to the same treatment as U.S. Shareholders with respect to such gain (subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals).

 

Effective generally from and after 2006, a special “wash sale” rule applies to a non-U.S. shareholder who owns any class of our shares if (1) the shareholder owns more than 5% of that class of shares at any time during the one-year period ending on the date of the distribution described below, or (2) that class of our shares is not, within the meaning of applicable Treasury Regulations, “regularly traded” on a domestic “established securities market” such as the NYSE. Although there can be no assurance in this regard, we believe that our common shares and our Series E preferred shares will be “regularly traded” on an “established securities market” within the meaning of applicable Treasury regulations, as described in the accompanying prospectus. We thus anticipate this new wash sale rule to apply, if at all, only to a non-U.S. shareholder that owns more than 5% of either our common shares or our Series E preferred shares. Such a non-U.S. shareholder will be treated as having made a “wash sale” of our shares if it (1) disposes of an interest in our shares during the 30 days preceding the ex-distribution date of a distribution by us that, but for such disposition, would have been treated by the non-U.S. shareholder in whole or in part as gain from the sale or exchange of a United States real property interest, and then (2) acquires or enters into a contract to acquire a substantially identical interest in our shares, either actually or constructively through a related party, during the 61-day period beginning 30 days prior to the ex-distribution date. In the event of such a wash sale, the non-

U.S. shareholder will have gain from the sale or exchange of a USRPI in an amount equal to the portion of the distribution that, but for the wash sale, would have been a gain from the sale or exchange of a USRPI. As described in the accompanying prospectus, a non-U.S. shareholder’s gain from the sale or exchange of a USRPI can trigger increased United States taxes, such as the branch profits tax applicable to non-U.S. corporations, and increased United States tax filing requirements.

 

If the proceeds of a disposition of Series E preferred shares are paid by or through a U.S. office of a broker, the payment is subject to information reporting and backup withholding unless the disposing Non-U.S. Shareholder certifies as to his name, address and non-U.S. status or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding will not apply to a payment of disposition proceeds if the payment is made outside the U.S. through a non-U.S. office of a non-U.S. broker.

 

U.S. information reporting requirements (but not backup withholding) will apply, however, to a payment of disposition proceeds outside the U.S. if (i) the payment is made through an office outside the U.S. of a broker that is either (a) a U.S. person, (b) a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the U.S., (c) a “controlled foreign corporation” for U.S. federal income tax purposes, or (d) a foreign partnership more than 50% of the capital or profits of which is owned by one or more U.S. persons or which engages in a U.S. trade or business, and (ii) the broker fails to obtain documentary evidence that the shareholder is a Non-U.S. Shareholder and that certain conditions are met or that the Non-U.S. Shareholder otherwise is entitled to an exemption.

 

Possible legislative or other actions affecting tax consequences

 

Prospective investors should recognize that the present U.S. federal income tax treatment of an investment in our shares may be modified by legislative, judicial or administrative action at any time, and that any such action may affect investments and commitments previously made. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department, resulting in revisions or regulations and revised interpretations of established concepts as well as statutory changes. Revisions in U.S. federal tax laws and interpretations thereof could adversely affect the tax consequences of an investment in our shares.

 

Moreover, prospective investors should be aware that as of January 1, 2011, absent legislative action, the maximum capital gains federal income tax rate for U.S. shareholders who are individuals will revert to 20% and the maximum ordinary income tax rate will revert to 39.6%.

 

State tax consequences and withholding

 

We and our shareholders may be subject to state or local taxation in various state or local jurisdictions, including those in which we or they transact business or reside. The state and local tax treatment of EPR and our shareholders may not conform to the U.S. federal income tax consequences discussed above. Several states in which we may own properties may treat REITs as ordinary corporations. We do not believe, however, that shareholders will be required to file state tax returns, other than in their respective states of residence, as a result of the ownership of shares. However, you should consult your own tax advisor regarding the effect of state and local tax laws on an investment in our shares.

 

You are advised to consult with your own tax advisor regarding the specific tax consequences to you of the ownership and sale of shares in an entity electing to be taxed as a real estate investment trust, including the federal, state, local, foreign, and other tax consequences of such purchase, ownership, sale, and election and of potential changes in applicable tax laws.

 

J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated are acting as the representatives of the underwriters named below. We and J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated as representatives of the underwriters, have entered into an underwriting agreement concerning the Series E preferred shares being offered by this prospectus supplement and the accompanying prospectus. The underwriters’ obligations are several and not joint, which means that each underwriter is required to purchase a specified number of shares, but is not responsible for the commitment of any other underwriter to purchase shares. Subject to the terms and conditions of the underwriting agreement, each underwriter has severally agreed to purchase the number of Series E preferred shares set forth opposite its name below at the public offering price on the cover page of this prospectus supplement less the underwriting discount.

 

 

The underwriting agreement provides that the obligations of the underwriters are conditional and may be terminated at their discretion based on their assessment of the state of the financial markets. The obligations of the underwriters may also be terminated upon the occurrence of the events specified in the underwriting agreement. The underwriters are severally committed to purchase all of the Series E preferred shares being offered if any shares are purchased, other than those shares covered by the over-allotment option described below.

 

We have granted the underwriters an option to purchase up to 450,000 additional Series E preferred shares to be sold in this offering at the public offering price, less the underwriting discounts and commissions described on the cover page of this prospectus supplement. The underwriters may exercise this option solely to cover over-allotments, if any. This option may be exercised, in whole or in part, at any time within the 30-day period after the date of this prospectus supplement. To the extent the option is exercised, the underwriters will be severally committed, subject to certain conditions, to purchase the additional Series E preferred shares in proportion to their respective commitments as indicated in the table above.

 

The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers’ certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public without notice and to reject orders in whole or in part.

 

The underwriters propose to offer the Series E preferred shares directly to the public initially at the public offering price set forth on the cover page of this prospectus supplement and to selected dealers at such price less a concession not to exceed $0.45 per share. The underwriters may allow, and such selected dealers may reallow, a concession not to exceed $0.15 per share. After the commencement of this offering, the underwriters may change the public offering price and other selling terms.

 

The following table shows the initial public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option.

 

 

We estimate that the total expenses of this offering payable by us, excluding underwriting discounts and commissions, will be approximately $225,000.

 

We have agreed in the underwriting agreement to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, and, where such indemnification is unavailable, to contribute to payments that the underwriters may be required to make in respect of such liabilities.

 

The Series E preferred shares are a new issue of securities and, prior to acceptance of the Series E preferred shares for listing on the NYSE, there will be no established trading market for the Series E preferred shares. We have filed an application to list the Series E preferred shares on the NYSE under the symbol, “EPR PrE.” If this application is approved, we expect trading in the Series E preferred shares to commence within a 30-day period after the initial delivery of the Series E preferred shares. In order to meet the requirements for listing the Series E preferred shares on the NYSE, the underwriters have undertaken to sell (i) Series E preferred shares to ensure a minimum of 100 beneficial holders with a minimum of 100,000 Series E preferred shares outstanding and (ii) a sufficient number of Series E preferred shares so that following this offering, the Series E preferred shares have a minimum aggregate market value of $2 million.

 

The underwriters have advised us that they intend to make a market in the Series E preferred shares, but they are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Series E preferred shares.

 

In order to facilitate this offering of Series E preferred shares, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the market price of the Series E preferred shares in accordance with Regulation M under the Securities Exchange Act of 1934, as amended.

 

The underwriters have advised us that they may make short sales of Series E preferred shares in connection with this offering, resulting in the sale by the underwriters of a greater number of shares than they are required to purchase pursuant to the underwriting agreement. The short position resulting from those short sales will be deemed a “covered” short position to the extent it does not exceed the number of shares the underwriters have the right to purchase in this offering including the 450,000 shares subject to their over-allotment option and will be deemed a “naked” short position to the extent it exceeds the number. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the trading price of the Series E preferred shares in the open market that could adversely affect investors who purchase shares in this offering.

 

The underwriters may reduce or close out a covered short position either by exercising the over-allotment option or by purchasing shares in the open market. In determining which of these alternatives to pursue, the underwriters will consider the price at which shares are available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. Any “naked” short position will be closed out by purchasing shares in the open market. Open market purchases made by the underwriters to cover all or a portion of their short position may be effected on the NYSE or otherwise. Similar to other purchase transactions, the underwriters’ purchases to cover a short position or to stabilize the market price of the Series E preferred shares may have the effect of raising or maintaining the market price of the Series E preferred shares or preventing or mitigating a decline in the market price of the Series E preferred shares following this offering. As a result, the common shares may trade at a price that is higher than the price that otherwise might prevail in the open market.

 

No representation is made as to the magnitude or effect of any such stabilization or other activities. The underwriters are not required to engage in these activities and, if commenced, may discontinue any of these activities at any time.

 

We have agreed that, except pursuant to the underwriting agreement or the concurrent offering of our common shares, we will not offer, sell, contract to sell, pledge, grant any option to purchase or otherwise dispose of, directly or indirectly, or file with the SEC or cause to be declared effective a registration statement under the Securities Act relating to, any common shares, any other equity security of ours or any of our subsidiaries on parity with or senior to the common shares (with respect to distribution rights or payments upon our liquidation, dissolution or winding up) or any securities that are convertible into, that are exchangeable or exercisable for, or that represent the right to receive, any such securities (which we refer to as relevant securities), or publicly disclose the intention to make any such offer, sale, pledge, grant, disposition or filing, in each case for a period of 90 days after the date of this prospectus supplement, without the prior written consent of J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated, subject to certain exceptions and the extension described below.

 

Our executive officers have agreed that they will not (1) (a) offer, sell, contract to sell, pledge, grant any option to purchase or otherwise dispose of, directly or indirectly, any relevant security or (b) enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of a relevant security, whether any of these transactions are to be settled by delivery of relevant securities or other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge, grant or disposition, or enter into any such transaction, swap, hedge or other arrangement, or (2) file, or participate in the filing of, with the SEC a registration statement under the Securities Act of 1933, as amended, relating to, or exercise any rights to require registration with the SEC of, or circulate or participate in the circulation of any preliminary or final prospectus or other disclosure document with respect to, any proposed offering or sale of any relevant security without, in each case, the prior written consent of J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated for a period of 90 days after the date of this prospectus supplement, subject to certain exceptions and to the extension described below.

 

In the event that either (1) during the last 17 days of the “lock-up” period applicable to us or our executive officers, we release earnings results or material news or a material event relating to us occurs or (2) prior to the expiration of the applicable “lock-up” period, we announce that we will release earnings results during the 16-day period beginning on the last day of the

applicable “lock-up” period, then in either case the expiration of the applicable “lock-up” period will be extended until the expiration of the 18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable, unless J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated waive in writing, such an extension.

 

From time to time, the underwriters and/or 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 for which they have received, and expect to receive, customary fees and commissions for these transactions. JPMorgan Chase Bank, N.A., an affiliate of one of the underwriters, J.P. Morgan Securities, Inc., is a lender under our unsecured revolving credit facility and will receive approximately 15% of any proceeds from this offering and the concurrent offering of our common shares that are used to repay indebtedness under the credit facility. In addition, a holding company of JPMorgan Chase Bank, N.A. has entered into a merger agreement with a holding company of Bear Stearns Corporate Lending Inc. Bear Stearns Corporate Lending, Inc. is a lender under the credit facility and will receive approximately 4% of any proceeds from this offering and the concurrent offering of our common shares that are used to repay indebtedness under the credit facility. Royal Bank of Canada, an affiliate of one of the underwriters, RBC Capital Markets Corporation, is also a lender under the credit facility and will receive approximately 15% of the proceeds of this offering and the concurrent offering of our common shares that are used to repay indebtedness under the credit facility. Each underwriter is an underwriter for our concurrent offering of common shares.

 

It is expected that delivery of the Series E preferred shares will be made on or about April 2, 2008, which will be the fourth business day following the date of pricing of the Series E preferred shares.

 

Stinson Morrison Hecker LLP will issue an opinion regarding the validity of the Series E preferred shares offered by this prospectus supplement. In addition, the discussion under the caption “Additional U.S. Federal Income Tax Considerations” in this prospectus supplement and “U.S. Federal Income Tax Considerations” in the accompanying prospectus (as amended and supplemented by “Additional U.S. Federal Income Tax Considerations” in this prospectus supplement) is based on the tax opinion of Stinson Morrison Hecker LLP. Certain legal matters in connection with this offering will be passed upon for the underwriters by Dechert LLP.

 

The consolidated financial statements and schedules of EPR as of December 31, 2007 and 2006 and for each of the years in the three-year period ended December 31, 2007 have been incorporated by reference in this prospectus supplement and the accompanying prospectus and in the registration statement of which this prospectus supplement and the accompanying prospectus are a part, in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein and upon the authority of that firm as experts in accounting and auditing. The audit report covering the December 31, 2006 financial statements refers to a change in the method of quantifying errors in 2006.

 

We are subject to the informational requirements of the Exchange Act, and in accordance with those requirements, we file reports and other information with the SEC. The reports and other information can be inspected and copied at the public reference facilities maintained by the SEC at Room 1580, 100 F Street, N.E., Washington, D.C. 20549. Copies of this material can be obtained by mail from the Public Reference Section of the SEC at Room 1580,100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. The public may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet website (http://www.sec.gov) that contains reports, proxy and information statements and other materials that are filed through the SEC Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. In addition, our common shares, our Series B preferred shares, Series C preferred shares and Series D preferred shares are listed on the New York Stock Exchange and we are required to file reports, proxy and information statements and other information with the New York Stock Exchange. These documents can be inspected at the principal office of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.

 

We have filed with the SEC a registration statement on Form S-3 (Registration File No. 333-140978) covering the securities offered by this prospectus supplement. You should be aware that this prospectus supplement does not contain all of the information contained or incorporated by reference in that registration statement and its exhibits and schedules. You may inspect and obtain the registration statement, including exhibits, schedules, reports and other information that we have filed with the SEC, as described in the preceding paragraph. Statements contained in this prospectus supplement concerning the contents of any document we refer you to are not necessarily complete and in each instance we refer you to the applicable document filed with the SEC for more complete information.

 

PROSPECTUS

 

Entertainment Properties Trust

 

Debt Securities, Common Shares, Preferred Shares,
Depositary Shares and Warrants

 

 

We may offer, from time to time, in one or more series or classes and in amounts, at prices and on terms that we will determine at the time of offering:

 

 

These securities may be offered and sold separately or together in units with other securities described in this prospectus. We will provide the specific terms of these securities in supplements to this prospectus or other offering materials. You should read this prospectus, the applicable prospectus supplement and other applicable offering materials carefully before you invest.

 

The securities may be sold directly or through agents, underwriters or dealers. If any agent, dealer or underwriter is involved in selling the securities, its name, the applicable purchase price, fee, commission or discount arrangement, and the net proceeds to us from the sale of the securities will be described in a prospectus supplement or other offering materials. See “Plan of Distribution.”

 

Our common shares are listed on the New York Stock Exchange under the symbol “EPR”. The last reported sale price of our common shares on the New York Stock Exchange on February 26, 2007 was $67.88 per share. Our Series A Cumulative Redeemable Preferred Shares (“Series A Preferred Shares”), Series B Cumulative Redeemable Preferred Shares (“Series B Preferred Shares”) and Series C Cumulative Convertible Preferred Shares (“Series C Preferred Shares”) are listed on the New York Stock Exchange under the symbols “EPR PrA”, “EPR PrB”, and “EPR PrC”, respectively.

 

To preserve our qualification as a real estate investment trust or “REIT” for U.S. federal income tax purposes and for other purposes, we impose restrictions on ownership of our common and preferred shares. See “U.S. Federal Income Tax Considerations” and “Description of Certain Provisions of Maryland Law and EPR’s Declaration of Trust and Bylaws” in this prospectus.

 

Investing in these securities involves certain risks. See the “Risk Factors” section on page 3 of this prospectus as well as the “Risk Factors” section of our most recent annual report on Form 10-K and, to the extent applicable, our quarterly reports on Form 10-Q.

 

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.

 

Our principal executive office is located at 30 W. Pershing Road, Suite 201, Kansas City, Missouri 64108. The telephone number for our principal executive office is (816) 472-1700.

 

The date of this prospectus is February 27, 2007.

 

TABLE OF CONTENTS

 

 

This prospectus is part of a registration statement (No. 333-       ) that we filed with the Securities and Exchange Commission (“SEC”) using a “shelf” registration process. Under this shelf process, we may sell any combination of the securities described in this prospectus from time to time in one or more offerings.

 

This prospectus provides you with a general description of the securities we may offer. Each time we offer and sell securities, we will provide a prospectus supplement or other offering materials that contain specific information about the terms of the offering and the securities offered. The prospectus supplement or other offering materials also may add to, update or change information provided in this prospectus. You should read this prospectus, the applicable prospectus supplement, the other applicable offering materials and the other information described in “Available Information” and “Incorporation of Certain Information by Reference” prior to investing.

 

As allowed by SEC rules, this prospectus does not contain all the information you can find in the registration statement or the exhibits to the registration statement. For further information, we refer you to the registration statement, including its exhibits and schedules. Statements contained in this prospectus about the provisions or contents of any contract, agreement or any other document referred to are not necessarily complete. For each of these contracts, agreements or documents filed as an exhibit to the registration statement, we refer you to the actual exhibit for a more complete description of the matters involved.

 

We have not authorized any dealer, salesman or other person to give any information or to make any representation other than those contained or incorporated by reference in this prospectus, any applicable supplement to this prospectus or any other applicable offering materials. You must not rely upon any information or representation not contained or incorporated by reference in this prospectus or any applicable supplement to this prospectus or any other applicable offering materials as if we had authorized it. This prospectus, any applicable prospectus supplement and any other applicable offering materials do not constitute an offer to sell or the solicitation of an offer to buy any securities other than the registered securities to which they relate. Nor do this prospectus, any accompanying prospectus supplement or any other applicable offering materials constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. You should assume that the information appearing in this prospectus, the accompanying prospectus supplement or any other offering materials is accurate only as of the date on their respective covers, and you should assume that the information appearing in any document incorporated or deemed to be incorporated by reference in this prospectus, any accompanying prospectus supplement or any other applicable offering materials is accurate only as of the date that document was filed with the SEC. Our business, financial condition, results of operations and prospects may have changed since those dates.

 

Unless otherwise indicated or unless the context requires otherwise, all references in this prospectus to “we,” “us,” “our,” the “Company” or “EPR” mean Entertainment Properties Trust. When we refer to our “Declaration of Trust” we mean Entertainment Properties Trust’s Amended and Restated Declaration of Trust, including the articles supplementary for each series of preferred shares, as amended. When we refer to our “Bylaws” we mean Entertainment Properties Trust’s Bylaws, as amended.

 

The SEC allows us to “incorporate by reference” the information we file with the SEC, which means we can disclose important information to you by referring to those documents. The information incorporated by reference is an important part of this prospectus. Any statement contained in a document which is incorporated by reference in this prospectus is automatically updated and superseded if information contained in this prospectus or information we later file with the SEC, modifies or replaces that information.

 

The documents listed below have been filed by us under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (File No. 1-13561) and are incorporated by reference in this prospectus:

 

1. Our annual report on Form 10-K for the year ended December 31, 2006 filed on February 28, 2007.

 

2. The description of our common shares included in our registration statement on Form 8-A filed on November 4, 1997.

3. The description of our Series A Preferred Shares included in our registration statement on Form 8-A filed on May 24, 2002.

 

4. The description of our Series B Preferred Shares included in our registration statement on Form 8-A filed on January 12, 2005.

 

5. The description of our Series C Preferred Shares included in our registration statement on Form 8-A filed on December 21, 2006.

 

In addition, all documents filed by us under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (excluding any information that is deemed to have been “furnished” and not “filed” with the SEC) after the date of this prospectus and prior to the termination of the offering of the securities covered by this prospectus are incorporated by reference herein.

 

To obtain a free copy of any of the documents incorporated by reference in this prospectus (other than exhibits, unless they are specifically incorporated by reference in the documents) please contact us at:

 

Investor Relations Department
Entertainment Properties Trust
30 W. Pershing Road, Suite 201
Kansas City, Missouri 64108
(816) 472-1700/FAX (816) 472-5794
Email info@eprkc.com

 

Our SEC filings also are available on our Internet website at www.eprkc.com. The information on our website is not, and you must not consider the information to be, a part of this prospectus.

 

With the exception of historical information, this prospectus and our reports filed under the Exchange Act and incorporated by reference in this prospectus and other offering materials and documents deemed to be incorporated by reference herein or therein may contain 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, such as those pertaining to our acquisition or disposition of properties, our capital resources, future expenditures for development projects and our results of operations. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of actual events. There is no assurance the events or circumstances reflected in the forward-looking statements will occur. You can identify forward-looking statements by use of words such as “will be,” “intend,” “continue,” “believe,” “may,” “expect,” “hope,” “anticipate,” “goal,” “forecast,” or other comparable terms, or by discussions of strategy, plans or intentions. Forward-looking statements necessarily are dependent on assumptions, data or methods that may be incorrect or imprecise.

 

Factors that could materially and adversely affect us include, but are not limited to, the factors listed below:

 

 

 

You should consider the risks described in the “Risk Factors” section of our most recent annual report on Form 10-K and, to the extent applicable, our quarterly reports on Form 10-Q, in evaluating any forward-looking statements included or incorporated by reference in this prospectus.

 

Given these uncertainties, you should not place undue reliance on these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference in this prospectus whether as a result of new information, future events or otherwise. In light of the factors referred to above, the future events discussed or incorporated by reference in this prospectus may not occur and actual results, performance or achievements could differ materially from those anticipated or implied in the forward-looking statements.

 

An investment in our securities involves certain risks. See the “Risk Factors” section of our most recent annual report on Form 10-K and, to the extent applicable, our quarterly reports on Form 10-Q, to read about factors you should consider before investing in our securities.

 

We are a self-administered real estate investment trust, or “REIT.” As of February 26, 2007, our real estate portfolio consists of:

 

 

We generally lease our single-tenant properties to tenants on a long-term triple-net basis that requires the tenant to assume the primary risks involved in operating the property and to pay substantially all expenses associated with the operation and maintenance of the property. We also provide secured mortgage financing, as appropriate, and we own multi-tenant properties which are managed for us by third-party management companies.

Beginning with our taxable year ended December 31, 1997, we elected to be treated as a REIT for U.S. federal income tax purposes. In order to maintain our status as a REIT, we must comply with a number of requirements under federal income tax law that are discussed in “U.S. Federal Income Tax Considerations.”

 

Our executive offices are located at 30 W. Pershing Road, Suite 201, Kansas City, Missouri 64108. Our telephone number is (816) 472-1700.

 

Unless otherwise indicated in the applicable prospectus supplement or other applicable offering materials, EPR intends to use the net proceeds from any sale of common shares, preferred shares, depositary shares, warrants or debt securities under this prospectus for general business purposes, which may include funding the acquisition, development or financing of properties and repayment of debt. Further details relating to the use of net proceeds from any specific offering will be described in the applicable prospectus supplement or other applicable offering materials.

 

The table below presents our ratio of earnings to fixed charges by dividing earnings by fixed charges. For this purpose, “earnings” is the sum of net income before equity in earnings of unconsolidated subsidiaries, minority interest in earnings and fixed charges (excluding capitalized interest) plus distributed income from unconsolidated joint ventures. “Fixed charges” consist of interest incurred on all indebtedness. The ratios are based solely on historical financial information and no pro forma adjustments have been made.

 

 

The table below presents our ratio of earnings to combined fixed charges and preferred share distributions by dividing earnings by combined fixed charges and preferred share distributions. The terms “earnings” and “fixed charges” have the meanings assigned above. The ratios are based solely on historical financial information and no pro forma adjustments have been made.

 

 

The following description, together with the additional information we include in any applicable prospectus supplements or other applicable offering materials, summarizes the material terms and provisions of the debt securities that we may offer under this prospectus. Because it is a summary, it does not contain all information that may be important to you. If you want more information, you should read the forms of indentures we have filed as exhibits to the registration statement of which this prospectus is a part. While the terms we have summarized below will apply generally to any future debt securities we may offer, we will describe the particular terms of any debt securities that we may offer in more detail in the applicable prospectus supplement or other offering materials. This summary is also subject to and qualified by reference to the descriptions of the particular terms of the securities described in the applicable prospectus supplement or other applicable offering materials and by the terms of the applicable final indenture, applicable indenture supplement and debt security. See “Available Information.”

 

General

 

The debt securities that we may issue will constitute debentures, notes, bonds or other evidences of indebtedness of the Company, to be issued in one or more series, which may include senior debt securities, subordinated debt securities and senior subordinated debt securities. The particular terms of any series of debt securities we offer, including the extent to which the general terms set forth below may be applicable to a particular series, will be described in a prospectus supplement relating to such series.

 

Debt securities that we may issue will be issued under one or more separate indentures between us and a trustee to be named in the related prospectus supplement. Senior debt securities will be issued under a senior indenture and subordinated debt securities will be issued under a subordinated indenture. Together the senior indenture and the subordinated indenture are called “indentures.” We have filed the forms of the indentures as exhibits to the registration statement of which this prospectus is a part. If we enter into any indenture supplement, we will file a copy of that supplement with the SEC.

 

Unless otherwise indicated in the applicable prospectus supplement, the debt securities will be our direct obligations. The senior debt securities will rank equally with all of our other senior and unsubordinated debt. The subordinated debt securities will have a junior position to certain of our debt, as described in the subordinated securities themselves or under the supplemental indenture under which they are issued. Unless we otherwise provide, we may reopen a series, without the consent of the holders of the series, for issuances of additional securities of that series.

 

We conduct a significant portion of our operations through our subsidiaries. Therefore, holders of debt securities will have a position junior to the prior claims of creditors of our subsidiaries, including trade creditors, debtholders, secured creditors, taxing authorities and guarantee holders, and any preferred stockholders, except to the extent that we may ourselves be a creditor with recognized and unsubordinated claims against any subsidiary. Our ability to pay principal of and premium, if any, and interest on any debt securities is, to a large extent, dependent upon the payment to us of dividends, interest or other charges by our subsidiaries.

 

The following description is a summary of the material provisions of the forms of indentures. It does not restate the indentures in their entireties. The indentures are governed by the Trust Indenture Act of 1939. The terms of the debt securities include those stated in the indentures and those made part of the indentures by reference to the Trust Indenture Act. We urge you to read the indentures because they, and not this description, define your rights as a holder of the debt securities. The following description is subject to and qualified by reference to the terms of the final indentures and any supplement thereto.

 

Information You Will Find in the Prospectus Supplement or Other Offering Materials

 

The indentures provide that we may issue debt securities from time to time in one or more series and that we may denominate the debt securities and make them payable in foreign currencies. The indentures do not limit the aggregate principal amount of debt securities that can be issued thereunder. The prospectus supplement or other

offering materials for a series of debt securities will provide information relating to the terms of the series of debt securities being offered, which may include:

 

 

 

Subordination

 

We will describe in the applicable prospectus supplement or other offering materials the terms and conditions, if any, upon which any series of subordinated securities is subordinated to debt securities of another series or to our other indebtedness. The terms will include a description of:

 

 

Interest Rate

 

Debt securities that bear interest will do so at a fixed rate or a floating rate.

 

Original Issue Discount

 

One or more series of debt securities offered by this prospectus may be sold at a substantial discount below their stated principal amount, bearing no interest or interest at a rate that at the time of issuance is below market rates. The material federal income tax consequences and special considerations applicable to any series of debt securities generally will be described in the applicable prospectus supplement or other applicable offering materials.

Registered Global Securities

 

We may issue registered debt securities of a series in the form of one or more fully registered global securities. We will deposit the registered global security with a depositary or with a nominee for a depositary identified in the prospectus supplement or other offering materials relating to such series. The global security or global securities will represent and will be in a denomination or aggregate denominations equal to the portion of the aggregate principal amount of outstanding registered debt securities of the series to be represented by the registered global security or securities. Unless otherwise specified in the applicable prospectus supplement or other applicable offering materials, unless it is exchanged in whole or in part for debt securities in definitive registered form, a registered global security may not be transferred, except as a whole in three cases:

 

 

The prospectus supplement or other offering materials relating to a series of debt securities will describe the specific terms of the depositary arrangement concerning any portion of that series of debt securities to be represented by a registered global security. We anticipate that the following provisions will generally apply to all depositary arrangements.

 

Upon the issuance of a registered global security, the depositary will credit, on its book-entry registration and transfer system, the principal amounts of the debt securities represented by the registered global security to the accounts of persons that have accounts with the depositary. These persons are referred to as “participants.” Any underwriters, agents or debtors participating in the distribution of debt securities represented by the registered global security will designate the accounts to be credited. Only participants or persons that hold interests through participants will be able to beneficially own interests in a registered global security. The depositary for a global security will maintain records of beneficial ownership interests in a registered global security for participants. Participants or persons that hold through participants will maintain records of beneficial ownership interests in a global security for persons other than participants. These records will be the only means to transfer beneficial ownership in a registered global security.

 

The laws of some states may require that specified purchasers of securities take physical delivery of the securities in definitive form. These laws may limit the ability of those persons to own, transfer or pledge beneficial interests in global securities.

 

So long as the depositary, or its nominee, is the registered owner of a registered global security, the depositary or its nominee will be considered the sole owner or holder of the debt securities represented by the registered global security for all purposes under the indenture. Except as set forth below, or in the applicable supplemental indenture, owners of beneficial interests in a registered global security:

 

 

Accordingly, each person owning a beneficial interest in a registered global security must rely on the procedures of the depositary for the registered global security and, if the person is not a participant, on the procedures of the participant through which the person owns its interests, to exercise any rights of a holder under the indenture applicable to the registered global security.

 

Payment of Interest on and Principal of Registered Global Securities

 

Unless otherwise specified in the applicable prospectus supplement or other applicable offering materials, we will make payments of principal, premium, if any, interest on and additional amounts with respect to debt securities

represented by a registered global security registered in the name of a depositary or its nominee to the depositary or its nominee as the registered owner of the registered global security. None of the Company, the trustee, or any paying agent for debt securities represented by a registered global security will have any responsibility or liability for

 

 

Generally, a depositary, upon receipt of any payment of principal, premium, interest on or additional amounts with respect to the global security, will immediately credit participants’ accounts with payments in amounts proportionate to their beneficial interests in the principal amount of a registered global security as shown on the depositary’s records. Generally, payments by participants to owners of beneficial interests in a registered global security held through participants will be governed by standing instructions and customary practices. This is currently the case with the securities held for the accounts of customers registered in “street name.” Such payments will be the responsibility of participants.

 

Exchange of Registered Global Securities

 

We may issue debt securities in definitive form in exchange for the registered global security if both of the following occur:

 

 

In addition, we may, at any time, determine not to have any of the debt securities of a series represented by one or more registered global securities. In this event, we will issue debt securities of that series in definitive form in exchange for all of the registered global security or securities representing those debt securities.

 

Covenants by the Company

 

The indenture includes covenants by us, including among other things that (i) we will make all payments of principal and interest at the times and places required and (ii) we will do or cause to be done all things necessary to preserve and keep in full force our existence, subject to certain terms as generally described under “— Mergers, Consolidations and Certain Sales of Assets”. The board resolution or supplemental indenture establishing each series of debt securities may contain additional covenants, including covenants which could restrict our right to incur additional indebtedness or liens and to take certain actions with respect to our businesses and assets.

 

The indentures contain no covenant or provision which affords debt holders protection in the event of a highly leveraged transaction.

 

Events of Default

 

Unless otherwise indicated in the applicable prospectus supplement or other applicable offering materials, the following will be events of default under the indenture with respect to each series of debt securities issued under the indenture:

 

 

 

Except as to certain events of bankruptcy, insolvency or similar proceedings affecting us and except as provided in the applicable prospectus supplement, if any event of default shall occur and be continuing with respect to any series of debt securities under the indenture, either the trustee or the holders of at least 25% in aggregate principal amount of outstanding debt securities of such series may accelerate the maturity of all debt securities of such series. Upon certain events of bankruptcy, insolvency or similar proceedings affecting us, the principal, premium, if any, and interest on all debt securities of each series shall be immediately due and payable. After any such acceleration, but before a judgment or decree based on acceleration has been obtained by the trustee, the holders of a majority in aggregate principal amount of each affected series of debt securities may waive all defaults with respect to such series and rescind and annul such acceleration if all events of default, other than the non-payment of accelerated principal, have been cured, waived or otherwise remedied.

 

An event of default for a particular series of debt securities does not necessarily constitute an event of default for any other series of debt securities issued under an indenture. The trustee may withhold notice to the holders of debt securities of any default (except in the payment of principal, premium, if any, interest on or any additional amounts with respect to such debt securities) if it considers such withholding of notice to be in the best interests of the holders.

 

No holder of any debt securities of any series will have any right to institute any proceeding with respect to the applicable indenture or for any remedy under such indenture, unless:

 

 

However, such limitations do not apply to a suit instituted by a holder of a debt security for enforcement of payment of the principal of and premium, if any, interest on or any additional amounts with respect to such debt security on or after the respective due dates expressed in such debt security.

 

Supplemental Indentures

 

We and the applicable trustee may, at any time and from time to time, without prior notice to or consent of any holders of debt securities, enter into one or more indentures supplemental to the indentures, among other things to:

 

 

 

With the consent of the holders of at least a majority in principal amount of debt securities of each series affected by such supplemental indenture (voting as one class), we and the trustee may enter into one or more supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the indentures or modifying in any manner the rights of the holders of debt securities of each such series.

 

Notwithstanding our rights and the rights of the trustee to enter into one or more supplemental indentures with the consent of the holders of debt securities of the affected series as described above, no such supplemental indenture shall, without the consent of the holder of each outstanding debt security of the affected series, among other things:

 

 

Unless otherwise provided in a supplemental indenture with respect to any series of debt securities, under the indenture, the holders of at least a majority of the principal amount of debt securities of each series may, on behalf of that series:

 

 

 

Satisfaction and Discharge of the Indenture; Defeasance

 

Except to the extent set forth in a supplemental indenture with respect to any series of debt securities, we, at our election, may discharge the applicable indenture and such indenture shall generally cease to be of any further effect with respect to that series of debt securities if (i) we have delivered to the trustee for cancellation all debt securities of that series or (ii) all debt securities of that series not previously delivered to the trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year, and we have deposited with the trustee the entire amount sufficient to pay at maturity or upon redemption all such debt securities.

 

In addition, to the extent set forth in a supplemental indenture with respect to a series of debt securities, we may have a “legal defeasance option” (pursuant to which we may terminate, with respect to the debt securities of a particular series, all of our obligations under such debt securities and the indenture with respect to such debt securities) and a “covenant defeasance option” (pursuant to which we may terminate, with respect to the debt securities of a particular series, our obligations with respect to such debt securities under certain specified covenants contained in the indenture). If we have and exercise a legal defeasance option with respect to a series of debt securities, payment of such debt securities may not be accelerated because of an event of default. If we have and exercise a covenant defeasance option with respect to a series of debt securities, payment of such debt securities may not be accelerated because of an event of default related to the specified covenants.

 

To the extent set forth in a supplemental indenture with respect to a series of debt securities, we may exercise a legal defeasance option or a covenant defeasance option with respect to the debt securities of a series only if we irrevocably deposit in trust with the trustee cash or U.S. government obligations (for debt securities denominated in U.S. dollars) or certain foreign government obligations (for debt securities denominated in a currency other than U.S. dollars) for the payment of principal, premium, if any, and interest and any additional amounts with respect to such debt securities to maturity or redemption, as the case may be. In addition, to exercise either of the defeasance options, we must comply with certain other conditions, including for debt securities denominated in U.S. dollars the delivery to the trustee of an opinion of counsel to the effect that the holders of debt securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred (and, in the case of legal defeasance only, such opinion of counsel must be based on a ruling from the Internal Revenue Service or other change in applicable federal income tax law).

 

The trustee will hold in trust the cash or government obligations deposited with it as described above and will apply the deposited cash and the proceeds from deposited government obligations to the payment of principal, premium, if any, and interest and any additional amounts with respect to the debt securities of the defeased series.

 

Mergers, Consolidations and Certain Sales of Assets

 

Except to the extent set forth in a supplemental indenture with respect to any series of debt securities, we may not:

 

 

 

 

Governing Law

 

The indentures and the debt securities will be governed by the laws of the State of New York, except as may be provided as to any series in a supplemental indenture.

 

Conversion or Exchange Rights

 

Any debt securities that we may issue pursuant to this prospectus may be convertible into or exchangeable for shares of our equity or other securities. The terms and conditions of such conversion or exchange will be set forth in the applicable prospectus supplement or other offering materials. Such terms may include, among others, the following:

 

 

Concerning the Trustee

 

The indentures provide that there may be more than one trustee with respect to one or more series of debt securities but we need not designate more than one trustee. If there are different trustees for different series of debt securities, each trustee will be a trustee of a trust under a supplemental indenture separate and apart from the trust administered by any other trustee under such indenture. Except as otherwise indicated in this prospectus or any prospectus supplement, any action permitted to be taken by a trustee may be taken by the trustee only with respect to the one or more series of debt securities for which it is the trustee under an indenture. Any trustee under an indenture or a supplemental indenture may resign or be removed with respect to one or more series of debt securities. All payments of principal or, premium, if any, interest on and any additional amounts with respect to, and all registration, transfer, exchange authentication and delivery of, the debt securities of a series will be effected with respect to such series at an office designated by us.

 

The indentures contain limitations on the rights of any trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. If any trustee acquires an interest that conflicts with any duties with respect to the debt securities, such trustee is required to either resign or eliminate such conflicting interest to the extent and in the manner provided by the applicable indenture.

 

Notices

 

Notices to holders of debt securities will be given by mail to the addresses of such holders as they appear in the security register.

 

The following description of our shares of beneficial interest (“shares”) is only a summary and is subject to, and qualified in its entirety by reference to, the provision governing such shares contained in our Declaration of Trust and Bylaws, copies of which we have previously filed with the SEC. Because it is a summary, it does not contain all of the information that may be important to you. See “Available Information” for information about how to obtain copies of the Declaration of Trust and Bylaws. This summary also is subject to and qualified by reference to the descriptions of the particular terms of the securities described in the applicable prospectus supplement or other applicable offering materials.

 

Our Declaration of Trust authorizes us to issue up to 50,000,000 common shares, par value $0.01 per share, and 15,000,000 preferred shares, par value $0.01 per share, 2,300,000 of which are designated as Series A Preferred Shares, 3,200,000 of which are designated as Series B Preferred Shares, and 6,000,000 of which are designated as Series C Preferred Shares, and authorizes our Board of Trustees to determine, at any time and from time to time the number of authorized shares of beneficial interest, as described below. As of February 26, 2007, we had 26,458,875 common shares issued and outstanding, 2,300,000 Series A Preferred Shares issued and outstanding, 3,200,000 Series B Preferred Shares issued and outstanding, and 5,400,000 Series C Preferred Shares issued and outstanding. As of the date of this prospectus no other class or series of preferred shares has been established. For a summary of restrictions on ownership and transfers of shares, see “Description of Certain Provisions of Maryland Law and EPR’s Declaration of Trust and Bylaws — Restrictions on Ownership and Transfers of Shares.”

 

Our Declaration of Trust contains a provision permitting our Board of Trustees, without any action by our shareholders, to amend the Declaration of Trust at any time to increase or decrease the aggregate number of shares or the number of shares of any class that we have authority to issue. Our Declaration of Trust further authorizes our Board of Trustees to cause us to issue our authorized shares and to reclassify any unissued shares into other classes or series. We believe that this ability of our Board of Trustees will provide us with flexibility in structuring possible future financings and acquisitions and in meeting other business needs which might arise. Although our Board of Trustees has no intention at the present time of doing so, it could authorize us to issue a new class or series that could, depending upon the terms of the class or series, delay, defer or prevent a change of control of EPR.

 

The transfer agent and registrar for our shares is UMB Bank, n.a.

 

Common Shares

 

All of our common shares are entitled to the following, subject to the preferential rights of any other class or series of shares which may be issued and to the provisions of our Declaration of Trust regarding the restriction of the ownership of shares:

 

 

Subject to the provisions of our Declaration of Trust on restrictions on transfer, each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders, including the election of trustees. Holders of our common shares do not have cumulative voting rights in the election of trustees.

 

Holders of our common shares have no preference, conversion, exchange, sinking fund, redemption or, except to the extent expressly required by the law pertaining to Maryland real estate investment trusts, appraisal rights. Shareholders have no preemptive rights to subscribe for any of our securities.

 

For other information with respect to our common shares, including effects that provisions in our Declaration of Trust and Bylaws may have in delaying, deferring or preventing a change in our control, see “Description of Certain Provisions of Maryland Law and EPR’s Declaration of Trust and Bylaws” below.

Preferred Shares

 

General

 

Our Declaration of Trust authorizes our Board of Trustees to determine the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption of our authorized and unissued preferred shares. These may include:

 

 

The issuance of preferred shares, or the issuance of any rights or warrants to purchase preferred shares, could discourage an unsolicited acquisition proposal. In addition, the rights of holders of common shares will be subject to, and may be adversely affected by, the rights of holders of any preferred shares that we may issue in the future.

 

The following describes some general terms and provisions of the preferred shares to which a prospectus supplement or other applicable offering materials may relate. The statements below describing the preferred shares are in all respects subject to and qualified in their entirety by reference to the applicable provisions of our Declaration of Trust, including the articles supplementary for the applicable series of preferred shares, and our Bylaws.

 

The applicable prospectus supplement or other applicable offering materials will describe the specific terms as to each issuance of preferred shares, including:

 

 

 

As described under “Description of Depositary Shares,” we may, at our option, elect to offer depositary shares evidenced by depositary receipts. If we elect to do this, each depositary receipt will represent a fractional interest in a share of the particular series of the preferred shares issued and deposited with a depositary. The applicable prospectus supplement or other applicable offering materials will specify that fractional interest.

 

Rank

 

Unless our Board of Trustees otherwise determines and we so specify in the applicable prospectus supplement or other applicable offering materials, we expect that the preferred shares will, with respect to distribution rights and rights upon liquidation or dissolution, rank senior to all of our common shares.

 

Distributions

 

Holders of preferred shares of each series will be entitled to receive dividends at the rates and on the dates shown in the applicable prospectus supplement or other offering materials. Even though the preferred shares may specify a fixed rate of distribution, our Board of Trustees must authorize and declare those distributions and they may be paid only out of assets legally available for payment. We will pay each distribution to holders of record as they appear on our share transfer books on the record dates fixed by our Board of Trustees. In the case of preferred shares represented by depositary receipts, the records of the depositary referred to under “Description of Depositary Shares” will determine the persons to whom distributions are payable.

 

Distributions on any series of preferred shares may be cumulative or noncumulative, as provided in the applicable prospectus supplement or other offering materials. We refer to each particular series, for ease of reference, as the applicable series. Cumulative distributions will be cumulative from and after the date shown in the applicable prospectus supplement or other applicable offering materials. If our Board of Trustees fails to authorize a distribution on any applicable series that is noncumulative, the holders will have no right to receive, and we will have no obligation to pay, a distribution in respect of the applicable distribution period, whether or not distributions on that series are declared payable in the future.

 

Unless otherwise provided in the applicable prospectus or other applicable offering materials, if the applicable series is entitled to a cumulative distribution, we may not declare, or pay or set aside for payment, any full distributions on any other series of preferred shares ranking, as to distributions, on a parity with or junior to the applicable series, unless we declare, and either pay or set aside for payment, full cumulative distributions on the applicable series for all past distribution periods and the then current distribution period. If the applicable series does not have a cumulative distribution, we must declare, and pay or set aside for payment, full distributions for the then current distribution period only unless otherwise provided in the applicable prospectus supplement or other applicable offering materials. Unless otherwise provided in the applicable prospectus or other applicable offering materials, when distributions are not paid, or set aside for payment, in full upon any applicable series and the shares

of any other series ranking on a parity as to distributions with the applicable series, we must declare, and pay or set aside for payment, all distributions upon the applicable series and any other parity series proportionately, in accordance with accrued and unpaid distributions of the several series. Unless otherwise provided in the applicable prospectus supplement or other applicable offering materials, for these purposes, accrued and unpaid distributions do not include unpaid distribution periods on noncumulative preferred shares. No interest will be payable in respect of any distribution payment that may be in arrears unless otherwise provided in the applicable prospectus or other applicable offering materials.

 

Unless otherwise provided in the applicable prospectus supplement or other applicable offering materials, except as provided in the immediately preceding paragraph, unless we declare, and pay or set aside for payment, full cumulative distributions, including for the then current period, on any cumulative applicable series, we may not declare, or pay or set aside for payment, any distributions upon common shares or any other equity securities ranking junior to or on a parity with the applicable series as to distributions or upon liquidation. The foregoing restriction does not apply to distributions paid in common shares or other equity securities ranking junior to the applicable series as to distributions and upon liquidation, unless otherwise provided in the applicable prospectus supplement or other applicable offering materials. Unless otherwise provided in the applicable prospectus supplement or other applicable offering materials, if the applicable series is noncumulative, we need only declare, and pay or set aside for payment, the distribution for the then current period, before declaring distributions on common shares or junior or parity securities. In addition, under the circumstances that we could not declare a distribution, we may not redeem, purchase or otherwise acquire for any consideration any common shares or other parity or junior equity securities, except upon conversion into or exchange for common shares or other junior equity securities, unless otherwise provided in the applicable prospectus supplement or other applicable offering materials. We may, however, make purchases and redemptions otherwise prohibited pursuant to certain redemptions or pro rata offers to purchase the outstanding shares of the applicable series and any other parity series of preferred shares, unless otherwise provided in the applicable prospectus supplement or other applicable offering materials.

 

We will credit any distribution payment made on an applicable series first against the earliest accrued but unpaid distribution due with respect to the series.

 

Redemption

 

We may have the right or may be required to redeem one or more series of preferred shares, as a whole or in part, in each case upon the terms, if any, and at the times and at the redemption prices shown in the applicable prospectus supplement or other applicable offering materials.

 

If a series of preferred shares is subject to mandatory redemption, we will specify in the applicable prospectus supplement or other applicable offering materials the number of shares we are required to redeem, when those redemptions start, the redemption price, and any other terms and conditions affecting the redemption. The redemption price will include all accrued and unpaid distributions, except in the case of noncumulative preferred shares. The redemption price may be payable in cash or other property, as specified in the applicable prospectus supplement or other applicable offering materials. If the redemption price for preferred shares of any series is payable only from the net proceeds of our issuance of shares of beneficial interest, the terms of the preferred shares may provide that, if no shares of beneficial interest shall have been issued or to the extent the net proceeds from any issuance are insufficient to pay in full the aggregate redemption price then due, the preferred shares will automatically and mandatorily be converted into shares of beneficial interest pursuant to conversion provisions specified in the applicable prospectus supplement or other applicable offering materials.

 

Liquidation Preference

 

The applicable prospectus supplement or other applicable offering materials will show the liquidation preference of the applicable series. Upon our voluntary or involuntary liquidation, before any distribution may be made to the holders of our common shares or any other shares of beneficial interest ranking junior in the distribution of assets upon any liquidation to the applicable series, the holders of that series will be entitled to receive, out of our assets legally available for distribution to shareholders, liquidating distributions in the amount of the liquidation preference, plus an amount equal to all distributions accrued and unpaid. In the case of a

noncumulative applicable series, accrued and unpaid distributions include only the then current distribution period. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of preferred shares will have no right or claim to any of our remaining assets. If liquidating distributions shall have been made in full to all holders of preferred shares, our remaining assets will be distributed among the holders of any other shares of beneficial interest ranking junior to the preferred shares upon liquidation, according to their rights and preferences and in each case according to their number of shares.

 

If, upon any voluntary or involuntary liquidation, our available assets are insufficient to pay the amount of the liquidating distributions on all outstanding shares of that series and the corresponding amounts payable on all shares of beneficial interest ranking on a parity in the distribution of assets with that series, then the holders of that series and all other equally ranking shares of beneficial interest shall share ratably in the distribution in proportion to the full liquidating distributions to which they would otherwise be entitled.

 

For these purposes, our consolidation or merger with or into any other trust or corporation or other entity, or the sale, lease or conveyance of all or substantially all of our property or business, or a statutory share exchange, will not be a liquidation unless otherwise provided in the applicable prospectus supplement or other applicable offering materials.

 

Voting Rights

 

Holders of our preferred shares will not have any voting rights, except as shown below or as otherwise from time to time specified in the applicable prospectus supplement or other applicable offering materials.

 

Unless otherwise specified in the applicable prospectus supplement or other applicable offering materials, holders of our preferred shares (voting separately as a class with all other series of preferred shares with similar voting rights) will be entitled to elect two additional trustees to our Board of Trustees at our next annual meeting of shareholders or at a special meeting called for such purpose, if at any time distributions on the applicable series are in arrears for six or more quarterly periods. If the applicable series has a cumulative distribution, the right to elect additional trustees described in the preceding sentence shall remain in effect until we declare and pay or set aside for payment all distributions accrued and unpaid on the applicable series. In the event the preferred shareholders are so entitled to elect trustees, the entire Board of Trustees will be increased by two trustees.

 

Unless otherwise specified in the applicable prospectus supplement or other applicable offering materials, so long as any preferred shares are outstanding, we may not, without the affirmative vote or consent of two-thirds of the shares of each series of preferred shares (and other shares having like voting rights) outstanding at that time:

 

 

The authorization, creation, increase or decrease of the authorized amount of any class or series of shares ranking on parity or junior to a series of preferred shares with respect to distribution and liquidation rights, or the issuance of such shares, will not be deemed to materially and adversely affect that series.

The foregoing voting provisions will not apply if, at or prior to the time of such amendment, provisions are made for the redemption of all of the outstanding shares of the series of preferred with the right to vote.

 

As more fully described under “Description of Depositary Shares” below, if we elect to issue depositary shares, each representing a fraction of a share of a series, each depositary will in effect be entitled to a fraction of a vote per depositary share.

 

Conversion Rights

 

We will describe in the applicable prospectus supplement or other applicable offering materials the terms and conditions, if any, upon which you may, or we may require you to, convert shares of any series of preferred shares into common shares or any other class or series of securities. The terms will include the number of common shares or other securities into which the preferred shares are convertible, the conversion price (or the manner of determining it), the conversion period, provisions as to whether conversion will be at the option of the holders of the series or at our option, the events requiring an adjustment of the conversion price, and provisions affecting conversion upon the redemption of shares of the series.

 

Our Exchange Rights

 

We will describe in the applicable prospectus supplement or other applicable offering materials the terms and conditions, if any, upon which we can require you to exchange shares of any series of preferred shares for debt securities. If an exchange is required, you will receive debt securities with a principal amount equal to the liquidation preference of the applicable series of preferred shares. The other terms and provisions of the debt securities will not be materially less favorable to you than those of the series of preferred shares being exchanged.

 

Series A Cumulative Redeemable Preferred Shares

 

Our Series A Preferred Shares provide for quarterly payments of cumulative dividends at the rate of 9.50% of the $25 per share liquidation preference of the Series A Preferred Shares, or a fixed rate of $2.375 per share each year. Dividends not declared or paid in any quarter continue to accumulate. On liquidation of the Company, holders of the Series A Preferred Shares are entitled to a liquidation preference of $25 per share plus all accumulated, accrued and unpaid dividends before any amount is payable to the holders of our common shares. The Series A Preferred Shares are not redeemable prior to May 29, 2007, except in limited circumstances relating to the preservation of our status as a REIT. On or after that date, we may at our own option redeem the Series A Preferred Shares in whole or in part by paying the $25 per share liquidation preference plus all accumulated, accrued and unpaid dividends. The Series A Preferred Shares rank senior to our common shares and on a parity with our Series B Preferred Shares, Series C Preferred Shares and other parity securities we may issue in the future with respect to the payment of dividends and amounts on liquidation, dissolution and winding up. Holders of Series A Preferred Shares generally have no voting rights, except that if dividends on the Series A Preferred Shares have not been paid for six or more quarterly periods (whether or not consecutive), holders of the Series A Preferred Shares (together with other shares having like voting rights) are entitled to elect two additional trustees to the Board of Trustees to serve until all unpaid dividends have been paid or declared and set aside for payment. In addition, certain material and adverse changes to the terms of the Series A Preferred Shares cannot be made without the affirmative vote of at least two-thirds of the outstanding Series A Preferred Shares and the holders of all other shares on a parity with the Series A Preferred Shares and having like voting rights.

 

Series B Cumulative Redeemable Preferred Shares

 

Our Series B Preferred Shares provide for quarterly payments of cumulative dividends at the rate of 7.75% of the $25 per share liquidation preference of the Series B Preferred Shares, or a fixed rate of $1.9375 per share each year. Dividends not declared or paid in any quarter continue to accumulate. On liquidation of the Company, holders of the Series B Preferred Shares are entitled to a liquidation preference of $25 per share plus all accumulated, accrued and unpaid dividends before any amount is payable to the holders of our common shares. The Series B Preferred Shares are not redeemable prior to January 19, 2010, except in limited circumstances relating to the preservation of our status as a REIT. On or after that date, we may at our own option redeem the Series B Preferred

Shares in whole or in part by paying the $25 per share liquidation preference plus all accumulated, accrued and unpaid dividends. The Series B Preferred Shares rank senior to our common shares and on a parity with our Series A Preferred Shares, Series C Preferred Shares and other parity securities we may issue in the future with respect to the payment of dividends and amounts on liquidation, dissolution and winding up. Holders of Series B Preferred Shares generally have no voting rights, except that if dividends on the Series B Preferred Shares have not been paid for six or more quarterly periods (whether or not consecutive), holders of the Series B Preferred Shares (together with other shares having like voting rights) are entitled to elect two additional trustees to the Board of Trustees to serve until all unpaid dividends have been paid or declared and set aside for payment. In addition, certain material and adverse changes to the terms of the Series B Preferred Shares cannot be made without the affirmative vote of at least two-thirds of the outstanding Series B Preferred Shares and the holders of all other shares on a parity with the Series B Preferred Shares and having like voting rights.

 

Series C Cumulative Convertible Preferred Shares

 

Our Series C Preferred Shares provide for quarterly payments of cumulative dividends at the rate of 5.75% of the $25 per share liquidation preference of the Series C Preferred Shares, or a fixed rate of $1.4375 per share each year. Dividends not declared or paid in any quarter continue to accumulate. On liquidation of the Company, holders of the Series C Preferred Shares are entitled to a liquidation preference of $25 per share plus all accumulated, accrued and unpaid dividends before any amount is payable to the holders of our common shares. The Series C Preferred Shares are not redeemable. Holders of Series C Preferred Shares may, at their option, convert the Series C Preferred Shares into our common shares subject to certain conditions at the then applicable conversion rate. The conversion rate is subject to adjustment upon the occurrence of specified events. On or after January 15, 2012, we may, at our option, convert some or all of the Series C Preferred Shares into common shares at the then applicable conversion rate in certain circumstances based on the market price of our common shares. Upon any conversion of Series C Preferred Shares, we will have the option to deliver either (1) a number of common shares based upon the applicable conversion rate, or (2) an amount of cash and common shares as specified in the articles supplementary for such shares. If the holders of Series C Preferred Shares elect to convert their Series C Preferred Shares in connection with a fundamental change that occurs on or prior to January 15, 2017, we will increase the conversion rate for the Series C Preferred Shares surrendered for conversion to the extent described in the articles supplementary for the Series C Preferred Shares. In addition, upon a fundamental change, when the actual applicable price of our common shares, as determined in accordance with the article supplementary, is less than $59.45 per share, the holders of Series C Preferred Shares may require us to convert some or all of their Series C Preferred Shares at a conversion rate equal to the liquidation preference of the Series C Preferred Shares being converted plus accrued and unpaid distributions divided by 98% of the market price of our common shares. We will have the right to repurchase for cash some or all of the Series C Preferred Shares that would otherwise be required to be converted. The Series C Preferred Shares rank senior to our common shares and on a parity with our Series A Preferred Shares, Series B Preferred Shares and other parity securities we may issue in the future with respect to the payment of dividends and amounts on liquidation, dissolution and winding up. Holders of Series C Preferred Shares generally have no voting rights, except that if dividends on the Series C Preferred Shares have not been paid for six or more quarterly periods (whether or not consecutive), holders of the Series C Preferred Shares (together with shares having like voting rights) are entitled to elect two additional trustees to the Board of Trustees to serve until all unpaid dividends have been paid or declared and set aside for payment. In addition, certain material and adverse changes to the terms of the Series C Preferred Shares cannot be made without the affirmative vote of at least two-thirds of the outstanding Series C Preferred Shares and the holders of all other shares on a parity with the Series C Preferred Shares and having like voting rights.

 

The following is a summary of the material provisions of any deposit agreement and of the depositary shares and depositary receipts representing depositary shares. Because it is a summary, it does not contain all of the information that may be important to you. If you want more information, you should read the form of deposit agreement and depositary receipts which we will file as exhibits to the registration statement of which this prospectus is part prior to an offering of depositary shares. See “Available Information.” This summary also is subject to and qualified by reference to the descriptions of the particular terms of the securities described in the applicable prospectus supplement or other applicable offering materials and by the terms of the applicable final deposit agreement and depositary receipts.

 

General

 

We may, at our option, elect to offer fractional interests in shares of preferred shares, rather than shares of preferred shares. If we exercise this option, we will appoint a depositary to issue depositary receipts representing those fractional interests. Preferred shares of each series represented by depositary shares will be deposited under a separate deposit agreement between us and the depositary. The prospectus supplement or other offering materials relating to a series of depositary shares will show the name and address of the depositary. Subject to the terms of the applicable deposit agreement, each owner of depositary shares will be entitled to all of the distribution, voting, conversion, redemption, liquidation and other rights and preferences of the preferred shares represented by those depositary shares.

 

Depositary receipts issued pursuant to the applicable deposit agreement will evidence ownership of depositary shares. Upon surrender of depositary receipts at the office of the depositary, and upon payment of the charges provided in and subject to the terms of the applicable deposit agreement, a holder of depositary shares will be entitled to receive the preferred shares underlying the surrendered depositary receipts.

 

Distributions

 

A depositary will be required to distribute all cash distributions received in respect of the applicable preferred shares to the record holders of depositary receipts evidencing the related depositary shares in proportion to the number of depositary receipts owned by the holders. Fractions will be rounded down to the nearest whole cent.

 

If the distribution is other than in cash, a depositary will be required to distribute property received by it to the record holders of depositary receipts entitled thereto, unless the depositary determines that it is not feasible to make the distribution. In that case, the depositary may, with our approval, sell the property and distribute the net proceeds from the sale to the holders.

 

Depositary shares that represent preferred shares converted or exchanged will not be entitled to distributions. The deposit agreement also will contain provisions relating to the manner in which any subscription or similar rights we offer to holders of the preferred shares will be made available to holders of depositary shares. All distributions will be subject to obligations of holders to file proofs, certificates and other information and to pay certain charges and expenses to the depositary.

 

Withdrawal of Preferred Shares

 

You may receive the number of whole shares of your series of preferred shares and any money or other property represented by those depositary receipts after surrendering the depositary receipts at the corporate trust office of the depositary. Partial shares of preferred shares will not be issued. If the depositary shares that you surrender exceed the number of depositary shares that represent the number of whole preferred shares you wish to withdraw, then the depositary will deliver to you at the same time a new depositary receipt evidencing the excess number of depositary shares. Once you have withdrawn your preferred shares, you will not be entitled to re-deposit those preferred shares under the deposit agreement in order to receive depositary shares. We do not expect that there will be any public trading market for withdrawn preferred shares.

Redemption of Depositary Shares

 

If we redeem a series of the preferred shares underlying the depositary shares, the depositary will redeem those shares from the proceeds received by it. The depositary will mail notice of redemption not less than 30 days, and not more than 60 days, before the date fixed for redemption to the record holders of the depositary receipts evidencing the depositary shares we are redeeming at their addresses appearing in the depositary’s books. The redemption price per depositary share will be equal to the applicable fraction of the redemption price per share payable with respect to the series of the preferred shares. The redemption date for depositary shares will be the same as that of the preferred shares. If we are redeeming less than all of the depositary shares, the depositary will select the depositary shares we are redeeming by lot or pro rata as the depositary may determine.

 

After the date fixed for redemption, the depositary shares called for redemption no longer will be deemed outstanding. All rights of the holders of the depositary shares and the related depositary receipts will cease at that time, except for the right to receive the money or other property to which the holders of depositary shares were entitled upon redemption. Receipt of the money or other property is subject to surrender to the depositary of the depositary receipts evidencing the redeemed depositary shares.

 

Voting of the Preferred Shares

 

Upon receipt of notice of any meeting at which the holders of the applicable preferred shares are entitled to vote, a depositary will be required to mail the information contained in the notice of meeting to the record holders of the applicable depositary receipts. Each record holder of depositary receipts on the record date will be entitled to instruct the depositary as to the exercise of the voting rights pertaining to the amount of preferred shares represented by the holder’s depositary shares. The depositary will try, as practical, to vote the shares as you instruct. We will agree to take all reasonable action that the depositary deems necessary in order to enable it to do so.

 

If you do not instruct the depositary how to vote your shares, the depositary will abstain from voting those shares. The depositary will not be responsible for any failure to carry out an instruction to vote or for the effect of any such vote made so long as the action or inaction of the depositary is in good faith and is not the result of the depositary’s gross negligence or willful misconduct.

 

Liquidation Preference

 

Upon our liquidation, whether voluntary or involuntary, each holder of depositary shares will be entitled to the fraction of the liquidation preference accorded each preferred share represented by the depositary shares, as shown in the applicable prospectus supplement or other applicable offering materials.

 

Conversion or Exchange of Preferred Shares

 

The depositary shares will not themselves be convertible into or exchangeable for common shares, preferred shares or any of our other securities or property. Nevertheless, if so specified in the applicable prospectus supplement or other applicable offering materials, the depositary receipts may be surrendered by holders to the applicable depositary with written instructions to it to instruct us to cause conversion of the preferred shares represented by the depositary shares. Similarly, if so specified in the applicable prospectus supplement or other applicable offering materials, we may require you to surrender all of your depositary receipts to the applicable depositary upon our requiring the conversion or exchange of the preferred shares represented by the depositary shares into our debt securities. We will agree that, upon receipt of the instruction and any amounts payable in connection with the conversion or exchange, we will cause the conversion or exchange using the same procedures as those provided for delivery of preferred shares to effect the conversion or exchange. If you are converting only a part of the depositary shares, the depositary will issue you a new depositary receipt for any unconverted depositary shares.

 

Federal Income Tax Consequences Relating to Depositary Shares

 

As an owner of depositary shares, you will be treated for U.S. federal income tax purposes as if you were an owner of the series of preferred shares represented by the depositary shares. Therefore, you will be required to take

into account, for U.S. federal income tax purposes, income and deductions to which you would be entitled if you were a holder of the underlying series of preferred shares. In addition:

 

 

Amendment and Termination of a Deposit Agreement

 

We and the applicable depositary will be permitted to amend the provisions of the depositary receipts and the deposit agreement. However, the holders of at least a majority of the applicable depositary shares then outstanding must approve any amendment that adds or increases fees or charges or prejudices an important right of holders. Every holder of an outstanding depositary receipt at the time any amendment becomes effective, by continuing to hold the receipt, will be bound by the applicable deposit agreement, as amended.

 

Any deposit agreement may be terminated by us upon not less than 30 days’ prior written notice to the applicable depositary if (1) the termination is necessary to preserve our status as a Maryland real estate investment trust or (2) a majority of each series of preferred shares affected by the termination consents to the termination. When either event occurs, the depositary will be required to deliver or make available to each holder of depositary receipts, upon surrender of the depositary receipts held by the holder, the number of whole or fractional shares of preferred shares as are represented by the depositary shares evidenced by the depositary receipts, together with any other property held by the depositary with respect to the depositary receipts. In addition, a deposit agreement will automatically terminate if:

 

 

Charges of a Depositary

 

We will pay all transfer and other taxes and governmental charges arising solely from the existence of a deposit agreement. In addition, we will pay the fees and expenses of a depositary in connection with the initial deposit of the preferred shares and any redemption of preferred shares. However, holders of depositary receipts will pay any transfer or other governmental charges and the fees and expenses of a depositary for any duties the holders request to be performed that are outside of those expressly provided for in the applicable deposit agreement.

 

Resignation and Removal of Depositary

 

A depositary may resign at any time by delivering to us notice of its election to do so. In addition, we may at any time remove a depositary. Any resignation or removal will take effect when we appoint a successor depositary and it accepts the appointment. We must appoint a successor depositary within 60 days after delivery of the notice of resignation or removal.

Miscellaneous

 

A depositary will be required to forward to holders of depositary receipts any reports and communications from us that it receives with respect to the related preferred shares. Holders of depositary receipts will be able to inspect the transfer books of the depositary and the list of holders of depositary receipts upon reasonable notice.

 

Neither a depositary nor our company will be liable if it is prevented from or delayed in performing its obligations under a deposit agreement by law or any circumstances beyond its control. Our obligations and those of the depositary under a deposit agreement will be limited to performing duties in good faith and without gross negligence or willful misconduct. Neither we nor any depositary will be obligated to prosecute or defend any legal proceeding in respect of any depositary receipts, depositary shares or related preferred shares unless satisfactory indemnity is furnished. We and each depositary will be permitted to rely on written advice of counsel or accountants, on information provided by persons presenting preferred shares for deposit, by holders of depositary receipts, or by other persons believed in good faith to be competent to give the information, and on documents believed in good faith to be genuine and signed by a proper party.

 

If a depositary receives conflicting claims, requests or instructions from any holders of depositary receipts, on the one hand, and us, on the other hand, the depositary shall be entitled to act on the claims, requests or instructions received from us.

 

The following is a summary of the material terms of our warrants and the warrant agreement. Because it is a summary, it does not contain all of the information that may be important to you. If you want more information, you should read the forms of warrants and the warrant agreement which we will file as exhibits to the registration statement of which this prospectus is part. See “Available Information.” This summary also is subject to and qualified by reference to the descriptions of the particular terms of the securities described in the applicable prospectus supplement or other applicable offering materials and the terms of the applicable final warrant agreement and warrants.

 

We may issue, together with any other securities being offered or separately, warrants entitling the holder to purchase from or sell to us, or to receive from us the cash value of the right to purchase or sell, debt securities, preferred shares, depositary shares or common shares. We and a warrant agent will enter a warrant agreement pursuant to which the warrants will be issued. The warrant agent will act solely as our agent in connection with the warrants and will not assume any obligation or relationship of agency or trust for or with any holders or beneficial owners of warrants. We will file a copy of the forms of warrants and the warrant agreement with the SEC at or before the time of the offering of the applicable series of warrants.

 

In the case of each series of warrants, the applicable prospectus supplement or other applicable offering materials will describe the terms of the warrants being offered thereby. These include the following, if applicable:

 

 

Warrants may be exercised at the appropriate office of the warrant agent or any other office indicated in the applicable prospectus supplement or other applicable offering materials. Before the exercise of warrants, holders will not have any of the rights of holders of the securities purchasable upon exercise and will not be entitled to payments made to holders of those securities.

The warrant agreement may be amended or supplemented without the consent of the holders of the warrants to which the amendment or supplement applies to effect changes that are not inconsistent with the provisions of the warrants and that do not adversely affect the interests of the holders of the warrants. However, any amendment that materially and adversely alters the rights of the holders of warrants will not be effective unless the holders of at least a majority of the applicable warrants then outstanding approve the amendment. Every holder of an outstanding warrant at the time any amendment becomes effective, by continuing to hold the warrant, will be bound by the applicable warrant agreement as amended thereby. The prospectus supplement or other offering materials applicable to a particular series of warrants may provide that certain provisions of the warrants, including the securities for which they may be exercisable, the exercise price, and the expiration date, may not be altered without the consent of the holder of each warrant.

 

We are organized as a Maryland real estate investment trust. The following is a summary of our Declaration of Trust and Bylaws and several provisions of Maryland law. Because it is a summary, it does not contain all the information that may be important to you. If you want more information, you should read our entire Declaration of Trust and Bylaws, copies of which we have previously filed with the SEC, or refer to the provisions of Maryland law. See “Available Information” for information about how to obtain copies of our Declaration of Trust and Bylaws.

 

Trustees

 

Our Declaration of Trust and Bylaws provide that only our Board of Trustees will establish the number of Trustees, provided however that the term of office of a Trustee will not be affected by any decrease in the number of Trustees. Any vacancy on the Board of Trustees may be filled only by a majority of the remaining Trustees, even if the remaining trustees do not constitute a quorum, or by the sole Trustee. Any Trustee elected to fill a vacancy will hold office until the next annual meeting of shareholders and until a successor is elected and qualified.

 

Our Declaration of Trust divides our Board of Trustees into three classes. Shareholders elect the Trustees of each class for three-year terms upon the expiration of their current terms. Shareholders elect only one class of Trustees each year.

 

We believe that classification of our Board of Trustees helps to assure the continuity of our business strategies and policies. There is no cumulative voting in the election of Trustees. Consequently, at each annual meeting of shareholders, the holders of a majority of our common shares are able to elect all of the successors of the class of Trustees whose term expires at that meeting. The classified Board of Trustees provision could have the effect of making the replacement of our incumbent Trustees more time consuming and difficult. At least two annual meetings of shareholders are generally required to effect a change in a majority of our Board of Trustees.

 

Our Declaration of Trust provides that, subject to the rights of holders of one or more classes of preferred shares to elect or remove one or more Trustees, a Trustee may be removed for cause by the affirmative vote of the holders of at least two-thirds of our common shares entitled to be cast in the election of trustees. This provision precludes shareholders from removing our incumbent Trustees unless cause, as defined in the Declaration of Trust, exists, and they can obtain a substantial affirmative vote of shares.

 

Advance Notice of Trustee Nominations and New Business

 

Our Bylaws provide that nominations of persons for election to our Board of Trustees and business to be transacted at shareholder meetings may be properly brought pursuant to our notice of the meeting, by our Board of Trustees, or by a shareholder who (i) is a shareholder of record at the time of giving the advance notice and at the time of the meeting, (ii) is entitled to vote at the meeting and (iii) has complied with the advance notice provisions set forth in our Bylaws.

 

Under our Bylaws, a shareholder’s notice of nominations for Trustee or business to be transacted at an annual meeting of shareholders must be delivered to our secretary at our principal office not later than the close of business on the 60th day and not earlier than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting. In the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary date of the preceding year’s annual meeting, a shareholder’s notice must be delivered to us not earlier than the close of business on the 90th day prior to such annual meeting and not later than the later of: (i) the 60th day prior to such annual meeting, or (ii) the 10th day following the day on which we first make a public announcement of the date of such meeting. The public announcement of a postponement or of an adjournment of such annual meeting to a later date or time will not commence a new time period for the giving of a shareholder’s notice. If the number of Trustees to be elected to our Board of Trustees is increased and we make no public announcement of such action at least 70 days prior to the first anniversary of the preceding year’s annual meeting, a shareholder’s notice also will be considered timely, but only with respect to nominees for any new positions created by such increase, if the notice is delivered to our secretary at

our principal office not later than the close of business on the 10th day immediately following the day on which such public announcement is made.

 

For special meetings of shareholders, our Bylaws require a shareholder who is nominating a person for election to our Board of Trustees at a special meeting at which Trustees are to be elected to give notice of such nomination to our secretary at our principal office not earlier than the close of business on the 90th day prior to such special meeting and not later than the close of business on the later of: (1) the 60th day prior to such special meeting or (2) the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Trustees to be elected at such meeting. The public announcement of a postponement or adjournment of a special meeting to a later date or time will not commence a new time period for the giving of a shareholder’s notice as described above.

 

Meetings of Shareholders

 

Under our Bylaws, our annual meeting of shareholders will take place during the second quarter of each year following delivery of the annual report. Our Chairman, President, or one-third of our Trustees may call a special meeting of the shareholders. Our secretary also may call a special meeting of shareholders upon the written request of holders of at least a majority of the shares entitled to vote at the meeting.

 

Liability and Indemnification of Trustees and Officers

 

The laws relating to Maryland real estate investment trusts (the “Maryland REIT Law”) permit a real estate investment trust to indemnify and advance expenses to its trustees, officers, employees and agents to the same extent permitted by the Maryland General Corporation Law (the “MGCL”) for directors and officers of Maryland corporations. The MGCL permits a corporation to indemnify its present and former directors and officers against judgments, penalties, fines, settlements and reasonable expenses incurred in connection with any proceeding to which they may be made, or are threatened to be made, a party by reason of their service in those capacities. However, a Maryland corporation is not permitted to provide this type of indemnification if the following is established:

 

 

Additionally, a Maryland corporation may not indemnify a director or officer for an adverse judgment in a suit by or in the right of that corporation or for a judgment of liability on the basis that personal benefit was improperly received, unless in either case a court orders indemnification and then only for expenses. The MGCL permits a corporation to advance reasonable expenses to a director or officer upon the corporation’s receipt of the following:

 

 

Our officers and trustees are and will be indemnified under our Declaration of Trust against certain liabilities. Our Declaration of Trust provides that we will, to the maximum extent permitted by Maryland law in effect from time to time, indemnify: (a) any individual who is a present or former trustee or officer of EPR; or (b) any individual who, while a trustee or officer of EPR and at the request of EPR, serves or has served as a director, officer, shareholder, partner, trustee, employee or agent of any real estate investment trust, corporation, partnership, joint venture, trust, employee benefit plan or any other enterprises against any claim or liability, together with reasonable expenses actually incurred in advance of a final disposition of a legal proceeding, to which such person may become subject or which such person may incur by reason of his or her status as such. We have the power, with the approval of our Board of Trustees, to provide such indemnification and advancement of expenses to a person who served a

predecessor of EPR in any of the capacities described in (a) or (b) above and to any employee or agent of EPR or its predecessors.

 

We have also entered into indemnification agreements with our trustees and certain of our officers providing for procedures for indemnification by us to the fullest extent permitted by law and advancements by us of certain expenses and costs relating to claims, suits or proceedings arising from their service to us.

 

We have obtained trustee’s and officers’ liability insurance for the purpose of funding the provision of any such indemnification.

 

The SEC has expressed the opinion that indemnification of trustees, officers or persons otherwise controlling a company for liabilities arising under the Securities Act is against public policy and is therefore unenforceable.

 

Shareholder Liability

 

Under Maryland law, a shareholder is not personally liable for the obligations of a real estate investment trust solely as a result of his or her status as a shareholder. Despite this, our legal counsel has advised us that in some jurisdictions the possibility exists that shareholders of a trust entity such as ours may be held liable for acts or obligations of the trust. While we intend to conduct our business in a manner designed to minimize potential shareholder liability, we can give no assurance that you can avoid liability in all instances in all jurisdictions. Our Trustees have not provided in the past and do not intend to provide insurance covering these risks to our shareholders.

 

Actions by Shareholders by Written Consent

 

Our Bylaws provide procedures governing actions by shareholders by written consent. The Bylaws specify that any written consents must be signed by shareholders entitled to cast a sufficient number of votes to approve the matter, as required by statute, our Declaration of Trust or our Bylaws, and such consent must be filed with minutes of the proceedings of the shareholders.

 

Restrictions on Ownership and Transfer of Shares

 

Our Declaration of Trust restricts the number of shares which may be owned by shareholders. Generally, for us to qualify as a REIT under the Code, not more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals (defined in the Code to include certain entities and constructive ownership among specified family members) at any time during the last half of a taxable year. The shares also must be beneficially owned by 100 or more persons during at least 335 days of a taxable year. In order to maintain our qualification as a REIT, our Declaration of Trust contains restrictions on the acquisition of shares intended to ensure compliance with these requirements.

 

Our Declaration of Trust generally provides that any person (not just individuals) holding more than 9.8% in number of shares or value, of the outstanding shares of any class or series of our common stock or preferred stock (the “Ownership Limit”) may be subject to forfeiture of the shares (including common shares and preferred shares) owned in excess of the Ownership Limit. We refer to the shares in excess of the Ownership Limit as “Excess Shares.” The Excess Shares may be transferred to a trust for the benefit of one or more charitable beneficiaries. The trustee of that trust would have the right to vote the voting Excess Shares, and dividends on the Excess Shares would be payable to the trustee for the benefit of the charitable beneficiaries. Holders of Excess Shares would be entitled to compensation for their Excess Shares, but that compensation may be less than the price they paid for the Excess Shares. Persons who hold Excess Shares or who intend to acquire Excess Shares must provide written notice to us.

 

Our Ownership Limit may also act to deter an unfriendly takeover of the Company.

 

Business Combinations

 

The MGCL contains a provision which regulates business combinations with interested shareholders. This provision applies to Maryland real estate investment trusts like us. Under the MGCL, business combinations such as

mergers, consolidations, share exchanges and the like between a Maryland real estate investment trust and an interested shareholder or an affiliate of an interested shareholder are prohibited for five years after the most recent date on which the shareholder becomes an interested shareholder. Under the MGCL the following persons are deemed to be interested shareholders:

 

 

After the five-year prohibition period has ended, a business combination between a trust and an interested shareholder must be recommended by the board of trustees of the trust and must receive the following shareholder approvals:

 

 

The shareholder approvals discussed above are not required if the trust’s shareholders receive the minimum price set forth in the MGCL for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for its shares.

 

The foregoing provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by the board of trustees of the trust prior to the time that the interested shareholder becomes an interested shareholder. A person is not an interested shareholder under the MGCL if the board of trustees approved in advance the transaction by which the person otherwise would have become an interested shareholder. The board of trustees may provide that its approval is subject to compliance with any terms and conditions determined by the board of trustees.

 

Control Share Acquisitions

 

The MGCL contains a provision which regulates control share acquisitions. This provision also applies to Maryland real estate investment trusts. The MGCL provides that control shares of a Maryland real estate investment trust acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquiror, by officers or by trustees who are employees of the trust are excluded from shares entitled to vote on the matter. Control shares are voting shares which, if aggregated with all other shares owned by the acquiror, or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing trustees within one of the following ranges of voting power:

 

 

Control shares do not include shares which the acquiring person is entitled to vote as a result of having previously obtained shareholder approval. A control share acquisition means the acquisition of control shares, subject to certain exceptions.

 

A person who has made or proposes to make a control share acquisition may compel the board of trustees to call a special meeting of shareholders to be held within 50 days of 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, the trust may itself present the question at any shareholders meeting.

 

If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the MGCL, then the trust may redeem for fair value any or all of the control shares, except those for which voting rights have previously been approved. The right of the trust to redeem control shares is subject to conditions and limitations. 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 shareholders at which the voting rights of the shares are considered and not approved. If voting rights for control shares are approved at a shareholders meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other shareholders may exercise appraisal rights. The fair value of the shares as determined for purposes of 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 of the MGCL does not apply to the following:

 

 

Anti-Takeover Effect of Maryland Law and of Our Declaration of Trust and Bylaws

 

The following provisions in our Declaration of Trust and Bylaws and in Maryland law could delay or prevent a change in control of EPR:

 

 

The following discussion summarizes the material United States (“U.S.”) federal income tax considerations regarding EPR and the acquisition, ownership and disposition of our securities. If we offer debt securities, depositary shares or warrants, information about any additional income tax consequences to holders of those securities will be included in the prospectus supplement or other applicable offering materials under which those securities are offered.

 

This summary is based on current law, is for general information only and is not tax advice. The tax treatment to holders of our securities will vary depending on a holder’s particular situation. This summary does not address all aspects of federal income taxation that may be relevant to a holder of securities in light of his or her personal investments or tax circumstances. Moreover, this summary does not address tax considerations applicable to certain types of holders subject to special treatment under the federal income tax laws (including, without limitation dealers or traders in securities, financial institutions, insurance companies and shareholders that hold our stock as part of a hedge, straddle, conversion transaction or other arrangement) except to the extent discussed under the subheadings “— Taxation of Tax-Exempt Shareholders” and “— Taxation of Non-U.S. shareholders.” In addition, the summary below does not consider the effect of any foreign, state, local or other tax laws that may be applicable to holders of our shares.

 

The information in this section is based on the U.S. Internal Revenue Code (the “Code”), current, temporary and proposed Treasury Regulations promulgated under the Code, the legislative history of the Code, current administrative interpretations and practices of the Internal Revenue Service (the “IRS”), and court decisions, all as of the date of this prospectus. Future legislation, Treasury Regulations, administrative interpretations and practices and court decisions may adversely affect, perhaps retroactively, the tax considerations described herein. We have not requested, and do not plan to request, any rulings from the IRS concerning our tax treatment and the statements in this prospectus are not binding on the IRS or any court. Thus, we can provide no assurance that these statements will not be challenged by the IRS or sustained by a court if challenged by the IRS.

 

You are advised to consult your tax advisor regarding the specific tax consequences to you of the acquisition, ownership and sale of our securities, and of our election to be taxed as a REIT, including the federal, state, local, foreign and other tax consequences of such acquisition, ownership, sale and election and of potential changes in applicable tax laws.

 

Taxation of the Company

 

General

 

We elected to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ended December 31, 1997. We believe we have been organized and have operated in a manner which allows us to qualify for taxation as a REIT under the Code commencing with our taxable year ended December 31, 1997. We intend to continue to operate in this manner.

 

In the opinion of Stinson Morrison Hecker LLP, we have qualified as a REIT under the Code for our taxable years ended December 31, 1997 through December 31, 2006, we are organized in conformity with the requirements for qualification as a REIT, and our current and proposed method of operation will enable us to meet the requirements for qualification and taxation as a REIT under the Code for our taxable year ending December 31, 2007 and for future taxable years. It must be emphasized that this opinion is based upon certain assumptions and representations as to factual matters made by us, including representations made by us in a representation letter and certificate provided by our officers and our factual representations set forth herein and in registration statements previously filed with the SEC. Any variation from the factual statements set forth herein, in registration statements previously filed with the SEC, or in the representation letter and certificate we have provided to Stinson Morrison Hecker LLP may affect the conclusions upon which its opinion is based.

 

The opinions of Stinson Morrison Hecker LLP are based on existing law as contained in the Code and Treasury Regulations promulgated thereunder, in effect on the date of this prospectus, and the interpretations of such provisions and Treasury Regulations by the IRS and court decisions, all of which are subject to change either prospectively or retroactively, and to possibly different interpretations. Stinson Morrison Hecker LLP will have no

obligation to advise us or the holders of our securities 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 the opinions expressed are not binding upon the IRS or any court. Accordingly, there can be no assurance that contrary positions may not successfully be asserted by the IRS. Moreover, our qualification and taxation as a REIT depends upon our ability, through actual annual operating results and methods of operation, to satisfy various qualification tests imposed under the Code, such as distributions to shareholders, asset composition levels, and diversity of stock ownership, the actual results of which have not been and will not be reviewed by Stinson Morrison Hecker LLP. In addition, our ability to qualify as a REIT also depends in part upon the operating results, organizational structure and entity classification for federal income tax purposes of certain affiliated entities, including affiliates that have made elections to be taxed as REITs, and for whom the actual results of the various REIT qualification tests have not been and will not be reviewed by Stinson Morrison Hecker LLP.

 

Accordingly, no assurance can be given that the actual results of our operations for any particular taxable year will satisfy such requirements for qualification and taxation as a REIT.

 

If we qualify for taxation as a REIT, we generally will not be subject to federal corporate income taxes on our taxable income that is distributed currently to our shareholders. This treatment substantially eliminates the “double taxation” (once at the corporate level when earned and once again at the shareholders’ level when distributed) that generally results from investment in an ordinary Subchapter C corporation. However, we will be subject to federal income tax as follows:

 

First, we will be taxed at regular corporate rates on any undistributed REIT taxable income, including undistributed net capital gains.

 

Second, we may be subject to the “alternative minimum tax” on our items of tax preference under certain circumstances.

 

Third, if we have (a) net income from the sale or other disposition of “foreclosure property” (defined generally as property we acquired through foreclosure or after a default on a loan secured by the property or a lease of the property) which is held primarily for sale to customers in the ordinary course of business or (b) other nonqualifying income from foreclosure property, we will be subject to tax at the highest U.S. federal corporate income tax rate on this income.

 

Fourth, we will be subject to a 100% tax on any net income from prohibited transactions (which are, in general, certain sales or other dispositions of property (other than foreclosure property) held primarily for sale to customers in the ordinary course of business).

 

Fifth, if we fail to satisfy the 75% or 95% gross income tests (as discussed below), but have maintained our qualification as a REIT because we satisfied certain other requirements, we will be subject to a 100% tax on an amount equal to (a) the gross income attributable to the greater of the amounts by which we fail the 75% or 95% gross income tests multiplied by (b) a fraction intended to reflect our profitability.

 

Sixth, if we fail to distribute during each calendar year at least the sum of (a) 85% of our REIT ordinary income for the year, (b) 95% of our REIT capital gain net income for the year (other than certain long-term capital gains for which we make a capital gains designation (described below) and on which we pay the tax), and (c) any undistributed taxable income from prior periods, we would be subject to a 4% excise tax on the excess of the required distribution over the amounts actually distributed.