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                                                                    Exhibit 99.1

Federal Income Tax Considerations

     The following discussion addresses the material federal income tax
considerations relevant to the taxation of the Company and summarizes the
material federal income tax consequences relevant to certain shareholders. This
discussion is for general information only, is not exhaustive of all possible
tax considerations and is not intended as and should not be construed as tax
advise. The actual tax consequences of holding particular securities being
issued by the Company may vary in light of a prospective holder's particular
facts and circumstances. Certain holders, such as tax-exempt entities, insurance
companies and financial institutions, are generally subject to special rules
which are not addressed fully herein. In addition, the following discussion does
not discuss issues under any foreign, state or local tax laws except as
expressly stated. The tax treatment of a holder of any of the securities offered
by the Company will vary depending upon the terms of the particular securities
acquired by such holder, as well as his particular situation, and this
discussion does not attempt to address aspects of federal income taxation
relating to holders of particular securities. Any additional federal income tax
considerations relevant to holders of particular securities will be provided in
the applicable Prospectus and/or Prospectus Supplement relating thereto.

     The following general summary of the federal income tax rules governing a
REIT and its shareholders is based on the Internal Revenue Code ("Code"),
Treasury Regulations, generally available judicial decisions, rulings and other
administrative interpretations, all of which are subject to change, and possibly
retroactively. Accordingly, no assurance can be given that future legislation,
administrative regulations, rulings, or interpretations or court decisions will
not alter significantly the tax consequences described below or that such
changes or decisions will not be retroactive. The Company has not requested, nor
does it presently intend to request, a ruling from the Internal Revenue Service
("IRS") with respect to any of the matters discussed below. Because the
provisions governing REITs are highly technical and complex, no attempt is made
in the following discussion to discuss in detail all of the possible tax
consequences applicable to the Company or its shareholders. It is also important
to note that the application of federal income tax laws and applicable
regulations may be subject to varying interpretations and could result in a
charge to the Company at a later date upon final determination by taxing
authorities.

     ACCORDINGLY, THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL
TAX PLANNING AND EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT THE APPLICABLE
PROSPECTUS AND/OR PROSPECTUS SUPPLEMENT, AS WELL AS WITH HIS OWN TAX ADVISOR,
REGARDING THE TAX CONSEQUENCES TO HIM OF THE ACQUISITION, OWNERSHIP AND SALE OF
THE COMPANY'S SECURITIES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER
TAX CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.

TAXATION OF THE COMPANY

     The Company elected to be taxed as a REIT for federal income tax purposes
commencing with the taxable year ending December 31, 1994. The Company has
continued its REIT election since that time and intends to continue such
election. The Company believes that it is organized and has operated in a manner
so as to qualify for taxation as a REIT, and the Company intends to continue to
operate in such a manner. Qualification and taxation as a REIT depends upon the
Company's ability to meet on a continuing basis, through actual annual operating
results, the various requirements under the Code with regard to, among other
things, the source of its gross income, the composition of its assets,
distribution

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levels and diversity of stock ownership. While the Company intends to operate so
that it qualifies 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 circumstances of the Company, no assurance can
be given that the Company has operated in a manner so as to qualify for taxation
as a REIT or that it will continue to operate in such a manner.

     Generally, if the Company continues to qualify for taxation as a REIT, it
will not be subject to federal corporate income tax on its net income that it
distributes in a timely manner to shareholders. However, notwithstanding the
Company's qualification as a REIT, the Company will be subject to federal income
tax as follows: First, the Company will be taxed at regular corporate rates on
any undistributed "real estate investment trust taxable income," including
undistributed net capital gains. Second, under certain circumstances, the
Company may be subject to the "alternative minimum tax" on its items of tax
preference, if any. Third, if the Company has (i) net income from the sale or
other disposition of "foreclosure property" that is held primarily for sale to
customers in the ordinary course of business, or (ii) other nonqualifying income
from foreclosure property, it will be subject to tax on such income at the
highest corporate rate. Fourth, any net income that the Company has from
prohibited transactions (which are, in general, certain sales or other
dispositions of property, other than certain foreclosure property, held
primarily for sale to customers in the ordinary course of business) will be
subject to a 100% tax. Fifth, if the Company should fail to satisfy either the
75% or 95% gross income tests (as discussed below), and has nonetheless
maintained its qualification as a REIT because certain other requirements have
been met, it will be subject to a 100% tax on an amount equal to (i) the gross
income attributable to the greater of the amount by which the Company fails the
75% or 95% gross income tests multiplied by (ii) a fraction intended to reflect
the Company's profitability. Sixth, if the Company fails to distribute during
each calendar year at least the sum of (i) 85% of its REIT ordinary income for
such year, (ii) 95% of its REIT capital gain net income for such year (other
than certain long-term capital gain net income which the Company elects to
retain and pay tax on), and (iii) any undistributed taxable income from
preceding periods, then the Company will be subject to a 4% federal excise tax
on the excess of such required distribution over the amounts actually
distributed. Seventh, to the extent that the Company recognizes gain from the
disposition of an asset with respect to which there existed "built-in gain" as
of January 1, 1994 and such disposition occurs within a 10-year recognition
period beginning January 1, 1994, the Company will be subject to federal income
tax at the highest regular corporate rate on the amount of its "net recognized
built-in gain." The Company estimates that as of December 31, 2001, the "net
built-in gain" is approximately $6.9 million. The Company may offset any net
recognized built-in gain by available net operating loss carryforwards. On
January 1, 1994, the Company had approximately $2.7 million in net operating
loss carryforwards which expire at various dates through 2007. Management of the
Company will consider this tax effect when determining whether it is in the best
interest of the Company to sell a specific piece of real property. Eighth, if
the Company acquires any asset from a taxable "C" corporation in a transaction
in which the adjusted tax basis of the asset in the Company's hands is
determined by reference to the adjusted tax basis of the asset in the hands of
the taxable "C" corporation, and the Company recognizes gain on the disposition
of such asset during the ten-year period beginning on the date on which the
Company acquired such asset, then the Company will be subject to a tax imposed
at the highest corporate rate on the amount of gain equal to the excess of (i)
the fair market value of such property at the beginning of such ten-year period
over (ii) the Company's adjusted tax basis in such property at the beginning of
such ten-year period. Ninth, the Company will be subject to a 100% tax on any
excess amounts received through arrangements between the Company, its tenants
and a taxable REIT subsidiary of the Company that are not at arm's length. In
addition, the Company could be subject to tax in certain situations and on
certain transactions not presently contemplated.

REQUIREMENTS FOR QUALIFICATION AS A REIT

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     To qualify as a REIT for a taxable year under the Code, the Company must
have no earnings and profits accumulated in any non-REIT year. The Company also
must have in effect an election to be taxed as a REIT and must meet other
requirements, some of which are summarized below, including percentage tests
relating to the sources of its gross income, the nature of the Company's assets
and the distribution of its income to shareholders. Such election, if properly
made and assuming continuing compliance with the qualification tests described
herein, will continue in effect for subsequent years.

     If the Company ceases to qualify as a REIT in any taxable year, and the
relief provisions do not apply, the Company's income that is distributed to
shareholders would be subject to the "double taxation" on earnings (once at the
corporate level and again at the shareholder level) that generally results from
investment in a corporation. Failure to maintain qualification as a REIT would
force the Company to reduce significantly its distributions and possibly incur
substantial indebtedness or liquidate substantial investments in order to pay
the resulting corporate taxes. In addition, the Company, once having obtained
REIT status and having lost such status, would not be eligible to elect REIT
status for the four subsequent taxable years, unless its failure to maintain its
qualification was due to reasonable cause and not willful neglect, and certain
other requirements were satisfied. In order to elect to again be taxed as a
REIT, just as with the original election, the Company would be required to
distribute all of its earnings and profits accumulated in any non-REIT taxable
year.

ORGANIZATIONAL REQUIREMENTS AND SHARE OWNERSHIP TESTS

     The Code defines a REIT as a corporation, trust or association (1) which is
managed by one or more trustees or directors; (2) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (3) which would be taxable, but for the special Code
provisions applicable to REITs, as a domestic corporation; (4) which is neither
a financial institution nor an insurance company, subject to certain provisions
of the Code; (5) the beneficial ownership of which is held by 100 or more
persons, determined without reference to any rules of attribution (the "share
ownership test"); (6) that during the last half of each taxable year not more
than 50% in value of the outstanding stock of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) (the "five or fewer test"); and (7) which meets certain other
tests, described below, regarding the nature of its income and assets. The Code
provides that conditions (1) through (4), inclusive, 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 taxable year
of fewer than 12 months. The five or fewer test and the share ownership test do
not apply to the first taxable year for which an election is made to be treated
as a REIT.

     The Company issued sufficient shares to a sufficient number of people
pursuant to its initial public offering to allow it to satisfy the share
ownership test and the five or fewer test. In addition, to assist in complying
with the five or fewer test on an ongoing basis, the Company's Charter contains
certain restrictions on the transfer of the Company's common and preferred stock
to prevent concentration of stock ownership. For purposes of determining whether
the five or fewer test (but not the share ownership test) is met, any stock held
by a qualified trust (generally pension plans, profit-sharing plans and other
employee retirement trusts) generally is treated as held directly by the trust's
beneficiaries in proportion to their actuarial interests in the trust, and not
held by the trust.

     To monitor the Company's compliance with the share ownership requirements
imposed on REITs, the Company is required to maintain records of the actual and
constructive beneficial ownership of its shares. If the Company timely mails
demand letters to certain shareholders requesting stock ownership information be
provided to the Company or the IRS, unless the Company knows, or exercising
reasonable due diligence would have known, that the five or fewer test has in
fact not been satisfied, the Company shall be deemed to have satisfied the five
or fewer test. If the Company fails to comply with the

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Treasury Regulations to ascertain its ownership it will be subject to a penalty
for failing to do so and will void the possible application of the deemed
satisfaction of the five or fewer test. The penalty is $25,000 ($50,000 for
intentional violations) for any year in which the Company does not comply with
the ownership Treasury Regulations. The Company will also be required, when
requested by the IRS, to send curative demand letters. In accordance with the
Treasury Regulations, the Company must and will demand from certain shareholders
written statements concerning the actual and constructive beneficial ownership
of shares. The Company's Bylaws require such record holders to respond to such
requests for information. Any shareholder who does not provide the Company with
requested information concerning share ownership will be required to include
certain information relating thereto with his income tax return. A list of
shareholders failing to fully comply with the demand for the written statements
shall be maintained as part of the Company's records required under the Code.

TAXABLE REIT SUBSIDIARIES

     A taxable REIT subsidiary is a corporation, other than a REIT, in which a
REIT directly or indirectly holds stock and that has made a joint election with
the REIT to be treated as a taxable REIT subsidiary. A taxable REIT subsidiary
also includes any corporation, other than a REIT, with respect to which a
taxable REIT subsidiary owns securities possessing more than 35% of the total
voting power or value of the outstanding securities of such corporation. A
taxable REIT subsidiary is subject to regular federal income tax, and state and
local income tax where applicable, as a regular "C" corporation.

     The value of the securities of all taxable REIT subsidiaries cannot exceed
20% of the total value of the REIT's assets. In addition, interest paid by a
taxable REIT subsidiary to the related REIT is subject to the earnings stripping
rules contained in Section 163(j) of the Code and, therefore, the taxable REIT
subsidiary cannot deduct interest in any year that would exceed 50% of the
subsidiary's adjusted gross income. If any amount of interest, rent, or other
deductions of the taxable REIT subsidiary to be paid to the REIT is determined
not to be at arm's length, an excise tax of 100% is imposed on the portion that
is determined to be excessive. However, rent received by a REIT will not fail to
qualify as rents from real property by reason of the fact that all or any
portion of such rent is redetermined for purposes of the 100% excise tax.

     The Company and JDN Development jointly elected to treat JDN Development
and its subsidiaries as taxable REIT subsidiaries effective January 1, 2001. In
addition, effective January 1, 2001, the Company acquired the remaining voting
stock in JDN Development and, therefore, owns 100% of the capital stock of JDN
Development. The Company consolidated JDN Development's operations in its
financial statements effective with the first reporting period in 2001.

QUALIFIED REIT SUBSIDIARIES

     Generally, a qualified REIT subsidiary is a corporation, other than a
taxable REIT subsidiary, all of the capital stock of which is owned by the REIT.
The Company may own 100% of the stock of a corporation if such corporation is a
"qualified REIT subsidiary." If the Company owns a corporate subsidiary that is
a "qualified REIT subsidiary," the separate existence of that subsidiary will be
disregarded for federal income tax purposes and the assets, liabilities, income,
deductions and other attributes will be treated as being owned or generated
directly by the Company. If the Company acquires 100% of an existing
corporation, the acquired corporation will be deemed to liquidate and all of its
built-in gain will be taxable. In addition, the Company would have to make
distributions sufficient to eliminate any "C" corporation earnings and profits
as well as sufficient distributions to meet the distribution requirements
described below. A qualified REIT subsidiary of the Company will not be subject
to federal corporate income taxation, although it may be subject to state and
local taxation in some states. The Company currently has four qualified REIT
subsidiaries.

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INCOME TESTS

     In order to maintain qualification as a REIT, there are two gross income
requirements that must be satisfied annually by the Company. First, at least 75%
of the Company's gross income (other than from certain "prohibited
transactions") in each taxable year must consist of certain types of income
identified in the Code, including qualifying "rents from real property";
qualifying interest on obligations secured by mortgages on real property or
interests in real property; gain from the sale or other disposition of real
property (including interests in real property and mortgages on real property)
held for investment and not primarily for sale to customers in the ordinary
course of business; income and gain from certain properties acquired by the
Company through foreclosure; and income earned from certain types of qualifying
temporary investments. When the Company receives new capital in exchange for its
shares (other than dividend reinvestment amounts) or in a public offering of
debt instruments with maturities of five years or longer, income attributable to
the temporary investment of such new capital, if received or accrued within one
year of the Company's receipt of the new capital, is qualified temporary
investment income under the 75% gross income test.

     Second, at least 95% of the Company's gross income (other than from certain
"prohibited transactions") in each taxable year must consist of income which
qualifies under the 75% gross income test as well as dividends and interest from
any other source, gain from the sale or other disposition of shares and other
securities which are not dealer property, any payment to the Company under an
interest rate swap or cap agreement entered into as a hedge against variable
rate indebtedness incurred to acquire or carry real estate assets, and any gain
from the disposition of such an agreement.

     In order for rents received by the Company to qualify as "rents from real
property" in satisfying the gross income requirements for a REIT described
above, several conditions must be met related to the identity of the tenant, the
computation of the rent payable, and the nature of the property leased. First,
the amount of rent must not be based in whole or in part on the income or
profits of any person. However, an amount received or accrued generally will not
be excluded from the term "rents from real property" solely by reason of being
based on a fixed percentage or percentages of receipts or sales. Second, rents
received from a "related party tenant" will not qualify as rents from real
property in satisfying the gross income tests unless (1) the tenant is a taxable
REIT subsidiary, (2) at least 90% of the property is leased to unrelated tenants
and (3) the rent paid by the taxable REIT subsidiary is substantially comparable
to the rent paid by the unrelated tenants for comparable space. A tenant is a
related party tenant if the REIT, or an actual or constructive owner of 10% or
more of the REIT, actually or constructively owns 10% or more of the tenant.
Third, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to the personal property will not
qualify as rents from real property.

     Generally, for rents to qualify as "rents from real property" for the
purposes of the gross income tests, the Company is allowed only to provide
services that are both "usually or customarily rendered" in connection with the
rental of real property and not otherwise considered "rendered to the occupant."
The Company self-manages the properties, but does not provide services to
tenants which it believes are outside this exception. Income received from any
other services will be treated as "impermissible tenant service income" unless
the services are provided through an independent contractor that bears the
expenses of providing the services and from whom the Company derives no revenue
or through a taxable REIT subsidiary, subject to specified limitations. The
amount of impermissible tenant service income is deemed to be the greater of the
amount actually received by the REIT or 150% of the Company's direct cost of
providing the service. If the impermissible tenant service income exceeds 1% of
the Company's total income from a property, then all of the income from that
property will fail to qualify as "rents from real property." If the total amount
of impermissible tenant service income from a property does not exceed 1% of the
Company's total income from that property, the income will not cause the rent
paid by

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tenants of that property to fail to qualify as "rents from real property," but
the impermissible tenant service income itself will not qualify as "rents from
real property."

     The Company may, if necessary, provide third party management services
through a taxable REIT subsidiary to avoid failing to satisfy either the 95% or
75% gross income test. The Company may receive certain other types of income
with respect to the properties it owns that will not qualify for the 75% or 95%
gross income test. In addition, dividends on the Company's stock in any
non-controlled subsidiaries or taxable REIT subsidiaries will not qualify under
the 75% gross income test. The Company believes, however, that the aggregate
amount of such non-qualifying income in any taxable year will not cause the
Company to exceed the limits on non-qualifying income under the 75% and 95%
gross income tests.

     If rent attributable to personal property leased in connection with a lease
of real property is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not qualify
as "rents from real property." Generally, this 15% test is applied separately to
each lease. The portion of rental income treated as attributable to personal
property is determined according to the ratio of the fair market value of the
personal property to the total fair market value of the property which is
rented. The determination of what fixtures and other property constitute
personal property for federal tax purposes is difficult and imprecise. Based
upon allocations of value as found in the purchase agreements and/or upon review
by employees of the Company, the Company believes that it currently does not
have and does not believe that is likely in the future to have 15% in value of
any significant portion of its real properties classified as personalty. If,
however, rent payments do not qualify, for reasons discussed above, as "rents
from real property," it will be more difficult for the Company to meet the 95%
or 75% gross income tests and continue to qualify as a REIT.

     The Company may temporarily invest its working capital in short-term
investments, including shares in other REITs or interests in REMICs. Although
the Company will use its best efforts to ensure that its income generated by
these investments will be of a type which satisfies the 75% and 95% gross income
tests, there can be no assurance in this regard. The Company has analyzed its
gross income through December 31, 2001 and has determined that it has met and
expects in the future to meet the 75% and 95% gross income tests.

     If the Company fails to meet the requirements of either or both the 75% or
95% gross income tests for any taxable year, it may nevertheless qualify as a
REIT for such year if it is entitled to relief under certain provisions of the
Code. These relief provisions will be generally available if the Company's
failure to meet such tests was due to reasonable cause and not to willful
neglect, the Company attaches a schedule of the sources of its income to its
return, and any incorrect information on the schedule was not due to fraud with
intent to evade tax. It is not possible, however, to know whether the Company
would be entitled to the benefit of these relief provisions, if such a failure
occurred, as the application of the relief provisions is dependent on future
facts and circumstances. If these relief provisions apply, a special tax
generally equal to 100% is imposed upon the net income attributable to the
greater of the amount by which the Company failed the 75% or 95% gross income
tests.

ASSET TESTS

     At the close of each quarter of the Company's taxable year, the Company
must satisfy certain tests relating to the nature of its assets. First, at least
75% of the value of the Company's total assets must consist of "real estate
assets" (including interests in real property, interests in mortgages on real
property, shares in other qualified REITs, and certain temporary investments),
cash, cash items and government securities. Second, not more than 25% of the
Company's total assets may be represented, in whole or in part, by securities
other than those includable in the 75% asset class. Third, except for
investments in

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REITs, qualified REIT subsidiaries and taxable REIT subsidiaries, the value of
any one issuer's securities owned by the Company may not exceed 5% of the value
of the Company's total assets. Fourth, except for investments in REITs,
qualified REIT subsidiaries and taxable REIT subsidiaries, the Company may not
own more than 10% of any one issuer's outstanding voting securities, nor more
than 10% of the total value of the outstanding securities of any one issuer.
Fifth, not more than 20% of the value of the Company's total assets may be
represented by the securities of one or more taxable REIT subsidiaries.

     Securities for purposes of the asset tests may include debt securities.
However, debt of an issuer will not count as a security for purposes of the 10%
value test if the debt securities meet the straight debt safe harbor and (1) the
issuer is an individual, (2) the only securities of the issuer that the REIT
holds are straight debt or (3) if the issuer is a partnership, the REIT holds at
least a 20% profits interest in the partnership.

     If the Company meets the above asset tests at the close of any quarter, it
will not lose its status as a REIT because of the change in value of its assets
during a subsequent quarter unless the discrepancy exists immediately after the
acquisition of any security or other property which is wholly or partly the
result of such acquisition. Where a failure to satisfy the above requirements
results from an acquisition of securities or other property during a quarter,
the failure can be cured by disposition of sufficient nonqualifying assets
within 30 days after the close of such quarter. While the Company intends to
meet the requirements of the asset tests described above, no assurance can be
given that the Company will be able to do so. If the Company were to fail to
cure noncompliance with the asset tests within the required time period, the
Company would cease to qualify as a REIT.

DISTRIBUTION REQUIREMENTS

     In order to qualify as a REIT, the Company is required to distribute
dividends (other than capital gain dividends) to its shareholders in an amount
at least equal to (A) the sum of (i) 90% of the Company's "REIT taxable income,"
computed without regard to the dividends paid deduction and the Company's net
capital gain ("net investment income") and (ii) 90% of the net income, if any,
(after tax) from foreclosure property, minus (B) the sum of certain non-cash
income (from certain imputed rental income and income from transactions
inadvertently failing to qualify as like-kind exchanges). Such distributions
generally must be paid in the taxable year to which they relate. Dividends may
be paid in the following year in two circumstances. First, dividends may be paid
in the following year if the dividends are declared before the Company timely
files its tax return for the year and if made before the first regular dividend
payment made after such declaration. Second, if the Company declares a dividend
in October, November, or December of any year with a record date in one of these
months and pays the dividend on or before January 31 of the following year, the
Company will be treated as having paid the dividend on December 31 of the year
in which the dividend was declared.

     Unlike net investment income, the Company's net capital gain need not be
distributed in order for the Company to maintain its status under the Code as a
REIT; however, the Company will be taxed on any net capital gain which it fails
to distribute in a timely manner. A REIT may elect to retain and pay income tax
on net long-term capital gains that it receives during a taxable year. If the
Company makes this election, shareholders are required to include in their
income as long-term capital gain their proportionate share of the undistributed
long-term capital gains so designated by the Company. A shareholder will be
treated as having paid his or her share of the tax paid by the Company in
respect of long-term capital gains so designated by the Company, for which the
shareholder will be entitled to a credit or refund. In addition, the
shareholder's basis in his or her Company shares will be increased by the amount
of the Company's designated undistributed long-term capital gains that are
included in the shareholder's long-term capital gains, reduced by the
shareholder's proportionate share of tax paid by the Company on those gains that
the shareholder is treated as having paid. The earnings and profits of the

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Company will be reduced, and the earnings and profits of any corporate
shareholder of the Company will be increased, to take into account amounts
designated by the Company pursuant to this rule. The Company must pay its tax on
its designated long-term capital gains within 30 days of the close of any
taxable year in which it designates long-term capital gains pursuant to this
rule, and it must mail a written notice of its designation to its shareholders
within 30 days of the close of the taxable year.

     Should the Company distribute a capital gain dividend while preferred
shares are outstanding, it may be required to designate a portion of dividends
entitled to be received by holders of the preferred shares as capital gain
dividends, thereby reducing the portion of total distributions paid to holders
of the Company's common shares which would otherwise be characterized as capital
gains dividends.

     To the extent the Company does not distribute all of its net capital gain
or distribute at least 90%, but less than 100%, of its "REIT taxable income," as
adjusted, the Company will be subject to tax thereon at the capital gains or
ordinary corporate tax rates, as the case may be. Furthermore, if the Company
should fail to distribute during each calendar year at least the sum of (i) 85%
of its ordinary income for such year, (ii) 95% of its capital gain income for
such year (other than certain long-term capital gains income which the Company
elects to retain and pay tax on), and (iii) undistributable tax income from
prior periods, the Company would be subject to a 4% federal excise tax on the
excess of such required distribution over the amounts actually distributed. The
Company intends to make distributions to shareholders so that it will not incur
this tax but, as noted below, various situations could make it impractical to
meet the prescribed distribution schedule.

     It is possible that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet the 90% distribution requirements due to
timing differences between actual receipt of income and actual payment of
deductible expenses or dividends on the one hand and the inclusion of such
income and deduction of such expenses or dividends in arriving at "real estate
investment trust taxable income" of the Company on the other hand. The problem
of inadequate cash to make required distributions could also occur as a result
of the repayment in cash of principal amounts due on the Company's outstanding
debt, particularly in the case of "balloon" repayments or as a result of capital
losses on short-term investments of working capital. Therefore, the Company
might find it necessary to arrange for short-term, or possibly long-term
borrowing, or new equity financing, or to pay distributions in the form of
taxable distributions of property. If the Company were unable to arrange such
borrowing or financing as might be necessary to provide funds for required
distributions, its REIT status could be jeopardized.

     Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirement for a year by paying "deficiency dividends"
to shareholders in a later year, which may be included in the Company's
deduction for dividends paid for the earlier year. The Company may be able to
avoid being taxed on amounts distributed as deficiency dividends; however, the
Company may in certain circumstances remain liable for the 4% federal excise tax
described above.

COMPANY'S OWNERSHIP OF PARTNERSHIP INTERESTS

     In the case of a REIT that is a partner in a partnership, the REIT is
deemed to own its proportionate share of the partnership's assets and to earn
its proportionate share of the partnership's income. In addition, the assets and
gross income of the partnership retain the same character in the hands of the
REIT for purposes of the gross income and asset tests applicable to REITs as
described above. Thus, the Company's proportionate share of the assets,
liabilities and items of income of the partnerships and limited liability
companies in which it has ownership interests will be treated as assets,
liabilities and items of income of the Company for purposes of applying the REIT
requirements described herein.

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FEDERAL INCOME TAX TREATMENT OF LEASES

     The availability to the Company of, among other things, depreciation
deductions with respect to the facilities owned and leased by the Company
depends upon the treatment of the Company as the owner of the facilities and the
classification of the leases of the facilities as true leases, rather than as
sales or financing arrangements, for federal income tax purposes. The Company
has not requested nor received an opinion that it will be treated as the owner
of the portion of the facilities constituting real property and the leases will
be treated as true leases of such real property for federal income tax purposes.
Based on the conclusions of the Company and its senior management as to the
values of personalty, the Company has met and plans to meet in the future its
compliance with the 90% distribution requirement by making distributions on the
assumption that it is not entitled to depreciation deductions for that portion
of the leased facilities which it believes constitutes personal property, but to
report the amount of income taxable to its shareholders by taking into account
such depreciation. The value of real and personal property and whether certain
fixtures are real or personal property are factual evaluations that cannot be
determined with absolute certainty under current IRS regulations and therefore
are somewhat uncertain.

INCOME FROM PROHIBITED TRANSACTIONS

     A REIT is subject to a 100% tax on the net income derived from "prohibited
transactions." A prohibited transaction is the sale or other disposition of
property "held primarily for sale to customers in the ordinary course of
business" which is not foreclosure property. The Company intends to hold its
properties for investment with a view to long-term appreciation, to engage in
the business of acquiring, developing, owning and operating its properties and
to make sales or exchanges of its properties as are consistent with the
Company's investment objectives. Whether property is held primarily for sale to
customers in the ordinary course of business is a question of fact that depends
on all the facts and circumstances with respect to the particular transaction.

     A safe harbor exception is provided for which certain sales of "real estate
assets" will be deemed not to constitute a prohibited transaction. Generally,
the following requirements must be met for the sale to fall within this safe
harbor:

     .    the REIT must have held the property for at least four years;

     .    the total expenditures made by the REIT during the four-year period
          preceding the date of sale which are includable in the basis of the
          property must not exceed 30% of the net selling price of the property;

     .    during the taxable year, (i) the REIT does not make more than seven
          sales of property (other than sales of foreclosure property or
          property that was involuntarily converted), or (ii) the total adjusted
          bases of property (other than sales of foreclosure property or
          property that was involuntarily converted) sold must not exceed 10% of
          the total bases of all of the assets of the REIT as of the beginning
          of the taxable year;

     .    if the REIT makes more than seven sales of property (other than sales
          of foreclosure property or property that was involuntarily converted)
          during the taxable year, substantially all of the marketing and
          development expenditures with respect to the property must be made
          through an "independent contractor" from whom the REIT itself does not
          derive or receive any income; and

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     .    if the property consists of land or improvements, not acquired through
          foreclosure (or deed in lieu of foreclosure), or lease termination,
          the REIT must have held such property for at least four years for
          production of rental income.

     The Company may from time to time sell or exchange some of its properties
for various reasons. If the above safe harbor is not met, the Company will
consider all of the facts and circumstances of the particular transaction and
the possible applicability of the 100% tax. However, the Company believes that
in such event, based on all of the facts and circumstances, it will not have
held such properties primarily for sale to customers in the ordinary course of a
trade or business and, therefore, such property sales would not be considered
prohibited transactions. There can be no assurance that the IRS will not
disagree with such conclusion.

OTHER ISSUES

     With respect to property acquired from and leased back to the same or an
affiliated party, the IRS could assert that the Company realized prepaid rental
income in the year of purchase to the extent that the value of the leased
property exceeds the purchase price paid by the Company for that property. In
litigated cases involving sale-leasebacks which have considered this issue,
courts have concluded that buyers have realized prepaid rent where both parties
acknowledged that the purported purchase price for the property was
substantially less than fair market value and the purported rents were
substantially less than the fair market rentals. Because of the lack of clear
precedent and the inherently factual nature of the inquiry, complete assurance
cannot be given that the IRS could not successfully assert the existence of
prepaid rental income in such circumstances. The value of property and the fair
market rent for properties involved in sale-leasebacks are inherently factual
matters and always subject to challenge.

     Additionally, it should be noted that Section 467 of the Code (concerning
leases with increasing rents) may apply to those leases of the Company which
provide for rents that increase from one period to the next. Section 467
provides that in the case of a so-called "disqualified leaseback agreement,"
rental income must be accrued at a constant rate. If such constant rent accrual
is required, the Company would recognize rental income in excess of cash rents
and as a result, may fail to meet the 90% dividend distribution requirement.
"Disqualified leaseback agreements" include leaseback transactions where a
principal purpose of providing increasing rent under the agreement is the
avoidance of federal income tax. The IRS has issued final regulations under
Section 467 relating to the treatment of rent and interest provided for in
certain leases. The regulations apply to rental agreements that provide for
increasing or decreasing rent. A rental agreement has increasing or decreasing
rent if it requires the payment of contingent rent, other than rent that is
contingent due to (1) a provision computing rent based on a percentage of the
lessee's gross or net receipts; (2) adjustments based on a reasonable price
index; or (3) a provision requiring the lessee to pay third-party costs.
Therefore, additional rent provisions of leases containing such clauses should
not be "disqualified leaseback agreements." The regulations also provide that if
the rent allocated to each calendar year does not vary from the average rent
allocated to all calendar years by more than 10%, the lease will be deemed not
motivated by tax avoidance and thus should not be a "disqualified leaseback
agreement." It should be noted, however, that leases involved in sale-leaseback
transactions are subject to special scrutiny under Section 467. The Company,
based on its evaluation of the value of the property and the terms of the
leases, does not believe it has or will have in the future rent subject to the
provisions of Section 467.

DEPRECIATION OF PROPERTIES

     For tax purposes, the Company's real property acquired subsequent to its
initial public offering is being depreciated over 39 years utilizing the
straight-line method of depreciation and personal property is

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<PAGE>

being depreciated over 5 to 15 years in accordance with applicable laws and
regulations relating to different classifications of personal property.

FAILURE TO QUALIFY AS A REIT

     If the Company fails to qualify for federal income tax purposes as a REIT
in any taxable year, and the relief provisions do not apply, the Company will be
subject to tax on its taxable income at regular corporate rates (plus any
applicable alternative minimum tax). Distributions to shareholders in any year
in which the Company fails to qualify will not be deductible by the Company nor
will they be required to be made. In such event, to the extent of current or
accumulated earnings and profits, all distributions to shareholders will be
taxable as ordinary income and, subject to certain limitations in the Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, the Company will
also be disqualified from taxation as a REIT for the following four taxable
years. It is not possible to state whether in all circumstances the Company
would be entitled to statutory relief from such disqualification. Failure to
qualify for even one year could result in the Company's incurring substantial
indebtedness (to the extent borrowings are feasible) or liquidating substantial
investments in order to pay the resulting taxes.

TAXATION OF TAXABLE U.S. SHAREHOLDERS

     As used in this discussion, the term "U.S. shareholder" means a beneficial
owner of common shares of the Company that is, for U.S. federal income tax
purposes:

     .    an individual who is a citizen or resident of the United States;

     .    a corporation or partnership created or organized in or under the laws
          of the United States or of any political subdivision of the United
          States, other than a partnership treated as foreign under U.S.
          Treasury regulations;

     .    an estate whose income is includible in gross income for U.S. federal
          income tax purposes regardless of its source; or

     .    a trust, in general, if a U.S. court is able to exercise primary
          supervision over the administration of the trust and one or more U.S.
          persons have authority to control all substantial decisions of the
          trust.

     As long as the Company qualifies as a REIT, distributions made to the
Company's taxable U.S. shareholders out of current or accumulated earnings and
profits (and not designated as capital gain dividends or retained net long-term
capital gains) will be taken into account by them as ordinary income and will
not be eligible for the dividends received deduction for corporations.

     Distributions in excess of current and accumulated earnings and profits
will not be taxable to a U.S. shareholder to the extent that they do not exceed
the adjusted basis of the U.S. shareholder's shares in respect of which the
distributions were made, but rather will reduce the adjusted basis of such
shares. To the extent that such distributions exceed the adjusted basis of a
U.S. shareholder's shares in respect of which the distributions were made, they
will be included in income as capital gain provided that the shares are a
capital asset in the hands of the U.S. shareholder.

     Distributions that are designated as capital gain dividends will be taxed
as long-term capital gains (to the extent that they do not exceed the Company's
actual net capital gain for the taxable year) without regard to the period for
which the U.S. shareholder has held his or her stock. If the Company elects to

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<PAGE>

retain net long-term capital gains rather than distribute them, a U.S.
shareholder will be deemed to receive a capital gain distribution equal to the
amount of such retained net long-term capital gains. In that case, a U.S.
shareholder (i) will be allowed a credit against its federal income tax
liability for its proportionate share of tax paid by the Company on retained
capital gains, and (ii) will receive an increase in the basis of its shares
equal to the excess of such deemed capital gain distribution over the amount of
such tax credit. Corporate U.S. shareholders may be required to treat up to 20%
of certain capital gain dividends as ordinary income.

     Upon any taxable sale or other disposition of shares of the Company, a U.S.
shareholder will recognize gain or loss for federal income tax purposes on the
disposition in an amount equal to the difference between (a) the amount of cash
and the fair market value of any property received on such disposition and (b)
the shareholder's adjusted basis in the shares for tax purposes. Gain or loss
will be capital gain or loss if the shares have been held by the U.S.
shareholder as a capital asset. The applicable tax rate will depend on the U.S.
shareholder's holding period in the asset (generally, if an asset has been held
for more than one year, it will produce long-term capital gain) and the
shareholder's tax bracket. 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 shareholders, to a portion of capital gain realized by a
non-corporate shareholder on the sale of REIT shares that would correspond to
the REIT's "unrecaptured Section 1250 gain." U.S. shareholders are advised to
consult with their own tax advisors with respect to their capital gain tax
liability.

     Capital losses recognized by a U.S. shareholder upon the disposition of
shares of the Company held for more than one year at the time of disposition
will be a long-term capital loss. In addition, any loss upon a sale or exchange
of shares of the Company by a U.S. shareholder who has held such shares for six
months or less (after applying certain holding period rules) will be treated as
a long-term capital loss to the extent of distributions from the Company
required to be treated by such U.S. shareholder as long-term capital gain. All
or a portion of any loss realized upon a taxable disposition of shares of the
Company may be disallowed if other shares of the Company are purchased (under a
dividend reinvestment plan or otherwise) within 30 days before or after the
disposition.

     The Company may be required to withhold and remit to the IRS 30% (this rate
will be reduced to 29% for years 2004 and 2005, and 28% for 2006 and thereafter)
of the dividends paid to any U.S. shareholder who (a) fails to furnish the
Company with a properly certified taxpayer identification number, (b) has under
reported dividend or interest income to the IRS or (c) fails to certify to the
Company that he or she is not subject to backup withholding. Any amount paid as
backup withholding will be creditable against the U.S. shareholder's income tax
liability. The Company will report to its U.S. shareholders and the IRS the
amount of dividends paid during each calendar year and the amount of any tax
withheld.

TAXATION OF TAX-EXEMPT SHAREHOLDERS

     Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the IRS has ruled that dividend
distributions from a REIT to an exempt employee pension trust do not constitute
UBTI, provided that the shares of the REIT are not otherwise used in an
unrelated trade or business of the exempt employee pension trust. Based on that
ruling, amounts distributed by the Company to Exempt Organizations should
generally not constitute UBTI. However, if an Exempt Organization finances its
acquisition of its shares with debt, a portion of its income from the Company
will constitute UBTI pursuant to the "debt-financed property" rules. In
addition, in certain circumstances, a pension trust that owns more than 10% of
the Company's stock is required to treat a percentage of the dividends from the
Company as UBTI (the "UBTI Percentage"). The

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<PAGE>

UBTI Percentage is the gross income derived by the Company from an unrelated
trade or business (determined as if the Company were a pension trust) divided by
the gross income of the Company for the year in which the dividends are paid.
The UBTI rule applies to a pension trust holding more than 10% of the Company's
stock only if (1) the UBTI Percentage is at least 5%, (2) the Company qualifies
as a REIT only because the pension trust is not treated as a single issuer for
purposes of the five or fewer rule, and (3) either (A) one pension trust owns
more than 25% of the value of the Company's stock or (B) a group of pension
trusts each individually holding more than 10% of the value of the Company's
stock collectively owns more that 50% of the value of the Company's stock. The
Company currently does not expect that this rule will apply.

TAXATION OF NON-U.S. SHAREHOLDERS

     The rules governing U.S. federal income taxation of shareholders who are
not U.S. shareholders ("non-U.S. shareholders") are complex and no attempt will
be made herein to provide more than a summary of such rules. Non-U.S.
shareholders should consult with their own tax advisers to determine the impact
of federal, state and local income tax laws with regard to an investment in
shares of the Company, including any reporting requirements.

     Distributions that are not attributable to gain from sales or exchanges by
the Company of "United States Real Property Interests" and not designated by the
Company as capital gain dividends will be treated as dividends of ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of the Company. Generally, such distributions will be subject to a
U.S. withholding tax equal to 30% of the gross amount of the distribution unless
an applicable tax treaty reduces or eliminates that tax. Under certain treaties,
however, lower withholding rates generally applicable to dividends do not apply
to dividends from REITs. Dividends that are effectively connected with a U.S.
trade or business will be subject to tax on a net income basis at the regular
graduated U.S. federal income tax rates in the same manner as if the non-U.S.
shareholder were a resident of the United States, and are generally not subject
to withholding. Applicable certification and disclosure requirements must be
satisfied to be exempt from withholding under the effectively connected income
exemption. Any dividends received by a corporate non-U.S. shareholder that is
engaged in a U.S. trade or business also may be subject to an additional branch
profits tax at a 30% rate, or lower applicable treaty rate. The Company expects
to withhold U.S. income tax at the rate of 30% on any dividend distributions,
not designated as (or deemed to be) capital gain dividends, made to a non-U.S.
shareholder unless:

     (1) a lower treaty rate applies and the non-U.S. shareholder files an IRS
Form W-8BEN evidencing eligibility for that reduced rate with the Company; or

     (2) the non-U.S. shareholder files an IRS Form W-8ECI with the Company
claiming that the distribution is effectively connected income.

     Any distributions in excess of current and accumulated earnings and profits
of the Company will not be taxable to a non-U.S. shareholder to the extent that
they do not exceed the adjusted basis of the shareholder's shares, but rather
will reduce the adjusted basis of such shares. To the extent that such
distributions exceed the adjusted basis of a non-U.S. shareholder's shares in
the Company, they will give rise to gain from the sale or exchange of the
shareholder's shares. The tax treatment of this gain is described below.

     The Company may be required to withhold at least 10% of any distribution in
excess of its current and accumulated earnings and profits, even if a lower
treaty rate applies or the non-U.S. shareholder is not liable for tax on the
receipt of that distribution. However, a non-U.S. shareholder may

                                       13

<PAGE>

seek a refund of these amounts from the IRS if the non-U.S. shareholder's U.S.
tax liability with respect to the distribution is less than the amount withheld.

     Distributions to a non-U.S. shareholder that are designated by the Company
at the time of the distribution as capital gain dividends, other than those
arising from the disposition of a United States real property interest,
generally should not be subject to U.S. federal income taxation unless:

     (1) the investment in the shares is effectively connected with the non-U.S.
shareholder's U.S. trade or business, in which case the non-U.S. shareholder
will be subject to the same treatment as U.S. shareholders with respect to any
gain, except that a shareholder that is a foreign corporation also may be
subject to the 30% branch profits tax, as discussed above, or

     (2) the non-U.S. shareholder is a nonresident alien individual who is
present in the United States for 183 days or more during the taxable year and
has a "tax home" in the United States, in which case the nonresident alien
individual will be subject to a 30% tax on the individual's capital gains.

     For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of "United
States Real Property Interests" will be taxed to a non-U.S. shareholder under
the provisions of the Foreign Investment in Real Property Tax Act of 1980, as
amended ("FIRPTA"). Under FIRPTA, these distributions are taxed to a non-U.S.
shareholder as if such gain were effectively connected with a U.S. trade or
business. Non-U.S. shareholders would be subject to U.S. federal income tax at
the rates applicable to U.S. individuals or corporations, without regard to
whether such distribution is designated as a capital gain dividend. Also,
distributions subject to FIRPTA may be subject to a 30% branch profits tax in
the hands of a foreign corporate shareholder not entitled to treaty exemption.
The Company is required to withhold 35% of any distribution that could be
designated by the Company as a capital gain dividend to the extent that such
capital gain dividends are attributable to the sale or exchange by the Company
of "United States Real Property Interests." This amount is creditable against
the non-U.S. shareholder's federal tax liability.

     Although the law is not entirely clear on the matter, it appears that
amounts designated by the Company as undistributed capital gains would be
treated with respect to non-U.S. shareholders in the manner outlined in the
preceding paragraph for actual distributions by the Company of capital gain
dividends. Under that approach, the non-U.S. shareholders would be able to
offset as a credit against their U.S. federal income tax liability resulting
therefrom their proportionate share of the tax paid by the Company on such
undistributed capital gains (and to receive from the IRS a refund to the extent
their proportionate share of such tax paid by the Company were to exceed their
actual U.S. federal income tax liability).

     Gain recognized by a non-U.S. shareholder upon a sale of Company shares
generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which, at all times during a
specified testing period, less than 50% in value of the shares were held
directly or indirectly by non-U.S. persons. The Company believes that it is, and
it expects to continue to be a domestically controlled REIT and, therefore, the
sale of Company shares should not be subject to taxation under FIRPTA. Because
the Company's stock is publicly traded, however, no assurance can be given that
the Company will continue to be a domestically controlled REIT.

     If the Company does not constitute a domestically controlled REIT, a non-
U.S. shareholder's sale of Company shares generally will still not be subject to
tax under FIRPTA as a sale of U.S. Real Property Interests provided that (i) the
stock is "regularly traded" (as defined by applicable Treasury Regulations) on
an established securities market and (ii) the selling non-U.S. shareholder held
5% or less of the Company's outstanding stock at all times during a specified
testing period.

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<PAGE>

     If gain on the sale of shares of the Company were subject to taxation under
FIRPTA, the non-U.S. shareholder would be subject to the same treatment as a
U.S. shareholder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals) and the purchaser of the stock could be required to withhold
10% of the purchase price and remit such amount to the IRS.

     Gain from the sale of Company shares that would not otherwise be subject to
FIRPTA will nonetheless be taxable in the United States to a non-U.S.
shareholder in two cases: (i) if the non-U.S. shareholder's investment in the
Company's stock is effectively connected with a U.S. trade or business conducted
by such non-U.S. shareholder, the non-U.S. shareholder will be subject to the
same treatment as a U.S. stockholder with respect to such gain, or (ii) if the
non-U.S. shareholder is a nonresident alien individual who was present in the
United States for 183 days or more during the taxable year and has a "tax home"
in the United States, the nonresident alien individual will be subject to a 30%
tax on the individual's capital gain.

     The Company must report annually to the IRS and to each non-U.S.
shareholder the amount of dividends paid to that shareholder and the tax
withheld from those dividends. These reporting requirements apply regardless of
whether withholding was reduced or eliminated by an applicable tax treaty.
Copies of the information returns reporting those dividends and withholding may
also be made available to the tax authorities in the country in which the
non-U.S. shareholder is a resident under the provisions of an applicable income
tax treaty or agreement.

     Under some circumstances, Treasury Regulations require additional
information reporting and backup withholding at a rate of 30% (this rate will be
reduced to 29% for years 2004 and 2005, and 28% for 2006 and thereafter) on some
payments on shares of the Company. The gross amount of dividends paid to a
non-U.S. shareholder that fails to certify its non-U.S. shareholder status in
accordance with applicable Treasury Regulations generally will be reduced by
backup withholding at a rate of 30%.

     The payment of the proceeds of the sale or other disposition of shares of
the Company by a non-U.S. shareholder to or through the U.S. office of any
broker, U.S. or non-U.S., generally will be reported to the IRS and reduced by
backup withholding at a rate of 30%, unless the non-U.S. shareholder certifies
its status as a non-U.S. shareholder under penalties of perjury or otherwise
establishes an exemption. The payment of the proceeds of the sale or other
disposition of shares of the Company by a non-U.S. shareholder to or through a
non-U.S. office of a non-U.S. broker will not be reduced by backup withholding
or reported to the IRS, unless the non-U.S. broker has certain enumerated
connections with the United States. In general, the payment of proceeds from the
sale or other disposition of shares of the Company by or through a non-U.S.
office of a broker that is a U.S. person or has certain enumerated connections
with the United States will be reported to the IRS and may be reduced by backup
withholding at a rate of 30%, unless the non-U.S. shareholder certifies its
status as a non-U.S. shareholder under penalties of perjury or otherwise
establishes an exemption or the broker has documentary evidence in its files
that the holder is a non-U.S. shareholder.

     Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a non-U.S. shareholder can be
refunded or credited against the non-U.S. shareholder's U.S. federal income tax
liability, if any, provided that the required information is furnished to the
IRS in a timely manner. These backup withholding and information reporting rules
are complex and non-U.S. shareholders are urged to consult their own tax
advisors regarding the application of these rules to them.

                                       15