Global Self Storage, Inc S-3, filed Nov 26, 2021
Global Self Storage, Inc. (SELF)
S-3
2021-11-26
View Original
Added on
October 26, 2026
As filed with the Securities and Exchange Commission on November 26, 2021
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Global Self Storage, Inc.
(Exact name of Registrant as specified in its charter)
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Maryland
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13-3926714
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(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
3814 Route 44
Millbrook, NY 12545
(212) 785-0900
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Donald Klimoski II, Esq.
Global Self Storage, Inc.
3814 Route 44
Millbrook, NY 12545
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Jason D. Myers, Esq.
Robert Matthew Worden, Esq.
Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019
(212) 878-8000
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of the Registration Statement as determined by market conditions.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: ☐
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933,
other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the
Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☐
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or
additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☒
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Smaller reporting company ☒
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Emerging growth company ☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Exchange Act.
CALCULATION OF REGISTRATION FEE
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Title of each class of securities to be registered(1)(2)
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Amount to be registered
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Proposed Maximum Aggregate Offering Price(6)
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Amount of
Registration Fee(7) |
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Common Stock, Preferred Stock, Depositary Shares,(3) Warrants and Rights
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(4) (5)
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$100,000,000
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$9,270
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This registration statement also covers delayed delivery contracts which may be issued by the registrant under which the counterparty may be required to purchase common stock, preferred stock, depositary shares, warrants or rights. Such
contracts may be issued together with the specific securities to which they relate. In addition, securities registered hereunder may be sold separately, together or as units with other securities registered hereunder.
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Subject to footnote (6), there is being registered hereunder an indeterminate amount of common stock, preferred stock, depositary shares, warrants and rights as may be sold, from time to time, by the registrant.
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Each depositary share will be issued under a deposit agreement and will represent an interest in a share of preferred stock and will be evidenced by a depositary receipt.
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Omitted pursuant to General Instruction II.D to Form S-3, under the Securities Act of 1933, as amended.
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Calculated pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
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Estimated solely for purposes of calculating the registration fee. No separate consideration will be received for common stock that are issued upon conversion of depositary shares or preferred stock or upon exercise of common stock warrants
registered hereunder. The aggregate maximum offering price of all securities issued pursuant to this registration statement will not exceed $100,000,000.
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The registration fee has been calculated in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Pursuant to Rule 457(p) of the rules and regulations under the Securities Act of 1933, as amended, a portion of the
Registration Fee of $9,270 due for the registration of the securities to be registered pursuant to this registration statement is offset by $4,412 of the registration fee previously paid by the registrant under Registration Statement No.
333-227879, which was initially filed on December 4, 2018 and declared effective on December 7, 2018.
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The registrant hereby amends this registration statement on the date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any
jurisdiction where an offer or sale is not permitted.
Subject to Completion, dated November 26, 2021
PROSPECTUS
$100,000,000
GLOBAL SELF STORAGE, INC.
Common Stock,
Preferred Stock,
Depositary Shares,
Warrants,
and
Rights
We may from time to time offer, in one or more series or classes, separately or together, and in amounts, at prices and on terms to be set forth in one or more
supplements to this prospectus, the following securities:
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shares of our common stock, par value $0.01 per share ("common stock");
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shares of our preferred stock, par value $0.01 per share ("preferred stock");
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depositary shares representing entitlement to all rights and preferences of fractions of preferred stock of a specified class or series and represented by depositary
receipts;
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warrants to purchase common stock, preferred stock or depositary shares; and
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rights to purchase common stock or preferred stock.
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We refer to the common stock, preferred stock, depositary shares, warrants and rights, collectively, as the "securities" in this prospectus. The securities will
have an aggregate initial offering price of up to $100,000,000, or its equivalent in a foreign currency based on the exchange rate at the time of sale, in amounts, at initial prices and on terms determined at the time of the offering.
The specific terms of the securities will be set forth in the applicable prospectus supplement and will include, as applicable: (i) in the case of our common stock,
any public offering price; (ii) in the case of our preferred stock, the specific designation and any dividend, liquidation, redemption, conversion, voting and other rights, and any public offering price; (iii) in the case of depositary shares, the
fractional preferred stock represented by each such depositary share and designation and terms of the relevant class or series of preferred stock; (iv) in the case of warrants, the duration, offering price, exercise price and detachability and type and
terms of security deliverable upon exercise; and (v) in the case of rights, the number being issued, the exercise price and the expiration date and type and terms of security deliverable upon exercise.
The applicable prospectus supplement will also contain information, where applicable, about certain U.S. federal income tax consequences relating to, and any listing
on a securities exchange of, the securities covered by such prospectus supplement. It is important that you read both this prospectus and the applicable prospectus supplement before you invest.
We may offer the securities directly, through agents, or to or through underwriters. The prospectus supplement will describe the terms of the plan of distribution
and set forth the names of any underwriters involved in the sale of the securities. See "Plan of Distribution" beginning on page 7 for more information on this topic. No securities may be sold without delivery of this prospectus and a prospectus
supplement describing the method and terms of the offering of those securities.
Our common stock is listed on the Nasdaq Stock Market ("NASDAQ"), under the symbol "SELF." On November 22, 2021, the closing sale price of our common stock on
NASDAQ was $5.39 per share.
The aggregate market value of the shares of our common stock held by non-affiliates, computed by reference to the highest price at which a share of our common stock
was last sold or the average bid and asked price of a share of our common stock within the 60-day period ending on the date of the filing of the registration statement of which this prospectus is a part, was $54,362,636 based
on 9,884,116 outstanding shares of our common stock held by non-affiliates. Pursuant to General Instruction I.B.6 of Form S-3, in no event will we sell securities in a public primary offering with a value
exceeding more than one-third of our public float in any 12-month period so long as our public float remains below $75.0 million.
Investing in these securities involves risks. You should carefully read the risk factors beginning on page 3 of this prospectus and in our Securities and Exchange
Commission filings, including those described under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 10-K"), in any prospectus supplement, and in any documents incorporated by reference herein or therein,
before investing in our securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon
the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is November 26, 2021.
TABLE OF CONTENTS
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| ABOUT THIS PROSPECTUS |
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SUMMARY INFORMATION
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2
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| RISK FACTORS |
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FORWARD-LOOKING STATEMENTS
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| USE OF PROCEEDS |
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PLAN OF DISTRIBUTION
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DESCRIPTION OF SECURITIES
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8
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| DESCRIPTION OF COMMON STOCK |
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DESCRIPTION OF PREFERRED STOCK
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| DESCRIPTION OF DEPOSITARY SHARES |
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| DESCRIPTION OF WARRANTS |
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DESCRIPTION OF RIGHTS
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| CERTAIN PROVISIONS OF THE MARYLAND GENERAL CORPORATION LAW AND OUR CHARTER AND BYLAWS |
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| U.S. FEDERAL INCOME TAX CONSIDERATIONS |
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| BOOK-ENTRY SECURITIES |
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| LEGAL MATTERS |
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EXPERTS
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| WHERE YOU CAN FIND MORE INFORMATION |
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| PART II INFORMATION NOT REQUIRED IN PROSPECTUS |
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| EXHIBIT INDEX | 57 |
ABOUT THIS PROSPECTUS
This prospectus is part of a shelf registration statement. Under this shelf registration statement, we may sell any combination of common stock, preferred stock, depositary
shares, warrants and rights in one or more offerings. You should rely only on the information provided or incorporated by reference in this prospectus, any accompanying prospectus supplement or any free writing prospectus. We have not authorized
anyone to provide you with different or additional information. We are not making an offer to sell these securities in any jurisdiction where the offer or sale of these securities is not permitted. You should not assume that the information appearing
in this prospectus, any accompanying prospectus supplement or any free writing prospectus or the documents incorporated by reference herein or therein is accurate as of any date other than their respective dates. Our business, financial condition,
results of operations and prospects may have changed since those dates. You should read carefully the entirety of this prospectus, any accompanying prospectus supplement or any free writing prospectus, as well as the documents incorporated by
reference herein or therein before making an investment decision.
In this prospectus, unless otherwise specified or the context requires otherwise, we use the terms "company," "we," "us" and "our" to refer to Global Self Storage, Inc., a Maryland
corporation, together with its subsidiaries.
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SUMMARY INFORMATION
Global Self Storage, Inc., a Maryland corporation, is a self-administered and self-managed real estate investment trust ("REIT") that owns, operates, manages, acquires, and
redevelops self storage properties in the United States. Our properties are designed to offer affordable, easily accessible, and secure storage space for residential and commercial customers. We currently own and/or manage thirteen properties located
in Connecticut, Illinois, Indiana, New York, Ohio, Pennsylvania, South Carolina, and Oklahoma. On January 19, 2016, we changed our name to Global Self Storage, Inc. from Self Storage Group, Inc., changed our Securities and Exchange Commission (the
"SEC") registration from an investment company to an operating company reporting under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and listed our common stock on NASDAQ under the symbol "SELF". We have elected and we believe
we have qualified to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2013.
Our principal corporate offices are located at 3814 Route 44, Millbrook, NY 12545. Our telephone number is (212) 878-0900. Our website is www.globalselfstorage.us. The
information on our website is not intended to form a part of or be incorporated by reference into this prospectus.
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RISK FACTORS
Investing in our securities involves a high degree of risk. Before making an investment decision, you should carefully consider the risk factors described in the section “Risk Factors” contained in our 2020 10-K and in subsequent periodic reports which we file with the SEC, as well as risk factors and other
information in this prospectus, any accompanying prospectus supplement or any free writing prospectus incorporated by reference herein or therein before purchasing any of our securities. Any of these risks described could materially adversely affect
our business, financial condition, results of operations, tax status or ability to make distributions to our stockholders. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially
and adversely affect our business operations. If this were to happen, the price of our securities could decline significantly, and you could lose a part or all of your investment. See "Where You Can Find More Information" beginning on page 51 of
this prospectus.
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FORWARD-LOOKING STATEMENTS
Certain information presented in this prospectus may contain "forward-looking statements" within the meaning of the federal securities laws including, but not
limited to, the Private Securities Litigation Reform Act of 1995. Forward looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs,
plans or intentions relating to acquisitions and other information that is not historical information. In some cases, forward looking statements can be identified by terminology such as "believes," "plans," "intends," "expects," "estimates," "may,"
"will," "should," or "anticipates" or the negative of such terms or other comparable terminology, or by discussions of strategy. All forward-looking statements by the company involve known and unknown risks, uncertainties and other factors, many of
which are beyond the control of the company, which may cause the company's actual results to be materially different from those expressed or implied by such statements. We may also make additional forward-looking statements from time to time. All
such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements. All forward-looking statements, including without limitation, management's examination of
historical operating trends and estimates of future earnings, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them,
but there can be no assurance that management's expectations, beliefs and projections will result or be achieved.
All forward looking statements apply only as of the date made. Except as may be required by law, we undertake no obligation to publicly update or revise forward looking statements
which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-
looking statements contained in or contemplated by this prospectus.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this
prospectus. Any forward-looking statements should be considered in light of the risks referenced in "Risk Factors" beginning on page 3 of this prospectus and in "Item 1A. Risk Factors" included in the 2020 10-K and in the other documents that we file
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus, which will be considered to be incorporated by reference into this prospectus and any accompanying prospectus supplement. Such factors include, but
are not limited to:
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general risks associated with the ownership and operation of real estate, including changes in demand, risks related to development or redevelopment (including expansion) of self storage
properties, potential liability for environmental contamination, natural disasters and adverse changes in tax, real estate and zoning laws and regulations;
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risks associated with downturns in the national and local economies in the markets in which we operate, including risks related to current economic conditions and the economic health of our
customers;
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the impact of competition from new and existing self storage and commercial properties and other storage alternatives;
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difficulties in our ability to successfully evaluate, finance, integrate into our existing operations, and manage acquired and developed properties;
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risks related to our development of new properties and expansions and related lease up at our existing properties and/or participation in joint ventures;
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risks of ongoing litigation and other legal and regulatory actions, which may divert management's time and attention, require us to pay damages and expenses or restrict the operation of
our business;
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the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing the environment, taxes and our tenant
reinsurance business and REITs, and risks related to the impact of new laws and regulations;
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risk of increased tax expense associated either with a possible failure by us to qualify as a REIT, or with challenges to intercompany transactions with our taxable REIT subsidiaries;
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changes in federal or state tax laws related to the taxation of REITs, which could impact our status as a REIT;
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increases in taxes, fees and assessments from state and local jurisdictions;
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security breaches or a failure of our networks, systems or technology;
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our ability to obtain and maintain financing arrangements on favorable terms;
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market trends in our industry, interest rates, the debt and lending markets or the general economy;
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the timing of acquisitions and our ability to execute on our acquisition pipeline;
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general volatility of the securities markets in which we participate;
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changes in the value of our assets;
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changes in interest rates and the degree to which our hedging strategies may or may not protect us from interest rate volatility;
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our ability to continue to qualify and maintain our qualification as a REIT for U.S. federal income tax purposes;
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availability of qualified personnel;
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difficulties in raising capital at a reasonable cost;
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fiscal policies or inaction at the U.S. federal government level, which may lead to federal government shutdowns or negative impacts on the U.S economy;
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estimates relating to our ability to make distributions to our stockholders in the future;
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our ability to receive forgiveness for our proportionate share of the Paycheck Protection Program loan; and
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economic uncertainty due to the impact of terrorism, infectious or contagious diseases or pandemics, or war.
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USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement, we intend to use the net proceeds from the sale of any securities pursuant to this prospectus and any
accompanying prospectus supplement or any free writing prospectus to acquire or develop additional assets, repay indebtedness or for general corporate purposes and working capital. Further details regarding the use of proceeds from the sale of
specific securities will be set forth in the applicable prospectus supplement.
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PLAN OF DISTRIBUTION
We may sell the securities to one or more underwriters for public offering and sale by them or may sell the securities to investors directly or through agents.
Any underwriter or agent involved in the offer and sale of the securities will be named in the applicable prospectus supplement. Underwriters and agents in any distribution contemplated hereby may from time to time be designated on terms to be set
forth in the applicable prospectus supplement.
Underwriters or agents could make sales in privately negotiated transactions and any other method permitted by law. Securities may be sold in one or more of the following
transactions: (a) block transactions (which may involve crosses) in which a broker-dealer may sell all or a portion of the securities as agent but may position and resell all or a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker-dealer as principal and resale by the broker-dealer for its own account pursuant to a prospectus supplement; (c) a special offering, an exchange distribution or a secondary distribution in accordance with applicable NASDAQ or
other stock exchange rules; (d) ordinary brokerage transactions and transactions in which a broker-dealer solicits purchasers; (e) "at the market" offerings or sales "at the market," within the meaning of Rule 415(a)(4) of the Securities Act of 1933,
as amended (the "Securities Act"), to or through a market maker or into an existing trading market on an exchange or otherwise; (f) sales in other ways not involving market makers or established trading markets, including direct sales to purchasers; or
(g) through a combination of any of these methods. Broker-dealers may also receive compensation from purchasers of these securities which is not expected to exceed those customary in the types of transactions involved.
Underwriters or agents may offer and sell the securities at a fixed price or prices, which may be changed in relation to the prevailing market prices at the time of sale or at
negotiated prices. We also may, from time to time, authorize underwriters acting as our agents to offer and sell the securities upon the terms and conditions as are set forth in the applicable prospectus supplement. In connection with the sale of
securities, underwriters or agents may be deemed to have received compensation from us in the form of underwriting discounts or commissions and may also receive commissions from purchasers of securities for whom they may act as agent. Underwriters or
agents may sell securities to or through dealers, and the dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters or the agents and/or commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by us to underwriters or agents in connection with the offering of securities, and any discounts, concessions or commissions allowed by
underwriters or agents to participating dealers, will be set forth in the applicable prospectus supplement. If indicated in the applicable prospectus supplement, we may authorize underwriters or other agents to solicit offers by institutions to
purchase securities from it pursuant to contracts providing for payment and delivery on a future date. Institutions with which it may make these delayed delivery contracts include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and others. Underwriters, dealers and agents participating in the distribution of the securities may be deemed to be underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the securities may be deemed to be underwriting discounts and commissions, under the Securities Act. Underwriters, dealers and agents may be entitled, under agreements entered into with us to indemnification
against and contribution toward civil liabilities, including liabilities under the Securities Act.
We may have agreements with the underwriters, dealers, agents and remarketing firms to indemnify them against certain civil liabilities, including liabilities under the Securities
Act, or to contribute with respect to payments that the underwriters, dealers, agents or remarketing firms may be required to make. Underwriters, dealers, agents and remarketing firms may be customers of, engage in transactions with or perform
services for us in the ordinary course of their businesses.
Any securities issued hereunder (other than common stock) will be new issues of securities with no established trading market. Any underwriters or agents to or through whom such
securities are sold by us for public offering and sale may make a market in such securities, but such underwriters or agents will not be obligated to do so and may discontinue any market making at any time without notice. We cannot assure you as to
the liquidity of the trading market for any such securities.
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DESCRIPTION OF SECURITIES
This prospectus contains summary descriptions of the material terms of the common stock, preferred stock, depositary shares, warrants and rights that we may
offer and sell from time to time. These summary descriptions are not meant to be complete descriptions of each security. The particular terms of any security will be described in the applicable prospectus supplement and are subject to and qualified
in their entirety by reference to Maryland law and our articles of amendment and restatement ("our charter") and second amended and restated bylaws ("our bylaws"). See "Where You Can Find More Information."
Our charter provides that we may issue up to 450,000,000 shares of common stock, $0.01 par value per share, and up to 50,000,000 shares of preferred stock, $0.01 par value per
share. Our charter authorizes our board of directors to amend our charter from time to time to increase or decrease the aggregate number of authorized shares of stock or the number of shares of stock of any class or series that we have authority to
issue without stockholder approval. As of November 26, 2021, 10,708,613 shares of common stock were issued and outstanding. Under Maryland law, stockholders are not generally liable for our debts or
obligations solely as a result of their status as stockholders.
Power to Reclassify Our Unissued Shares of Common Stock
Our charter authorizes our board of directors to classify and reclassify any unissued shares of common or preferred stock into other classes or series of stock. Prior to the
issuance of shares of each class or series, our board of directors is required by Maryland law and by our charter to set, subject to the provisions of our charter regarding restrictions on ownership and transfer of our stock, the preferences,
conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series. Therefore, our board of directors could authorize the issuance
of shares of common or preferred stock with terms and conditions that may have the effect of delaying, deferring or preventing a change in control or other transaction that might involve a premium price for our shares of common stock or otherwise be in
the best interest of our stockholders. No shares of preferred stock are presently outstanding, and we have no present plans to issue any shares of preferred stock.
Power to Increase or Decrease Authorized Shares of Common Stock and Issue
Additional Shares of Common and Preferred Stock
We believe the power of our board of directors to amend our charter from time to time to increase or decrease the number of authorized shares of stock, to issue additional
authorized but unissued shares of common or preferred stock and to classify or reclassify unissued shares of common or preferred stock and thereafter to issue such classified or reclassified shares of stock will provide us with increased flexibility in
structuring possible future financings and acquisitions and in meeting other needs that might arise. The additional classes or series, as well as the additional shares of common stock, will be available for issuance without further action by our
stockholders, unless such approval is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. Although our board of directors does not intend to do so, it could
authorize us to issue a class or series of stock that may, depending upon the terms of the particular class or series, delay, defer or prevent a change in control or other transaction that might involve a premium price for our shares of common stock or
otherwise be in the best interest of our stockholders.
Restrictions on Ownership and Transfer
In order for us to qualify as a REIT under Internal Revenue Code of 1986, as amended (the "Code"), our shares of stock must be beneficially owned by 100 or more persons during at
least 335 days of a taxable year of 12 months (other than the first year for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable year. In addition, no more than 50% of the value of the outstanding shares
of stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of any taxable year (other than the first year for which an election to be a REIT has been made). To
qualify as a REIT, we must satisfy other requirements as well. See "U.S. Federal Income Tax Considerations—Requirements for Qualification—General."
Our charter contains restrictions on the ownership and transfer of our shares of common stock and other outstanding shares of stock. The relevant sections of our charter provide
that no person or entity may own, or be
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deemed to own, by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% in value or number of shares, whichever is more restrictive, of the outstanding shares of our
common stock (the common stock ownership limit), or 9.8% in value or number of shares, whichever is more restrictive, of the outstanding shares of all classes and series of our capital stock (the aggregate stock ownership limit). We refer to the
common stock ownership limit and the aggregate stock ownership limit collectively as the "ownership limits." A person or entity that, but for operation of the ownership limits or another restriction on ownership and transfer of our stock as described
below, would beneficially own or be deemed to beneficially own, by virtue of the applicable constructive ownership provisions of the Code, shares of our stock and/or, if appropriate in the context, a person or entity that would have been the record
owner of such shares of our stock is referred to as a "prohibited owner."
The constructive ownership rules under the Code are complex and may cause shares of stock owned actually or constructively by a group of related individuals and/or entities to be
owned constructively by one individual or entity. As a result, the acquisition of less than 9.8% in value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock or 9.8% in value or number of shares, whichever
is more restrictive, of the outstanding shares of all classes or series of our stock (or the acquisition of an interest in an entity that owns, actually or constructively, shares of our stock) by an individual or entity, could, nevertheless, cause that
individual or entity, or another individual or entity, to own shares constructively in excess of the ownership limits.
Our board of directors may, in its sole and absolute discretion and subject to the receipt of such certain representations, covenants and undertakings deemed reasonably necessary
by the board, prospectively or retroactively, exempt a person from the ownership limits and establish an excepted holder limit for such person. However, our board of directors may not exempt any person whose ownership of our outstanding stock would
result in our being "closely held" within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise would result in our failing to qualify as a REIT. In
order to be considered by the board of directors for exemption, a person also must provide our board of directors with information and undertakings requested by our board of directors that such person does not own, actually or constructively, an
interest in one of our tenants (or a tenant of any entity which we own or control) that would cause us to own beneficially or constructively more than a 9.9% interest in the tenant unless the amount of income derived by us from such tenant would not
adversely affect our ability to qualify as a REIT. The person seeking an exemption must provide representations and undertakings to the satisfaction of our board of directors that it will not violate these restrictions. The person also must agree
that any violation or attempted violation of these restrictions will result in the automatic transfer to a trust of the shares of stock causing the violation. As a condition of its waiver, our board of directors may require an opinion of counsel or
the IRS ruling satisfactory to our board of directors with respect to our qualification as a REIT.
In connection with the waiver of the ownership limits, creating an excepted holder limit or at any other time, our board of directors may, in its sole and absolute discretion, from
time to time increase or decrease the ownership limits subject to the restrictions in the paragraph above; provided, however, that the ownership limits may not be decreased or increased if, after giving effect to such decrease or increase, five or
fewer persons could own or beneficially own in the aggregate, more than 49.9% in value of our shares then outstanding. Prior to the modification of the ownership limits, our board of directors may require such opinions of counsel, affidavits,
undertakings or agreements as it may deem necessary or advisable in order to determine or ensure our qualification as a REIT. Reduced ownership limits will not apply to any person or entity whose percentage ownership in our shares of common stock or
stock of all classes and series, as applicable, is in excess of such decreased ownership limits until such time as such person's or entity's percentage ownership of our common stock or stock of all classes and series, as applicable, equals or falls
below the decreased ownership limits, but any further acquisition of shares of our common stock or stock of all classes and series, as applicable, in excess of such percentage ownership of our shares of common stock or total shares of stock will be in
violation of the ownership limits.
Our charter further prohibits:
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any person from beneficially or constructively owning (taking into account applicable attribution rules under the Code) shares of our stock that would result in our being "closely held"
under Section 856(h) of the Code or otherwise cause us to fail to qualify as a REIT (including, without limitation, any person beneficially or constructively owning shares of our stock that would result in us owning (directly or indirectly)
an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by us from such tenant would cause us to fail to satisfy any of the gross income requirements of Section 856(c) of the Code); and
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any person from transferring our shares of stock if such transfer would result in our shares of stock being beneficially owned by fewer than 100 persons (determined, as a general matter,
without reference to any attribution rules).
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Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of our stock that will or may violate the ownership limits or any of the
foregoing restrictions on ownership and transfer will be required to give written notice immediately to us (or, in the case of a proposed or attempted acquisition, at least 15 days prior written notice to us) and provide us with such other information
as we may request in order to determine the effect of such transfer on our qualification as a REIT.
If any transfer of shares of our stock would result in shares of our stock being beneficially owned by fewer than 100 persons, such transfer will be null and void and the intended
transferee will acquire no rights in such shares. In addition, if any purported transfer of shares of our stock or any other event would otherwise result in any person violating the ownership limits or such other limit established by our board of
directors or in our being "closely held" under Section 856(h) of the Code or otherwise failing to qualify as a REIT, then generally that number of shares (rounded up to the nearest whole share) that would cause us to violate such restrictions will be
automatically transferred to, and held by, a trust for the exclusive benefit of one or more charitable organizations selected by us and the intended transferee will acquire no rights in such shares. The automatic transfer will be effective as of the
close of business on the business day prior to the date of the violative transfer or other event that results in a transfer to the trust. Any dividend or other distribution paid to the prohibited owner, prior to our discovery that the shares had been
automatically transferred to a trust as described above, must be repaid to the trustee upon demand for the benefit of the charitable beneficiary of the trust. If the transfer to the trust as described above is not automatically effective, for any
reason, to prevent violation of the applicable ownership limits, or our being "closely held" under Section 856(h) of the Code or otherwise failing to qualify as a REIT or the ownership and transfer restrictions described above, then our charter
provides that the transfer of the shares will be null and void.
Shares of stock transferred to the trustee are deemed offered for sale to us, or our designee, at a price per share equal to the lesser of (i) the price paid by the prohibited
owner for the shares (or, in the event of a gift, devise or other such transaction, the last reported sales price reported on NASDAQ (or other applicable exchange) at the time of the gift, devise or other such transaction) and (ii) the market price on
the date we, or our designee, accepts such offer. We have the right to accept such offer until the trustee has sold the shares of our stock held in the trust pursuant to the clauses discussed below. Upon a sale to us, the interest of the charitable
beneficiary in the shares sold terminates, the trustee must distribute the net proceeds of the sale to the prohibited owner, but the trustee may reduce the amount payable to the prohibited owner by the amount of dividends and other distributions which
have been paid to the prohibited owner and are owed by the prohibited owner to the trustee. To the extent the prohibited owner would receive an amount for such shares that exceeds the amount that such prohibited owner would have been entitled to
receive had the trustee sold the shares held in the trust to a third party, such excess shall be retained by the trustee for the benefit of the charitable beneficiary.
If we do not buy the shares, the trustee must, within 20 days of receiving notice from us of the transfer of shares to the trust, use best efforts to sell the shares to a person
designated by the trustee who could own the shares without violating the ownership limitations set forth in the charter. Upon such sale, the trustee must distribute to the prohibited owner an amount equal to the lesser of (i) the price paid by the
prohibited owner for the shares (or, in the event of a gift, devise or other such transaction, the last reported sales price reported on NASDAQ (or other applicable exchange) on the day of the event which resulted in the transfer of such shares of
stock to the trust) and (ii) the sales proceeds (net of commissions and other expenses of sale) received by the trustee for the shares. The trustee will reduce the amount payable to the prohibited owner by the amount of dividends and other
distributions which have been paid to the prohibited owner and are owed by the prohibited owner to the trustee. Any net sales proceeds in excess of the amount payable to the prohibited owner will be immediately paid to the beneficiary of the trust and
any dividend or other distribution paid to trustee shall be held in trust for the charitable beneficiary. In addition, if, prior to discovery by us that shares of stock have been transferred to a trust, such shares of stock are sold by a prohibited
owner, then such shares will be deemed to have been sold on behalf of the trust and to the extent that the prohibited owner received an amount for such shares that exceeds the amount that such prohibited owner was entitled to receive,
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such excess amount will be paid to the trustee upon demand. The prohibited owner has no rights in the shares held by the trustee.
The trustee will be designated by us and will be unaffiliated with us and with any prohibited owner. Prior to the sale of any shares by the trust, the trustee will receive, in
trust for the beneficiary of the trust, all dividends and other distributions paid by us with respect to the shares held in trust and may also exercise all voting rights with respect to the shares held in trust. These rights will be exercised for the
exclusive benefit of the beneficiary of the trust. Any dividend or other distribution paid prior to our discovery that shares of stock have been transferred to the trust will be paid by the recipient to the trustee upon demand. Any dividend or other
distribution authorized but unpaid will be paid when due to the trustee.
Subject to Maryland law, effective as of the date that the shares have been transferred to the trust, the trustee will have the authority, at the trustee's sole discretion:
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to rescind as void any vote cast by a prohibited owner prior to our discovery that the shares have been transferred to the trust; and
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to recast the vote in accordance with the desires of the trustee acting for the benefit of the beneficiary of the trust.
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However, if we have already taken irreversible corporate action, then the trustee may not rescind and recast the vote.
In addition, if our board of directors determine that a proposed transfer would violate the restrictions on ownership and transfer of our shares of stock set forth in our charter,
our board of directors will take such action as it deems or they deem advisable to refuse to give effect to or to prevent such transfer, including, but not limited to, causing us to redeem the shares of stock, refusing to give effect to the transfer on
our books or instituting proceedings to enjoin the transfer.
Every owner of 5% or more (or such lower percentage as required by the Code or the regulations promulgated thereunder) of our stock, within 30 days after the end of each taxable
year, is required to give us written notice, stating the stockholder's name and address, the number of shares of each class and series of our stock that the stockholder beneficially or constructively owns and a description of the manner in which the
shares are held. Each such owner must provide us with such additional information as we may request in order to determine the effect of the stockholder's beneficial or constructive ownership on our qualification as a REIT and to ensure compliance with
the ownership limits. In addition, each stockholder must provide us with such information as we may request in good faith in order to determine our qualification as a REIT and to comply with the requirements of any taxing authority or governmental
authority or to determine such compliance.
Any certificates, or written statements of information delivered in lieu of certificates, representing shares of our stock will bear a legend referring to the restrictions
described above.
These restrictions on ownership and transfer will not apply if our board of directors determines that it is no longer in our best interests to qualify as a REIT or that compliance
with such provisions is no longer required for REIT qualification.
These ownership limits could delay, defer or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best
interest of our stockholders.
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DESCRIPTION OF COMMON STOCK
The following is a summary of the material terms of our shares of common stock. This summary does not purport to be complete and is subject to and qualified in
its entirety by reference to the MGCL, our charter and bylaws. See "Where You Can Find More Information."
Common Stock
All shares of common stock issued and outstanding are fully paid and nonassessable. Subject to the preferential rights of any other class or series of our stock and to the
provisions of our charter regarding the restrictions on ownership and transfer of our stock, holders of shares of common stock are entitled to receive distributions on such shares of common stock out of assets legally available therefor if, as and when
authorized by our board of directors and declared by us, and the holders of our shares of common stock are entitled to share ratably in our assets legally available for distribution to our stockholders in the event of our liquidation, dissolution or
winding up after payment of or adequate provision for all our known debts and liabilities.
Subject to the provisions of our charter regarding the restrictions on ownership and transfer of our stock and except as may otherwise be specified in our charter, each outstanding
share of common stock entitles the holder thereof to one vote on all matters on which the stockholders of common stock are entitled to vote, including the election of directors, and, except as provided with respect to any other class or series of
stock, the holders of shares of common stock will vote together as a single class and will possess the exclusive voting power. Unless nominations of all nominees for director are approved by a majority of the Continuing Directors (as defined below),
the affirmative vote of the holders of at least two- thirds of the outstanding shares of all classes of voting stock, voting together, is required to elect a director. If the nominations of all nominees for director are approved by a majority of the
Continuing Directors, a plurality of all votes cast at a meeting at which a quorum is present is sufficient. "Continuing Director" means (i) each of Russell E. Burke III, George B. Langa, Mark C. Winmill, Thomas B. Winmill and William C. Zachary
("Current Directors"), (ii) directors whose nomination for election by our stockholders or by the directors to fill vacancies is approved by a majority of the Current Directors then serving or (iii) any successor directors whose nomination for election
by the stockholders or by the directors to fill vacancies is approved by a majority of the Continuing Directors or the successor Continuing Directors then in office.
Holders of shares of common stock have no preference, conversion, exchange, sinking fund or redemption rights, have no preemptive rights to subscribe for any securities of our
company and generally have no appraisal rights unless our board of directors determines that appraisal rights apply, with respect to all or any such classes or series of stock, to one or more transactions occurring after the date of such determination
in connection with which holders of such shares would otherwise be entitled to exercise appraisal rights. Subject to the provisions of our charter regarding the restrictions on ownership and transfer of our stock and except as otherwise provided in
our charter, shares of common stock will have equal distribution, liquidation and other rights.
Under the MGCL, a Maryland corporation generally cannot dissolve, amend its charter, merge or consolidate with, or convert into, another entity, sell all or substantially all of
its assets or engage in a share exchange unless the action is approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter unless a lesser percentage (but not less than a majority
of all of the votes entitled to be cast on the matter) is specified in the corporation's charter. Our charter provides that these actions (other than certain amendments to the provisions of our charter related to the removal of directors and the vote
required to amend certain provisions) may be approved by stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter.
Transfer Agent and Registrar
The transfer agent and registrar for our shares of common stock is American Stock Transfer & Trust Company, LLC.
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DESCRIPTION OF PREFERRED STOCK
General
Our charter provides that we may issue up to 50,000,000 shares of preferred stock, $0.01 par value per share. As of September 30, 2021, we had no outstanding shares of preferred
stock.
Preferred stock may be issued independently or together with any other securities and may be attached to or separate from the securities. The following description of the
preferred stock sets forth general terms and provisions of the preferred stock to which any prospectus supplement may relate. The statements below describing the preferred stock are in all respects subject to and qualified in their entirety by
reference to the applicable provisions of our charter and bylaws setting forth the terms of a class or series of preferred stock. The issuance of preferred stock could adversely affect the voting power, dividend rights and other rights of holders of
common stock. Although our board of directors does not have this intention at the present time, it or a duly authorized committee could establish another class or series of preferred stock, that could, depending on the terms of the series, delay,
defer or prevent a transaction or a change in control of our company that might involve a premium price for the common stock or otherwise be in the best interest of the holders thereof.
Terms
Subject to the limitations prescribed by our charter, our board of directors is authorized to classify any unissued shares of preferred stock and to reclassify any previously
classified but unissued shares of preferred stock into other classes or series of stock. Our board of directors may fix the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption for each class or series.
Reference is made to the applicable prospectus supplement relating to the class or series of preferred stock offered thereby for the specific terms thereof, including:
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the designation of the class or series of preferred stock;
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the number of shares of preferred stock of the class or series, the liquidation preference of the shares of preferred stock and the offering price of the shares of preferred stock;
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the dividend rate(s), period(s) and/or payment day(s) or method(s) of calculation thereof applicable to the class or series of preferred stock;
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the date from which dividends on the class or series of preferred stock shall accumulate, if applicable;
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the procedures for any auction and remarketing, if any, for the class or series of preferred stock;
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the provision for a sinking fund, if any, for the class or series of preferred stock;
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the provisions for redemption, if applicable, of the class or series of preferred stock;
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any listing of the preferred stock on any securities exchange;
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the terms and conditions, if applicable, upon which the class or series of preferred stock may or will be convertible into our common stock or other securities, including the conversion
price or manner of calculation thereof;
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the relative ranking and preferences of the class or series of preferred stock as to dividend rights and rights upon liquidation, dissolution or winding up of our affairs;
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whether interests in the preferred stock will be represented by depositary shares;
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any additional limitations on ownership and restrictions on transfer of the class or series of preferred stock;
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any limitations on the issuance of any class or series of preferred stock ranking senior or equal to the class or series of preferred stock being offered as to dividend rights and rights
upon liquidation, dissolution or the winding up of our affairs;
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a discussion of U.S. federal income tax considerations applicable to the preferred stock; and
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any other specific terms, preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions
of redemption of the preferred stock.
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The terms of each class or series of preferred stock will be described in any prospectus supplement related to such class or series of preferred stock and will contain a discussion
of any material Maryland law or material U.S. federal income tax considerations applicable to the preferred stock.
Transfer Agent and Registrar
We will name the registrar and transfer agent for the preferred stock in the applicable prospectus supplement.
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DESCRIPTION OF DEPOSITARY SHARES
We may, at our option, elect to offer depositary shares that will represent ownership of and entitlement to all rights and preferences of a fraction of a share
of preferred stock of a specified class or series (including dividend, voting, redemption and liquidation rights). The applicable fraction will be specified in a prospectus supplement. The shares of preferred stock represented by the depositary
shares will be deposited with a depositary named in the applicable prospectus supplement, under a deposit agreement, among our company, the depositary and the holders of the certificates evidencing depositary shares, or depositary receipts as specified
in the applicable prospectus supplement. Depositary receipts will be delivered to those persons purchasing depositary shares in the offering. The depositary will be the transfer agent, registrar and dividend disbursing agent for the depositary
shares. Holders of depositary receipts agree to be bound by the deposit agreement, which requires holders to take certain actions such as filing proof of residence and paying certain charges. We will file with the SEC any executed deposit agreement
and form of depositary receipt.
The summary of terms of the depositary shares contained in this prospectus does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of
the deposit agreement and the articles supplementary for the applicable class or series of preferred stock. While the deposit agreement relating to a particular class or series of preferred stock may have provisions applicable solely to that class or
series of preferred stock, all deposit agreements relating to preferred stock we issue will include the following provisions:
Dividends and Other Distributions
Each time we pay a cash dividend or make any other type of cash distribution with regard to preferred stock of a class or series, the depositary will distribute to the holder of
record of each depositary share relating to that class or series of preferred stock an amount equal to the dividend or other distribution per depositary share that the depositary receives. If there is a distribution of property other than cash, the
depositary either will distribute the property to the holders of depositary shares in proportion to the depositary shares held by each of them, or the depositary will, if we approve, sell the property and distribute the net proceeds to the holders of
the depositary shares in proportion to the depositary shares held by them.
Withdrawal of Preferred Stock
A holder of depositary shares will be entitled to receive, upon surrender of depositary receipts representing depositary shares, the number of whole or fractional shares of the
applicable class or series of preferred stock and any money or other property to which the depositary shares relate.
Redemption of Depositary Shares
Whenever we redeem shares of preferred stock held by a depositary, the depositary will be required to redeem, on the same redemption date, depositary shares constituting, in total,
the number of shares of preferred stock held by the depositary which we redeem, subject to the depositary's receiving the redemption price of those shares of preferred stock. If fewer than all the depositary shares relating to a class or series of
preferred stock are to be redeemed, the depositary shares to be redeemed will be selected by lot or by another method we determine to be equitable.
Voting
Any time we send a notice of meeting or other materials relating to a meeting to the holders of a class or series of preferred stock to which depositary shares relate, we will
provide the depositary with sufficient copies of those materials so they can be sent to all holders of record of the applicable depositary shares, and the depositary will send those materials to the holders of record of the depositary shares on the
record date for the meeting. The depositary will solicit voting instructions from holders of depositary shares and will vote or not vote the shares of preferred stock to which the depositary shares relate in accordance with those instructions.
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Liquidation Preference
Upon our liquidation, dissolution or winding up, the holder of each depositary share will be entitled to what the holder of the depositary share would have received if the holder
had owned the number of shares (or fraction of a share) of preferred stock represented by the depositary share.
Conversion
If shares of a class or series of preferred stock are convertible into common stock or other of our securities or property, holders of depositary shares relating to that class or
series of preferred stock will, if they surrender depositary receipts representing depositary shares and appropriate instructions to convert them, receive the shares of common stock or other securities or property into which the number of shares (or
fractions of shares) of preferred stock to which the depositary shares relate could at the time be converted.
Amendment and Termination of a Deposit Agreement
We and the depositary may amend a deposit agreement, except that an amendment which materially and adversely affects the rights of holders of depositary shares, or would be
materially and adversely inconsistent with the rights granted to the holders of the class or series of preferred stock to which they relate, must be approved by holders of at least two-thirds of the outstanding depositary shares. No amendment will
impair the right of a holder of depositary shares to surrender the depositary receipts evidencing those depositary shares and receive the shares of preferred stock to which they relate, except as required to comply with law. We may terminate a deposit
agreement with the consent of holders of a majority of the depositary shares to which it relates. Upon termination of a deposit agreement, the depositary will make the whole or fractional shares of preferred stock to which the depositary shares issued
under the deposit agreement relate available to the holders of those depositary shares. A deposit agreement will automatically terminate if:
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all outstanding depositary shares to which it relates have been redeemed or converted; or
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the depositary has made a final distribution to the holders of the depositary shares issued under the deposit agreement upon our liquidation, dissolution or winding up.
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Miscellaneous
There will be provisions: (1) requiring the depositary to forward to holders of record of depositary shares any reports or communications from us which the depositary receives
with respect to the class or series of preferred stock to which the depositary shares relate; (2) regarding compensation of the depositary; (3) regarding resignation of the depositary; (4) limiting our liability and the liability of the depositary
under the deposit agreement (generally limited to failure to act in good faith, gross negligence or willful misconduct); and (5) indemnifying the depositary against certain possible liabilities.
Reference is made to the prospectus supplement relating to the depositary shares offered thereby for the specific terms thereof, including, but not limited to, a discussion of U.S.
federal income tax considerations applicable to the depositary shares.
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DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of shares of common stock, preferred stock or depositary shares and may issue warrants independently or together with
common stock, preferred stock or depositary shares or attached to, or separate from, such securities. We will issue each series of warrants under a separate warrant agreement between us and a bank or trust company as warrant agent, as specified in the
applicable prospectus supplement. We will file with the SEC any executed warrant agreement and form of warrant agreement and the form of the warrant certificate will be filed with the SEC and incorporated by reference as an exhibit to the registration
statement of which this prospectus is a part.
The warrant agent will act solely as our agent in connection with the warrants and will not act for or on behalf of warrant holders. The following sets forth certain general terms
and provisions of the warrants that may be offered under this registration statement. Further terms of the warrants and the applicable warrant agreement will be set forth in the applicable prospectus supplement.
The applicable prospectus supplement will describe the terms of the warrants in respect of which this prospectus is being delivered, including, where applicable, the following:
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the title of such warrants;
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the aggregate number of such warrants;
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the price or prices at which such warrants will be issued;
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the type and number of securities purchasable upon exercise of such warrants;
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the designation and terms of the other securities, if any, with which such warrants are issued and the number of such warrants issued with each such offered security;
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the date, if any, on and after which such warrants and the related securities will be separately transferable;
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the price at which each security purchasable upon exercise of such warrants may be purchased;
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the date on which the right to exercise such warrants shall commence and the date on which such right shall expire;
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the minimum or maximum amount of such warrants that may be exercised at any one time;
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information with respect to book-entry procedures, if any;
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any anti-dilution protection;
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a discussion of certain U.S. federal income tax considerations; and
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any other terms of such warrants, including terms, procedures and limitations relating to the transferability, exercise and exchange of such warrants.
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Warrant certificates will be exchangeable for new warrant certificates of different denominations and warrants may be exercised at the corporate trust office of the warrant agent
or any other office indicated in the applicable prospectus supplement. Prior to the exercise of their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise or to any dividend payments
or voting rights as to which holders of shares of common stock, preferred stock or depositary shares purchasable upon such exercise may be entitled.
Each warrant will entitle the holder to purchase for cash such number of shares of common stock, preferred stock or depositary shares, at such exercise price as shall, in each
case, be set forth in, or be determinable as set forth
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in, the applicable prospectus supplement relating to the warrants offered thereby. After the expiration date set forth in the applicable prospectus supplement, unexercised warrants will be void.
Warrants may be exercised as set forth in the applicable prospectus supplement relating to the warrants. Upon receipt of payment and the warrant certificate properly completed and
duly executed at the corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement, we will, as soon as practicable, forward the securities purchasable upon such exercise. If less than all of the
warrants are presented for exercise with respect to a warrant certificate, a new warrant certificate will be issued for the remaining amount of warrants.
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DESCRIPTION OF RIGHTS
We may issue rights to our stockholders to purchase shares of common stock or preferred stock. Each series of rights may be issued under a separate agreement
to be entered into between us and a bank or trust company, as subscription agent, or in a similar capacity, all as set forth in the prospectus supplement relating to the particular issue of rights. Such agent will act solely as our agent in connection
with the certificates relating to the rights of such series and will not assume any obligation or relationship of agency or trust for or with any holders of rights certificates or beneficial owners of rights. We will file with the SEC any material
agreements or rights certificates relating to each series of rights.
The applicable prospectus supplement will describe the terms of the rights to be issued, including the following, where applicable:
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the date for determining the stockholders entitled to the rights distribution;
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the aggregate number of shares of common stock or preferred stock purchasable upon exercise of such rights and the exercise price;
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the designation and terms of the class or series of preferred stock, if any, purchasable upon exercise of such rights;
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the exercise price;
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the aggregate number of rights being issued;
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the date, if any, on and after which such rights may be transferable separately;
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the date on which the right to exercise such rights shall commence and the date on which such right shall expire;
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any special U.S. federal income tax consequences; and
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any other terms of such rights, including terms, procedures and limitations relating to the distribution, exchange and exercise of such rights.
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The description in any accompanying prospectus supplement of any rights we offer will not necessarily be complete and will be qualified in its entirety by reference to the
applicable rights certificate or related agreements, if applicable, which will be filed with the SEC if we offer rights. For more information on how you can obtain copies of any rights certificate or related material agreements if we offer rights, see
"Where You Can Find More Information" in this prospectus. We urge you to read the applicable rights certificate, the applicable material agreements, if any, and any applicable prospectus supplement in their entirety.
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CERTAIN PROVISIONS OF THE MARYLAND GENERAL CORPORATION LAW
AND OUR CHARTER AND BYLAWS
AND OUR CHARTER AND BYLAWS
The following summary of certain provisions of Maryland law and of our charter and bylaws does not purport to be complete and is subject to and qualified in its
entirety by reference to the MGCL and our charter and bylaws. Copies of our charter and bylaws are filed with the SEC, which we incorporate by reference as exhibits to the registration statement of which this prospectus is a part. See "Where You Can
Find More Information."
Our Board of Directors
Our charter and bylaws provide that the number of directors we have may be established by our board of directors but that the number may not be less than the minimum number
required by the MGCL. Our bylaws further provide that the number of directors may not be more than 15. Our charter and bylaws currently provide that, except as may be provided by the board of directors in setting the terms of any class or series of
preferred stock, any vacancy may be filled by a majority of the remaining directors, even if the remaining directors do not constitute a quorum.
Removal of Directors
Our charter provides that, subject to the rights of holders of one or more classes or series of preferred stock to elect or remove one or more directors, any director or the entire
board of directors may be removed only for cause and then only by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast generally in the election of directors. Cause means, with respect to any
particular director, a conviction of a felony or a final judgment of a court of competent jurisdiction holding that such director caused demonstrable, material harm to us through bad faith or active and deliberate dishonesty.
Business Combinations
Under the MGCL, certain "business combinations" (including a merger, consolidation, share exchange or, in certain circumstances, an asset transfer or issuance or reclassification
of equity securities) between a Maryland corporation and an interested stockholder (defined generally as any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation's outstanding voting stock or an
affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding stock of the corporation)
or an affiliate of such an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Thereafter, any such business combination must generally be recommended
by the board of directors of such corporation and approved by the affirmative vote of at least (i) 80% of the votes entitled to be cast by holders of outstanding voting stock of the corporation and (ii) two-thirds of the votes entitled to be cast by
holders of voting stock of the corporation other than shares held by the interested stockholder with whom (or with whose affiliate) the business combination is to be effected or held by an affiliate or associate of the interested stockholder, unless,
among other conditions, the corporation's common stockholders receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its
shares. A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. The board of directors may provide that its
approval is subject to compliance with any terms and conditions determined by it.
These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a board of directors prior to the time that the interested stockholder
becomes an interested stockholder. Pursuant to the statute, our board of directors has by resolution exempted business combinations between us and any other person and, consequently, the five-year prohibition and the supermajority vote requirements
will not apply to business combinations between us and any person as described above. As a result, any person described above may be able to enter into business combinations with us that may not be in the best interest of our stockholders without
compliance by our company with the supermajority vote requirements and other provisions of the statute.
We cannot assure you our board of directors will not opt to be subject to such business combination provisions in the future. However, an alteration or repeal of the resolution
described above will not have any effect on any business combinations that have been consummated or upon any agreements existing at the time of such
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modification or repeal. If our board of directors opts back into the business combination statute, the business combination statute may discourage others from trying to acquire control of us and
increase the difficulty of consummating any offer.
Control Share Acquisitions
The MGCL provides that "control shares" of a Maryland corporation acquired in a "control share acquisition" have no voting rights except to the extent approved by the affirmative
vote of stockholders entitled to cast two-thirds of the votes entitled to be cast on the matter, excluding shares of stock in a corporation in respect of which any of the following persons is entitled to exercise or direct the exercise of the voting
power of such shares in the election of directors: (i) a person who makes or proposes to make a control share acquisition; (ii) an officer of the corporation; or (iii) an employee of the corporation who is also a director of the corporation. "Control
shares" are voting shares of stock which, if aggregated with all other such shares of stock previously acquired by the acquirer, or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of
a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power: (a) one-tenth or more but less than one-third; (b) one-third or more but less than a majority; or (c) a
majority or more of all voting power. Control shares do not include shares that the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval or shares acquired directly from the corporation. A "control
share acquisition" means the acquisition, directly or indirectly, of ownership of, or the power to direct the exercise of voting power with respect to, issued and outstanding control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking to pay expenses and making an "acquiring
person statement" as described in the MGCL), may compel the corporation to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. If no request for a meeting is made, the corporation may
itself present the question at any stockholders' 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 statute, then, subject to certain
conditions and limitations, the corporation may redeem any or all of the control shares (except those for which voting rights have previously been approved) for fair value determined, without regard to the absence of voting rights for the control
shares, as of the date of any meeting of stockholders at which the voting rights of such shares are considered and not approved or, if no such meeting is held, the date of the last control share acquisition by the acquirer. If voting rights for
control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of
such appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.
The control share acquisition statute does not apply to (i) shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (ii)
acquisitions approved or exempted by the charter or bylaws of the corporation.
Our bylaws contain a provision exempting from the control share acquisition statute any acquisitions by any person of shares of our stock. There is no assurance that such provision
will not be amended or eliminated at any time in the future.
Subtitle 8
Subtitle 8 of Title 3 of the MGCL permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three independent directors to
elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions:
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a classified board;
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a two-thirds vote requirement for removing a director;
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a requirement that the number of directors be fixed only by vote of the directors;
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a requirement that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of class of directors in which the vacancy occurred; and
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a majority requirement for the calling of a stockholder-requested special meeting of stockholders.
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Through provisions in our charter and bylaws unrelated to Subtitle 8, we already (a) vest in our board of directors the exclusive power to fix the number of directors, (b) require,
unless called by the chairman of the board, president or board of directors, the request of stockholders entitled to cast at least a majority of the votes entitled to be cast on any matter that may properly be considered at a meeting of stockholders to
call a special meeting to act on such matter, and (c) require the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast generally in the election of directors to remove a director. Pursuant to Subtitle
8, we have elected that, except as may be provided by our board of directors in setting the terms of any class or series of preferred stock, any and all vacancies on our board of directors may be filled only by the affirmative vote of a majority of the
remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy will serve for the remainder of the full term of the directorship in which the vacancy occurred and until a successor
is elected and qualifies.
Stockholder Rights Plan
We do not have a stockholders' rights plan.
Meetings of Stockholders
Pursuant to our bylaws, a meeting of our stockholders for the election of directors and the transaction of any business will be held annually at a date, time and place set by our
board of directors. The chairman of our board of directors, our president or our board of directors by resolution adopted by the affirmative vote of a majority of the total number of authorized directors may call a special meeting of our
stockholders. Subject to compliance with the provisions of our bylaws, a special meeting of our stockholders will also be called by our secretary upon the written request of the stockholders entitled to cast a majority of all the votes entitled to be
cast on any matter that may be properly considered at a meeting of stockholders and upon obtaining the information required in our bylaws.
Exclusive Forum
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that Court does not have
jurisdiction, other state courts of the State of Maryland or, if no state court located within the State of Maryland has jurisdiction, the U.S. District Court for the District of Maryland, Baltimore Division, is the sole and exclusive forum for: (i)
any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of any duty owed by any of our directors or officers or other employees to us or our stockholders; (iii) any action asserting a claim against us or
any of our directors or officers or other employees arising pursuant to any provision of the MGCL or our charter or bylaws; (iv) any action to interpret, apply, enforce or determine the validity of our charter or bylaws; or (v) any action asserting a
claim against us or any or any of our directors or officers or other employees that is governed by the internal affairs doctrine. Our bylaws further provide that, if any such action is filed in a court other than a court located within the State of
Maryland in the name of any stockholder, such stockholder will be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Maryland in connection with any action brought in any such court to
enforce the relevant provision in our bylaws and (ii) having service of process made upon such stockholder in any such action by service upon such stockholder's counsel as agent for such stockholder.
Amendments to Our Charter and Bylaws
Except for amendments to the provisions of our charter relating to the removal of directors and the vote required to amend certain provisions (each of which must be advised by our
board of directors and approved by the affirmative vote of the stockholders entitled to cast not less than two-thirds of all the votes entitled to be cast on the matter), our charter generally may be amended only if the amendment is declared advisable
by our board of directors and is approved by the affirmative vote of the stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter. However, our board of directors, without stockholder approval, has the power under
our charter to amend our charter from time to time to increase or decrease the aggregate number of shares of stock or the number of
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shares of stock of any class or series that we are authorized to issue, to authorize us to issue authorized but unissued shares of our common stock or preferred stock and to classify or reclassify
any unissued shares of our common stock or preferred stock into one or more classes or series of stock and set the terms of such newly classified or reclassified shares. See "Description of Securities—Power to Reclassify Our Unissued Shares of Common
Stock" and "Description of Securities—Power to Increase or Decrease Authorized Shares of Common Stock and Issue Additional Shares of Common and Preferred Stock."
Except as otherwise expressly provided in our bylaws, our board of directors has the exclusive power to adopt, alter or repeal any provision of our bylaws and to make new bylaws.
Any such amendment, alteration, or repeal must be approved by resolution of the board of directors approved by the affirmative vote of a majority of the total number of authorized directors.
Dissolution of Our Company
The dissolution of our company must be declared advisable by a majority of our entire board of directors and approved by the affirmative vote of the stockholders entitled to cast a
majority of all of the votes entitled to be cast on the matter.
Advance Notice of Director Nominations and New Business
Our bylaws provide that, with respect to an annual meeting of stockholders, nominations of individuals for election to our board of directors and the proposal of other business to
be considered by stockholders may be made only (i) pursuant to our notice of the meeting(or any supplement thereto) given by or at the direction of our board of directors (or any duly authorized committee thereof), (ii) if not specified in the notice
of meeting (or any supplement thereto) given by or at the direction of our board of directors (or any duly authorized committee thereof), otherwise properly brought before the annual meeting by or at the direction of our board of directors (or any duly
authorized committee thereof) or (iii) by any stockholder who is Present in Person (as defined below) and who (A) was a stockholder of record at the record date set by our board of directors for the purpose of determining stockholders entitled to vote
at the meeting, (B) was a stockholder of record at the time of giving the notice required by our bylaws and at the time of the meeting (and any postponement, adjournment, rescheduling or continuation thereof), (C) who is entitled to vote at the meeting
in the election of each individual so nominated and on any such other business proposed by such stockholder and (D) who has complied with the advance notice provisions set forth in our bylaws in all applicable respects. “Present in Person” means that
the stockholder proposing nominees for election as directors or other business to be brought before the stockholders’ meeting, or, if the proposing stockholder is not an individual, a qualified representative of such proposing stockholder, appear in
person at such stockholders’ meeting (unless such meeting is held by means of the Internet or other electronic technology in which case the proposing stockholder or, if applicable, its qualified representative shall be present at such stockholders’
meeting by means of the Internet or other electronic technology). With respect to special meetings of stockholders, only the business specified in our notice of meeting may be brought before the meeting. Nominations of individuals for election to our
board of directors may be made only (i) pursuant to our notice of the meeting (or any supplement thereto) given by or at the direction of our board of directors (or any duly authorized committee thereof), (ii) if not specified in the notice of meeting
(or any supplement thereto) given by or at the direction of our board of directors (or any duly authorized committee thereof), otherwise properly brought before the special meeting by or at the direction of our board of directors (or any duly
authorized committee thereof), (iii) if properly brought before a stockholder-requested special meeting requested and called in accordance with our bylaws for the purpose of electing one or more individuals to our board of directors, by a stockholder
who submits a request for such stockholder-requested special meeting that complies with our bylaws and incudes therein the information required by our bylaws with respect to such stockholder, any Stockholder Associated Person (as defined in our bylaws)
and any proposed nominee, and (iv) provided that the meeting has been called in accordance with our bylaws for the purpose of electing one or more individuals to our board of directors, by any stockholder who is Present in Person and who (A) was a
stockholder of record as of the record date set by our board of directors for the purpose of determining stockholders entitled to vote at the meeting, (B) was a stockholder of record at the time of giving the notice required by our bylaws and at the
time of the meeting (and any postponement, adjournment, rescheduling or continuation thereof), (C) who is entitled to vote at the meeting in the election of each individual so nominated and (D) who has complied with the advance notice provisions set
forth in our bylaws.
The purpose of requiring stockholders to give us advance notice of nominations and other business is to afford our board of directors a meaningful opportunity to consider the
qualifications of the proposed nominees and
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the advisability of any other proposed business and, to the extent deemed necessary or desirable by our board of directors, to inform stockholders and make recommendations about such qualifications
or business, as well as to provide a more orderly procedure for conducting meetings of stockholders. Although our bylaws do not give our board of directors any power to disapprove stockholder nominations for the election of directors or proposals
recommending certain action, they may have the effect of precluding a contest for the election of directors or the consideration of stockholder proposals if proper procedures are not followed and of discouraging or deterring a third party from
conducting a solicitation of proxies to elect its own slate of directors or to approve its own proposal without regard to whether consideration of such nominees or proposals might be harmful or beneficial to us and our stockholders.
Anti-Takeover Effect of Certain Provisions of Maryland Law and of Our
Charter and Bylaws
Our charter and bylaws and Maryland law contain provisions that may delay, defer or prevent a change in control or other transaction that might involve a premium price for our
shares of common stock or otherwise be in the best interest of our stockholders, including restrictions on ownership and transfer of our stock and advance notice requirements for director nominations and stockholder proposals. Likewise, if the
provision in our bylaws opting out of the control share acquisition provisions of the MGCL were rescinded, if we were to opt into the business combination provisions of the MGCL, or if we were to elect to be subject to a classified board or other
provisions of Subtitle 8, these provisions of the MGCL could have similar anti-takeover effects.
Interested Director and Executive Officer Transactions
Our bylaws provide that a contract or other transaction between us and a director or between us and any other corporation or other entity in which any of our directors is a
director or has a material financial interest is not void or voidable solely on the grounds of such common directorship or interest, the presence of such director at the meeting at which the contract or transaction is authorized, approved or ratified
or the counting of the director's vote in favor thereof, if:
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the fact of the common directorship or interest is disclosed or known to our board of directors or a committee of our board, and our board or committee authorizes, approves or ratifies the
contract or transaction by the affirmative vote of a majority of disinterested directors, even if the disinterested directors constitute less than a quorum;
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the fact of the common directorship or interest is disclosed or known to our stockholders entitled to vote thereon, and the contract or transaction is authorized, approved or ratified by a
majority of the votes cast by the stockholders entitled to vote other than the votes of shares owned of record or beneficially by the interested director or corporation or other entity; or
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the contract or transaction is fair and reasonable to us.
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Indemnification and Limitation of Directors' and Executive Officers'
Liability
Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for
money damages except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or active and deliberate dishonesty that was established by a final judgment and was material to the cause of action. Our
charter contains such a provision and eliminates the liability of our directors and officers to the maximum extent permitted by Maryland law.
The MGCL requires a Maryland corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful, on the
merits or otherwise, in the defense of any proceeding to which he or she is made or threatened to be made a party by reason of his or her service in that capacity. The MGCL permits a Maryland corporation to indemnify its present and former directors
and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a party by reason of their service in
those or other capacities unless it is established that:
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the act or omission of the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate
dishonesty;
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the director or officer actually received an improper personal benefit in money, property or services; or
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in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.
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However, under the MGCL, a Maryland corporation may not indemnify a director or officer in a suit by or in the right of the corporation, in which the director or officer was
adjudged liable to the corporation or in any proceeding charging improper personal benefit in which the director or officer was adjudged liable on the basis that personal benefit was improperly received. A court may order indemnification if it
determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct or was adjudged liable on the basis that personal benefit was improperly
received. However, indemnification for an adverse judgment in a suit by the corporation or in its right, or for a judgment of liability on the basis that personal benefit was improperly received, is limited to expenses.
In addition, the MGCL permits a Maryland corporation to advance reasonable expenses to a director or officer upon the corporation's receipt of:
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a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation; and
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a written undertaking by the director or officer or on the director's or officer's behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the
director or officer did not meet the standard of conduct.
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Our charter and bylaws obligate us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of
the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to:
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any present or former director or officer who is made, or threatened to be made, a party to or witness in the proceeding by reason of his or her service in that capacity; or
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any individual who, while a director or officer of our company and at our request, serves or has served as a director, officer, partner, member, manager or trustee of another corporation,
real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise and who is made, or threatened to be made, a party to or witness in the proceeding by reason of his or her
service in that capacity.
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Our charter and bylaws also permit us, with the approval of our board of directors, to indemnify and advance expenses to any individual who served any predecessor of our company in
a similar capacity, who is made or threatened to be made a party to or witness in the proceeding by reason of his or her service in such capacity, as well as to any employee or agent of our company or a predecessor of our company.
REIT Qualification
Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without approval of our stockholders, if it determines that it is no longer in
our best interests to continue to qualify as a REIT.
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U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax consequences relating to our qualification and taxation as a REIT and the acquisition, ownership,
and disposition of our common stock. For purposes of this section under the heading "U.S. Federal Income Tax Considerations," references to "the company," "we," "our" and "us" mean only Global Self Storage, Inc., and not its subsidiaries or other
lower-tier entities, except as otherwise indicated and references to a REIT are to an entity treated as a real estate investment trust for U.S. federal income tax purposes. You are urged to both review the following discussion and to consult your tax
advisor to determine the effects of ownership and disposition of our shares on your individual tax situation, including any state, local or non-U.S. tax consequences.
This summary is based upon the Code, the regulations promulgated by the U.S. Treasury Department (the "Treasury Regulations"), current administrative interpretations and practices
of the IRS (including administrative interpretations and practices expressed in private letter rulings which are binding on the IRS only with respect to the particular taxpayers who requested and received those rulings) and judicial decisions, all as
currently in effect, and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of
the tax consequences described below. No advance ruling has been or will be sought from the IRS regarding any matter discussed in this summary. This summary is also based upon the assumption that the operation of the company, and of its subsidiaries
and other lower-tier and affiliated entities, will in each case be in accordance with its applicable organizational documents or partnership agreements. This summary does not address any U.S. federal estate or gift tax consequences, the alternative
minimum tax, or any state, local, or non-U.S. tax consequences. This summary is for general information only, and does not purport to discuss all aspects of U.S. federal income taxation that may be important to a particular stockholder in light of its
investment or tax circumstances, or to stockholders subject to special tax rules, such as:
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U.S. expatriates;
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persons who mark-to-market our common stock;
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subchapter S corporations;
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U.S. stockholders (as defined below) whose functional currency is not the U.S. dollar;
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financial institutions;
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insurance companies;
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broker-dealers;
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RICs;
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REITs;
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holders who receive our common stock through the exercise of employee share options or otherwise as compensation;
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persons holding our common stock as part of a "straddle," "hedge," "conversion transaction," "synthetic security" or other integrated investment;
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persons subject to the alternative minimum tax provisions of the Code;
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persons holding their interest through a partnership or similar pass-through entity;
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persons holding a 10% or more (by vote or value) beneficial interest in us;
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and, except to the extent discussed below:
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tax-exempt organizations; and
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non-U.S. stockholders (as defined below).
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This summary assumes that stockholders hold our common stock as capital assets for U.S. federal income tax purposes, which generally means as property held for investment.
THE U.S. FEDERAL INCOME TAX TREATMENT OF US AND HOLDERS OF OUR COMMON STOCK DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX
PROVISIONS OF U.S. FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE. IN ADDITION, THE TAX CONSEQUENCES OF HOLDING OUR COMMON STOCK TO ANY PARTICULAR STOCKHOLDER WILL DEPEND ON THE STOCKHOLDER'S PARTICULAR TAX
CIRCUMSTANCES. YOU ARE URGED TO CONSULT YOUR TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES TO YOU, IN LIGHT OF YOUR PARTICULAR INVESTMENT OR TAX CIRCUMSTANCES, OF ACQUIRING, HOLDING, AND DISPOSING
OF OUR COMMON STOCK.
Taxation of Our Company
We have elected to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ended December 31, 2013. We believe that we have been organized
and have operated in a manner which has allowed us to qualify for taxation as a REIT under the Code commencing with our taxable year ended December 31, 2013, and we intend to continue to be organized and to operate in this manner.
The law firm of Clifford Chance US LLP has acted as our counsel in connection with the filing of this registration statement. We will receive an opinion of Clifford Chance US LLP
to the effect that, commencing with our taxable year ended December 31, 2015, we have been organized and operated in conformity with the requirements for qualification and taxation as a REIT, and that our proposed method of operation will enable us to
continue to meet the requirements for qualification and taxation as a REIT. It must be emphasized that the opinion of Clifford Chance US LLP will be based on various assumptions and limitations relating to our organization and operation, including
that all factual representations and statements set forth in all relevant documents, records and instruments are true and correct, all actions described in this registration statement are completed in a timely fashion and that we will at all times
operate in accordance with the method of operation described in our organizational documents and this registration statement. Additionally, the opinion of Clifford Chance US LLP will be conditioned upon factual representations and covenants made by
our management and affiliated entities regarding our organization, assets, present and future conduct of our business operations and other items regarding our ability to meet the various requirements for qualification as a REIT, and will assume that
such representations and covenants are accurate and complete and that we will take no action inconsistent with such representations and covenants. While we believe that we have been organized and operated and intend to continue to be organized and to
operate so that we will continue to qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations and the possibility of future changes in our circumstances or applicable law, no
assurance can be given by Clifford Chance US LLP or us that we have in fact qualified or will so qualify for any particular year. In addition, the company has held and may continue to hold investments in other publicly traded REITs, and the opinion of
Clifford Chance US LLP will assume that such REITs have qualified as REITs and our interests in these REITs were treated as equity in a REIT for U.S. federal income tax purposes during all relevant periods. If any such publicly traded REIT fails to
qualify as a REIT or if our interests in these REITs were otherwise not treated as equity in a REIT for U.S. federal income tax purposes with respect to any period during which the company holds or has held shares of such REIT, the company's ability to
satisfy the REIT requirements could be adversely affected. The Clifford Chance US LLP opinion will be based on the Code, the regulations promulgated thereunder, and judicial and administrative interpretations thereof existing and in effect as of the
date of the opinion, all of which are subject to change, and such change could be applied retroactively. No assurance can be given that the conclusions in the opinion will not be adversely affected by subsequent changes in applicable law or
interpretations thereof. Clifford Chance US LLP will have no obligation to advise us or the holders of our common stock of any subsequent change in the matters stated, represented or assumed or of any subsequent change in the applicable law. You
should be aware that opinions of counsel are not binding on the IRS, and no assurance can be given that the IRS will not challenge the conclusions set
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forth in such opinions or that a court will not sustain such a challenge. In addition, Clifford Chance US LLP's opinion does not foreclose the possibility that we may have to utilize one or more
REIT savings provisions discussed below, which could require the payment of an excise or penalty tax (which could be significant in amount) in order to maintain our REIT qualification.
Our qualification and taxation as a REIT depends on our ability to meet, on a continuing basis, through actual operating results, distribution levels, and diversity of share
ownership, various qualification requirements imposed upon REITs by the Code. In addition, our ability to qualify as a REIT may depend in part upon the operating results, organizational structure and entity classification for U.S. federal income tax
purposes of certain entities in which we invest. Our ability to qualify as a REIT for a particular year also requires that we satisfy certain asset and income tests during such year, some of which depend upon the fair market values of assets directly
or indirectly owned by us. Such values may not be susceptible to a precise determination. Accordingly, no assurance can be given that the actual results of our operations for any taxable year have satisfied or will satisfy such requirements for
qualification and taxation as a REIT.
Taxation of REITs in General
As indicated above, our qualification and taxation as a REIT for a particular year depend upon our ability to meet, on a continuing basis during such year, through actual results
of operations, distribution levels, diversity of share ownership and various qualification requirements imposed upon REITs by the Code. The material qualification requirements are summarized below under "—Requirements for Qualification— General."
While we intend to be organized and to operate so that we qualify as a REIT, no assurance can be given that the IRS will not challenge our qualification as a REIT, or that we will be able to operate in accordance with the REIT requirements in the
future. See "—Failure to Qualify."
Provided that we qualify as a REIT, we will generally be entitled to a deduction for dividends that we pay and therefore will not be subject to U.S. federal corporate income tax on
our net taxable income that we currently distribute to our stockholders. This treatment substantially eliminates the "double taxation" at the corporate and stockholder levels that generally results from investment in a C corporation. A "C
corporation" is a corporation that generally is required to pay tax at the corporate level. Double taxation means taxation once at the corporate level when income is earned and once again at the stockholder level when the income is distributed.
Income generated by a REIT generally is taxed only at the stockholder level upon a distribution of dividends by the REIT.
U.S. stockholders (as defined below) who are individuals, trusts and estates are generally taxed on corporate dividends at a maximum rate of 20% (the same as long-term capital
gains), thereby substantially reducing, though not completely eliminating, the double taxation that has historically applied to corporate dividends. With limited exceptions, however, dividends received by non-corporate U.S. stockholders from us or
from other entities that are taxed as REITs will continue to be taxed at rates applicable to ordinary income, which are as high as 37% through taxable years ending in 2025 and 39.6% thereafter; however, individuals, trusts, and estates that own stock
in REITs are generally permitted to deduct up to 20% of dividends received on such stock, subject to certain limitations, generally resulting in an effective maximum U.S. federal income tax rate of 29.6% on such dividends (through taxable years ending
in 2025). Net operating losses, foreign tax credits and other tax attributes of a REIT generally do not pass through to the stockholders of the REIT, subject to special rules for certain items such as capital gains recognized by REITs. See "—Taxation
of Stockholders."
Even if we qualify to be taxed as a REIT, we will nonetheless be subject to U.S. federal income tax as follows:
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We will be taxed at regular corporate rates on any undistributed income, including undistributed net capital gains.
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For taxable years prior to 2018, we may be subject to the "alternative minimum tax" on our items of tax preference, if any.
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Net income from prohibited transactions, which are, in general, sales or other dispositions of property held primarily for sale to customers in the ordinary course of business, other than
foreclosure property, as described below, is subject to a 100% tax. See "—Requirements for Qualification—General—Prohibited Transactions," and "—Requirements for Qualification—General— Foreclosure Property," below.
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If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or leasehold as "foreclosure property," we may thereby avoid (1) the 100% tax on gain from
a resale of that property (if the sale would otherwise constitute a prohibited transaction), and (2) the inclusion of any income from such property not qualifying for purposes of the REIT gross income tests discussed below, but the income
from the sale or operation of the property may be subject to corporate income tax at the highest applicable rate (currently 21%).
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If we fail to satisfy the 75% gross income test or the 95% gross income test, as discussed below, but nonetheless maintain our qualification as a REIT because other requirements are met, we
will be subject to a 100% tax on an amount equal to (1) the greater of (A) the amount by which we fail the 75% gross income test or (B) the amount by which we fail the 95% gross income test, as the case may be, multiplied by (2) a fraction
intended to reflect our profitability.
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If we fail to satisfy any of the REIT asset tests, as described below, other than a failure of the 5% or 10% REIT asset tests that does not exceed a statutory de minimis amount as described more fully below, but our failure is due to reasonable cause and not due to willful neglect and we nonetheless maintain our REIT qualification because of specified cure provisions, we
will be required to pay a tax equal to the greater of $50,000 or the highest corporate tax rate (currently 21%) of the net income generated by the nonqualifying assets during the period in which we failed to satisfy the asset tests.
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If we fail to satisfy any provision of the Code that would result in our failure to qualify as a REIT (other than a gross income or asset test requirement) and that violation is due to
reasonable cause and not willful neglect, we may retain our REIT qualification, but we will be required to pay a penalty of $50,000 for each such failure.
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If we fail to distribute during each calendar year at least the sum of (1) 85% of our REIT ordinary income for such year, (2) 95% of our REIT capital gain net income for such year and (3)
any undistributed taxable income from prior periods ("required distribution"), we will be subject to a 4% non-deductible excise tax on the excess of the required distribution over the sum of (A) the amounts actually distributed (taking into
account excess distributions from prior years), plus (B) retained amounts on which U.S. federal income tax is paid at the corporate level.
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We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record-keeping requirements intended to monitor our compliance with rules
relating to the composition of its stockholders, as described below in "—Requirements for Qualification—General."
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A 100% excise tax may be imposed on some items of income and expense that are directly or constructively paid between us, our tenants and/or SSG TRS LLC ("SSG TRS") or any other TRSs, if
and to the extent that the IRS successfully adjusts the reported amounts of these items.
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If we acquire any asset from a corporation that is not a REIT, a RIC or a corporation taxable under subchapter S of the Code (i.e., a corporation
taxable under subchapter C of the Code) in a transaction in which the adjusted tax basis of the asset in our hands is less than the fair market value of the asset, determined as of the date on which we acquired the asset, or we hold any asset
currently and held it at a time when we were not treated as a REIT, and in each case we subsequently recognize gain on the disposition of the asset during the 5-year period (or with respect to certain prior years the 10-year period) beginning
on the date on which we acquired the asset, then we will be required to pay tax at the highest regular corporate tax rate on this gain to the extent of the excess of (1) the fair market value of the asset over (2) our adjusted tax basis in
the asset, in each case determined as of the date on which we acquired the asset. The results described in the preceding sentence could occur if we failed to qualify as a REIT (and, thus, were treated as a subchapter C corporation) or were
otherwise treated as a C corporation for a prior year and then re-qualified as a REIT in a later year, in which case the appreciation would be measured as of the beginning of the year in which we first re-qualified as a REIT. Any gain from
the sale of property acquired by us in an exchange under Section 1031 (a like kind exchange) or 1033 (an involuntary conversion) of the Code is excluded from the application of this built-in gains tax.
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We may elect to retain and pay income tax on our net long-term capital gain. In that case, each stockholder would include its proportionate share of our undistributed long-term capital
gain (to the extent we make a timely designation of such gain to the stockholder) in its income, would be deemed to have paid the tax that we paid on such gain, and would be allowed a credit for its proportionate share of the tax deemed to
have been paid, and an adjustment would be made to increase the stockholder's basis in shares of our common stock. Stockholders that are U.S. corporations will also appropriately adjust their earnings and profits for the retained capital
gain in accordance with Treasury Regulations to be promulgated.
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We own all of the membership interests in SSG TRS, which is a subchapter C corporation subject to U.S. federal income tax on its earnings, and we may own interests in other lower-tier
entities that are subchapter C corporations, the earnings of which could be subject to U.S. federal, state and local corporate income tax.
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Requirements for Qualification—General
The Code defines a REIT as a corporation, trust or association:
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that is managed by one or more trustees or directors;
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the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest;
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that would be taxable as a domestic corporation but for the special Code provisions applicable to REITs;
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that is neither a financial institution nor an insurance company subject to specific provisions of the Code;
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the beneficial ownership of which is held by 100 or more persons;
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in which, during the last half of each taxable year, not more than 50% in value of the outstanding shares are owned, directly or indirectly, by five or fewer "individuals" (as defined in the Code to include specified entities);
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that meets other tests described below, including with respect to the nature of its income and assets and the amount of its distributions; and
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that makes an election to be a REIT for the current taxable year or has made such an election for a previous taxable year that has not been terminated or revoked.
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The Code provides that conditions (1) through (4) must be met during the entire taxable year, and that condition (5) must be met during at least 335 days of a taxable year of 12
months, or during a proportionate part of a shorter taxable year. Conditions (5) and (6) do not need to be satisfied for the first taxable year for which an election to become a REIT has been made.
We believe that we have issued common stock with sufficient diversity of ownership to satisfy the requirements described in conditions (5) and (6) above. Our charter currently
provides certain customary restrictions regarding the ownership and transfer of shares of our stock, which are intended, among other purposes, to assist us in
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satisfying the share ownership requirements described in conditions (5) and (6) above. These restrictions include an ownership limitation that prohibits any person from beneficially or
constructively owning more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding share of our common stock or all classes and series of our capital stock. However, prior to October 20, 2017, our charter did not
contain such ownership restrictions and therefore did not ensure that we satisfied the 5/50 Test. With respect to the period between January 1, 2013 and October 20, 2017, we monitored purchases and transfers of shares of our common stock by regularly
reviewing, among other things, ownership filings required by the federal securities laws to monitor the beneficial ownership of our shares in an attempt to ensure that we met the 5/50 Test. However, the attribution rules under the Code are broad, and
we may not have had the information necessary to ascertain with certainty whether or not we satisfied the 5/50 Test during such period. As a result, no assurance can be provided that we satisfied the 5/50 Test during such period. If it were
determined that we failed to satisfy the 5/50 Test, we could fail to qualify as a REIT, or assuming we qualify for a statutory relief provision under the Code, be required to pay a penalty tax. See "—Failure to Qualify." For purposes of the 5/50
Test, an "individual" generally includes a supplemental unemployment compensation benefit plan, a private foundation or a portion of a trust permanently set aside or used exclusively for charitable purposes but does not include a qualified pension plan
or profit sharing trust.
To monitor compliance with the share ownership requirements, we are required to maintain records regarding the actual ownership of our shares. To do so, we must demand written
statements each year from the record holders of significant percentages of our shares in which the record holders are to disclose the actual owners of the shares (i.e., the persons required to include in gross
income the dividends paid by us). A list of those persons failing or refusing to comply with this demand must be maintained as part of our records. Failure by us to comply with these record- keeping requirements could subject us to monetary
penalties. In the past, we have not sent written demands for certain years to the record holders of significant percentages of our common stock and therefore we may owe a penalty as a result of such failure. If we satisfy these requirements and after
exercising reasonable diligence would not have known that condition (6) is not satisfied, we will be deemed to have satisfied such condition. A stockholder that fails or refuses to comply with the demand is required by Treasury Regulations to submit a
statement with its tax return disclosing the actual ownership of the shares and other information.
In addition, a corporation generally may not elect to become a REIT unless its taxable year is the calendar year. We satisfy this requirement. Furthermore, a corporation does not
qualify as a REIT for a given taxable year if, as of the final day of the taxable year, the corporation has any undistributed earnings and profits that accumulated during a period that the corporation was not treated as a REIT. Although we have not
always been treated as a REIT, because for all taxable years prior to our first taxable year as a REIT we believe that we distributed 100% of our earnings and profits from such years, we believe that we do not have any undistributed earnings and
profits that accumulated during a period that the corporation was not treated as a REIT. Accordingly, we believe that we have complied with this requirement. If it is determined that we have accumulated earnings and profits from any year preceding
the year that we first qualified as a REIT, we could be required to pay a deficiency dividend to stockholders after the relevant determination in order to maintain our qualification as a REIT, or we could fail to qualify as a REIT.
Effect of Subsidiary Entities
Ownership of Partnership Interests. In the case of a REIT that is a partner in a partnership (references herein to "partnership" include
limited liability companies that are classified as partnerships for U.S. federal income tax purposes), Treasury Regulations provide that the REIT is deemed to own its proportionate share of the partnership's assets and to earn its proportionate share
of the partnership's gross income based on its pro rata share of capital interests in the partnership for purposes of the asset and gross income tests applicable to REITs, as described below. However, solely for purposes of the 10% value test,
described below, the determination of a REIT's interest in partnership assets will be based on the REIT's proportionate interest in any securities issued by the partnership, excluding, for these purposes, certain excluded securities as described in the
Code. In addition, the assets and gross income of the partnership generally are deemed to retain the same character in the hands of the REIT. Thus, our proportionate share of the assets and items of income of any partnerships in which we own an
equity interest (including such partnership's share of these items of other partnerships in which it owns an equity interest), is treated as our assets and items of income for purposes of applying the REIT requirements described below. Consequently,
to the extent that we directly or indirectly hold a preferred or other equity interest in a partnership, the partnership's assets and operations may affect our ability to qualify as a REIT, even though we may have no control, or only limited influence,
over the partnership.
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A summary of certain rules governing the U.S. federal income taxation of partnerships and their partners is provided below in "—Tax Aspects of Investments in Partnerships."
Disregarded Subsidiaries. If a REIT owns a corporate subsidiary that is a "qualified REIT subsidiary," that subsidiary is disregarded as a
separate entity for U.S. federal income tax purposes, and all assets, liabilities and items of income, deduction and credit of the subsidiary are treated as assets, liabilities and items of income, deduction and credit of the REIT, including for
purposes of the gross income and asset tests applicable to REITs as summarized below. A qualified REIT subsidiary is any corporation, other than a TRS, as described below under "—Taxable REIT Subsidiaries," that is wholly owned by a REIT, or by other
disregarded subsidiaries, or by a combination of the two. Single member limited liability companies that are wholly owned by a REIT are also generally disregarded as separate entities for U.S. federal income tax purposes, including for purposes of the
REIT gross income and asset tests. Disregarded subsidiaries, along with partnerships in which we hold an equity interest, are sometimes referred to herein as "pass-through subsidiaries."
In the event that a disregarded subsidiary ceases to be wholly owned by us—for example, if any equity interest in the subsidiary is acquired by a person other than us or another
disregarded subsidiary of ours—the subsidiary's separate existence would no longer be disregarded for U.S. federal income tax purposes. Instead, it would have multiple owners and would be treated as either a partnership or a taxable corporation. Such
an event could, depending on the circumstances, adversely affect our ability to satisfy the various asset and gross income tests applicable to REITs, including the requirement that REITs generally may not own, directly or indirectly, more than 10% of
the value or voting power of the outstanding securities of another corporation. See "—Asset Tests" and "—Gross Income Tests."
Taxable REIT Subsidiaries. A REIT generally may jointly elect with a subsidiary corporation, whether or not wholly owned, to treat the
subsidiary corporation as a TRS. The separate existence of a TRS or other taxable corporation, unlike a disregarded subsidiary as discussed above, is not ignored for U.S. federal income tax purposes. Accordingly, such an entity would generally be
subject to corporate U.S. federal, state and local income or franchise taxes on its earnings, which may reduce the cash flow generated by us and our subsidiaries in the aggregate, and our ability to make distributions to our stockholders.
We have jointly elected with SSG TRS, for SSG TRS to be treated as a TRS. This allows SSG TRS to invest in assets and engage in activities that could not be held or conducted
directly by us without jeopardizing our qualification as a REIT. A REIT is not treated as holding the assets of a TRS or other taxable subsidiary corporation or as receiving any income that the subsidiary earns. Rather, the shares issued by the
subsidiary are an asset in the hands of the REIT, and the REIT recognizes as income the dividends, if any, that it receives from the subsidiary. This treatment can affect the gross income and asset test calculations that apply to the REIT, as
described below. Because a REIT does not include the assets and income of such subsidiary corporations in determining the REIT's compliance with the REIT requirements, such entities may be used by the parent REIT to undertake indirectly activities
that the REIT rules might otherwise preclude it from doing directly or through pass-through subsidiaries or render commercially unfeasible (for example, activities that give rise to certain categories of income such as management fees or fees for
certain non-customary services to tenants of the REIT). If dividends are paid to us by SSG TRS or one or more other TRSs we may own, then a portion of the dividends that we distribute to stockholders who are taxed at individual rates may be eligible
for taxation at the preferential tax rates applicable to qualified dividend income rather than at ordinary income rates. See "Taxation of Stockholders—Taxation of Taxable U.S. Stockholders" and "—Annual Distribution Requirements."
Certain restrictions imposed on TRSs are intended to ensure that such entities will be subject to appropriate levels of U.S. federal income taxation. If amounts are paid to a REIT
or deducted by a TRS due to transactions between a REIT, its tenants and/or a TRS, that exceed the amount that would be paid to or deducted by a party in an arm's-length transaction, the REIT generally will be subject to an excise tax equal to 100% of
such excess.
Rents received by us that include amounts for services furnished by a TRS to any of our tenants will not be subject to the excise tax if such amounts qualify for the safe harbor
provisions contained in the Code. Safe harbor provisions are provided where (1) amounts are excluded from the definition of impermissible tenant service income as a result of satisfying a 1% de minimis exception;
(2) a TRS renders a significant amount of similar services to unrelated parties and the charges for such services are substantially comparable; (3) rents paid to us by tenants that are not receiving services from the TRS are substantially comparable to
the rents by our tenants leasing comparable
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space that are receiving such services from the TRS and the charge for the services is separately stated; or (4) the TRS's gross income from the service is not less than 150% of the TRS's direct
cost of furnishing the service.
We intend to structure transactions with SSG TRS and any other TRS on terms that we believe are arm's length to avoid incurring the 100% excise tax described above. There can be
no assurances, however, that we will be able to avoid application of the 100% tax.
We expect to hold certain assets directly or indirectly in SSG TRS or one or more other TRSs. We may conduct certain activities (such as selling packing supplies and locks)
through such TRSs. We are subject to the limitation that securities in TRSs may not represent more than 20% of a REIT's assets. There can be no assurance that we will at all times be able to continue to comply with such limitation.
Gross Income Tests
In order to maintain our qualification as a REIT, we annually must satisfy two gross income tests. First, at least 75% of our gross income for each taxable year, excluding gross
income from sales of inventory or dealer property in "prohibited transactions" and certain hedging and foreign currency transactions, must be derived from investments relating to real property or mortgages on real property, including "rents from real
property," dividends received from and gain from the disposition of shares of other REITs, interest income derived from mortgage loans secured by real property (including certain types of mortgage-backed securities), and gains from the sale of real
estate assets (other than income or gains with regard to debt instruments issued by public REITs that are not otherwise secured by real property), as well as income from certain kinds of temporary investments. Second,
at least 95% of our gross income in each taxable year, excluding gross income from prohibited transactions and certain hedging and foreign currency transactions, must be derived from some combination of income that qualifies under the 75% income test
described above, as well as other dividends, interest, and gain from the sale or disposition of stock or securities, which need not have any relation to real property.
For purposes of the 75% and 95% gross income tests, a REIT is deemed to have earned a proportionate share of the income earned by any partnership, including any limited liability
company treated as a partnership for U.S. federal income tax purposes, in which it owns an interest, which share is determined by reference to its capital interest in such entity, and is deemed to have earned the income earned by any qualified REIT
subsidiary.
Rents received by us will qualify as "rents from real property" in satisfying the 75% gross income test described above only if several conditions are met, including the
following. The rent must not be based in whole or in part on the income or profits of any person. However, an amount will not be excluded from rents from real property solely by being based on a fixed percentage or percentages of receipts or sales,
or being based on the net income or profits of a tenant which derives substantially all of its income with respect to such property from the subleasing of substantially all of such property, to the extent that the rents paid by the sublessees would
qualify as rents from real property if earned directly by us. If rent is partly attributable to personal property leased in connection with a lease of real property, the portion of the total rent that is attributable to the personal property will not
qualify as rents from real property unless it constitutes 15% or less of the total rent received under the lease for the taxable year. Moreover, for rents received to qualify as rents from real property, we generally must not operate or manage the
property or furnish or render certain services to the tenants of such property, other than through an "independent contractor" who is adequately compensated and from which we derive no income, or through a TRS, as discussed below. We are permitted,
however, to perform services that are "usually or customarily rendered" in connection with the rental of space for occupancy only and are not otherwise considered rendered to the occupant of the property. In addition, we may directly or indirectly
provide non-customary services to tenants of our properties if the gross income from such services does not exceed 1% of the total gross income from the property for the relevant taxable year. In such a case, only the amounts for non-customary
services are not treated as rents from real property and the provision of the services does not disqualify the rents from treatment as rents from real property. If, however, the gross income from such non-customary services exceeds the 1% threshold,
none of the gross income from the property for the relevant taxable year is treated as rents from real property. For purposes of this test, the gross income received from such non-customary services is deemed to be at least 150% of the direct cost of
providing the services. Moreover, we are permitted to provide services to tenants through a TRS without disqualifying the rental income received from tenants as rents from real property. Also, rental income will qualify as rents from real property
only to the extent that we do not directly or indirectly (through application of certain constructive ownership rules) own, (1) in the case of any tenant which is a corporation, stock possessing 10% or more of the total combined voting power of all
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entitled to vote, or 10% or more of the total value of shares of all classes of stock of such tenant, or (2) in the case of any tenant which is not a corporation, an interest of 10% or more in the
assets or net profits of such tenant. However, rental payments from a TRS will qualify as rents from real property even if we own more than 10% of the total value or combined voting power of the TRS if at least 90% of the property is leased to
unrelated tenants and the rent paid by the TRS is substantially comparable to the rent paid by the unrelated tenants for comparable space. We do not believe that we have owned an interest in any tenant that has prevented rental income from the tenant
from qualifying as rents from real property under the above rules. However, it is possible that the constructive ownership rules could cause us to be treated as owning an interest in a tenant, for example if one of our stockholders held shares of our
stock above certain thresholds and also held an ownership interests in a tenant that exceeded the thresholds described above, which could adversely impact our qualification as a REIT.
Unless we determine that the resulting nonqualifying income under any of the following situations, taken together with all other nonqualifying income earned by us in the taxable
year, will not jeopardize our qualification as a REIT, we do not intend to:
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charge rent for any property that is based in whole or in part on the income or profits of any person, except by reason of being based on a fixed percentage or percentages of receipts or
sales, as described above;
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rent any property to a related party tenant, including a TRS, unless the rent from the lease to the TRS would qualify for the special exception from the related party tenant rule applicable
to certain leases with a TRS;
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derive rental income attributable to personal property other than personal property leased in connection with the lease of real property, the amount of which is less than 15% of the total
rent received under the lease; or
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directly perform services considered to be noncustomary or rendered to the occupant of the property.
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As noted above, we may conduct certain activities that do not generate qualifying income. We expect that such activities will be conducted through SSG TRS or one or more other
TRSs unless any nonqualifying income from such activities would be de minimis. In addition, we have provided and may continue to provide certain other tenant services, such as access to insurance, through third-party contractors. We believe that
these services have been provided through independent contractors meeting the applicable requirements, and as a result that these services do not cause our rental income to be characterized as other than rents from real property for purposes of the
REIT gross income tests. However, no assurance can be provided that the IRS would agree with this characterization. If the IRS were to successfully challenge our characterization of these services, our qualification as a REIT could be adversely
impacted. In addition, we have provided services to tenants at certain of our properties directly, rather than through a TRS or independent contractor, including services that are not usually or customarily rendered in connection with the rental of
space for occupancy only. We believe that the income from these non-customary services (including the deemed income determined based on the direct costs of providing the services as described above) has not exceeded 1% of the total gross income from
the relevant properties in the relevant taxable years. However, there is limited guidance regarding what items are included as direct costs for the purposes of this test. If the IRS were to successfully assert that our income from these services
exceeded the 1% threshold described above, we could fail to qualify as a REIT.
We may directly or indirectly receive distributions from any TRSs or other corporations that are not REITs or qualified REIT subsidiaries. These distributions will be classified
as dividend income to the extent of the earnings and profits of the distributing corporation. Such distributions will generally constitute qualifying income for purposes of the 95% gross income test, but not for purposes of the 75% gross income test.
We may from time to time need to make distributions from a TRS in order to keep the value of the securities that we hold in our TRSs below 20% (25% for taxable years prior to 2018)
of our total assets. See "—Asset Tests." While we will monitor our compliance with these income test and asset tests and intend to conduct our affairs so as to comply with them, they may at times be in conflict with one another. For example, it is
possible that we may wish to distribute a dividend from a TRS in order to reduce the value of TRS securities below 20% of our assets, but may be unable to do so without violating the 75% gross income test. Although there are other measures we can take
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circumstances in order to remain in compliance with the requirements for REIT qualification, there can be no assurance that we will be able to comply with these tests in all market conditions.
Any dividends received by us from a REIT will be qualifying income for purposes of both the 95% and 75% gross income tests. As described above, we have held and may continue to
hold interests in certain publicly traded REITs. We do not generally independently investigate the REIT qualification of such REITs, but rather generally rely on statements made by such REITs in their public filings. In the event that one or more of
the publicly traded REITs in which we invest was not properly treated as a REIT for U.S. federal income tax purposes, any distributions received from such company would be qualifying income for purposes of the 95% gross income test but not the 75%
gross income test, which could adversely impact our ability to qualify as a REIT.
Interest income constitutes qualifying mortgage interest for purposes of the 75% gross income test (as described above) to the extent that the obligation is secured by a mortgage
on real property. If we receive interest income with respect to a mortgage loan that is secured by both real property and other property, and the highest principal amount of the loan outstanding during a taxable year exceeds the fair market value of
the real property on the date that we acquired or originated the mortgage loan, then, subject to the exception described below, the interest income will be apportioned between the real property and the other property, and our income from the
arrangement will qualify for purposes of the 75% gross income test only to the extent that the interest is allocable to the real property. For taxable years beginning after December 31, 2015, if a loan is secured by both real property and personal
property and the fair market value of the personal property does not exceed 15% of the fair market value of all real and personal property securing the loan, interest on the loan is treated as interest paid on a loan secured solely by the real property
for purposes of these rules. Even if a loan is not secured by real property or is undersecured, the income that it generates may nonetheless qualify for purposes of the 95% gross income test.
To the extent that the terms of a loan provide for contingent interest that is based on the cash proceeds realized upon the sale of the property securing the loan (a "shared
appreciation provision"), income attributable to the participation feature will be treated as gain from sale of the underlying property, which generally will be qualifying income for purposes of both the 75% and 95% gross income tests, provided that
the property is not inventory or dealer property in the hands of the borrower or us.
Hedging Transactions
We may enter into hedging transactions with respect to one or more of our assets or liabilities. Hedging transactions could take a variety of forms, including interest rate swap
agreements, interest rate cap agreements, options, futures contracts, forward rate agreements or similar financial instruments. Except to the extent provided by Treasury Regulations, any income from a hedging transaction we enter into (1) in the
normal course of our business primarily to manage risk of interest rate or price changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets,
which we clearly identify as specified in Treasury Regulations before the close of the day on which it was acquired, originated, or entered into, including gain from the sale or disposition of such a transaction, (2) primarily to manage risk of
currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% income tests which is clearly identified as such before the close of the day on which it was acquired, originated, or entered into, or
(3) primarily to manage risk with respect to a hedging transaction described in clause (1) or (2) after the extinguishment of such borrowings or disposal of the asset producing such income that is hedged by the hedging transaction, provided, in each
case, that the hedging transaction is clearly identified as such before the close of the day on which it was acquired, originated or entered into, will not constitute gross income for purposes of the 75% or 95% gross income test. To the extent that we
enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both of the 75% and 95% gross income tests. We intend to structure any hedging transactions in a manner
that does not jeopardize our qualification as a REIT.
Failure to Satisfy the Gross Income Tests
We intend to monitor our sources of income, including any non-qualifying income received by us, so as to ensure compliance with the gross income tests. If we fail to satisfy one
or both of the 75% or 95% gross income tests for any taxable year, we may still qualify as a REIT for the year if we are entitled to relief under applicable provisions of the Code. These relief provisions will generally be available if the failure of
our company to meet these tests was
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due to reasonable cause and not due to willful neglect and, following the identification of such failure, we set forth a description of each item of our gross income that satisfies the applicable
gross income test in a schedule for the taxable year filed in accordance with the Treasury Regulations. It is not possible to state whether we would be entitled to the benefit of these relief provisions in all circumstances. If we fail to satisfy one
or both of the gross income tests and these relief provisions are inapplicable to a particular set of circumstances, we will not qualify as a REIT. As discussed above under "—Taxation of Our Company" and "—Taxation of REITs in General," even where
these relief provisions apply, a tax would be imposed upon the profit attributable to the amount by which we fail to satisfy the particular gross income test, which could be significant in amount.
Asset Tests
At the close of each calendar quarter we must also satisfy five tests relating to the nature of our assets. First, at least 75% of the value of our total assets must be
represented by some combination of "real estate assets," cash, cash items, U.S. government securities, and, under some circumstances, stock or debt instruments purchased with new capital. For this purpose, real estate assets include interests in real
property, such as land, buildings, leasehold interests in real property, stock of other REITs, interests in mortgages secured by real property or by interests in real property, certain kinds of mortgage-backed securities and mortgage loans, and, for
taxable years beginning after 2015, debt instruments issued by publicly offered REITs, interests in obligations secured by both real property and personal property if the fair market value of the personal property does not exceed 15% of the total fair
market value securing such mortgage, and personal property to the extent income from such personal property is treated as "rents from real property" because the personal property is rented in connection with a rental of real property and constitutes
less than 15% of the aggregate property rented. Assets that do not qualify for purposes of the 75% test are subject to the additional asset tests described below.
Second, the value of any one issuer's securities owned by us may not exceed 5% of the value of our total assets. Third, we may not own more than 10% of any one issuer's
outstanding securities, as measured by either voting power or value. Fourth, the aggregate value of all securities of any TRSs held by us may not exceed 20% (25% for taxable years prior to 2018) of the value of our total assets. Fifth, the aggregate
value of debt instruments issued by publicly offered REITs held by us that are not otherwise secured by real property may not exceed 25% of the value of our total assets.
The 5% and 10% asset tests described above do not apply to securities of TRSs, qualified REIT subsidiaries or securities that are "real estate assets" for purposes of the 75% gross
asset test described above. The 10% value test does not apply to certain "straight debt" and other excluded securities, as described in the Code including, but not limited to, any loan to an individual or estate, any obligation to pay rents from real
property and any security issued by a REIT. In addition, for purposes of applying the 10% value test, (1) a REIT's interest as a partner in a partnership is not considered a security issued by the partnership; (2) any debt instrument issued by a
partnership (other than straight debt or another excluded security) will not be considered a security issued by the partnership if at least 75% of the partnership's gross income (excluding gross income from prohibited transactions) is derived from
sources that would qualify for the 75% REIT gross income test; and (3) any debt instrument issued by a partnership (other than straight debt or another excluded security) will not be considered a security issued by the partnership to the extent of the
REIT's interest as a partner in the partnership. For purposes of the 10% value test, "straight debt" means a written unconditional promise to pay on demand or on a specified date a sum certain in money if (i) debt is not convertible, directly or
indirectly, into stock, (ii) the interest rate and interest payment dates are not contingent on profits, the borrower's discretion, or similar factors other than certain contingencies relating to the timing and amount of principal and interest
payments, as described in the Code and (iii) in the case of an issuer that is a corporation or a partnership, securities that otherwise would be considered straight debt will not be so considered if we, and any of our "controlled taxable REIT
subsidiaries," as defined in the Code, hold any securities of the corporate or partnership issuer which (a) are not straight debt or other excluded securities (prior to the application of this rule), and (b) have an aggregate value greater than 1% of
the issuer's outstanding securities (including, for the purposes of a partnership issuer, its interest as a partner in the partners).
The asset tests must be satisfied at the close of each calendar quarter of our taxable year in which we acquire securities in the applicable issuer, and also at the close of each
calendar quarter in which we increase our ownership of securities of such issuer. If we fail to satisfy an asset test because we acquire securities or other property during a quarter, we may cure this failure by disposing of sufficient nonqualifying
assets within 30 days after the close of that quarter. If we fail to cure any noncompliance with the asset tests within the 30 day cure period, we would cease to
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qualify as a REIT unless we are eligible for certain relief provisions discussed below. We believe that our holdings of securities and other assets will comply with the foregoing REIT asset
requirements, and we intend to monitor compliance with such tests on an ongoing basis. There can be no assurance, however, that we will be successful in this effort.
Moreover, the values of some of our assets, including the securities of SSG TRS and any other TRSs, or other nonpublicly traded investments, may not be susceptible to a precise
determination and are subject to change in the future. Furthermore, the proper classification of an instrument as debt or equity for U.S. federal income tax purposes may be uncertain in some circumstances, which could affect the application of the
REIT asset tests. Accordingly, there can be no assurance that the IRS will not successfully contend that our assets do not meet the requirements of the REIT asset tests.
Certain relief provisions may be available to us if we discover a failure to satisfy the asset tests described above after the 30-day cure period. Under these provisions, we will
be deemed to have met the 5% and 10% asset tests if the value of our nonqualifying assets (i) does not exceed the lesser of (a) 1% of the total value of our assets at the end of the applicable quarter or (b) $10 million and (ii) we dispose of the
nonqualifying assets or otherwise satisfy such tests within (a) six months after the last day of the quarter in which the failure to satisfy the asset tests is discovered or (b) the period of time prescribed by Treasury Regulations to be issued. For
violations of any of the asset tests due to reasonable cause and not due to willful neglect and that are, in the case of the 5% and 10% asset tests, in excess of the de minimis exception described above, we may
avoid disqualification as a REIT after the 30 day cure period by taking steps including (i) the disposition of sufficient nonqualifying assets, or the taking of other actions, which allow us to meet the asset tests within (a) six months after the last
day of the quarter in which the failure to satisfy the asset tests is discovered or (b) the period of time prescribed by Treasury Regulations to be issued, (ii) paying a tax equal to the greater of (a) $50,000 or (b) the highest corporate tax rate
multiplied by the net income generated by the nonqualifying assets, and (iii) disclosing certain information to the IRS.
We believe that our holdings of securities and other assets comply with the foregoing REIT asset requirements, and we intend to monitor compliance with such tests on an ongoing
basis. There can be no assurance, however, that we will be successful in this effort. In particular, in prior years our satisfaction of the 75% gross asset test described above was based in part on our ownership of stock of certain publicly traded
REITs. Although we are not aware of any failure, if one or more of those REITs was not properly treated as a REIT for U.S. federal income tax purposes, such treatment could have caused us to fail the 75% gross asset test. As described above, we have
held and may continue to hold interests in certain publicly traded REITs. We do not generally independently investigate the REIT qualification of such REITs, but rather generally rely on statements made by such REITs in their public filings. In the
event that one or more of the publicly traded REITs in which we invest was not properly treated as a REIT for U.S. federal income tax purposes, the shares of such company would not constitute a qualifying asset for purposes of the 75% gross asset test,
in which case we could fail to satisfy one or more of the REIT gross asset tests.
If we fail to cure any noncompliance with the asset tests in a timely manner, and the relief provisions described above are not available, we would cease to qualify as a REIT.
Annual Distribution Requirements
In order to qualify as a REIT, we are required to distribute dividends, other than capital gain dividends, to our stockholders in an amount at least equal to:
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the sum of:
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90% of our "REIT taxable income" for the taxable year (computed without regard to our deduction for dividends paid and by excluding our net capital gains), and
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90% of the net income, if any (after tax), from foreclosure property, as described below, and recognized built-in gain, as discussed above, minus
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the sum of specified items of non-cash income that exceeds a percentage of our net taxable income.
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These distributions must be paid in the taxable year to which they relate, or in the following taxable year if such distributions are declared in October, November or December of
the taxable year, are payable to stockholders of record on a specified date in any such month, and are actually paid before the end of January of the following year. Such distributions are treated as both paid by us and received by each stockholder on
December 31 of the year in which they are declared. In addition, at our election, a distribution for a taxable year may be declared before we timely file our tax return for the year, provided we pay such distribution with or before our first regular
dividend payment after such declaration, provided that such payment is made during the 12-month period following the close of such taxable year. These distributions are taxable to our stockholders in the year in which paid, even though the
distributions relate to our prior taxable year for purposes of the 90% distribution requirement. In order to be taken into account for purposes of our distribution requirement, except as provided below, the amount distributed must not be
preferential—i.e., every stockholder of the class of stock to which a distribution is made must be treated the same as every other stockholder of that class, and no class of stock may be treated other than
according to its dividend rights as a class. Beginning in 2015, these preferential dividend limitations no longer apply to us during any period that we are treated as a publicly offered REIT, which generally includes a REIT required to file annual and
periodic reports with the SEC.
To the extent that we distribute at least 90%, but less than 100%, of our net taxable income, as adjusted, we will be subject to tax at ordinary corporate tax rates on the retained
portion. In addition, we may elect to retain, rather than distribute, our net long-term capital gains and pay tax on such gains. In this case, we would elect to have our stockholders include their proportionate share of such undistributed long-term
capital gains in their income and receive a corresponding credit for their proportionate share of the tax paid by us. Our stockholders would then increase their adjusted basis in our shares by the difference between the designated amounts included in
their long-term capital gains and the tax deemed paid with respect to their proportionate shares.
If we fail to distribute during each calendar year at least the sum of (1) 85% of our REIT ordinary income for such year, (2) 95% of our REIT capital gain net income for such year
and (3) any undistributed taxable income from prior periods, we will be subject to a 4% non-deductible excise tax on the excess of such amount over the sum of (A) the amounts actually distributed (taking into account excess distributions from prior
periods) and (B) the amounts of income retained on which we have paid corporate income tax. We intend to make timely distributions so that we are not subject to the 4% excise tax.
It is possible that we, from time to time, may not have sufficient cash to meet the REIT distribution requirements due to timing differences between (1) the actual receipt of cash
and (2) the inclusion of items in income by us for U.S. federal income tax purposes. Additional potential sources of non-cash taxable income include loans held by us as assets that are issued at a discount and require the accrual of taxable interest
income in advance of our receipt in cash, loans on which the borrower is permitted to defer cash payments of interest and distressed loans on which we may be required to accrue taxable interest income even though the borrower is unable to make current
interest payments in cash. In the event that such timing differences occur, in order to meet the distribution requirements, it might be necessary to arrange for short-term, or possibly long-term, borrowings, or to pay dividends in the form of taxable
in-kind distributions of property, including taxable share dividends. In the case of a taxable share dividend, stockholders would be required to include the dividend as income and would be required to satisfy the tax liability associated with the
distribution with cash from other sources including sales of our shares. Both a taxable share distribution and sale of shares resulting from such distribution could adversely affect the price of our shares.
We may be able to rectify a failure to meet the distribution requirements for a year by paying "deficiency dividends" to stockholders in a later year, which may be included in our
deduction for dividends paid for the earlier year. In this case, we may be able to avoid losing our REIT qualification or being taxed on amounts distributed as deficiency dividends, subject to the 4% excise tax described above. However, we will be
required to pay interest and a penalty based on the amount of any deduction taken for deficiency dividends.
Tax on Built-In Gains
If we acquire appreciated assets from a subchapter C corporation in a transaction in which the adjusted tax basis of the assets in our hands is less than the fair market value of
the
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assets, determined at the time we acquired such assets, and if we subsequently dispose of any such assets during the 5-year period (or with respect to certain prior years, the 10-year period)
following the acquisition of the assets from the C corporation, we will be subject to tax at the highest corporate tax rates on any gain from such assets to the extent of the excess of the fair market value of the assets on the date that they were
contributed to us over the basis of such assets on such date, which we refer to as built-in gains. In addition, if we were treated as a C corporation that is not a RIC or a REIT for any period of time, any asset that we held during such period of time
generally would be subject to this tax on built-in-gains. Similarly, to the extent that any C corporation holds an interest in an entity treated as a partnership for U.S. federal income tax purposes (either directly or through one or more other
entities treated as partnerships for U.S. federal income tax purposes) and we acquire appreciated assets from such partnership in a transaction in which the adjusted tax basis of the assets in our hands is less than the fair market value determined at
the time we acquired such assets, determined by reference to the adjusted tax basis of the assets in the hands of the partnership, the underlying C corporation's proportionate share of such assets will be treated as contributed by a C corporation and
therefore will be subject to the tax on built-in gains. However, the built-in gains tax will not apply if the C corporation elects to be subject to an immediate tax upon the transfer. Any gain from the sale of property acquired by us in an exchange
under Section 1031 (a like kind exchange) or 1033 (an involuntary conversion) of the Code is excluded from the application of this built-in gains tax.
Recordkeeping Requirements
We are required to maintain records and request on an annual basis information from specified stockholders. These requirements are designed to assist us in determining the actual
ownership of our outstanding shares and maintaining our qualification as a REIT.
Prohibited Transactions
Net income that we derive from a prohibited transaction is subject to a 100% tax. The term "prohibited transaction" generally includes a sale or other disposition of property
(other than foreclosure property as described below) that is held as inventory or primarily for sale to customers in the ordinary course of a trade or business by a REIT, by a lower-tier partnership in which the REIT holds an equity interest or by a
borrower that has issued a shared appreciation mortgage or similar debt instrument to the REIT. We intend to conduct our operations so that the real properties owned by us or our pass-through subsidiaries will not be treated as held as inventory or
primarily for sale to customers, and that a sale of any properties by us will not be treated as in the ordinary course of business. We have sold items such as locks, boxes, and packing materials to tenants and third parties directly rather than
through a TRS, and as a result could be liable for the prohibited transaction tax with respect to these sales.
However, we intend to structure future sales of these items such that income from such sales is earned by SSG TRS and therefore is not subject to the prohibited transaction tax.
Whether property is held as inventory or "primarily for sale to customers in the ordinary course of a trade or business" depends on the particular facts and circumstances. The 100% tax will not apply to gains from the sale of property by a TRS,
although such income will be subject to tax in the hands of the TRS at regular corporate income tax rates. No assurance can be given that any particular property in which we hold a direct or indirect interest will not be treated as property held as
inventory or primarily for sale to customers.
The Code provides a safe harbor that, if met, allows us to avoid being treated as engaged in a prohibited transaction. In order to meet the safe harbor, among other things, (i) we
must have held the property for at least two years (and, in the case of property which consists of land or improvements not acquired through foreclosure, we must have held the property for at least two years for the production of rental income), (ii)
we capitalized expenditures on the property in the two years preceding the sale that do not exceed 30% of the net selling price of the property, and (iii) (a) we either have seven or fewer sales of property (excluding certain property obtained through
foreclosure or sales to which Section 1033 of the Code applies (involuntary conversions)) for the year of sale, (b) the aggregate adjusted bases of properties (excluding certain property obtained through foreclosure or sales to which Section 1033 of
the Code applies (involuntary conversions)) sold by us during the taxable year is 10% or less of the aggregate adjusted bases of all of our assets as of the beginning of the taxable year, (c) the aggregate fair market value of properties (excluding
certain property obtained through foreclosure or sales to which Section 1033 of the Code applies (involuntary conversions)) sold by us during the taxable year is 10% or less of the aggregate fair market value of all of our assets as of the beginning of
the taxable year, or (d) we satisfy clause (b) or (c), applied by substituting 20% for 10%, provided that the average percentage (of aggregate adjusted bases or fair market value, as applicable) for the current and prior two taxable years does not
exceed 10%. For purposes of applying the safe harbor, the sale of more than one property to one buyer as part of one transaction constitutes one sale.
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Foreclosure Property
Foreclosure property is real property (including interests in real property) and any personal property incident to such real property (1) that is acquired by a REIT as a result of
the REIT having bid on such property at foreclosure, or having otherwise reduced the property to ownership or possession by agreement or process of law, after there was a default (or default was imminent) on a lease of such property or a mortgage loan
held by the REIT and secured by such property, (2) for which the related loan or lease was made, entered into or acquired by the REIT at a time when default was not imminent or anticipated, and (3) for which such REIT makes a proper election to treat
the property as foreclosure property. REITs generally are subject to tax at the maximum corporate rate (currently 21%) on any net income from foreclosure property, including any gain from the disposition of the foreclosure property, other than income
that would otherwise be qualifying income for purposes of the 75% gross income test. Any gain from the sale of property for which a foreclosure property election has been made will not be subject to the 100% tax on gains from prohibited transactions
described above, even if the property would otherwise constitute inventory or dealer property in the hands of the selling REIT.
Tax Aspects of Investments in Partnerships
We may hold investments through entities that are classified as partnerships for U.S. federal income tax purposes. In general, partnerships are "pass-through" entities that are
not subject to U.S. federal income tax. Rather, partners are allocated their proportionate shares of the items of income, gain, loss, deduction and credit of a partnership, and are subject to tax on these items without regard to whether the partners
receive a distribution from the partnership. We will include in income our applicable proportionate share of these partnership items for purposes of the various REIT income tests, based on our relevant capital interest in such partnership, and in the
computation of net taxable income. Moreover, for purposes of the REIT asset tests, we will include the proportionate share of assets held by subsidiary partnerships, based on our relevant capital interest in such partnerships (other than for purposes
of the 10% value test, for which the determination of a REIT's interest in partnership assets is based on the REIT's proportionate interest in any securities issued by the partnership excluding, for these purposes, certain excluded securities as
described in the Code). Consequently, to the extent that we hold an equity interest in a partnership, the partnership's assets and operations may affect our ability to qualify as a REIT, even though we may have no control, or only limited influence,
over the partnership.
Failure to Qualify
In the event that a REIT violates a provision of the Code that would result in a failure to qualify as a REIT, such REIT may nevertheless continue to qualify as a REIT if (1) the
violation is due to reasonable cause and not due to willful neglect, (2) the REIT pays a penalty of $50,000 for each failure to satisfy a requirement for qualification as a REIT and (3) the violation does not include a violation under the gross income
or asset tests described above. This cure provision reduces the instances that could lead to our disqualification as a REIT for violations due to reasonable cause. Relief provisions are also available for failures of the income and asset tests, as
described above in "—Requirements for Qualification— General—Failure to Satisfy the Gross Income Tests" and "—Requirements for Qualification—General—Asset Tests." If we fail to qualify for taxation as a REIT in any taxable year and none of the relief
provisions of the Code apply, we will be subject to tax on our taxable income at regular corporate rates. Distributions to our stockholders in any year in which such entity is not a REIT will not be deductible by us, nor will we be required to make
any distributions. In this situation, to the extent of current and accumulated earnings and profits, and, subject to limitations of the Code, distributions to our stockholders will generally be taxable as regular corporate dividends. In the case of
U.S. stockholders (as defined below) who are individuals, trusts or estates, such dividends may be eligible for the preferential income tax rates applicable to qualified dividend income (at a maximum rate of 20%), and dividends in the hands of
corporate U.S. stockholders may be eligible for the dividends received deduction. Unless we are entitled to relief under the specific statutory provisions, we will also be disqualified from re-electing to be taxed as a REIT for four years following
the year during which qualification was lost. It is not possible to state whether, in all circumstances, we will be entitled to statutory relief.
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Taxation of Stockholders
Taxation of Taxable U.S. Stockholders
This section summarizes the taxation of U.S. stockholders that are not tax-exempt organizations. For these purposes, a U.S. stockholder is a beneficial owner of our common stock
who for U.S. federal income tax purposes is:
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an individual who is a citizen or resident of the United States;
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a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any state thereof or the
District of Columbia;
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an estate whose income is subject to U.S. federal income taxation regardless of its source; or
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any trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial
decisions of the trust or (2) it has in place a valid election in place to be treated as a U.S. person.
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If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the U.S. federal income tax treatment of a partner generally will
depend upon the status of the partner and the activities of the partnership. A partner of a partnership holding our common stock should consult its tax advisor regarding the U.S. federal income tax consequences to the partner of the acquisition,
ownership and disposition of our common stock by the partnership.
Distributions. Provided that we qualify as a REIT, distributions made to our taxable U.S. stockholders out of our current or accumulated
earnings and profits, and not designated as capital gain dividends, will generally be taken into account by them as ordinary dividend income and generally will not be eligible for the dividends received deduction for corporations. In determining the
extent to which a distribution with respect to our common stock constitutes a dividend for U.S. federal income tax purposes, our earnings and profits will be allocated first to distributions with respect to our preferred stock, if any, and then to our
common stock. Dividends received from REITs are generally not eligible to be taxed at the preferential income tax rates applicable to non-corporate U.S. stockholders who receive qualified dividend income from taxable subchapter C corporations.
However, for taxable years beginning after December 31, 2017 and before January 1, 2026, non-corporate taxpayers may deduct up to 20% of certain qualified business income, including "qualified REIT dividends" (generally, dividends received by a REIT
stockholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations, generally resulting in an effective maximum U.S. federal income tax rate of 29.6% on such income.
In addition, distributions from us that are designated as capital gain dividends will be taxed to U.S. stockholders as long-term capital gains, to the extent that they do not
exceed our actual net capital gain for the taxable year, without regard to the period for which the U.S. stockholder has held its shares. To the extent that we elect under the applicable provisions of the Code to retain our net capital gains, U.S.
stockholders will be treated as having received, for U.S. federal income tax purposes, our undistributed capital gains as well as a corresponding credit for taxes paid by us on such retained capital gains.
U.S. stockholders will increase their adjusted tax basis in our common stock by the difference between their allocable share of such retained capital gain and their share of the
tax paid by us. Corporate U.S. stockholders may be required to treat up to 20% of some capital gain dividends as ordinary income. Long-term capital gains are generally taxable at maximum U.S. federal rates of 20% in the case of U.S. stockholders who
are individuals, trusts and estates and 21% in the case of U.S. stockholders that are corporations. Capital gain dividends attributable to the sale of depreciable real property held for more than 12 months are subject to a 25% maximum U.S. federal
income tax rate for non-corporate U.S. stockholders, to the extent of previously claimed depreciation deductions.
Distributions in excess of our current and accumulated earnings and profits will not be taxable to a U.S. stockholder to the extent that they do not exceed the adjusted tax basis
of the U.S. stockholder's common stock in respect of which the distributions were made, but rather will reduce the adjusted tax basis of these shares. To the extent that such distributions exceed the adjusted tax basis of an individual U.S.
stockholder's shares, they will be
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included in income as long-term capital gain, or short-term capital gain if the shares have been held for one year or less. In addition, any dividend declared by us in October, November or December
of any year and payable to a U.S. stockholder of record on a specified date in any such month will be treated as both paid by us and received by the U.S. stockholder on December 31 of such year, provided that the dividend is actually paid by us on or
January 31 of the following calendar year.
With respect to U.S. stockholders who are taxed at the rates applicable to individuals, estates or trusts, we may elect to designate a portion of our distributions paid to such
U.S. stockholders as "qualified dividend income." A portion of a distribution that is properly designated as qualified dividend income is taxable to non-corporate U.S. stockholders at the rates applicable to long-term capital gains, provided that the
U.S. stockholder has held our common stock with respect to which the distribution is made for more than 60 days during the 121-day period beginning on the date that is 60 days before the date on which such common stock became ex-dividend with respect
to the relevant distribution. The maximum amount of our distributions eligible to be designated as qualified dividend income for a taxable year is equal to the sum of:
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the qualified dividend income received by us during such taxable year from non-REIT and non-RIC C corporations (including any TRS in which we may own an interest);
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the excess of any "undistributed" net taxable income recognized during the immediately preceding year over our U.S. federal income tax with respect to such undistributed net taxable income;
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the excess of any income recognized during the immediately preceding year attributable to the sale of a built-in gain asset that was acquired in a carry-over basis transaction from a non-REIT C corporation over the U.S. federal income tax
paid by us with respect to such built-in gain; and
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any earnings and profits that accumulated during a period that we were not treated as a REIT or a RIC for U.S. federal income tax purposes or that were inherited from a C corporation in a tax-deferred reorganization or similar transaction;
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provided that, in no case may the amount we designate as qualified dividend income exceed the amount we distribute to our stockholders as dividends with respect to the taxable year.
To the extent that we have available net operating losses and capital losses carried forward from prior tax years, such losses may reduce the amount of distributions that must be
made in order to comply with the REIT distribution requirements. See "—Effect of Subsidiary Entities— Annual Distribution Requirements." Such losses, however, are not passed through to U.S. stockholders and do not offset income of U.S. stockholders
from other sources, nor do they affect the character of any distributions that are actually made by us, which are generally subject to tax in the hands of U.S. stockholders to the extent that we have current or accumulated earnings and profits.
Dispositions of Our Common Stock. In general, a U.S. stockholder will realize gain or loss upon the sale, redemption or other taxable
disposition of our common stock in an amount equal to the difference between the sum of the fair market value of any property and the amount of cash received in such disposition and the U.S. stockholder's adjusted tax basis in the common stock at the
time of the disposition. In general, a U.S. stockholder's adjusted tax basis will equal the U.S. stockholder's acquisition cost, increased by the excess of net capital gains deemed distributed to the U.S. stockholder discussed above less tax deemed
paid on it and reduced by returns of capital. In general, capital gains recognized by individuals and other non-corporate U.S. stockholders upon the sale or disposition of shares of our common stock will be subject to a maximum U.S. federal income tax
rate of 20%, if such shares were held for more than 12 months, and will be taxed at ordinary income rates (of up to 37% through taxable years ending in 2025 and 39.6% thereafter) if such shares were held for 12 months or less. Gains recognized by U.S.
stockholders that are corporations are subject to U.S. federal income tax at a maximum rate of 21%, whether or not classified as long-term capital gains. The IRS has the authority to prescribe, but has not yet prescribed, regulations that would apply
a capital gain tax rate of 25% (which is generally higher than the long-term capital gain tax rates for non-corporate holders) to a portion of capital gain realized by a non-corporate holder on the sale of REIT stock that would correspond to the REIT's
"unrecaptured Section 1250 gain."
U.S. stockholders are advised to consult their tax advisors with respect to their capital gain tax liability. Capital losses recognized by a U.S. stockholder upon the disposition
of our common stock held for more than one
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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. stockholder but not ordinary income (except in
the case of individuals and certain noncorporate taxpayers, who may offset up to $3,000 of ordinary income each year). In addition, any loss upon a sale or exchange of shares of our common stock by a U.S. stockholder who has held the shares for six
months or less, after applying holding period rules, will be treated as a long-term capital loss to the extent of distributions received from us that were required to be treated by the U.S. stockholder as long-term capital gain.
If a U.S. stockholder recognizes a loss upon a subsequent disposition of our common stock in an amount that exceeds a prescribed threshold, it is possible that the provisions of
Treasury Regulations involving "reportable transactions" could apply, with a resulting requirement to separately disclose the loss generating transactions to the IRS. While these regulations are directed towards "tax shelters," they are written quite
broadly, and apply to transactions that would not typically be considered tax shelters. Significant penalties apply for failure to comply with these requirements. You should consult your tax advisors concerning any possible disclosure obligation with
respect to the receipt or disposition of our common stock, or transactions that might be undertaken directly or indirectly by us. Moreover, you should be aware that we and other participants in transactions involving us (including our advisors) might
be subject to disclosure or other requirements pursuant to these regulations.
Passive Activity Losses and Investment Interest
Limitations
Distributions made by us and gain arising from the sale or exchange by a U.S. stockholder of our common stock will not be treated as passive activity income. As a result, U.S.
stockholders will not be able to apply any "passive activity losses" against income or gain relating to our common stock. 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. A U.S. stockholder that elects to treat capital gain dividends, qualified dividend income or capital gains from the disposition of common stock as investment income for purposes of
the investment interest limitation will be taxed at ordinary income rates on such amounts.
Medicare Tax on Unearned Income
Certain U.S. stockholders that are individuals, estates or trusts are required to pay an additional 3.8% tax on "net investment income," which includes, among other things,
dividends on and capital gains from the sale or other disposition of common stock. Non-corporate U.S. stockholders should consult their tax advisors regarding the effect, if any, of this additional tax on their ownership and disposition of our common
stock.
Foreign Accounts
Dividends paid after June 30, 2014 to "foreign financial institutions" in respect of accounts of U.S. stockholders at such financial institutions may be subject to withholding at a
rate of 30%. U.S. stockholders should consult their tax advisors regarding the effect, if any, of these withholding rules on their ownership and disposition of our common stock.
Taxation of Tax-Exempt U.S. Stockholders
U.S. tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts, generally are exempt from U.S. federal income
taxation. However, they are subject to taxation on their unrelated business taxable income ("UBTI"). While many investments in real estate may generate UBTI, dividend distributions from a REIT to a tax-exempt entity do not constitute UBTI. Provided
that a tax-exempt U.S. stockholder has not held our common stock as "debt financed property" within the meaning of the Code (i.e., where the acquisition or ownership of the property is financed through a
borrowing by the tax-exempt stockholder), distributions from us and income from the sale of our common stock generally should not give rise to UBTI to a tax-exempt U.S. stockholder.
Tax-exempt U.S. stockholders that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans
exempt from U.S. federal income taxation under Sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Code, respectively, are subject to different UBTI rules, which generally will require them to characterize distributions from us as UBTI unless they
are able to properly claim a deduction for amounts set aside or placed in reserve for specific purposes so as to offset the income generated by their
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investment in our common stock. These prospective investors should consult their tax advisors concerning these "set aside" and reserve requirements.
In certain circumstances, a pension trust that (1) is described in Section 401(a) of the Code, and (2) is tax exempt under Section 501(a) of the Code (a "qualified pension trust")
that owns more than 10% of our stock could be required to treat a percentage of the dividends from us as UBTI if we are a "pension-held REIT." We will not be a pension-held REIT unless (1) either (A) at least one qualified pension trust owns more than
25% of the value of our stock, or (B) one or more qualified pension trusts, each individually holding more than 10% of the value of our stock, collectively owns more than 50% of the value of such stock and (2) we would not have qualified as a REIT but
for the fact that Section 856(h)(3) of the Code provides that stock owned by such trusts shall be treated, for purposes of the requirement that not more than 50% of the value of the outstanding stock of a REIT is owned, directly or indirectly, by five
or fewer "individuals" (as defined in the Code to include certain entities), as owned by the beneficiaries of such trusts. Although we do not believe that we are or will be treated as a pension-held REIT, there can be no assurance that this will be
the case. Prospective stockholders who are tax-exempt organizations should consult with their tax advisors regarding the tax consequences of investing in our common stock. The ownership limits contained in our charter generally prevent a tax-exempt
entity from directly owning more than 10% of the value of our common stock. However, no assurance can be provided that such ownership limits will prevent us from being treated as a pension-held REIT.
Tax-exempt U.S. stockholders are urged to consult their tax advisors
regarding the U.S. federal, state, local and non-U.S. tax consequences of the acquisition, ownership and disposition of our common stock.
Taxation of Non-U.S. Stockholders
The following is a summary of certain U.S. federal income tax consequences of the acquisition, ownership and disposition of our common stock applicable to non-U.S. stockholders.
For these purposes, a non-U.S. stockholder is a beneficial owner of our common stock who is neither a U.S. stockholder nor an entity that is treated as a partnership for U.S. federal income tax purposes. The discussion is based on current law and is
for general information only. It addresses only selective and not all aspects of U.S. federal income taxation. Non-U.S. stockholders are urged to consult their tax advisors to determine the impact of federal, state, local and non-U.S. income tax laws
and any applicable tax treaty on the exchange of your notes for shares of our common stock and the ownership and disposition of shares of our common stock, including any reporting requirements.
Ordinary Dividends. The portion of dividends received by non-U.S. stockholders payable out of our earnings and profits that are not
attributable to gains from sales or exchanges of U.S. real property interests and which are not effectively connected with a U.S. trade or business of the non-U.S. stockholder generally will be treated as ordinary income and will be subject to U.S.
federal withholding tax at the rate of 30%, unless reduced or eliminated by an applicable income tax treaty. Under some treaties, however, lower rates generally applicable to dividends do not apply to dividends from REITs.
In general, non-U.S. stockholders will not be considered to be engaged in a U.S. trade or business solely as a result of their ownership of our common stock. In cases where the
dividend income from a non-U.S. stockholder's investment in our common stock is, or is treated as, effectively connected with the non-U.S. stockholder's conduct of a U.S. trade or business, the non-U.S. stockholder generally will not be subject to the
30% withholding described above and will be subject to U.S. federal income tax at graduated rates in the same manner as U.S. stockholders are taxed with respect to such dividends, and may also be subject to the 30% branch profits tax (unless reduced or
eliminated by a treaty) on the income after the application of the income tax in the case of a non-U.S. stockholder that is a corporation.
Non-Dividend Distributions. Unless (1) our common stock constitutes a U.S. real property interest (a "USRPI"), or (2) either (A) if the
non-U.S. stockholder's investment in our common stock is effectively connected with a U.S. trade or business conducted by such non-U.S. stockholder (in which case the non-U.S. stockholder will be subject to the same treatment as U.S. stockholders with
respect to such gain unless otherwise provided in an applicable tax treaty) or (B) if the non-U.S. stockholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and certain other
conditions are met (in which case the non-U.S. stockholder will be subject to a 30% tax on the individual's net capital gain from U.S. sources for the year as reduced or eliminated by an applicable income tax treaty), distributions by us which are not
out of our earnings and profits will
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not be subject to U.S. federal income tax. If it cannot be determined at the time at which a distribution is made whether or not the distribution will exceed current and accumulated earnings and profits, the distribution will be subject to withholding at the rate applicable to dividends. However, the non-U.S. stockholder may seek a refund from the IRS of any amounts withheld if it is subsequently determined that the distribution was, in fact, in excess of our current and accumulated earnings and profits. If our common stock constitutes a USRPI, as described below, distributions by us in excess of the sum of our earnings and profits plus the non-U.S. stockholder's adjusted tax basis in our common stock will be taxed under the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"), at the rate of tax, including any applicable capital gains rates, that would apply to a U.S. stockholder of the same type (e.g., an individual or a corporation, as the case may be), and the collection of the tax will be enforced by a refundable withholding tax at a rate of 15% of the amount by which a distribution exceeds the stockholder's share of our earnings and profits unless an appropriate exemption certificate is provided. Non-U.S. stockholders that are treated as "qualified foreign pension funds" are exempt from U.S. federal income and applicable withholding taxes under FIRPTA on such distributions by us.
Capital Gain Dividends. Under FIRPTA, a distribution made by us to a non-U.S. stockholder, 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. stockholder and will be subject to U.S. federal income tax
at the rates applicable to U.S. stockholders, without regard to whether the distribution is designated as a capital gain dividend. In addition, we will be required to withhold tax equal to 21% of the amount of capital gain dividends to the extent the
dividends constitute USRPI capital gains. Distributions to a non-U.S. corporate shareholder subject to FIRPTA may also be subject to a 30% branch profits tax (unless reduced or eliminated by an applicable income tax treaty). However, the 21%
withholding tax will not apply to any capital gain dividend (i) with respect to any class of our common stock which is regularly traded on an established securities market located in the United States as defined by applicable Treasury regulations if
the non-U.S. stockholder did not own more than 10% of such class of common stock at any time during the one-year period ending on the date of such dividend or (ii) received by certain non-U.S. publicly traded investment vehicles meeting certain
requirements. Instead, any such capital gain dividend received by such a stockholder will be treated as a distribution subject to the rules discussed above under "—Taxation of Stockholders—Taxation of Non-U.S. Stockholders—Ordinary Dividends." Also,
the branch profits tax will not apply to such a distribution. In addition, non-U.S. stockholders that are treated as "qualified foreign pension funds" are exempt from income and withholding taxes applicable under FIRPTA on distributions from us to the
extent attributable to USRPI capital gains.
A distribution is not a USRPI capital gain if we held the underlying asset solely as a creditor, although the holding of a shared appreciation mortgage loan would not be solely as
a creditor. Capital gain dividends received by a non-U.S. stockholder from a REIT that are not USRPI capital gains are generally not subject to U.S. federal income or withholding tax, unless either (1) the non-U.S. stockholder's investment in our
common stock is effectively connected with a U.S. trade or business conducted by such non-U.S. stockholder (in which case the non-U.S. stockholder will be subject to the same treatment as U.S. stockholders with respect to such gain unless otherwise
provided in an applicable tax treaty) or (2) the non-U.S. stockholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and certain other conditions are met (in which case the non-U.S.
stockholder will be subject to a 30% tax on the individual's net capital gain from U.S. sources for the year, unless reduced or eliminated by an applicable income tax treaty).
Dispositions of Our Shares. Unless our common stock constitute a USRPI, a sale of the common stock by a non-U.S. stockholder generally
will not be subject to U.S. federal income taxation under FIRPTA. The common stock will not be treated as a USRPI if less than 50% of our assets throughout a prescribed testing period, and taking account certain look-through rules with respect to
subsidiary entities, consist of interests in real property located within the United States, excluding, for this purpose, interests in real property solely in a capacity as a creditor. It is expected that more than 50% of our assets will consist of
interests in real property located in the United States.
However, our common stock nonetheless will not constitute a USRPI if we are a "domestically controlled REIT." A domestically controlled REIT is a REIT in which, at all times
during a specified testing period (generally the lesser of the five-year period ending on the date of disposition of or a distribution on its shares or the period of existence), less than 50% in value of its outstanding stock is held directly or
indirectly by non-U.S. stockholders. For this purpose, effective December 18, 2015, a REIT may generally presume that any class of the REIT's share that are "regularly traded," as defined by the applicable Treasury Regulations, on an established
securities market located in
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the United States is held by U.S. persons, except in the case of holders of 5% or more of such class of shares, and except to the extent that the REIT has actual knowledge that such shares are held
by non-U.S. persons. In addition, certain look-through and presumption rules apply for this purposes to any shares of a REIT that are held by a RIC or another REIT. We believe we are, and we expect to continue to be, a domestically controlled REIT.
Assuming we are so treated, the sale of our common stock should not be subject to taxation under FIRPTA. Because our common stock is publicly traded, however, no assurance can be given that we are, or that if we are, that we will remain, a
domestically controlled REIT.
In the event that we do not constitute a domestically controlled REIT, a non-U.S. stockholder's sale of our common stock nonetheless will generally not be subject to tax under
FIRPTA as a sale of a USRPI, provided that (1) our common stock is regularly traded on an established securities market located in the United States, and (2) the selling non-U.S. stockholder owned, actually or constructively, 10% or less of our
outstanding shares at all times during a specified testing period. In addition, even if we do not qualify as a domestically controlled REIT and our common stock is not regularly traded on an established securities market located in the United States,
non-U.S. stockholders that are treated as "qualified foreign pension funds" are exempt from tax under FIRPTA on the sale of our common stock.
Specific "wash sales" rules applicable to sales of stock in a domestically-controlled REIT could result in gain recognition, taxable under FIRPTA, upon the sale of our common stock
even if we are a domestically-controlled REIT. These rules would apply if a non-U.S. stockholder (a) disposes of our common stock within a 30-day period preceding the ex-dividend date of a distribution, any portion of which, but for the disposition,
would have been taxable to such non-U.S. stockholder as gain from the sale or exchange of a USRPI, and (b) acquires, or enters into a contract or option to acquire, other shares of our common stock during the 61-day period that begins 30 days prior to
such ex-dividend date.
If gain on the sale of our common stock were subject to taxation under FIRPTA, the non-U.S. stockholder would be required to file a U.S. federal income tax return and would be
subject to the same treatment as a U.S. stockholder with respect to such gain, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of non-resident alien individuals, and the purchaser of the common stock, in
certain cases, could be required to withhold 15% of the purchase price and remit such amount to the IRS.
Gain from the sale of our common stock that would not otherwise be subject to FIRPTA will nonetheless be taxable in the United States to a non-U.S. stockholder in two cases: (1)
if the non-U.S. stockholder's investment in our common stock is effectively connected with a U.S. trade or business conducted by such non-U.S. stockholder, the non-U.S. stockholder will be subject to the same treatment as a U.S. stockholder with
respect to such gain unless otherwise provided in an applicable tax treaty, or (2) if the non-U.S. stockholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and certain other
conditions are met, the nonresident alien individual will be subject to a 30% tax on the individual's capital gain.
Backup Withholding and Information Reporting
We will report to our U.S. stockholders and the IRS the amount of dividends paid during each calendar year and the amount of any tax withheld. Under the backup withholding rules,
a U.S. stockholder may be subject to backup withholding, with respect to dividends paid, unless the holder (1) is a corporation or comes within other exempt categories and, when required, demonstrates this fact or (2) provides a taxpayer identification
number or social security number, certifies under penalties of perjury that such number is correct and that such holder is not subject to backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A U.S.
stockholder that does not provide his or her correct taxpayer identification number or social security number may also be subject to penalties imposed by the IRS. In addition, we may be required to withhold a portion of capital gain distribution to
any U.S. stockholder who fails to certify their non-foreign status.
We must report annually to the IRS and to each non-U.S. stockholder the amount of dividends paid to such holder and the tax withheld with respect to such dividends, regardless of
whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. stockholder resides under the provisions of an
applicable income tax treaty. A non-U.S. stockholder may be subject to backup withholding unless applicable certification requirements are met.
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Payment of the proceeds of a sale of our common stock within the United States is subject to both backup withholding and information reporting requirements unless the beneficial
owner certifies under penalties of perjury that it is a non-U.S. stockholder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person) or the holder otherwise establishes an exemption. Payment
of the proceeds of a sale of our common stock conducted through certain United States related financial intermediaries is subject to information reporting requirements (but not backup withholding) unless the financial intermediary has documentary
evidence in its records that the beneficial owner is a non-U.S. stockholder and specified conditions are met or an exemption is otherwise established.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against such stockholder's U.S. federal
income tax liability, provided the required information is furnished to the IRS in a timely manner.
Foreign Accounts
Pursuant to rules generally referred to as FATCA, withholding taxes may be imposed (at a 30% rate) on U.S. source payments made after June 30, 2014 to "foreign financial
institutions". Under these withholding rules, the failure to comply with additional certification, information reporting and other specified requirements could result in withholding tax being imposed on payments of dividends and sales proceeds to U.S.
stockholders (as defined above) who own shares of our common stock through foreign accounts or foreign intermediaries and certain non-U.S. stockholders. The withholding tax may be imposed on dividends on our common stock paid to a foreign financial
institution or to a foreign entity other than a financial institution, unless (i) the foreign financial institution undertakes certain diligence and reporting obligations or (ii) the foreign entity that is not a financial institution either certifies
it does not have any substantial United States owners or furnishes identifying information regarding each substantial United States owner. If the payee is a foreign financial institution (that is not otherwise exempt), it must enter into an agreement
with the United States Treasury requiring, among other things, that it undertake to identify accounts held by certain United States persons or United States-owned foreign entities, annually report certain information about such accounts, and withhold
30% on payments to account holders whose actions prevent it from complying with these reporting and other requirements. Alternatively, if the foreign financial institution is a resident in a jurisdiction that has entered into an intergovernmental
agreement to implement FATCA, it must comply with the revised diligence and reporting obligations of such intergovernmental agreement. Prospective investors should consult their tax advisors regarding these withholding rules. Non-U.S. stockholders
should consult their tax advisors to determine the applicability of FATCA in light of their individual circumstances.
State, Local and Foreign Taxes
We and our subsidiaries and stockholders may be subject to state, local and foreign taxation in various jurisdictions, including those in which they or we transact business, own
property or reside. We will likely own interests in properties located in a number of jurisdictions, and we may be required to file tax returns and pay taxes in certain of those jurisdictions. The state, local or foreign tax treatment of our company
and our stockholders may not conform to the U.S. federal income tax treatment discussed above. Any foreign taxes incurred by us would not pass through to stockholders as a credit against their U.S. federal income tax liability. Prospective
stockholders should consult their tax advisor regarding the application and effect of state, local and foreign income and other tax laws on an investment in our common stock.
Other Tax Considerations
Legislative or Other Actions Affecting REITs
The rules dealing with U.S. federal income taxation are constantly under review by Congress and persons involved in the legislative process and by the IRS and the U.S. Treasury
Department. Furthermore, the Biden administration has indicated an intention to enact tax legislation that could impact the taxation of an investment in our common stock. No assurance can be given as to whether, when, or in what form, the U.S.
federal income tax laws applicable to us and our stockholders may be enacted. Changes to the U.S. federal income tax laws and interpretations of U.S. federal tax laws could adversely affect an investment in our common stock.
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BOOK-ENTRY SECURITIES
We may issue the securities offered by means of this prospectus in whole or in part in book-entry form, meaning that beneficial owners of the securities will not receive
certificates representing their ownership interests in the securities, except in the event the book-entry system for the securities is discontinued. If securities are issued in book-entry form, they will be represented by one or more global securities
that will be deposited with, or on behalf of, a depositary identified in the applicable prospectus supplement relating to the securities. The Depository Trust Company is expected to serve as depositary. Unless and until it is exchanged in whole or in
part for the individual securities represented thereby, a global security may not be transferred except as a whole by the depositary for the global security to a nominee of such depositary or by a nominee of such depositary to such depositary or
another nominee of such depositary or by the depositary or any nominee of such depositary to a successor depositary or a nominee of such successor. Global securities may be issued in either registered or bearer form and in either temporary or
permanent form. The specific terms of the depositary arrangement with respect to a class or series of securities that differ from the terms described here will be described in the applicable prospectus supplement.
Unless otherwise indicated in the applicable prospectus supplement, we anticipate that the following provisions will apply to depositary arrangements.
Upon the issuance of a global security, the depositary for the global security or its nominee will credit on its book-entry registration and transfer system the respective
principal amounts of the individual securities represented by such global security to the accounts of persons that have accounts with such depositary, who are called "participants." Such accounts shall be designated by the underwriters, dealers or
agents with respect to the securities or by us if the securities are offered and sold directly by us. Ownership of beneficial interests in a global security will be limited to the depositary's participants or persons that may hold interests through
such participants. Ownership of beneficial interests in the global security will be shown on, and the transfer of that ownership will be effected only through, records maintained by the applicable depositary or its nominee (with respect to beneficial
interests of participants) and records of the participants (with respect to beneficial interests of persons who hold through participants). The laws of some states require that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and laws may impair the ability to own, pledge or transfer beneficial interest in a global security.
So long as the depositary for a global security or its nominee is the registered owner of such global security, such depositary or nominee, as the case may be, will be considered
the sole owner or holder of the securities represented by such global security for all purposes under the applicable instrument defining the rights of a holder of the securities. Except as provided below or in the applicable prospectus supplement,
owners of beneficial interest in a global security will not be entitled to have any of the individual securities of the class or series represented by such global security registered in their names, will not receive or be entitled to receive physical
delivery of any such securities in definitive form and will not be considered the owners or holders thereof under the applicable instrument defining the rights of the holders of the securities.
Payments of amounts payable with respect to individual securities represented by a global security registered in the name of a depositary or its nominee will be made to the
depositary or its nominee, as the case may be, as the registered owner of the global security representing such securities. None of us, our officers and trustees or any trustee, paying agent or security registrar for an individual class or series of
securities will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the global security for such securities or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
We expect that the depositary for a class or series of securities offered by means of this prospectus or its nominee, upon receipt of any payment of principal, premium, interest,
dividend or other amount in respect of a permanent global security representing any of such securities, will immediately credit its participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal
amount of such global security for such securities as shown on the records of such depositary or its nominee. We also expect that payments by participants to owners of beneficial interests in such global security held through such participants will be
governed by standing instructions and customary practices, as is the case with securities held for the account of customers in bearer form or registered in "street name." Such payments will be the responsibility of such participants.
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LEGAL MATTERS
Certain legal matters will be passed upon for us by Clifford Chance US LLP. In addition, the description of U.S. federal income tax consequences contained in the section of the
prospectus entitled "U.S. Federal Income Tax Considerations" is based on the opinion of Clifford Chance US LLP. If the validity of any securities is also passed upon by counsel for the underwriters of an offering of those securities, that counsel will
be named in the prospectus supplement relating to that offering.
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EXPERTS
The consolidated financial statements and the related financial statement schedule of Global Self Storage, Inc. as of December 31, 2020
and 2019 and for each of the years in the two-year period ended December 31, 2020 incorporated in this prospectus by reference from the Global Self Storage, Inc. Annual Report on Form 10-K for the year ended December 31, 2020 have been audited by
RSM US LLP, an independent registered public accounting firm, as stated in their report thereon and incorporated herein by reference, and have been incorporated in this prospectus and registration statement in reliance upon such report and upon the
authority of such firm as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act and, in accordance therewith, we file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other information we file at the SEC's public reference room located at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference room. Our SEC filings are also available to the public from commercial document retrieval services and at the website maintained by the SEC, containing reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC, at www.sec.gov.
This prospectus is a part of a registration statement on Form S-3 that we have filed with the SEC under the Securities Act covering securities that may be offered under this
prospectus. This prospectus does not contain all of the information set forth in the registration statement, certain parts of which are omitted in accordance with the rules and regulations of the SEC.
The SEC allows us to "incorporate by reference" information into this prospectus, which means that we can disclose important information to you by referring you to another document
filed separately with the SEC. The information incorporated by reference herein is deemed to be part of this prospectus, except for any information superseded by information in this prospectus. This prospectus incorporates by reference the documents
set forth below that we have previously filed with the SEC. These documents contain important information about us, our business and our finances.
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Document
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Filed
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Annual Report on Form 10-K for the year ended December 31, 2020 (File No. 001-12681)
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March 31, 2021
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Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 (File No. 001-12681)
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May 13, 2021
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Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 (File No. 001-12681)
Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 (File No. 001-12681)
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August 16, 2021
November 15, 2021
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Document
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Filed
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Current Report on Form 8-K (File No. 001-12681)
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June 8, 2021
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Current Report on Form 8-K (File No. 001-12681)
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June 25, 2021
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Current Report on Form 8-K (File No. 001-12681)
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July 6, 2021
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Document
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Filed
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Definitive Proxy Statement on Schedule 14A (only with respect to information contained in such Definitive Proxy Statement that is incorporated by reference into Part III of our Annual Report on Form 10-K for the year ended December 31, 2020)
(File No. 001-12681)
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April 29, 2021
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Registration Statement on Form 10, and amended on August 11, 2015, September 25, 2015, October 28, 2015, December 14, 2015 and March 28, 2018, including all amendments and reports filed for the purpose of updating such description. (File
No. 001-12681), as updated by Exhibit 4.4 to the Annual Report on Form 10-K for the year ended December 31, 2020 (“Exhibit 4.4”) (each containing a description of our common stock) (File No. 001-12681)
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June 30, 2015
March 31, 2021
(Exhibit 4.4)
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All documents that we file (but not those that we furnish) pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial registration statement
and prior to effectiveness of the registration statement and after the date of this prospectus and prior to the termination of the offering of any of the securities covered under this prospectus shall be deemed to be incorporated by reference into this
prospectus or any accompanying prospectus supplement and will automatically update and supersede the information in this prospectus, any accompanying prospectus supplement or any free writing prospectus and any previously filed documents.
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If you request, either orally or in writing, we will provide you with a copy of any or all documents that are incorporated by reference. Such documents will be provided to you
free of charge, but will not contain any exhibits, unless those exhibits are incorporated by reference into the document. Requests should be addressed to us at 3814 Route 44, Millbrook, NY 12545, Attention: Secretary, or contact our offices at (212)
785-0900. The documents may also be accessed on our website at www.globalselfstorage.us.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table itemizes the expenses incurred by us in connection with the issuance and registration of the securities being registered hereunder. All amounts shown are
estimates except the Securities and Exchange Commission (the "SEC") registration fee and Financial Industry Regulatory Authority ("FINRA") filing fee.
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SEC registration fee
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$ 9,270
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FINRA filing fee
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15,500
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Printing and engraving expenses*
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5,000
|
|
Legal fees and expenses*
|
35,000
|
|
Accounting fees and expenses*
|
5,000
|
|
Miscellaneous*
|
2,500
|
|
Total*
|
$ 72,270
|
| * |
Does not include expenses of preparing prospectus supplements and other expenses relating to offerings of particular securities.
|
Item 15. Indemnification of Directors and Officers.
Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for
money damages except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or active and deliberate dishonesty that was established by a final judgment and was material to the cause of action. Our
charter contains such a provision and eliminates the liability of our directors and executive officers to the maximum extent permitted by Maryland law.
The Maryland General Corporation Law ("MGCL") requires a Maryland corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer
who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made or threatened to be made a party by reason of his or her service in that capacity. The MGCL permits a Maryland corporation to indemnify
its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a party
by reason of their service in those or other capacities unless it is established that:
|
•
|
the act or omission of the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate
dishonesty;
|
|
•
|
the director or officer actually received an improper personal benefit in money, property or services; or
|
|
•
|
in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.
|
However, under the MGCL, a Maryland corporation may not indemnify a director or officer in a suit by or in the right of the corporation, in which the director or officer was
adjudged liable to the corporation or in any proceeding charging improper personal benefit in which the director or officer was adjudged liable on the basis that personal benefit was improperly received. A court may order indemnification if it
determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct or was adjudged liable on the basis that personal benefit was improperly
received. However, indemnification for an adverse judgment in a suit by the corporation or in its right, or for a judgment of liability on the basis that personal benefit was improperly received, is limited to expenses.
In addition, the MGCL permits a Maryland corporation to advance reasonable expenses to a director or officer upon the corporation's receipt of:
|
•
|
a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation; and
|
|
•
|
a written undertaking by the director or officer or on the director's or officer's behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the
director or officer did not meet the standard of conduct.
|
53
Our charter and bylaws obligate us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of
the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to:
|
•
|
any present or former director or officer who is made, or threatened to be made, a party to or witness in the proceeding by reason of his or her service in that capacity; or
|
|
•
|
any individual who, while a director or executive officer of our company and at our request, serves or has served as a director, officer, partner, member, manager or trustee of another
corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise and who is made, or threatened to be made, a party to or witness in the proceeding by reason of
his or her service in that capacity.
|
Our charter and bylaws also permit us, with the approval of our board of directors, to indemnify and advance expenses to any individual who served any predecessor of our company in
a similar capacity, who is made or threatened to be made a party to or witness in the proceeding by reason of his or her service in such capacity, as well as to any employee or agent of our company or a predecessor of our company.
Item 16. Exhibits.
See the index to exhibits that appears immediately preceding the signature pages to this registration statement.
Item 17. Undertakings.
| (a) |
The undersigned registrant hereby undertakes:
|
| (1) |
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
| (i) |
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act");
|
| (ii) |
To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in
the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;
|
| (iii) |
To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement;
|
provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the information required to be included in a post-effective amendment by
those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are incorporated by reference in this
registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of this registration statement.
54
| (2) |
That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof.
|
| (3) |
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
|
| (4) |
That, for the purpose of determining liability under the Securities Act to any purchaser:
|
| (A) |
Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of this registration statement as of the date the filed prospectus was deemed part of and included in this registration statement; and
|
| (B) |
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of
providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in this registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the
date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a
new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof; provided, however, that no statement made in a registration statement or prospectus that is part of this registration statement or made in a document incorporated or deemed incorporated by reference into this registration statement or
prospectus that is part of this registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in this registration statement or prospectus that was
part of this registration statement or made in any such document immediately prior to such effective date.
|
| (5) |
That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities: the undersigned registrant undertakes that in a primary offering of securities of the
undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
|
| (i) |
any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
|
| (ii) |
any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
|
| (iii) |
the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
|
| (iv) |
any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
|
55
| (b) |
The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to
the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
|
| (c) |
The undersigned registrant hereby undertakes to supplement the prospectus, after the expiration of the subscription period, to set forth the results of the subscription offer, the transactions by the underwriters during the subscription
period, the amount of unsubscribed securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public offering by the underwriters is to be made on terms differing from those set forth on the
cover page of the prospectus, a post- effective amendment will be filed to set forth the terms of such offering.
|
| (d) |
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
|
56
EXHIBIT INDEX
|
Exhibit Number
|
Exhibit Description
|
|
1.1*
|
Form of Underwriting Agreement by and among Global Self Storage, Inc. and the underwriters named therein.
|
|
3.1
|
Articles Supplementary of Global Self Storage, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K (No. 001-12681), filed on October 20, 2017).
|
|
3.2
|
Articles of Amendment and Restatement of Global Self Storage, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K (No. 001-12681), filed on October 20, 2017).
|
|
3.3
|
Third Amended and Restated Bylaws of Global Self Storage, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K (No. 001-12681), filed on October 16, 2020).
|
|
4.1
|
Specimen Stock Certificate of Global Self Storage, Inc. (incorporated by reference to Exhibit 4.1 to the registration statement on Form S-3 (No. 333-227879), filed on October 18, 2018).
|
|
4.2*
|
Form of Certificate for Preferred Stock of Global Self Storage, Inc.
|
|
4.3*
|
Form of Articles Supplementary with respect to any Preferred Stock.
|
|
4.4*
|
Form of Depositary Agreement.
|
|
4.5*
|
Form of Depositary Receipt.
|
|
4.6*
|
Form of Warrant Certificate.
|
|
4.7*
|
Form of Warrant Agreement.
|
|
4.8*
|
Form of Rights Certificate.
|
|
5.1†
|
Opinion of Clifford Chance US LLP (including consent of such firm).
|
|
8.1†
|
Tax Opinion of Clifford Chance US LLP (including consent of such firm).
|
|
23.1†
|
Consent of Clifford Chance US LLP (included in Exhibit 5.1).
|
|
23.2†
|
Consent of Clifford Chance US LLP (included in Exhibit 8.1).
|
|
23.3†
|
Consent of RSM US LLP for Global Self Storage, Inc.
|
|
24.1†
|
Power of Attorney (included on signature page).
|
| * |
To be filed by amendment or incorporated by reference in connection with the offering of a particular class or series of securities.
|
| † |
Filed herewith.
|
57
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that the registrant meets all of the requirements for filing
on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, in the State of New York, on November 26, 2021.
|
GLOBAL SELF STORAGE, INC.
By: /s/ Mark C. Winmill
Name: Mark C. Winmill
Title: President
|
|
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mark C. Winmill, Donald Klimoski II and Russell Kamerman, and each of
them, with full power to act without the other, such person's true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this
registration statement, and any and all amendments thereto (including post-effective amendments), and to file the same, with exhibits and schedules thereto, and other documents in connection therewith, with the SEC, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or desirable to be done in and about the premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
|
Signatures
|
Title
|
Date
|
|
|
By:
|
/s/ Mark C. Winmill
|
President, Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)
|
November 26, 2021.
|
|
Mark C. Winmill
|
|||
|
By:
|
/s/ Thomas O' Malley
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
|
November 26, 2021.
|
|
Thomas O' Malley
|
|||
|
By:
|
/s/ William C. Zachary
|
Director
|
November 26, 2021.
|
|
William C. Zachary
|
|||
|
By:
|
/s/ Thomas B. Winmill
|
Director
|
November 26, 2021.
|
|
Thomas B. Winmill
|
|||
|
By:
|
/s/ Russell E. Burke III
|
Director
|
November 26, 2021.
|
|
Russell E. Burke III
|
|||
|
By:
|
/s/ George B. Langa
|
Director
|
November 26, 2021.
|
|
George B. Langa
|
|||
58
Exhibit 5.1
 |
CLIFFORD CHANCE US LLP
31 WEST 52ND STREET
NEW YORK, NY 10019-6131
TEL +1 212 878 8000
FAX +1 212 878 8375
www.cliffordchance.com
|
November 26, 2021
Global Self Storage, Inc.
3814 Route 44
Milbrook, NY 12545
Ladies and Gentlemen:
We have acted as counsel to Global Self Storage, Inc., a Maryland corporation (the "Company"), in connection with a registration statement on Form S-3 under the Securities Act of 1933, as amended
(the "Registration Statement"), relating to possible offerings from time to time by the Company of: (1) its shares of common stock, par value $0.01 per share ("Common Stock"); (2) its shares of preferred stock, par value $0.01 per share
("Preferred Stock"); (3) its depositary shares representing Preferred Stock ("Depositary Shares"); (4) warrants entitling the holders to purchase Common Stock, Preferred Stock or Depositary Shares ("Warrants"); and (5) rights entitling the holders
to purchase Common Stock or Preferred Stock ("Rights").
In rendering the opinions expressed below, we have examined and relied upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents,
certificates and other instruments as in our judgment are necessary or appropriate. In examining all such documents, we have assumed the genuineness of all signatures, the authenticity of all documents purported to be originals and the conformity
to the respective originals of all documents submitted to us as certified, telecopied, photostatic, or reproduced copies or in portable document format.
Based on the foregoing, and such other examination of law and fact as we have deemed necessary, we are of the opinion that:
| 1. |
The Company is a corporation duly incorporated and validly existing under the laws of the State of Maryland and is in good standing.
|
| 2. |
When the board of directors of the Company (the "Board") authorizes the issuance of authorized but unissued Common Stock and in accordance with that authorization the Common Stock (a) are sold for at least their par value as contemplated
in the Registration Statement or (b) are issued on exercise of a right to convert Preferred Stock or Depositary Shares, on exercise of Warrants or on the exercise of Rights, which are sold for at least the par value of the Common Stock
(including any amount paid at the time of conversion or exercise) as contemplated in the Registration Statement, the Common Stock will be validly issued, fully paid and nonassessable.
|
| 3. |
When the Board authorizes the creation and sale of one or more series of Preferred Stock in accordance with the provisions of the Company's articles of amendment and restatement relating to the issuance of Preferred Stock and in
accordance with that authorization that Preferred Stock are (a) sold for at least their par value as contemplated in the Registration Statement or (b) issued on conversion of other series of Preferred Stock or on exercise of Warrants, which
are sold for at least the par value of the Preferred Stock (including any amount paid at the time of conversion or exercise) as contemplated in the Registration Statement, that Preferred Stock will be validly issued, fully paid and
nonassessable.
|
| 4. |
When the Board authorizes the creation and sale of Depositary Shares representing interests in shares of a particular series of Preferred Stock and in accordance with that authorization those Depositary Shares are (a) sold for at least
the par value of the underlying Preferred Stock as contemplated in the Registration Statement or (b) issued on conversion of other series of underlying Preferred Stock or exercise of Warrants, which are sold for at least the par value of
the Preferred Stock (including any amount paid at the time of conversion or exercise) as contemplated by the Registration Statement, those Depositary Shares will be validly issued, fully paid and nonassessable.
|
| 5. |
When the Board authorizes the issuance of Warrants which provide for the issuance of Common Stock, Preferred Stock or Depositary Shares upon payment of consideration equal at least to the par value of the Common Stock, Preferred Stock or
Depositary Shares being issued, if applicable, and which do not contain provisions which violate applicable law, and in accordance with that authorization those Warrants are issued as contemplated in the Registration Statement, those
Warrants will constitute valid and legally binding obligations of the Company (subject to any bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting the enforceability of creditors' rights
generally and to court decisions with respect thereto and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law)).
|
| 6. |
When the Board authorizes the issuance of Rights which provide for the right to purchase Common Stock or Preferred Stock, upon payment of consideration equal to at least the par value of the Common Stock or Preferred Stock being issued,
and which do not contain provisions which violate applicable law, and in accordance with that authorization those Rights are issued as contemplated in the Registration Statement, those Rights will constitute valid and legally binding
obligations of the Company (subject to any bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting the enforceability of creditors' rights generally and to court decisions with respect thereto
and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law)).
|
This foregoing opinion is based as to matters of law solely on the applicable provisions of the Maryland General Corporation Law, as amended, and the laws of the State of New York, each as
currently in effect. We express no opinion herein as to any other laws, statutes, ordinances, rules, or regulations.
We have relied as to certain factual matters on information obtained from public officials, officers of the Company and other sources believed by us to be responsible, and we have assumed that
the governing documents under which the Depositary Shares, Warrants and Rights are to be issued will have been duly authorized, executed and delivered by all parties thereto other than the Company and that the signatures on documents examined by us
are genuine. We have further assumed that the issuance or delivery by the Company of any securities other than the Depositary Shares, or of any other property, upon exercise or otherwise pursuant to the terms of the Depositary Shares will be
effected so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding on the Company and so as to comply with any requirement or restriction imposed by any court or governmental body having
jurisdiction over the Company.
This letter has been prepared for your use in connection with the Registration Statement and is based upon the law as in effect and the facts known to us on the date hereof. We have not
undertaken to advise you of any subsequent changes in the law or of any facts that hereafter may come to our attention.
We hereby consent to the filing of this opinion with the Securities and Exchange Commission (the "SEC") as an exhibit to the Registration Statement and to the references therein to us. In giving
such consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the SEC thereunder.
Very truly yours,
/s/ Clifford Chance US LLP
Exhibit 8.1
|
|
CLIFFORD CHANCE US LLP
31 WEST 52ND STREET
NEW YORK, NY 10019-6131
TEL +1 212 878 8000
FAX +1 212 878 8375
www.cliffordchance.com
|
November 26, 2021
Global Self Storage, Inc.
11 Hanover Square, 12th Floor
New York, New York, 10005
Re: REIT Qualification of Global Self Storage, Inc.
Ladies and Gentlemen:
We have acted as counsel to Global Self Storage, Inc., a Maryland corporation (the "Company"), in connection with the filing by the Company of a registration statement with the Securities and Exchange
Commission on November 26, 2021 on Form S-3 (including the prospectus contained therein, the "Registration Statement"). You have requested our opinion regarding (i) the qualification of the Company as a real estate investment trust (a "REIT")
under the Internal Revenue Code of 1986, as amended (the "Code") and (ii) the statements in the Registration Statement under the caption "U.S. Federal Income Tax Considerations," to the extent they describe applicable U.S. federal income tax
law. Except as otherwise indicated, capitalized terms used in this opinion letter have the meanings given to them in the Registration Statement.
In rendering the opinions expressed herein, we have examined and, with your permission, relied on the following items:
1. the Articles of Amendment and Restatement of the Company;
2. the bylaws of the Company;
3. the Certificate of Representations (the "Certificate of Representations"), dated as of the date hereof, provided to us by the
Company;
4. the Registration Statement; and
5. such other documents, records and instruments as we have deemed necessary in order to enable us to render the opinions referred to in
this letter.
In our examination of the foregoing documents, we have assumed, with your consent, that (i) all documents reviewed by us are original documents, or true and accurate copies of original documents and have not been
subsequently amended, (ii) the signatures of each original document are genuine, (iii) all representations and statements set forth in such documents are true and correct, (iv) all obligations imposed by any such documents on the parties thereto
have been or will be performed or satisfied in accordance with their terms, and (v) the Company at all times has been and will continue to be organized and operated in accordance with the method of operation described in its organizational
documents, the Registration Statement, and the Certificate of Representations.
For purposes of rendering the opinions stated below, we have also assumed, with your consent, the accuracy of the representations contained in the Certificate of Representations, and that each representation
contained in the Certificate of Representations that is qualified as to the best of the knowledge or belief of the person making such representation is accurate and complete without regard to such qualification as to the best of such person's
knowledge or belief. These representations generally relate to the organization and method of operation of the Company as a REIT under the Code. In addition, the Company has held and may continue to hold investments in other publicly traded
companies that intend to qualify as REITs. For the purposes of rendering the opinions stated below, we have assumed, with your consent, that any such company in which the Company has held or will hold an interest has qualified as a REIT, and the
interests in any such company held by the Company are treated as equity in a REIT for U.S. federal income tax purposes, during all relevant periods.
Based upon, subject to, and limited by the assumptions and qualifications set forth herein and in the Registration Statement, we are of the opinion that:
1. Commencing with its taxable year ended December 31, 2015, the Company has been organized and operated in conformity with the requirements
for qualification and taxation as a REIT under the Code, and its proposed method of operation as described in the Registration Statement and as set forth in the Certificate of Representations will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code; and
2. The statements in the Registration Statement under the caption "U.S. Federal Income Tax Considerations," to the extent they summarize or
describe applicable U.S. federal income tax law or legal conclusions, are correct in all material respects.
The opinions set forth in this letter are based on relevant provisions of the Code, Treasury Regulations promulgated thereunder, interpretations of the foregoing as expressed in court decisions, legislative history,
and existing administrative rulings and practices of the Internal Revenue Service ("IRS") (including its practices and policies in issuing private letter rulings, which are not binding on the IRS except with respect to a taxpayer that
receives such a ruling), all as of the date hereof. These provisions and interpretations are subject to change, which may or may not be retroactive in effect, and which may result in modifications of our opinions. Our opinions do not foreclose
the possibility of a contrary determination by the IRS or a court of competent jurisdiction, or of a contrary determination by the IRS or the Treasury Department in regulations or rulings issued in the future. In this regard, an opinion of counsel
with respect to an issue represents counsel's best professional judgment with respect to the outcome on the merits with respect to such issue, if such issue were to be litigated, but an opinion is not binding on the IRS or the courts and is not a
guarantee that the IRS will not assert a contrary position with respect to such issue or that a court will not sustain such a position asserted by the IRS.
The opinions set forth above represent our conclusions based upon the documents, facts, representations and assumptions referred to above. Any material amendments to such documents, changes in any significant facts
or inaccuracy of such representations or assumptions could affect the opinions referred to herein. Moreover, the Company's qualification as a REIT depends upon the ability of the Company to meet, for each taxable year, through actual annual
operating results, requirements under the Code regarding gross income, assets, distributions and diversity of stock ownership. We have not undertaken, and will not undertake, to review the Company's compliance with these requirements on a
continuing basis. Accordingly, no assurance can be given that the actual results of the Company's operations for any single taxable year have satisfied or will satisfy the tests necessary to qualify as a REIT under the Code. In addition, the
opinion set forth above does not foreclose the possibility that the Company may have to pay an excise or penalty tax, which could be significant in amount, in order to maintain its REIT qualification. Although we have made such inquiries and
performed such investigations as we have deemed necessary to fulfill our professional responsibilities as counsel, we have not undertaken an independent investigation of all of the facts referred to in this letter or the Certificate of
Representations, and we note that the Company will likely engage in transactions in connection with which we will not provide legal advice, and of which we may be unaware.
The opinions set forth in this letter are: (i) limited to those matters expressly covered and no opinion is expressed in respect of any other matter, (ii) as of the date hereof, and (iii) rendered by us at the
request of the Company. We hereby consent to the filing of this opinion with the SEC as an exhibit to the Registration Statement and to the references therein to us. In giving such consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the SEC promulgated thereunder.
Very truly yours,
/s/ Clifford Chance US LLP
EXHIBIT 23.3
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Registration Statement on Form S-3 and related Prospectus of Global Self Storage,
Inc. of our report dated March 31, 2021, relating to the consolidated financial statements and the financial statement schedule of Global Self Storage, Inc., appearing in the Annual Report on Form 10-K of Global Self Storage, Inc. for the year ended
December 31, 2020.
We also consent to the reference to our firm under the heading "Experts” in such Prospectus.
/s/ RSM US LLP
Stamford, Connecticut
November 26, 2021