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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 333-11491
SIMON DEBARTOLO GROUP, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 34-1755769
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
115 WEST WASHINGTON STREET
INDIANAPOLIS, INDIANA 46204
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (317) 636-1600
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS
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6 7/8% Notes due November 15, 2006
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [x] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
Documents Incorporated By Reference
Portions of the Simon DeBartolo Group, Inc.'s Proxy Statement in connection with
its Annual Meeting of Shareholders, scheduled to be held May 14, 1997, are
incorporated by reference in Part III.
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1
SIMON DEBARTOLO GROUP, L.P.
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1996
TABLE OF CONTENTS
Item No. Page No.
- -------- --------
Part I
1. Business...................................................................... 3
2. Properties.................................................................... 9
3. Legal Proceedings............................................................. 30
4. Submission of Matters to a Vote of Security Holders........................... 30
Part II
5. Market for the Registrant's Common Equity and Related Shareholder Matters..... 31
6. Selected Financial Data....................................................... 33
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................... 35
8. Financial Statements and Supplementary Data................................... 46
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure...................................................... 47
Part III
10. Directors and Executive Officers of the Registrant............................ 47
11. Executive Compensation........................................................ 47
12. Security Ownership of Certain Beneficial Owners and Management................ 47
13. Certain Relationships and Related Transactions................................ 47
Part IV
14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K............. 48
SIGNATURES...................................... 102
2
PART I
ITEM 1. BUSINESS
BACKGROUND
Simon DeBartolo Group, Inc. (the "Company"), a Maryland corporation,
formerly known as Simon Property Group, Inc., is a self-administered and
self-managed real estate investment trust ("REIT") under the Internal Revenue
Code of 1986, as amended. The Company completed its initial public offering of
securities (the "IPO") in 1993. Simon DeBartolo Group, L.P. ("SDG, LP") is a
subsidiary partnership of the Company. Simon Property Group, L.P. ("SPG, LP") is
a subsidiary partnership of SDG, LP. SDG, LP and SPG, LP are hereafter
collectively referred to as the " Operating Partnership". Prior to the Merger
(described below), references to the Operating Partnership refer to SPG, LP
only. The Operating Partnership, is engaged primarily in the ownership,
operation, management, leasing, acquisition, expansion and development of real
estate properties, primarily regional malls and community shopping centers. As
of December 31, 1996, the Operating Partnership owns or holds an interest in 186
income-producing properties, which consist of 113 regional malls, 65 community
shopping centers, three specialty retail centers, four mixed-use properties and
one value-oriented super-regional mall located in 33 states (the "Properties").
The Operating Partnership also owns interests in two specialty retail centers,
two value-oriented super-regional malls and one community center currently under
construction and six parcels of land held for future development. At December
31, 1996, 1995 and 1994, the Company's ownership interest in the Operating
Partnership was 61.4%, 61.0% and 56.4%, respectively. The Operating Partnership
also holds substantially all of the economic interest in M.S. Management
Associates, Inc. (the "Management Company"), which manages 33 regional malls
and community shopping centers not wholly-owned by the Operating Partnership and
certain other properties and also engages in certain property development
activities.
THE MERGER
On August 9, 1996 the national shopping center business of DeBartolo
Realty Corporation ("DRC") was acquired for an aggregate value of $3.0 billion
(the "Merger"). The acquired portfolio consisted of 49 regional malls, 11
community centers and one mixed-use Property. These Properties included
47,052,267 square feet of retail space gross leasable area ("GLA") and 558,636
of office GLA. In connection with the merger, the Company changed its name to
Simon DeBartolo Group, Inc.
Further, the Management Company purchased from The Edward J. DeBartolo
Corporation all of the voting stock of DeBartolo Properties Management, Inc.,
("DPMI"), for $2.5 million in cash. The Operating Partnership holds
substantially all of the economic interest in DPMI. The Operating Partnership
holds substantially all of the economic interest in the Management Company,
while substantially all of the voting stock is held by Melvin Simon, Herbert
Simon and David Simon. The Management Company is accounted for using the equity
method of accounting.
For additional information concerning the Merger, please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
GENERAL
As of December 31, 1996, the Operating Partnership owned or held
interests in a diversified portfolio of 186 income-producing Properties,
including 113 enclosed regional malls, 65 community shopping centers, three
specialty retail centers, four mixed-use properties and one value-oriented
super-regional mall, located in 33 states. Regional malls, community centers and
the remaining portfolio comprised 82%, 7.8%, and 10.2%, respectively of total
rent revenues and tenant reimbursements in 1996. The Properties contain an
aggregate of approximately 113.3 million square feet of GLA, of which 67.3
million square feet is owned by the Operating Partnership ("Owned GLA").
Approximately 3,200 different retailers occupy approximately 12,000 stores in
the Properties. Total estimated retail sales at the Properties approached $16.7
billion in 1996.
As of December 31, 1996, mall and freestanding Owned GLA was 84.7%
leased in the regional malls and 91.6% for Owned GLA in the community shopping
centers. In addition, the Operating Partnership has interests in five properties
under construction in the United States, and six parcels of land held for
development containing an aggregate of approximately 367 acres (collectively,
the "Development Properties", and together with the Properties, the "Portfolio
Properties").
OPERATING STRATEGIES
3
The Operating Partnership's primary business objectives are to
increase per unit of ownership in the Operating Partnership ("Unit") cash
generated from operations and the value of the Operating Partnership's
properties and operations. The Operating Partnership plans to achieve these
objectives through a variety of methods discussed below, although no assurance
can be made that such objectives will be achieved.
LEASING. The Operating Partnership pursues an active leasing strategy,
which includes aggressively marketing available space; renewing
existing leases at higher base rents per square foot; and continuing to
sign leases that provide for percentage rents and/or regular or
periodic fixed contractual increases in base rents.
MANAGEMENT. Drawing upon the expertise gained through management of
approximately 129 million square feet of retail and mixed-use
properties, the Operating Partnership seeks to maximize cash flow
through a combination of an active merchandising program to maintain
its shopping centers as inviting shopping destinations, continuation of
its successful efforts to minimize overhead and operating costs,
coordinated marketing and promotional activities, and systematic
planning and monitoring of results.
STRATEGIC EXPANSIONS AND RENOVATIONS. A key objective of the Operating
Partnership is to increase the profitability and market share of the
Portfolio Properties through the completion of strategic renovations
and expansions. In 1996, the Operating Partnership completed
construction and opened eight expansion and/or renovation projects at
Greenwood Plus in Greenwood, Indiana; Muncie Mall in Muncie, Indiana;
Summit Mall in Akron, Ohio; University Park Mall in South Bend,
Indiana; College Mall in Bloomington, Indiana; Century III Mall in
Pittsburgh, Pennsylvania; Coral Square in Coral Springs, Florida; and
The Florida Mall in Orlando, Florida.
The Operating Partnership has a number of renovation and/or expansion
projects currently under construction. In addition, preconstruction
development continues on a number of project expansions, renovations
and anchor additions. The Operating Partnership expects to commence
construction on many of these projects in the next 12 to 24 months.
Development. Development activities are an ongoing part of the
Operating Partnership's business. The Operating Partnership opened two
new regional malls, one specialty retail center, and one value-oriented
super-regional mall during 1996. The new regional malls include the 1.0
million square foot Cottonwood Mall in Albuquerque, New Mexico and the
800,000 square foot Indian River Mall in Vero Beach, Florida. The new
specialty retail center is the 60,000 square foot Tower Shops in Las
Vegas, Nevada and the value-oriented super-regional mall is the 1.3
million square foot Ontario Mills in Ontario, California. Cottonwood
Mall is anchored by Dillard's, Foley's, JCPenney, Mervyn's and
Montgomery Ward. Indian River Mall is anchored by AMC Theatres,
Burdines, Dillard's, JCPenney, and Sears. Ontario Mills' anchors
include: AMC Theatres, Burlington Coat Factory, JCPenney, Sports
Authority and Marshall's, with a Dave & Busters under construction.
In addition, Indian River Commons, a 265,000 square foot community
shopping center opened during March 1997 in Vero Beach, Florida. The
Operating Partnership owns 50% of this joint venture project, which is
anchored by HomePlace, Lowe's, Office Max and Service Merchandise.
Development activities are ongoing at several other locations
including:
o A 235,000 square foot phase II expansion of Forum in Las Vegas, in
which the Operating Partnership has a 55% ownership interest, is
scheduled to open in August 1997. The costs of the phase II
project are being funded with a portion of the $184 million
two-tranche financing facility which closed on February 23, 1996.
The loan bears interest on a weighted average basis at LIBOR plus
137 basis points and matures in February 2000.
o The Source, a 730,000 square foot value-oriented retail and
entertainment development project in Westbury (Long Island), New
York, is expected to open in August 1997. This new $150 million
development will adjoin an existing Fortunoff store. The Operating
Partnership has a total equity investment of $25.3 million in this
50%-owned joint venture project. Construction financing of $120
million closed on this property in July 1996. The loan initially
bears interest at LIBOR plus 170 basis points and matures on July
16, 1999.
o Arizona Mills, a 1,230,000 square foot retail development project
in Tempe, Arizona, broke ground on August 1, 1996. This $184
million value-oriented super-regional mall is expected to open in
November 1997. In January 1997, the joint venture closed on a
five-year $145 million construction loan with interest at LIBOR
4
plus 150 basis points. The Operating Partnership had an $13.5
million equity investment through December 31, 1996 and a 25%
ownership interest in this joint venture development.
o Grapevine Mills, a 1,480,000 square foot retail development
project in Grapevine (Dallas/Fort Worth), Texas, broke ground on
July 10, 1996. This $202 million value-oriented super-regional
mall development project is expected to open in October 1997. A
commitment has been obtained for a four-year $157 million
construction loan (plus a one-year extension) with an initial
interest rate of LIBOR plus 165 basis points. The Operating
Partnership has a $14 million equity commitment on this
37.5%-owned joint venture project, and made its initial
contribution of $7.9 million in January 1997.
o The Shops at Sunset Place, a destination-oriented retail and
entertainment project containing approximately 500,000 square feet
of GLA is scheduled to open in 1998 in South Miami, Florida. The
Operating Partnership owns 75% of this $143 million project. The
Operating Partnershi expects to have construction financing for
the majority of the development costs of this project in place
during the second quarter of 1997.
In addition, the Operating Partnership is in the preconstruction
development phase on two new community center projects, each of which
is immediately adjacent to an existing regional mall in the Operating
Partnership's portfolio. Lakeline Plaza, a 50%-owned joint venture
development project in Austin, Texas, is scheduled to open in 1998.
This approximately $39 million development is projected to open with
391,000-square-feet of GLA. Muncie Plaza, a wholly-owned project, is
scheduled to open in Muncie, Indiana, in 1998. This approximately $15
million development is projected to open with 200,000-square-feet of
GLA.
The Operating Partnership also has direct or indirect interests in six
other parcels of land held for development in five states totaling
approximately 367 acres. Management believes the Operating Partnership
is well positioned to pursue future development opportunities as
conditions warrant.
Acquisitions. In addition to the Merger, the Operating Partnership
acquired additional ownership in two existing regional malls, Ross Park
Mall and North East Mall, increasing its ownership in each of those
malls to 100%. The Operating Partnership intends to selectively acquire
individual properties and portfolios of properties that meet its
investment criteria as opportunities arise. Management believes that
consolidation will continue to occur within the shopping center
industry, creating opportunities for the Operating Partnership to
acquire additional portfolios of shopping centers. Management also
believes that its extensive experience in the shopping center business,
access to capital markets, familiarity with real estate markets and
advanced management systems will allow it to evaluate and execute
acquisitions competitively. Additionally, the Operating Partnership may
be able to acquire properties on a tax-advantaged basis for the
transferors.
COMPETITION
The Operating Partnership believes that it has a competitive advantage
in the retail real estate business as a result of (i) its use of innovative
retailing concepts, (ii) its management and operational expertise, (iii) its
extensive experience and relationship with retailers and lenders and (iv) the
size and diversity of its Properties. Management believes that the Portfolio
Properties are the largest, as measured by GLA, of any publicly traded REIT,
with more regional malls than any other publicly traded REIT. For these reasons,
management believes the Operating Partnership to be the leader in the industry.
All of the Portfolio Properties are located in developed areas. With
respect to certain of such properties, there are other properties of the same
type within the market area. The existence of competitive properties could have
a material effect on the Operating Partnership's ability to lease space and on
the level of rents the Operating Partnership can obtain.
There are numerous commercial developers, real estate companies and
other owners of real estate that compete with the Operating Partnership in its
trade areas. This results in competition for both acquisition of prime sites
(including land for development and operating properties) and for tenants to
occupy the space that the Operating Partnership and its competitors develop and
manage.
ENVIRONMENTAL MATTERS
5
Substantially all of the Portfolio Properties located in the United
States have been subjected to Phase I or similar environmental audits (which
involve only a review of records and visual inspection of the property without
soil sampling or ground water analysis) by independent environmental consultants
since April 1988. Most of these audits have been conducted since January 1,
1990. The Phase I environmental audits are intended to discover information
regarding, and to evaluate the environmental condition of, the surveyed
properties and surrounding properties. The environmental audits have not
revealed, nor is management aware of, any environmental liability that
management believes will have a material adverse effect on the Operating
Partnership. No assurance can be given that existing environmental studies with
respect to the Portfolio Properties reveal all potential environmental
liabilities, that any previous owner, occupant or tenant of a Portfolio Property
did not create any material environmental condition not known to management,
that the current environmental condition of the Portfolio Properties will not be
affected by tenants and occupants, by the condition of nearby properties, or by
unrelated third parties, or that future uses or condition (including, without
limitation, changes in applicable environmental laws and regulations or the
interpretation thereof) will not result in imposition of environmental
liability.
ASBESTOS-CONTAINING MATERIALS. Asbestos-containing materials are
present in most of the Properties, primarily in the form of vinyl asbestos tile,
mastics and roofing materials, which are generally in good condition.
Asbestos-containing materials in the form of spray-on fireproofing and thermal
system insulation are also present in certain Properties in limited
concentrations or in limited areas. The presence of such asbestos-containing
materials does not violate currently applicable laws. Asbestos-containing
materials will be removed by the Operating Partnership in the ordinary course of
any renovation, reconstruction and expansion, and in connection with the
retenanting of space. Although it is difficult to assess the costs of abatement
or removal of such asbestos-containing materials at this time, and no assurance
can be given as to the magnitude of such costs, the Operating Partnership does
not believe that such costs will be material to the Operating Partnership's
financial condition or results of operation. The Operating Partnership has
developed and is implementing an operations and maintenance program that
establishes operating procedures with respect to asbestos-containing materials.
UNDERGROUND STORAGE TANKS. Many of the Properties contain, or at one
time contained, underground storage tanks used to store heating oil for on-site
consumption or petroleum products typically related to the operations of auto
service centers. Certain adjacent properties contain, or at one time contained,
underground storage tanks. At present, the Operating Partnership is aware of
five underground storage tanks owned and operated by the Operating Partnership,
and has either begun or scheduled appropriate compliance activities in all
cases. The Operating Partnership also is aware of several additional underground
storage tanks operated by tenants or subtenants at the Properties, and
compliance activities with respect to those underground storage tanks are
expected to be completed by 1998 by the respective tenants or subtenants. Upon
any such tenant's or subtenant's failure to cause such compliance activities,
the Operating Partnership could become primarily responsible for such
compliance.
Site assessments at seven Properties have revealed certain soil and/or
groundwater contamination associated with underground storage tanks formerly
operated by third parties. All such tanks had been removed or, at one property,
previously abandoned in place. The Operating Partnership is in the process of
evaluating the extent of such contamination and will take appropriate action in
accordance with all applicable environmental laws. Since the underground storage
tanks associated with such contamination are no longer in place or in operation,
the Operating Partnership does not believe that the costs to the Operating
Partnership to address such contamination will be material. In addition, the
Operating Partnership has begun soil and/or groundwater remediation to address
minor contamination associated with other underground storage tanks currently or
formerly located at certain Properties. Such remediation is being conducted in
accordance with applicable environmental laws. The Operating Partnership has no
reason to believe that leakage has occurred from any other underground storage
tanks currently or previously located at the Properties or that the impact of
any such contamination from any onsite or offsite source would be material.
The cost of underground storage tank compliance, closure, removal and
remediation activities have been reserved for and are not expected to have
material adverse effect on the Operating Partnership's financial condition or
results of operations.
GENERAL COMPLIANCE. Management believes that the Portfolio Properties
are in compliance, in all material respects, with all Federal, state and local
environmental laws, ordinances and regulations (see Item 3. Legal Proceedings).
Management is unaware of any instances in which it would incur significant
environmental costs if any or all properties were sold, disposed of or
abandoned.
PROPERTIES TO BE DEVELOPED OR ACQUIRED. Land being held for shopping
mall development or that may be acquired for development may contain residues or
debris associated with the use of the land by prior owners or third parties. In
certain instances, such residues or debris could be or contain hazardous wastes
6
or hazardous substances. Prior to exercising any option to acquire any of the
optioned properties, the Operating Partnership will conduct the necessary
environmental due diligence consistent with past practice.
Employees
The Operating Partnership and its affiliates employ approximately
7,400 persons at various centers and offices throughout the United States.
Approximately 675 of such employees are located at the Operating Partnership's
headquarters in Indianapolis, Indiana, and approximately 3,950 of all employees
are part-time.
INSURANCE
The Operating Partnership has comprehensive liability, fire, flood,
extended coverage and rental loss insurance with respect to its properties.
Management believes that such insurance provides adequate coverage.
CORPORATE HEADQUARTERS
The Operating Partnership's executive offices are located at National
City Center, 115 West Washington Street, Indianapolis, Indiana 46204, and its
telephone number is (317) 636-1600.
7
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the
executive officers of the Company, which is the general partner of the Operating
Partnership, as of December 31, 1996.
Name Age Position
---- --- --------
Melvin Simon (1) 70 Co-Chairman
Herbert Simon (1) 62 Co-Chairman
David Simon (1) 35 Chief Executive Officer
Richard S. Sokolov 47 President and Chief Operating Officer
Randolph L. Foxworthy 52 Executive Vice President - Corporate Development
William J. Garvey 58 Executive Vice President - Property Development
James A. Napoli 50 Executive Vice President - Leasing
John R. Neutzling 44 Executive Vice President - Property Management
James M. Barkley 45 General Counsel; Secretary
Stephen E. Sterrett 41 Treasurer
(1) Melvin Simon is the brother of Herbert Simon and the father of
David Simon.
Set forth below is a summary of the business experience of the
executive officers of the Company. The executive officers of the Company serve
at the pleasure of the Board of Directors and have served in such capacities
since the completion of the Company's IPO, with the exception of Mr. Richard
Sokolov who has been President, Chief Operating Officer and a director since the
Merger. For biographical information of Melvin Simon, Herbert Simon, David
Simon, and Richard Sokolov, see Item 10 of this report.
Mr. Foxworthy is the Executive Vice President - Corporate Development
of the Company. He served as a Director of the Company from the IPO until the
Merger. Mr. Foxworthy joined Melvin Simon & Associates, Inc. ("MSA") in 1980 and
has been an Executive Vice President in charge of Corporate Development of MSA
since 1986 and has held the same position with the Company since the IPO.
Mr. Garvey is the Executive Vice President - Property Development of
the Company. Mr. Garvey, who was Executive Vice President and Director of
Development at MSA, joined MSA in 1979 and held various positions with MSA.
Mr. Napoli is the Executive Vice President - Leasing of the Company.
Mr. Napoli also served as Executive Vice President and Director of Leasing since
he joined MSA in 1989.
Mr. Neutzling holds the position of Executive Vice President -
Property Management of the Company. Mr. Neutzling has also been an Executive
Vice President of MSA since 1992 overseeing all property and asset management
functions. He joined MSA in 1974 and has held various positions with MSA.
Mr. Barkley serves as the Company's General Counsel and Secretary. Mr.
Barkley holds the same position for MSA. He joined MSA in 1978 as Assistant
General Counsel for Development Activity.
Mr. Sterrett serves as the Company's Treasurer. He joined MSA in 1989
and has held various positions with MSA.
8
ITEM 2. PROPERTIES
PORTFOLIO PROPERTIES
The Properties generally consist of two types: regional malls and
community shopping centers. Regional malls contain two or more anchors and a
wide variety of smaller stores ("Mall" stores) located in enclosed malls
connecting the anchors. Additional stores ("Freestanding" stores) are usually
located along the perimeter of the parking area. The 113 regional malls in the
Properties range in size from approximately 210,000 to 1.5 million square feet
of GLA, with 108 regional malls over 400,000 square feet. These regional malls
contain in the aggregate over 10,000 occupied stores, including over 430 anchors
which are mostly national retailers. As of December 31, 1996, regional malls
(including specialty retail centers, and retail space in the mixed-use
properties) represented 83.7% of the GLA, 79.7% of Owned GLA and 84.9% of total
annualized base rent of the Properties.
Community shopping centers are unenclosed and are generally smaller
than regional malls. Most of the 65 community shopping centers in the Properties
range in size from approximately 100,000 to 400,000 square feet of GLA.
Community shopping centers generally are of two types: (i) traditional community
centers, which focus primarily on value-oriented and convenience goods and
services, are usually anchored by a supermarket, drugstore or discount retailer
and are designed to service a neighborhood area; and (ii) power centers, which
are designed to serve a larger trade area and contain at least two anchors that
are usually national retailers among the leaders in their markets and occupy
more than 70% of the GLA in the center. As of December 31, 1996, community
shopping centers represented 13.4% of the GLA, 15.6% of Owned GLA and 10.1% of
the total annualized base rent of the Properties.
The Operating Partnership also has an interest in three specialty
retail centers, four mixed-use properties and one value-oriented super regional
mall. The specialty retail centers contain approximately 530,000 square feet of
GLA and do not have anchors; instead, they feature retailers and entertainment
facilities in a distinctive shopping environment and location. The four
mixed-use properties range in size from approximately 500,000 to 1,025,000
square feet of GLA. Two of these properties are regional malls with connected
office buildings, and two are located in mixed-use developments and contain
primarily office space. Ontario Mills is the value-oriented super regional mall.
Ontario Mills contains over 1.3 million square feet of GLA, including six
anchors, one of which is under construction.
As of December 31, 1996, approximately 84.7% of the Mall and
Freestanding Owned GLA in regional malls, specialty retail centers and the
retail space in the mixed use properties was leased and approximately 91.6% of
Owned GLA in the community shopping centers was leased.
Of the 186 Properties, 140 are owned 100% by the Operating Partnership
(the "Wholly-Owned Properties") and the remainder are held as joint venture
interests (the "Joint Venture Properties"). The Operating Partnership is the
managing or co-managing general partner of all but three Joint Venture Property
partnerships.
9
ADDITIONAL INFORMATION
The following table sets forth certain information, as of December 31,
1996, regarding the Properties:
OWNERSHIP THE OPERATING
INTEREST PARTNERSHIP'S
(EXPIRATION IF PERCENTAGE YEAR BUILT TOTAL
NAME/LOCATION GROUND LEASE) (1) INTEREST (2) OR ACQUIRED GLA ANCHORS/SPECIALTY ANCHORS
------------- ----------------- ------------ ----------- --- -------------------------
REGIONAL MALLS
1. Alton Square Fee 100.0% Acquired 545,376 Famous Barr, JCPenney
Alton, IL 1993 Sears (3)
2. Amigoland Mall Fee 100.0 Built 1974 560,297 Beall's, Dillard's, JCPenney
Brownsville, TX Montgomery Ward
3. Anderson Mall Fee 100.0 Built 1972 633,459 Gallant Belk, JCPenney
Anderson, SC Sears, Uptons
4. Aventura Mall (4) Fee 33.3 Built 1983 987,294 Bloomingdales (3), JCPenney
Miami, FL Lord & Taylor, Macy's, Sears
5. Avenues, The Fee 25.0 Built 1990 1,113,346 Dillard's, Gayfers
Jacksonville, FL Sears, Parisian, JCPenney
6. Barton Creek Square Fee 100.0 Built 1981 1,375,774 Dillard's (5), Foley's
Austin, TX JCPenney, Sears
Montgomery Ward
7. Battlefield Mall Fee and Ground 100.0 Built 1970 1,156,884 Dillard's, Famous Barr
Springfield, MO Lease (2056) Montgomery Ward, Sears
JCPenney
8. Bay Park Square Fee 100.0 Built 1980 641,838 Kohl's, Montgomery Ward
Green Bay, WI Shopko, Elder-Beerman
9. Bergen Mall Fee and Ground 100.0 Acquired 1,021,198 Value City, Stern's,
Paramus, NJ Lease (6) (2061) 1987 Marshall's, Off 5th-Saks
Fifth Avenue Outlet
10. Biltmore Square Fee (7) 66.7 Built 1989 495,439 Belk, Dillard's, Proffitt's
Asheville, NC Goody's
11. Boynton Beach Mall Fee 100.0 Built 1985 1,064,298 Burdines, Macy's, Sears
Boynton Beach, FL Mervyn's (8)
JCPenney
12. Broadway Square Fee 100.0 Acquired 570,775 Dillard's, JCPenney, Sears
Tyler, TX 1994
13. Brunswick Square Fee 100.0 Built 1973 736,688 Macy's, JCPenney
East Brunswick, NJ
14. Castleton Square Fee 100.0 Built 1972 1,352,632 LS Ayres, Lazarus,
Indianapolis, IN Montgomery Ward
JCPenney, Sears
10
OWNERSHIP THE OPERATING
INTEREST PARTNERSHIP'S
(EXPIRATION IF PERCENTAGE YEAR BUILT TOTAL
NAME/LOCATION GROUND LEASE) (1) INTEREST (2) OR ACQUIRED GLA ANCHORS/SPECIALTY ANCHORS
------------- ----------------- ------------ ----------- --- -------------------------
15. Century III Mall Fee 50.0 Built 1979 1,287,492 Lazarus, Kaufmann's
Pittsburgh, PA JCPenney, Sears, T.J. Maxx
Wickes Furniture
16. Century Mall Fee 100.0 Acquired 415,138 Burlington Coat Factory
Merrillville, IN 1982 Montgomery Ward
17. Charles Towne Square (11) Fee 100.0 Built 1976 463,311 Montgomery Ward
Charleston, SC Service Merchandise (9)
(10)
18. Chautauqua Mall Fee 100.0 Built 1971 420,737 The Bon Ton (3), Sears,
Lakewood, NY JCPenney(3), Office Max
19. Cheltenham Square Fee 100.0 Built 1981 619,838 Burlington Coat Factory
Philadelphia, PA Home Depot, Value City
Seaman's Furniture, Shop
Rite
20. Chesapeake Square Fee and Ground (7) 75.0 Built 1989 704,463 Proffitt's (8), Belk
Chesapeake, VA Lease (2062) JCPenney, Sears
Montgomery Ward
21. Cielo Vista Mall Fee and Ground 100.0 Built 1974 1,194,468 Dillard's (5), JCPenney
El Paso, TX Lease (12) (2027) Montgomery Ward
Sears
22. Circle Centre Property Lease 14.7 Built 1995 797,040 Nordstrom
Indianapolis, IN (2097) Parisian
23. College Mall Fee and Ground 100.0 Built 1965 706,175 JCPenney, Lazarus
Bloomington, IN Lease (13) (2048) L.S. Ayres, Sears, Target
24. Columbia Center Fee 100.0 Acquired 716,864 The Bon Marche, Lamonts
Kennewick, WA 1987 JCPenney, Sears
25. Coral Square Fee 50.0 Built 1984 939,182 Burdines (5), Mervyn's (8)
Coral Springs, FL JCPenney, Sears
26. Cottonwood Mall Fee 100.0 Built 1996 1,026,956 Dillard's, Foley's,
Albuquerque, NM JCPenney, Mervyn's
Montgomery Ward
27. Crossroads Mall Fee 100.0 Acquired 872,895 Dillard's, Sears
Omaha, NE 1994 Younkers
28. Crystal River Mall Fee 100.0 Built 1990 425,277 Belk Lindsey, Kmart
Crystal River, FL JCPenney, Sears
29. DeSoto Square Fee 100.0 Built 1973 689,733 Burdines, JCPenney
Bradenton, FL Sears, Dillard's
30. East Towne Mall Fee 100.0 Built 1984 975,676 Dillard's, JCPenney
Knoxville, TN Proffitt's, Sears
Service Merchandise
11
OWNERSHIP THE OPERATING
INTEREST PARTNERSHIP'S
(EXPIRATION IF PERCENTAGE YEAR BUILT TOTAL
NAME/LOCATION GROUND LEASE) (1) INTEREST (2) OR ACQUIRED GLA ANCHORS/SPECIALTY ANCHORS
------------- ----------------- ------------ ----------- --- -------------------------
31. Eastern Hills Mall Fee 100.0 Built 1971 997,081 Sears, The Bon Ton
Buffalo, NY JCPenney, Kaufmann's
Jenss, Waccamaw
32. Eastgate Consumer Mall Fee 100.0 Acquired 462,968 Burlington Coat Factory
Indianapolis, IN 1981
33. Eastland Mall Fee 100.0 Built 1986 702,707 Dillard's, JCPenney
Tulsa, OK Service Merchandise
Mervyn's,
34. Florida Mall, The Fee 50.0 Built 1986 1,119,726 Saks Fifth Avenue
Orlando, FL Dillard's (5), Gayfers
JCPenney, Sears
35. Forest Mall Fee 100.0 Built 1973 481,937 JCPenney, Kohl's
Fond Du Lac, WI Younkers, Sears
36. Forest Village Park Mall Fee 100.0 Built 1980 417,322 JCPenney, Kmart
Forestville, MD
37. Fremont Mall Fee 100.0 Built 1966 211,708 1/2 Price Store, JCPenney
Fremont, NE
38. Glen Burnie Mall Fee 100.0 Built 1963 455,718 Montgomery Ward, Best Buy
Glen Burnie, MD Toys "R" Us, Dick's Clothing
and Sporting Goods
39. Golden Ring Mall Fee 100.0 Built 1974 719,436 Caldor, Hecht's
Baltimore, MD Montgomery Ward
40. Great Lakes Mall Fee 100.0 Built 1961 1,292,924 Dillard's (5), Kaufmann's
Cleveland, OH JCPenney, Sears
41. Greenwood Park Fee 100.0 Acquired 1,273,561 JCPenney, Lazarus
Mall 1979 L.S. Ayres, Sears
Greenwood, IN Montgomery Ward
Service Merchandise
42. Gulf View Square Fee 100.0 Built 1980 809,813 Burdines, Dillard's
Port Richey, FL Montgomery Ward
JCPenney, Sears
43. Heritage Park Mall Fee 100.0 Built 1978 633,902 Dillard's, Sears
Midwest City, OK Montgomery Ward
Service Merchandise
44. Hutchinson Mall Fee 100.0 Built 1985 525,845 Dillard's, JCPenney
Hutchinson, KS Sears, Wal-Mart (14)
Service Merchandise
45. Independence Center Fee 100.0 Acquired 1,032,042 The Jones Store Co.
Independence, MO 1994 Dillard's, Sears, (10)
46. Indian River Mall Fee 50.0 Built 1996 753,705 Burdines, Sears
Vero Beach, FL JCPenney, Dillard's
47. Ingram Park Mall Fee 100.0 Built 1979 1,134,475 Dillard's (5), Foley's
San Antonio, TX JCPenney, Sears, Beall's
12
OWNERSHIP THE OPERATING
INTEREST PARTNERSHIP'S
(EXPIRATION IF PERCENTAGE YEAR BUILT TOTAL
NAME/LOCATION GROUND LEASE) (1) INTEREST (2) OR ACQUIRED GLA ANCHORS/SPECIALTY ANCHORS
------------- ----------------- ------------ ----------- --- -------------------------
48. Irving Mall Fee 100.0 Built 1971 1,087,878 Dillard's, Foley's,
Irving, TX Marshall's, JCPenney,
Mervyn's, Sears
49. Jefferson Valley Mall Fee 100.0 Built 1983 589,762 Macy's, Sears
Yorktown Heights, NY Service Merchandise
50. La Plaza Fee and Ground 100.0 Built 1976 840,448 Dillard's, JCPenney, Beall's
McAllen, TX Lease (6) (2040) Foley's (3), Sears
Service Merchandise
Joe Brand-Lady Brand
51. Lafayette Square Fee 100.0 Built 1968 1,220,402 JCPenney, LS Ayres
Indianapolis, IN Lazarus, Sears, Waccamaw
Montgomery Ward
52. Lakeland Square Fee 50.0 Built 1988 901,689 Belk Lindsey, Burdines
Lakeland, FL Dillard's, Mervyn's (8)
JCPenney, Sears
53. Lakeline Mall Fee 50.0 Built 1995 1,102,905 Dillard's, Foley's, Sears
N. Austin, TX JCPenney, Mervyn's
54. Lima Mall Fee 100.0 Built 1965 752,839 Elder-Beerman, Sears
Lima, OH Lazarus, JCPenney
55. Lincolnwood Town Center Fee 100.0 Built 1990 441,169 Carson Pirie Scott
Lincolnwood, IL JCPenney
56. Longview Mall Fee 100.0 Built 1978 617,002 Dillard's (5), JCPenney
Longview, TX Sears, Wilson's, Beall's
57. Machesney Park Mall Fee 100.0 Built 1979 555,863 Kohl's, JCPenney
Rockford, IL Bergners, (10)
58. Mall of the Mainland Fee (7) 65.0 Built 1991 779,095 Dillard's, JCPenney, Sears
Galveston, TX Palais Royal, Foley's
59. Markland Mall Ground Lease (2041) 100.0 Built 1968 391,394 Lazarus, Sears
Kokomo, IN Target
60. McCain Mall Ground Lease (15) 100.0 Built 1973 776,518 Dillard's, JCPenney
N. Little Rock, AR (2032) M.M. Cohn, Sears
61. Melbourne Square Fee 100.0 Built 1982 734,177 Belk, Burdines
Melbourne, FL Dillard's, Mervyn's (8)
JCPenney
62. Memorial Mall Fee 100.0 Built 1969 416,273 JCPenney, Kohl's
Sheboygan, WI Sears
63. Miami Fee 60.0 Built 1982 972,441 Burdines (5), Sears
International Mall Mervyn's (8), JCPenney
Miami, FL
13
OWNERSHIP THE OPERATING
INTEREST PARTNERSHIP'S
(EXPIRATION IF PERCENTAGE YEAR BUILT TOTAL
NAME/LOCATION GROUND LEASE) (1) INTEREST (2) OR ACQUIRED GLA ANCHORS/SPECIALTY ANCHORS
------------- ----------------- ------------ ----------- --- -------------------------
64. Midland Park Mall Fee 100.0 Built 1980 619,454 Dillard's (5), JCPenney
Midland, TX Sears, Beall's
65. Miller Hill Mall Fee 100.0 Built 1973 802,038 Glass Block, JCPenney
Duluth, MN Montgomery Ward, Sears
66. Mission Viejo Mall Fee 100.0 Built 1979 816,815 Macy's, Montgomery Ward
Mission Viejo, CA Robinsons - May (5)
67. Mounds Mall Ground Lease (2033) 100.0 Built 1965 407,423 Elder-Beerman, JCPenney
Anderson, IN Sears
68. Muncie Mall Fee 100.0 Built 1970 499,406 JCPenney, L.S. Ayres
Muncie, IN Sears, Elder Beerman
69. North East Mall Fee 100.0 Built 1971 1,141,585 Dillard's (5), JCPenney
Hurst, TX Montgomery Ward, Sears
70. North Towne Square Fee 100.0 Built 1980 750,882 Elder-Beerman, Lion
Toledo, OH Montgomery Ward
71. Northfield Square Fee (7) 31.6 Built 1990 533,162 Sears, Carson Pirie Scott
Bradley, IL JCPenney, Venture
72. Northgate Fee 100.0 Acquired 1,102,260 The Bon Marche, Lamonts
Mall 1987 (16) Nordstrom, JCPenney
Seattle, WA
73. Northwoods Mall Fee 100.0 Acquired 666,748 Famous Barr, JCPenney
Peoria, IL 1983 Montgomery Ward
74. Orange Park Mall Fee 100.0 Acquired 829,559 Dillard's, Gayfer's
Jacksonville, FL 1994 JCPenney, Sears
75. Paddock Mall Fee 100.0 Built 1980 568,082 Belk, Burdines
Ocala, FL JCPenney, Sears
76. Palm Beach Mall Fee 50.0 Built 1967 1,200,800 JCPenney, Sears
West Palm Beach, FL Lord & Taylor
Mervyn's (8), Burdines
77. Port Charlotte Fee (7) 80.0 Built 1989 715,820 Burdines, Dillard's
Town Center Montgomery Ward
Port Charlotte, FL JCPenney, Sears
78. Prien Lake Mall Fee and Ground 100.0 Built 1972 467,230 JCPenney
Lake Charles, LA Lease (6) (2025) Montgomery Ward
The White House
79. Raleigh Springs Mall Fee and Ground 100.0 Built 1979 907,826 Dillard's, Goldsmith's
Memphis, TN Lease (6) (2018) JCPenney, Sears
80. Randall Park Mall Fee 100.0 Built 1976 1,522,536 Dillard's, Kaufmann's
Cleveland, OH JCPenney, Sears
Burlington Coat Factory
14
OWNERSHIP THE OPERATING
INTEREST PARTNERSHIP'S
(EXPIRATION IF PERCENTAGE YEAR BUILT TOTAL
NAME/LOCATION GROUND LEASE) (1) INTEREST (2) OR ACQUIRED GLA ANCHORS/SPECIALTY ANCHORS
------------- ----------------- ------------ ----------- --- -------------------------
81. Richardson Square Fee 100.0 Built 1977 863,619 Dillard's, Sears
Dallas, TX Montgomery Ward
82. Richmond Mall Fee 100.0 Built 1966 873,619 JCPenney, Sears
Cleveland, OH
83. Richmond Square Fee 100.0 Built 1966 318,663 Dillard's (3), JCPenney
Richmond, IN Sears, Office Max
84. Rolling Oaks Mall Fee 49.9 Built 1988 758,834 Dillard's, Foley's
North San Antonio, TX Sears
85. Ross Park Mall Fee (7) 89.0 Built 1986 1,273,553 Lazarus, JCPenney
Pittsburgh, PA Kaufmann's, Sears
Service Merchandise
86. St. Charles Towne Center Fee 100.0 Built 1990 961,698 Hecht's, JCPenney,
Waldorf, MD Kohl's (3), Sears
Montgomery Ward,
87. Seminole Towne Fee 45.0 Built 1995 1,138,893 Burdines, Dillard's
Center JCPenney, Parisian, Sears
Sanford, FL
88. Smith Haven Mall Fee 25.0 Acquired 1,340,472 Sterns, Macy's
Lake Grove, NY 1995 Sears, JCPenney (3)
89. South Park Mall Fee 100.0 Built 1975 858,891 Burlington Coat Factory
Shreveport, LA Dillard's, JCPenney
Montgomery Ward
Stage
90. Southtown Mall Fee 100.0 Built 1969 858,196 Kohl's, JCPenney, L.S. Ayres
Ft. Wayne, IN Sears, Service Merchandise
91. Southern Park Mall Fee 100.0 Built 1970 1,200,480 Dillard's, Kaufmann's
Youngstown, OH JCPenney, Sears
92. Southgate Mall Fee 100.0 Acquired 321,343 Albertson's (14), Sears
Yuma, AZ 1988 Dillard's, JCPenney
93. Summit Mall Fee 100.0 Built 1965 717,868 Kaufmann's, Dillard's
Akron, OH (10)
94. Sunland Park Mall Fee 100.0 Built 1988 921,001 JCPenney, Mervyn's, Sears,
El Paso, TX Dillard's
Montgomery Ward
95. Tacoma Mall Fee 100.0 Acquired 1,282,240 The Bon Marche, Sears
Tacoma, WA 1987 Nordstrom, JCPenney
Mervyn's
96. Tippecanoe Mall Fee 100.0 Built 1973 866,727 Kohl's, Lazarus, Sears
Lafayette, IN L.S. Ayres, JCPenney
15
OWNERSHIP THE OPERATING
INTEREST PARTNERSHIP'S
(EXPIRATION IF PERCENTAGE YEAR BUILT TOTAL
NAME/LOCATION GROUND LEASE) (1) INTEREST (2) OR ACQUIRED GLA ANCHORS/SPECIALTY ANCHORS
------------- ----------------- ------------ ----------- --- -------------------------
97. Towne East Square Fee 100.0 Built 1975 1,151,119 Dillard's, JCPenney
Wichita, KS Sears, Service Merchandise
98. Towne West Square Fee 100.0 Built 1980 937,959 Dillard's, Sears, JCPenney
Wichita, KS Montgomery Ward
Service Merchandise
99. Treasure Coast Square Fee 100.0 Built 1987 884,630 Burdines, Dillard's, Sears
Stuart, FL Mervyn's (8), JCPenney
100. Tyrone Square Fee 100.0 Built 1972 1,092,599 Burdines, Dillard's
St. Petersburg, FL JCPenney, Sears
101. University Mall Ground Lease (17) 100.0 Built 1967 565,431 JCPenney, M.M. Cohn
Little Rock, AR (2026) Montgomery Ward
102. University Mall Fee 100.0 Acquired 712,170 McRae's, JCPenney
Pensacola, FL 1994 Sears
103. University Park Mall Fee 60.0 Built 1979 940,692 LS Ayres, Hudson's
South Bend, IN JCPenney, Sears
Marshall Fields
104. Upper Valley Mall Fee 100.0 Built 1971 750,704 Lazarus, JCPenney
Springfield, OH Sears, Elder-Beerman
105. Valle Vista Mall Fee 100.0 Built 1983 647,078 Dillard's, Mervyn's,
Harlingen, TX Sears, JCPenney, Marshalls,
Beall's
106. Virginia Center Fee (7) 70.0 Built 1991 788,481 Proffitt's (8), Hecht's
Commons (4) Leggett, JCPenney
Richmond, VA Sears
107. Washington Square Fee 100.0 Built 1974 1,178,457 L.S. Ayres, Lazarus
Indianapolis, IN Montgomery Ward
JCPenney, Sears
108. West Ridge Mall Fee 100.0 Built 1988 1,041,624 Dillard's, JCPenney
Topeka, KS (18) Jones, Sears
Montgomery Ward
109. West Town Mall Fee and Ground 2.0 Acquired 1,262,386 JCPenney, Sears, Parisian
Knoxville, TN Lease (6) (2042) 1991 Proffitt's, Dillard's
110. White Oaks Mall Fee 77.0 Built 1977 903,581 Bergner's, Famous Barr
Springfield, IL Montgomery Ward, Sears
111. Wichita Mall Ground Lease (2022) 100.0 Built 1969 379,461 Office Max
Wichita, KS Montgomery Ward
112. Windsor Park Mall Fee 100.0 Built 1976 1,095,093 Dillard's (5), JCPenney
San Antonio, TX Mervyn's, Beall's
Montgomery Ward
113. Woodville Mall Fee 100.0 Built 1969 794,325 Andersons, Sears
Toledo, OH Elder-Beerman, (10)
16
OWNERSHIP THE OPERATING
INTEREST PARTNERSHIP'S
(EXPIRATION IF PERCENTAGE YEAR BUILT TOTAL
NAME/LOCATION GROUND LEASE) (1) INTEREST (2) OR ACQUIRED GLA ANCHORS/SPECIALTY ANCHORS
------------- ----------------- ------------ ----------- --- -------------------------
VALUE-ORIENTED SUPER-REGIONAL MALL
1. Ontario Mills (4) Fee 25.0 Built 1996 1,332,030 AMC Theatres, JCPenney
Ontario, CA Burlington Coat Factory
Marshall's, Sports
Authority Dave & Busters
(3) Group USA, IWERKS (3)
American Wilderness
Experience (3), T.J. Maxx
Foozles, Totally for Kids
Bed, Bath & Beyond Bernini
- Off Rodeo Mikasa, Virgin
Megastore SEGA GameWorks
(3) Off 5th-Saks Fifth
Avenue Outlet
SPECIALTY RETAIL CENTERS
1. Forum Shops at Ground Lease (2067) 60.0 Built 1992 242,031
Caesars, The
Las Vegas, NV
2. Tower Shops Space Lease (2051) 50.0 Built 1996 61,280
Las Vegas, NV
3. Trolley Square Fee and Ground 90.0 Acquired 225,813
Salt Lake City, UT Lease (19) 1986
MIXED-USE PROPERTIES
1. Fashion Centre at Fee 21.0 Built 1989 988,524 Macy's
Pentagon City, The (20) Nordstrom
Arlington, VA
2. New Orleans Fee and Ground 100.0 Built 1988 1,024,344 Macy's
Centre/CNG Tower Lease (2084) (21) Lord & Taylor
New Orleans, LA
3. O'Hare International Fee 100.0 Built 1988 495,935
Center (22)
Rosemont, IL
4. Riverway Fee 100.0 Acquired 820,129
Rosemont, IL 1991 (23)
17
OWNERSHIP THE OPERATING
INTEREST PARTNERSHIP'S
(EXPIRATION IF PERCENTAGE YEAR BUILT TOTAL
NAME/LOCATION GROUND LEASE) (1) INTEREST (2) OR ACQUIRED GLA ANCHORS/SPECIALTY ANCHORS
------------- ----------------- ------------ ----------- --- -------------------------
COMMUNITY SHOPPING CENTERS
1. Arvada Plaza Ground Lease (2058) 100.0% Built 1966 98,242 King Soopers
Arvada, CO
2. Aurora Plaza Ground Lease (2058) 100.0 Built 1965 150,189 King Soopers,
Aurora, CO MacFrugel's Bargains
Super Saver Cinema
3. Bloomingdale Fee 100.0 Built 1987 598,570 Builders Square, T.J. Maxx
Court Cineplex Odeon
Bloomingdale, IL Frank's Nursery, Marshalls
Office Max, Wal-Mart, (10)
Service Merchandise,
4. Boardman Plaza Fee 100.0 Built 1951 651,257 Burlington Coat Factory
Youngstown, OH Giant Eagle, T.J. Maxx
Reyers Outlet, Hills, (10)
5. Bridgeview Court Fee 100.0 Built 1988 280,299 Omni, Venture
Bridgeview, IL
6. Brightwood Plaza Fee 100.0 Built 1965 41,893 _
Indianapolis, IN
7. Bristol Plaza Ground Lease (2029) 100.0 Built 1965 116,754 (10)
Bristol, VA
8. Buffalo Grove Towne Center Fee 92.5 Built 1988 134,131 Buffalo Grove Theatres
Buffalo Grove, IL
9. Celina Plaza Fee and Ground 100.0 Built 1978 32,622 General Cinema
El Paso, TX Lease (24) (2027)
10. Chesapeake Center Fee 100.0 Built 1989 305,904 Movies 10, Phar Mor
Chesapeake, VA K-Mart, Service Merchandise
11. Cobblestone Court Fee and Ground 35.0 Built 1993 261,165 Dick's Sporting Goods
Victor, NY Lease (13) (2038) Kmart, Office Max
12. Cohoes Commons Fee and Ground 100.0 Built 1984 262,964 Bryant & Stratton
Rochester, NY Lease (6) (2032) Business Institute
Lechmere's, Xerox
13. Countryside Plaza Fee and Ground 100.0 Built 1977 435,543 Best Buy, Builders Square
Countryside, IL Lease (13) (2058) Old Country Buffet
Venture, (10)
14. Crystal Court Fee 35.0 Built 1989 284,741 Cub Foods, Wal-Mart
Crystal Lake, IL Service Merchandise, (10)
15. East Towne Commons Fee 100.0 Built 1987 180,355 Electric Avenue & More
Knoxville, TN
16. Eastland Plaza Fee 100.0 Built 1986 188,154 Marshalls, Target
Tulsa, OK Toys "R" Us
18
OWNERSHIP THE OPERATING
INTEREST PARTNERSHIP'S
(EXPIRATION IF PERCENTAGE YEAR BUILT TOTAL
NAME/LOCATION GROUND LEASE) (1) INTEREST (2) OR ACQUIRED GLA ANCHORS/SPECIALTY ANCHORS
------------- ----------------- ------------ ----------- --- -------------------------
17. Fairfax Court Ground Lease (2052) 26.3 Built 1992 249,285 Circuit City Superstore
Fairfax, VA Montgomery Ward
Today's Man
18. Forest Plaza Fee 100.0 Built 1985 413,816 Builders Square, Kohl's
Rockford, IL Marshalls, Michaels
Office Max, T.J. Maxx
19. Fox River Plaza Fee 100.0 Built 1985 324,786 Builders Square, Venture
Elgin, IL Michaels (25)
Service Merchandise, (10)
20. Gaitway Plaza Fee 23.3 Built 1989 229,909 Books-A-Million
Ocala, FL Montgomery Ward
Office Depot, T.J. Maxx
21. Great Lakes Plaza Fee 100.0 Built 1976 163,920 Handy Andy, Circuit City
Cleveland, OH
22. Great Northeast Fee 50.0 Acquired 1989 298,242 Sears, Phar Mor
Plaza
Philadelphia, PA
23. Greenwood Plus Fee 100.0 Built 1979 188,480 Best Buy, Cinema I-IV
Greenwood, IN Kohl's
24. Griffith Park Plaza Ground Lease (2060) 100.0 Built 1979 274,230 General Cinema
Griffith, IN Venture
25. Grove at Lakeland Fee 100.0 Built 1988 215,591 Lakeland Square 10
Square, The Sports Authority
Lakeland, FL Wal-Mart
26. Hammond Square Space Lease (2011) 100.0 Built 1974 87,705 _
Sandy Springs, GA
27. Highland Lakes Fee 100.0 Built 1991 477,324 Goodings, Marshalls
Center Ross Dress for Less,
Orlando, FL Movies 10, Service
Merchandise
Office Max, Target, (10)
28. Ingram Plaza Fee 100.0 Built 1980 111,518 _
San Antonio, TX
29. Lake Plaza Fee 100.0 Built 1986 218,208 Builders Square (9)
Waukegan, IL Venture
30. Lake View Plaza Fee 100.0 Built 1986 388,318 Best Buy (26), Ultra 3 (26)
Orland Park, IL Linens-N-Things (26)
Marshalls, Michaels (25)
Omni, Pet Care Plus (26)
Service Merchandise, (10)
31. Lima Center Fee 100.0 Built 1978 193,279 Regal Cinema, Hills
Lima, OH Service Merchandise
19
OWNERSHIP THE OPERATING
INTEREST PARTNERSHIP'S
(EXPIRATION IF PERCENTAGE YEAR BUILT TOTAL
NAME/LOCATION GROUND LEASE) (1) INTEREST (2) OR ACQUIRED GLA ANCHORS/SPECIALTY ANCHORS
------------- ----------------- ------------ ----------- --- -------------------------
32. Lincoln Crossing Fee 100.0 Built 1990 161,337 PetsMart, Wal-Mart
O'Fallon, IL
33. Mainland Crossing Fee (7) 80.0 Built 1991 390,986 Sam's Club, Wal-Mart
Galveston, TX (10)
34. Maplewood Square Fee 100.0 Built 1970 130,780 Bag `N Save
Omaha, NE
35. Markland Plaza Fee 100.0 Built 1974 108,296 Service Merchandise
Kokomo, IN
36. Martinsville Plaza Space Lease (2036) 100.0 Built 1967 102,162 Rose's
Martinsville, VA
37. Marwood Plaza Fee 100.0 Built 1962 105,785 Kroger
Indianapolis, IN
38. Matteson Plaza Fee 100.0 Built 1988 275,455 Dominick's, Michael's
Matteson, IL Kmart, Service Merchandise
39. Memorial Plaza Fee 100.0 Built 1966 129,202 Marcus Theatre
Sheboygan, WI (10)
40. Mounds Mall Cinema Fee 100.0 Built 1974 7,500 Kerasotes Theater
Anderson, IN
41. New Castle Plaza Fee 100.0 Built 1966 91,648 Goody's
New Castle, IN
42. North Ridge Plaza Fee 100.0 Built 1985 323,672 Builders Square (27)
Joliet, IL Office Max
Service Merchandise
43. North Riverside Park Plaza Fee 100.0 Built 1977 119,608 _
North Riverside, IL
44. Northland Plaza Fee and Ground 100.0 Built 1988 205,688 Marshalls, Phar-Mor
Columbus, OH Lease (6) (2085) Service Merchandise
45. Northwood Plaza Fee 100.0 Built 1974 211,840 Regal Cinema
Fort Wayne, IN Target
46. Park Plaza Fee and Ground 100.0 Built 1968 114,042 Wal-Mart (9)
Hopkinsville, KY Lease (6) (2039)
47. Plaza at Buckland Fee 35.0 Built 1993 336,534 Toys "R" Us, Kids "R" Us
Hills, The Service Merchandise
Manchester, CT Lechmere, Comp USA
Linens-N-Things
Filene's Basement
48. Regency Plaza Fee 100.0 Built 1988 277,521 Sam's Wholesale
St. Charles, MO Wal-Mart
20
OWNERSHIP THE OPERATING
INTEREST PARTNERSHIP'S
(EXPIRATION IF PERCENTAGE YEAR BUILT TOTAL
NAME/LOCATION GROUND LEASE) (1) INTEREST (2) OR ACQUIRED GLA ANCHORS/SPECIALTY ANCHORS
------------- ----------------- ------------ ----------- --- -------------------------
49. Ridgewood Court Fee 35.0 Built 1993 240,843 Campo Electronics
Jackson, MS Home Quarters, T.J. Maxx
Service Merchandise
50. Royal Eagle Plaza Fee 35.0 Built 1989 203,140 Kmart
Coral Springs, FL Luxury Linens
51. St. Charles Towne Plaza Fee 100.0 Built 1987 435,162 Ames, Hechinger
Waldorf, MD Jo Ann Fabrics
People's, T.J. Maxx
Service Merchandise
Shoppers Food Warehouse
52. Teal Plaza Fee and Ground Lease 100.0 Built 1962 110,751 Hobby-Lobby
Lafayette, IN (2007) (6) (10)
53. Terrace at The Florida Fee 100.0 Built 1989 332,980 J. Byrons, Marshalls
Mall Service Merchandise
Orlando, FL Target, Waccamaw
54. Tippecanoe Plaza Fee 100.0 Built 1974 95,898 Barnes & Noble Bookseller
Lafayette, IN Service Merchandise
55. University Center Fee 60.0 Built 1980 150,533 Best Buy, Michaels
South Bend, IN Service Merchandise
56. Village Park Plaza Fee 35.0 Built 1990 503,052 Frank's Nursery, Gaylan's
Westfield, IN Jo-Ann Fabrics, Kohl's
Marsh, Regal Cinemas
Wal-Mart
57. Wabash Village Ground Lease (2063) 100.0 Built 1970 124,748 Kmart
West Lafayette, IN
58. Washington Plaza Fee (7) 85.0 Built 1976 50,302 Kids "R" Us
Indianapolis, IN
59. West Ridge Plaza Fee 100.0 Built 1988 237,650 Magic Forest, Target
Topeka, KS TJ Maxx, Toys "R" Us
60. West Town Corners Fee 23.3 Built 1989 384,454 PetsMart, Wal-Mart
Altamonte Springs, FL Service Merchandise
Sports Authority, Xtra
61. Westland Park Plaza Fee 23.3 Built 1989 163,154 Burlington Coat Factory
Orange Park, FL PetsMart, Sports Authority
62. White Oaks Plaza Fee 100.0 Built 1986 389,063 Cub Foods, Kids "R" Us
Springfield, IL Kohl's, Office Max
T.J. Maxx, Toys "R" Us
63. Willow Knolls Court Fee 35.0 Built 1990 372,741 Kohl's, Phar-Mor
Peoria, IL Sam's Wholesale Club
Willow Knolls Theaters 14
64. Wood Plaza Ground Lease (2045) 100.0 Built 1968 87,643 Country General
Fort Dodge, IA
21
OWNERSHIP THE OPERATING
INTEREST PARTNERSHIP'S
(EXPIRATION IF PERCENTAGE YEAR BUILT TOTAL
NAME/LOCATION GROUND LEASE) (1) INTEREST (2) OR ACQUIRED GLA ANCHORS/SPECIALTY ANCHORS
------------- ----------------- ------------ ----------- --- -------------------------
65. Yards Plaza, The Fee 35.0 Built 1990 273,292 Burlington Coat Factory
Chicago, IL Omni Superstore
Montgomery Ward
PROPERTIES UNDER CONSTRUCTION
1. Arizona Mills Fee 25.0 (28) 1,230,000 Burlington Coat Factory
Tempe, AZ Harkins Theater, Mikasa
Oshman's Supersport
Off 5th- Saks Fifth Avenue
Outlet, JCPenney Outlet
Mikasa, Rainforest Cafe
SEGA GameWorks, Hi Health,
Linens `N Things
2. Grapevine Mills Fee 37.5 (28) 1,480,000 Books-A-Million
Grapevine (Dallas/Ft. Burlington Coat Factory
Worth), TX Off 5th- Saks Fifth Avenue
Outlet, JCPenney Outlet
Rainforest Cafe, Group USA
Bed, Bath & Beyond
AMC Theatres, SEGA
GameWorks
American Wilderness
3. Indian River Commons Fee 50.0 (29) 265,000 HomePlace, Lowe's
Vero Beach, FL Office Max
Service Merchandise
4. The Source Fee 50.0 (30) 730,000 Fortunoff, Nordstrom Rack
Long Island, NY Circuit City, Just for Feet
Off 5th- Saks Fifth Avenue
Cheesecake Factory
Old Navy, Loehmann's
Bertolini's, Virgin
Megastore
5. The Shops at Sunset Fee 75.0 (31) 500,000 Nike Town, AMC Theatres
Place, Virgin Megastore
Miami, FL Z Gallerie, IMAX Theatre
Barnes & Noble, Twin Palms
22
- ----------------------
(1) The date listed is the expiration date of the last renewal option available
to the Operating Partnership under the ground lease. In a majority of the
ground leases, the lessee has either a right of first refusal or the right
to purchase the lessor's interest. Unless otherwise indicated, each ground
lease listed in this column covers at least 50% of its respective property.
(2) The Operating Partnership's interests in some Joint Venture Properties are
subject to preferences on distributions in favor of other partners.
(3) Indicates anchor is currently under construction.
(4) This property is managed by a third party.
(5) This retailer operates two stores at this property.
(6) Indicates ground lease covers less than 15% of the acreage of this
property.
(7) The Operating Partnership receives substantially all of the economic
benefit of these properties.
(8) Indicates retailer location is currently under contract to be sold to
Dillard's.
(9) Indicates anchor has closed, but is still obligated under lease agreement
to pay rent.
(10) Includes an anchor space currently vacant.
(11) The Operating Partnership intends to demolish this mall and rebuild a
community center and a cinema on the land during 1997.
(12) Indicates two ground leases which taken together, cover less than 50% of
the acreage of the property.
(13) Indicates ground lease covers less than 50% of the acreage of the property.
(14) Indicates this anchor is currently subleasing the space to other retailers.
(15) Indicates ground lease covers all of the property except for parcels owned
in fee by anchors.
(16) Primarily retail space with approximately 69,876 square feet of office
space.
(17) Indicates one ground lease covers substantially all of the property and a
second ground lease covers the remainder.
(18) Includes outlots in which the Operating Partnership has an 85% interest and
which represent less than 3% of the GLA and total annualized base rent for
the property.
(19) Indicates a ground lease covers a pedestrian walkway and steps at this
property. The Operating Partnership, as ground lessee, has the right to
successive five-year renewal options, except if the lessor, a public
agency, determines that public right-of-way needs necessitate the
locality's use of the ground lease property.
(20) Primarily retail space with approximately 167,150 square feet of office
space.
(21) Primarily retail space with 487,425 square feet of office space.
(22) Primarily office space with approximately 12,800 square feet of retail
space.
(23) Primarily office space with approximately 24,300 square feet of retail
space.
(24) Indicates ground lease covers outparcel.
(25) Indicates anchor closed prior to December 31, 1996, but was still under
lease until January 31, 1997.
(26) Subleased from TJX Companies.
(27) Lease was terminated subsequent to December 31, 1996 and is currently
vacant.
(28) Scheduled to open during the fall of 1997.
(29) This property is scheduled to open during March 1997.
(30) Scheduled to open during the summer of 1997.
(31) Scheduled to open during 1998.
23
LAND HELD FOR DEVELOPMENT
The Operating Partnership has direct or indirect ownership interests
in six parcels of land held for development, containing an aggregate of
approximately 367 acres located in five states, and, through the Management
Company, interest in a mortgage on a parcel of land held for development
containing approximately 134 acres. Management believes that the Operating
Partnership's significant base of commercially zoned land, together with the
Operating Partnership's status as a fully integrated real estate firm, gives it
a competitive advantage in future development activities over other commercial
real estate development companies in its principal markets.
The following table describes the acreage and intended use of the
parcels of undeveloped land in which the Operating Partnership has an ownership
interest, as well as the ownership percentage of the Operating Partnership's
interest in each parcel:
OWNERSHIP
LOCATION ACREAGE INTEREST (1)
-------- ------- ------------
Duluth, MN 11.17 100%
Lafayette, IN 22.87 100%
Little Rock, AR 97.00 50%
Mt. Juliet, TN 109.26 100%
Muncie, IN 33.20 100%
Bowie, MD 93.74 100%
367.24
=========
(1) The Operating Partnership has a direct ownership interest in each
parcel except Duluth, MN; Mt. Juliet, TN and Muncie, IN. The
Operating Partnership has the option to acquire those parcels from
the Management Company.
The Management Company has granted options to the Operating
Partnership (for no additional consideration) to acquire for a period of ten
years (expiring December 2003) the Management Company's interest in three
parcels of land held for development, as indicated in footnote (1) to the above
table, at a price equal to the actual cost incurred to acquire and carry such
properties from their acquisition by the Management Company to the exercise date
of the option. The Management Company may not sell its interest in any parcel
subject to option through December 1998 without the consent of the Operating
Partnership. After such period, if the Management Company notifies the Operating
Partnership that it desires to sell its interest in a parcel, the Operating
Partnership has 30 days to exercise its option, after which time the option
expires as to such parcel. If the Operating Partnership does not exercise its
option and the Management Company has not sold the parcel within one year from
such notice, the Management Company must again give the Operating Partnership
the right to purchase the Management Company's interest in such parcel before it
sells its interest by giving the Operating Partnership notice of such intent to
sell, following which notice the Operating Partnership again has 30 days to
elect to purchase the Management Company's interest at a price calculated as
described above.
The Management Company also holds indebtedness secured by 134 acres of
land held for development, Lakeview at Gwinnett ("Lakeview") in Gwinnett County,
Georgia, in which Melvin Simon, Herbert Simon and certain of their affiliates
(the "Simons") hold a 64% partnership interest. In addition, the Management
Company holds unsecured debt owed by the Simons as partners of this partnership.
The Management Company has an option to acquire the Simons' partnership
interests in Lakeview for one dollar in the event the requisite partner consents
to such transfers are obtained. The Management Company is required to fund
certain operating expenses and carrying costs of the partnership that are owed
by the Simons as partners thereof (the "Advances"). The Management Company has
granted to the Operating Partnership the option to acquire (i) the Simons'
partnership interest(s) and the secured debt or (ii) the property, if the
Management Company forecloses the secured indebtedness, for one dollar plus the
amount of all Advances plus the amount of the outstanding secured and unsecured
debt.
JOINT VENTURES
The Operating Partnership is a joint venture partner with a major
pension fund in twelve existing community shopping centers and two regional mall
24
(Seminole Towne Center and The Avenues). With certain exceptions, such pension
fund has a right of first refusal subject to certain conditions to enter into
joint ventures with the Operating Partnership for the development of future
power centers.
The Operating Partnership has also entered into an agreement which
gives the outside partner the right to sell its ownership interest in Rolling
Oaks Mall to the Operating Partnership in exchange for Units of the Operating
Partnership based on the fair market value of the ownership interest at the time
of the exchange. This right expires on January 1, 2002.
MORTGAGE FINANCING ON PROPERTIES
The following table sets forth certain information regarding the
mortgages and other debt encumbering the Properties. All mortgage and property
related debt is nonrecourse, although certain of the Unitholders other than the
Company have guaranteed a portion of the property related debt in the aggregate
amount of $506.4 million.
25
MORTGAGE AND OTHER DEBT ON PORTFOLIO PROPERTIES
(DOLLARS IN THOUSANDS)
INTEREST FACE AMOUNT ANNUAL DEBT MATURITY
PROPERTY NAME RATE @ 12/31/96 SERVICE DATE
------------- ---- ---------- ------- ----
CONSOLIDATED PROPERTIES:
- ------------------------
Anderson Mall (1) 6.74% $19,000 $1,281 (2) 12/15/03
Barton Creek Square 8.10% 63,549 5,867 12/30/99
Battlefield Mall 7.50% 50,724 4,765 06/01/03
Biltmore Square 7.15% 28,265 2,795 01/01/01
Bloomingdale Court (3) 8.75% 29,009 2,538 (2) 12/01/00
Chesapeake Centre 8.44% 6,563 554 (2) 05/15/15
Chesapeake Square 7.28% 52,576 4,882 01/01/01
Cielo Vista Mall (4) 9.25% (5) 56,329 5,665 05/01/07
Cielo Vista Mall 8.13% 2,323 376 07/01/04
College Mall (6) 7.00% 43,429 3,563 07/01/04
Columbia Shopping Center 7.62% 43,369 3,789 03/15/02
Crossroads Mall 7.75% 41,440 3,212 (2) 07/31/02
Crystal River - (7) (8) 16,000 - (2) 01/01/01
Eastgate Consumer Mall - (9) 25,429 - (2) 12/31/98
East Towne Mall -(10) 55,000 - (2) 09/29/98
Eastland Mall - (9) 30,000 - (2) 11/01/97
Forest Mall (12) 6.74% 12,800 863 (2) 12/15/03
Forest Plaza (3) 8.75% 16,904 1,518 (2) 12/01/00
Forest Village Park (1) 6.16% 20,600 1,269 (2) 12/15/03
Fox River Plaza (3) 8.75% 12,654 1,107 (2) 12/01/00
Golden Ring Mall (12) 6.74% 29,750 2,005 (2) 12/15/03
Great Lakes Mall 6.74% 54,137 4,354 03/15/01
Great Lakes Mall 7.07% 8,719 724 03/15/01
Greenwood Park Mall (6) 7.00% 36,374 2,984 07/01/04
Grove at Lakeland Square 8.44% 3,750 317 (2) 05/15/15
Gulf View Square 8.25% 38,600 3,185 (11) 10/01/06
Highland Lakes Plaza - (8) (9) 14,377 - (2) 03/31/02
Hutchinson Mall (12) 8.44% 11,523 973 (2) 10/01/02
Ingram Park Mall 8.10% 49,107 4,533 12/01/99
Ingram Park Mall 9.63% 7,000 674 (2) 11/01/99
Irving Mall (4) 9.25 (5) 43,375 4,363 05/01/07
Jefferson Valley Mall -(13) 50,000 - (2) 01/12/00
La Plaza Mall 8.25% 50,526 4,677 12/30/99
Lake View Plaza (3) 8.75% 22,169 1,940 (2) 12/01/00
Lima Mall 7.12% 19,412 1,619 03/15/02
Lincoln Crossing (3) 8.75% 997 87 (2) 12/01/00
Lincolnwood Town Center -(14) 63,000 - (2) 01/31/98
Longview Mall (1) 6.16% 22,100 1,361 (2) 12/15/03
Mainland Crossing - (8) (9) 2,226 - (2) 03/31/02
Mainland Peripheral - (7) (8) 1,290 - (2) 12/31/01
Mall of the Mainland - (7) (8) 40,706 - (2) 03/31/02
Markland Mall (12) 6.74% 10,000 675 (2) 12/15/03
Matteson Plaza (3) 8.75% 11,159 976 (2) 12/01/00
McCain Mall (4) 9.25% (5) 26,304 2,646 05/01/07
Melbourne Square 7.42% 40,214 3,374 02/01/05
Miami International 6.91% 47,500 3,267 12/21/03
Midland Park Mall (12) 6.31% 22,500 1,420 (2) 12/15/03
Miller Hill Mall (12) 6.74% 34,500 2,325 (2) 12/15/03
Muncie Mall (12) 6.74% 24,000 1,618 (2) 12/15/03
26
MORTGAGE AND OTHER DEBT ON PORTFOLIO PROPERTIES
(DOLLARS IN THOUSANDS)
INTEREST FACE AMOUNT ANNUAL DEBT MATURITY
PROPERTY NAME RATE @ 12/31/96 SERVICE DATE
------------- ---- ---------- ------- ----
CONSOLIDATED PROPERTIES:
- ------------------------
Muncie Mall (12) 6.99% 20,000 1,398 12/15/03
North East Mall 10.00% 22,442 2,475 09/01/00
North Riverside Park Plaza 9.38% 4,117 452 09/01/02
North Riverside Park Plaza 10.00% 3,668 420 09/01/02
North Towne Square (12) 6.31% 23,500 1,483 (2) 12/15/03
Northgate Mall 7.62% 80,983 7,075 03/15/02
O'Hare International Center 7.50% (15) 27,500 2,063 12/31/13
Paddock Mall 8.25% 30,700 2,873 (11) 10/01/06
Port Charlotte 7.28% 46,548 3,857 01/01/01
Randall Park 9.25% 34,269 4,338 01/01/11
Regency Plaza (3) 8.75% 1,878 164 (2) 12/01/00
Riverway -(16) 85,571 - (2) 12/31/98
Riverway -(16) 45,879 - (2) 12/31/98
Ross Park Mall 6.14% 60,000 3,684 08/15/98
South Park Mall (1) 7.25% 24,748 1,791 (2) 06/15/03
St. Charles Towne Plaza (3) 8.75% 30,887 2,703 (2) 12/01/00
Sunland Park Mall 8.63% (5) 40,149 3,773 01/01/26
Tacoma Mall 7.62% 94,752 8,278 03/15/02
Terrace at The Florida Mall 8.44% 4,688 396 05/15/15
The Forum Shops at Caesars -(17) 100,000 - (2) 02/23/00
The Forum Shops at Caesars -(18) 22,716 - (2) 02/23/00
Tippecanoe Mall (6) 8.45% 47,556 4,647 07/01/04
Towne East Square (6) 7.00% 57,419 4,711 07/01/04
Towne West Square (1) 6.16% 40,250 2,479 (2) 12/15/03
Treasure Coast Square 7.42% 54,581 4,571 (2) 01/01/06
Trolley Square 5.81% 19,000 1,104 (2) 07/23/00 (19)
Trolley Square - (9) 3,500 - (2) 07/23/00
Trolley Square - (9) 4,641 - (2) 07/23/00
University Park Mall 7.43% 59,500 4,421 (2) 10/01/07
Valle Vista Mall (4) 9.25% (5) 34,837 3,504 05/01/07
West Ridge Mall 8.00% 50,005 4,529 06/01/99
West Ridge Plaza (3) 8.75% 4,612 404 (2) 12/01/00
White Oaks Mall 7.70% 16,500 1,271 (2) 03/01/98
White Oaks Plaza (3) 8.75% 12,345 1,080 (2) 12/01/00
Windsor Park Mall 8.00% 8,951 811 05/01/12
Windsor Park Mall 8.00% 6,009 544 06/01/00
DRC Securitized Debt - Fixed 8.12% (20) 366,346 30,698 03/01/01
DRC Securitized Debt - Floating -(21) (8) 87,200 - (2) 03/01/01
--------------
TOTAL PLEDGED PROPERTY INDEBTEDNESS 3,089,525
Simon DeBartolo Group, L.P.:
Unsecured Revolving Credit Facility - (22) 230,000 - (2) 09/27/99
Unsecured Notes (34) 6.88% 250,000 17,200 11/15/06
Putable Asset Trust Securities (34) 6.75% 100,000 6,750 11/15/03
--------------
TOTAL INDEBTEDNESS-CONSOLIDATED (23) $3,669,525
==============
27
MORTGAGE AND OTHER DEBT ON PORTFOLIO PROPERTIES
(DOLLARS IN THOUSANDS)
INTEREST FACE AMOUNT ANNUAL DEBT MATURITY
PROPERTY NAME RATE @ 12/31/96 SERVICE DATE
------------- ---- ---------- ------- ----
JOINT VENTURE PROPERTIES:
- -------------------------
Aventura Mall -(24) 100,000 - (2) 08/08/98
Aventura Mall -(25) 6,700 - 05/01/97
Aventura Mall 7.00% 2,500 175 (2) 05/01/97
Aventura Mall -(26) 3,563 - (2) 03/01/97
The Avenues 8.36% 59,051 5,552 05/15/03
Century III Mall 7.00% 519 541 12/01/97
Century III Mall 6.78% 66,000 4,475 (2) 07/01/03
Circle Centre -(27) 60,000 - (2) 12/05/03
Cobblestone Court (28) 7.22% 6,180 446 (2) 11/30/05
Coral Square 7.40% 53,300 3,944 12/01/00
Crystal Court (28) 7.22% 3,570 258 (2) 11/30/05
Fairfax Court (28) 7.22% 10,320 745 (2) 11/30/05
Florida Mall -(29) 75,000 - (2) 12/01/98
Gaitway Plaza (28) 7.22% 7,350 531 (2) 11/30/05
Great Northeast Plaza 9.04% 17,940 1,744 06/01/06
Indian River Mall -(14) 37,723 - (2) 03/29/99
Lakeline Mall -(30) 68,515 - (2) 05/16/99
Lakeland Square 7.26% 53,300 3,870 (2) 12/22/03
Northfield Square 9.50% 24,596 2,575 04/01/00
Ontario Mills -(31) 77,637 - (2) 05/07/99
Palm Beach Mall 8.21% 52,179 5,072 12/15/02
Ridgewood Court (28) 7.22% 7,980 576 (2) 11/30/05
Royal Eagle Plaza (28) 7.22% 7,920 572 (2) 11/30/05
Seminole Towne Center 6.88% 70,500 4,850 (2) 12/27/05
Smith Haven Mall 7.86% 115,000 9,039 06/01/06
The Tower Shops - (7) 15,749 - (2) 03/13/99
The Plaza At Buckland Hills (28) 7.22% 17,680 1,276 (2) 11/30/05
The Source -(32) 62,032 - 07/16/01
The Yards Plaza (28) 7.22% 8,270 597 (2) 11/30/05
Village Park Plaza (28) 7.22% 8,960 647 (2) 11/30/05
West Town Corners (28) 7.22% 10,330 746 (2) 11/30/05
Westland Park Plaza (28) 7.22% 4,950 357 (2) 11/30/05
Willow Knolls Court (28) 7.22% 6,490 469 (2) 11/30/05
--------------
TOTAL INDEBTEDNESS-EQUITY (33) $1,121,804
==============
(FOOTNOTES ON FOLLOWING PAGE)
28
(FOOTNOTES FOR PRECEDING PAGES)
(1) Loans secured by these five properties are cross-collateralized and
cross-defaulted. The aggregate principal amount of the loans is $126,698,
with an annual debt service of $8,181 and weighted average interest rate
of 6.46%. Four of the loans have interest rate reset provisions available
on 12/15/98 and mature 12/15/2003. The remaining loan matures on
6/15/2003. During the term of these loans, there is amortization of a
portion of the principal amount.
(2) Requires monthly payments of interest only. Fixed-rate debt will reflect
an amount for annual debt service.
(3) These 10 properties are cross-defaulted.
(4) On December 31, 1996, these four properties were cross-collateralized and
cross-defaulted. On January 31, 1997, the Operating Partnership closed on
a restructure of these loans, which included repaying the Irving Mall
loan, paying $21,000 to remove the contingent interest feature on the
three remaining loans and paying down a total of $3,900 on two other
Property loans with the same lender.
(5) Lender also participates in a percentage of gross revenues above a
specified base.
(6) Loans secured by these four properties are cross-collateralized and
cross-defaulted. The aggregate principal amount of the loans is $184,778,
with an annual debt service of $15,905 and interest rate of 7.0%, except
for Tippecanoe Mall, which bears interest at 8.45%. During the term of
these loans, there is amortization of a portion of the principal amount.
(7) LIBOR + 2.00%.
(8) The Operating Partnership's share of this debt has LIBOR swapped at 4.75%.
(9) LIBOR + 1.50%.
(10) LIBOR + 1.125%.
(11) Loan requires monthly payments of interest only through 2/1/97, and then
begins amortizing over 25 years.
(12) Loans secured by these eight properties are cross-collateralized and/or
cross-defaulted. The aggregate principal amount of the loans is $188,573,
with an annual debt service of $12,760, and a weighted average interest
rate of 6.77%. Eight of these loans have interest reset provisions
available on 12/15/98 and mature 12/15/2003. The remaining loan will
mature 10/1/2002. During the term of these loans, there is amortization of
a portion of the principal amount.
(13) LIBOR + 0.55% with LIBOR capped at 8.7% through maturity.
(14) LIBOR + 1.25%.
(15) In 1998, the lender will begin participating in a percentage of gross
revenues after deduction of debt service, tenant improvement costs and
leasing commissions.
(16) LIBOR + 1.375%, LIBOR capped at 5.0% through maturity.
(17) LIBOR + 1.00%.
(18) LIBOR + 1.8125%.
(19) 7/23/2000 is the earliest date on which the lender may call the bonds.
(20) This is the weighted average interest rate of the securitized fixed-rate
debt.
(21) LIBOR + 0.56%, with LIBOR swapped at 4.75%.
(22) $750,000 unsecured revolving credit facility. Currently, bears interest at
LIBOR + 0.90% and provides for different pricing based upon the Operating
Partnership's investment grade rating. LIBOR is initially capped at 7.5%;
however, if LIBOR should equal or exceed 8.75% between monthly reset
dates, then LIBOR will be capped at 8.5% for that period only. As of
12/31/96, $510,000 was available, with an additional $10,000 reserved
under a letter of credit. SDG, LP and SPG, LP are co-borrowers under this
credit facility.
(23) Includes minority interest partners' share ($103,650) of total
consolidated indebtedness.
(24) Bank of Tokyo CD Rate + 0.90%. To hedge the Operating Partnership's share
of this debt, the Operating Partnership has swapped LIBOR at 4.75% in an
amount equal to its share of this debt.
(25) Prime Rate + 1.25%
(26) Prime Rate.
(27) On February 18, 1997 the loan was refinanced at LIBOR +.44% with a
maturity of 1/31/2004 and an initial reset date of 1/31/2001. The rate at
12/31/96 was LIBOR + 0.7%.
(28) Rate is fixed at 7.22% through December 1998 and thereafter the rate is
the greater of 7.22% or 2.0% over the then current yield of a six month
treasury bill selected by the lender.
(29) Commercial Paper Rate + 0.75%, plus letter of credit fees. To hedge the
Operating Partnership's share of this debt, the Operating Partnership has
swapped LIBOR at 4.75% in an amount equal to its share of this debt.
(30) LIBOR + 0.375%.
(31) LIBOR + 2.75%.
(32) LIBOR + 1.70%.
(33) Includes joint venture partners' share ($673,586) of total equity
indebtedness.
(34) The unsecured notes and putable asset trust securities issued by SDG, LP
are guaranteed by SPG, LP.
29
ITEM 3. LEGAL PROCEEDINGS
CARLO ANGOSTINELLI ET AL. V. DEBARTOLO REALTY CORP. ET AL. On October
16, 1996, a complaint was filed in the Court of Common Pleas of Mahoning County,
Ohio, captioned Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. The
---------------------------------------------------------
named defendants are SD Property Group, Inc., a 99%-owned subsidiary of the
Company, and DPMI, and the plaintiffs are 27 former employees of the defendants.
In the complaint, the plaintiffs allege that they were recipients of deferred
stock grants under the DRC Plan and that these grants immediately vested under
the DRC Plan's "change in control" provision as a result of the Merger.
Plaintiffs assert that the defendants' refusal to issue them approximately
661,000 shares of DRC common stock, which is equivalent to approximately 450,000
shares of common stock of the Company computed at the 0.68 Exchange Ratio used
in the Merger, constitutes a breach of contract and a breach of the implied
covenant of good faith and fair dealing under Ohio law. Plaintiffs seek damages
equal to such number of shares of DRC common stock, or cash in lieu thereof,
equal to all deferred stock ever granted to them under the DRC Plan, dividends
on such stock from the time of the grants, compensatory damages for breach of
the implied covenant of good faith and fair dealing, and punitive damages.
The complaint was served on the defendants on October 28, 1996, and
pretrial proceedings have just commenced. The Company is of the opinion that it
has meritorious defenses and accordingly intends to defend this action
vigorously. While it is difficult for the Company to predict the outcome of this
litigation at this stage based on the information known to the Company to date,
the Company does not expect this action will have a material adverse effect on
the Company or the Operating Partnership.
ROEL VENTO ET AL V. TOM TAYLOR ET AL. A subsidiary of the Operating
Partnership is a defendant in litigation entitled Roel Vento et al v. Tom Taylor
------------------------------
et al, in the District Court of Cameron County, Texas, in which a judgment in
- -----
the amount of $7,800 has been entered against all defendants. This judgment
includes approximately $6,500 of punitive damages and is based upon a jury's
findings on four separate theories of liability including fraud, intentional
infliction of emotional distress, tortuous interference with contract and civil
conspiracy arising out of the sale of a business operating under a temporary
license agreement at Valle Vista Mall, in Harlingen, Texas. The Operating
Partnership is seeking to overturn the award and has appealed the verdict.
Although the Operating Partnership is optimistic that it may be able to reverse
or reduce the verdict, there can be no assurance thereof. Management, based upon
the advice of counsel, believes that the ultimate outcome of this action will
not have a material adverse effect on the Operating Partnership.
BROWNING-FERRIS INDUSTRIES OF ILLINOIS, ET AL. V. RICHARD TER MAAT,
ET AL. V. CRAIG J. CAIN, ET AL., CASE NO. 92 C 20259. On April 4, 1994, a
third-party action was filed by Richard Ter Maat and five other parties
(collectively referred to as "Third Party Plaintiffs") named as defendants in
the above referenced litigation, which had begun in 1992, against Machesney Park
Associates (a "Subsidiary") and approximately 74 other parties (collectively
referred to as "Third-Party Defendants"). That third-party action alleged
generally that the Third-Party Defendants are liable under the Comprehensive
Environmental response, Compensation and Liability Act of 1980 ("CERCLA"), 42
U.S.C. section 9601 et seq., and under Illinois statutory and common law for
certain response costs expended and to be expended by Third-Party Plaintiffs in
connection with the claims asserted by Browning-Ferris Industries of Illinois
and approximately 20 other parties (collectively referred to as "Plaintiffs")
against the Third-Party Plaintiffs. In the original lawsuit, Plaintiffs sought
reimbursement of response costs they allegedly incurred and will incur in
response to the release or threat of release of hazardous substances from the
M.I.G./Dewane Landfill located one mile east of the City of Belvidere, in Boone
County, Illinois (the "Site"), and declaratory judgment on liability against
Defendants for such response costs. To date, the Plaintiffs have alleged
response costs in excess of $5.0 million in connection with the Site.
In February 1996, the Subsidiary settled this pending litigation by
the payment of $40,000 to the original Plaintiffs. Pursuant to that settlement,
the Operating Partnership agreed that it would take part in a nonbinding
arbitration or mediation at sometime in the future to allocate expenses incurred
in remediating the Site. No such arbitration or mediation has yet been
instituted. Management, based upon the advice of counsel, believes that the
ultimate outcome of this action will not have a material adverse effect on the
Operating Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
30
PART II
ITEM 5. MARKET FOR REGISTRANT AND RELATED SHAREHOLDER MATTERS
There is no established public trading market for the Operating
Partnership's Units or Preferred Units. The following table sets forth for the
periods indicated, the distributions declared on the Units:
DECLARED
DISTRIBUTION
------------
-------------------
1995
-------------------
1st Quarter 1995 $0.4925
2nd Quarter 1995 $0.4925
3rd Quarter 1995 $0.4925
4th Quarter 1995 $0.4925
-------------------
1996
-------------------
1st Quarter 1996 $0.4925
2nd Quarter 1996 $0.4925
3rd Quarter 1996 $0.1515 (1)
4th Quarter 1996 $0.4925
(1) Represents a distribution declared in the third quarter of 1996
related to the Merger, designated to align the time periods of distribution
payments of the merged entities.
On January 23, 1997, the Operating Partnership declared a distribution
of $0.4925 per Unit payable on February 21, 1997 to Unit holders of record on
February 7, 1997. The current annual distribution rate is $1.97 per share. As
the holder of the Preferred Units, the Company is entitled to preferential
distributions of cash equal to the dividends payable on its outstanding shares
of preferred stock. The number of holders of Units was 136 as of March 27, 1997.
31
UNREGISTERED SALES OF EQUITY SECURITIES
On October 4, 1996, the Operating Partnership exercised its option to
acquire the remaining 30% limited partnership interest in North East Mall owned
by the Simons in exchange for 472,410 Units, as well as the Simons' 50% general
partnership interest which the Operating Partnership acquired for nominal
consideration. The Simons had previously contributed to the Operating
Partnership in exchange for Units, the right to receive distributions relating
to its 50% general partnership interest. The Units are convertible on a
one-for-one basis into common stock of the Company.
32
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data for
the Operating Partnership and combined historical financial data of Simon
Property Group (the "Predecessor" of SPG, LP). The financial statements of the
Operating Partnership for the post merger periods reflect the reverse
acquisition of DeBartolo Realty Partnership, L.P. by the Company using the
purchase method of accounting. The financial statements for all pre-merger
comparative periods reflect the financial statements of SPG, LP the predecessor
for accounting purposes to SDG, LP. All references herein to the Operating
Partnership are to SDG, LP or SPG, LP as the case may be. The financial data
should be read in conjunction with the financial statements and notes thereto
and with Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Other data management believes is important in understanding trends in
the Operating Partnership's business is also included in the table.
THE OPERATING PARTNERSHIP SIMON PROPERTY GROUP
--------------------------------------------------------- ----------------------------
FOR THE FOR THE
PERIOD FROM PERIOD FROM FOR THE YEAR
DECEMBER 20 TO JANUARY 1 TO ENDED
FOR THE YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 19, DECEMBER 31,
----------------------------------------- ------------ ------------- -------------
1996(1) 1995(1) 1994(1) 1993 1993 1992
------- ------- ------- ---- ---- ----
(In thousands, except per Unit data)
OPERATING DATA:
Total revenue $ 747,704 $ 553,657 $ 473,676 $ 18,424 $ 405,869 $ 400,852
Income (loss)
before extraordinary
items 134,663 101,505 60,308 8,707 6,912 (11,692)
Net income (loss) 131,142 98,220 42,328 (21,774) 33,101 (11,692)
Preferred Unit requirement 12,694 1,490 -- -- -- --
Net income (loss) available to
Unitholders $ 118,448 $ 96,730 $ 42,328 $ (21,774) $ 33,101 $ (11,692)
EARNINGS PER UNIT (2):
Income before extraordinary items $ 1.02 $ 1.08 $ 0.71 $ 0.11 N/A N/A
Extraordinary items (0.03) (0.04) (0.21) (0.39) N/A N/A
----------- ----------- ----------- -----------
Net income (loss) $ 0.99 $ 1.04 $ 0.50 $ (0.28) N/A N/A
=========== =========== =========== ===========
Distributions per Unit(3) $ 1.63 $ 1.97 $ 1.90 -- N/A N/A
Weighted average Units outstanding 120,182 92,666 84,509 78,447 N/A N/A
BALANCE SHEET DATA:
Investment properties, net $ 5,021,949 $ 2,009,344 $ 1,829,111 $ 1,350,360 $ 1,156,009
Cash and cash equivalents 64,309 62,721 105,139 110,625 N/A 42,682
Total assets 5,895,910 2,556,436 2,316,860 1,793,654 N/A 1,494,289
Mortgages and other notes payable 3,681,984 1,980,759 1,938,091 1,455,884 N/A 1,711,778
Limited Partners' interest (4) -- 908,764 909,306 843,373 --
Partners'/Owners' equity (deficit) $ 1,945,174 $ (589,126) $ (807,613) $ (791,820) N/A $ (565,566)
OTHER DATA:
Cash flow provided by (used in):
Operating activities $ 236,464 $ 194,336 $ 128,023 N/A N/A N/A
Investing activities (199,742) (222,679) (266,772) N/A N/A N/A
Financing activities (35,134) (14,075) 133,263 N/A N/A N/A
Funds from Operations (FFO) (5) $ 281,495 $ 197,909 $ 167,761 N/A N/A N/A
NOTES
(1) NOTE 3 TO THE ACCOMPANYING FINANCIAL STATEMENTS DESCRIBES THE MERGER,
WHICH OCCURRED ON AUGUST 9, 1996, AND THE 1996, 1995 AND 1994 REAL ESTATE
ACQUISITIONS AND DEVELOPMENT.
(2) PER UNIT DATA IS REFLECTED ONLY FOR THE OPERATING PARTNERSHIP, BECAUSE
THE HISTORICAL COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR ARE A
COMBINED PRESENTATION OF PARTNERSHIPS AND CORPORATIONS.
33
(3) REPRESENTS DISTRIBUTIONS DECLARED IN 1996, WHICH INCLUDES A DISTRIBUTION
OF $0.1515 PER UNIT DECLARED ON AUGUST 9, 1996, IN CONNECTION WITH THE
MERGER, DESIGNATED TO ALIGN THE TIME PERIODS OF DISTRIBUTIONS OF THE
MERGED ENTITIES. ON JANUARY 23, 1997, THE OPERATING PARTNERSHIP DECLARED A
DISTRIBUTION OF $0.4925 PER UNIT PAYABLE ON FEBRUARY 21, 1997 TO
UNITHOLDERS OF RECORD ON FEBRUARY 7, 1997. THE CURRENT ANNUAL DISTRIBUTION
RATE IS $1.97 PER UNIT.
(4) SEE NOTE 9 FOR DISCUSSION REGARDING THE ACCOUNTING FOR LIMITED PARTNERS'
INTEREST.
(5) PLEASE REFER TO MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR A DEFINITION OF FUNDS FROM
OPERATIONS.
34
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Selected Financial Data, and all of the financial statements and notes thereto
included elsewhere herein. Certain statements made in this report may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Operating
Partnership to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions, which will, among other things, affect demand for retail space or
retail goods, availability and creditworthiness of prospective tenants, lease
rents and the terms and availability of financing; adverse changes in the real
estate markets including, among other things, competition with other companies
and technology; risks of real estate development and acquisition; governmental
actions and initiatives; and environmental/safety requirements.
OVERVIEW
The financial results reported reflect the merger completed on August
9, 1996 (the "Merger") of Simon Property Group, Inc. and DeBartolo Realty
Corporation ("DRC"), in accordance with the purchase method of accounting
utilized to record the transaction valued at $3.0 billion. The Merger resulted
in the addition of 49 regional malls, 11 community centers and one mixed-use
property. These properties included 47,052,267 square feet of retail space gross
leasable area ("GLA") and 558,636 of office GLA. Of these properties, 40
regional malls, 10 community centers and the mixed-use property are being
accounted for using the consolidated method of accounting. The remaining
properties are being accounted for using the equity method of accounting, with
the exception of West Town Mall, which is accounted for using the cost method of
accounting.
In addition, the Operating Partnership acquired several other
properties through purchase, acquisition and merger throughout the comparative
periods and, as result of changes in controlling interest, changed the way it
accounted for several properties (using either the consolidated method of
accounting or the equity method of accounting for noncontrolled joint venture
entities) (the "Property Transactions"). The following is a listing of such
transactions. Effective April 1, 1994, the Operating Partnership began including
The Forum Shops at Caesars ("Forum") as a consolidated property due to the
Operating Partnership's ability to demonstrate control. On September 1, 1994,
the Operating Partnership consolidated 15 properties as a result of the merger
of MSA Realty Corporation into the Company (the "MSAR Merger"). During December
1994, the Operating Partnership acquired a 100% interest in Independence Center,
Orange Park Mall, Broadway Square and University Mall (Florida). On February 23,
1995, the Operating Partnership acquired an additional 50% interest in White
Oaks Mall and began accounting for the property using the consolidated method of
accounting. On August 1, 1995, the Operating Partnership purchased the remaining
50% ownership in Crossroads Mall and subsequently began accounting for the
property using the consolidated method of accounting. On September 25, 1995, the
Operating Partnership acquired the remaining 55% ownership in East Towne Mall
and subsequently began accounting for the property using the consolidated method
of accounting. On April 11, 1996, the Operating Partnership acquired the
remaining 50% economic ownership interest in Ross Park Mall and subsequently
began accounting for the property using the consolidated method of accounting.
(See the "Liquidity and Capital Resources" discussion for additional information
regarding these transactions.)
35
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 VS. YEAR ENDED DECEMBER 31, 1995
Total revenue increased $194.0 million, or 35.0%, in 1996 as compared
to 1995. Of this increase, $155.7 million and $37.7 million are attributable to
the Merger and the Property Transactions, respectively. The remaining increase
includes net increases in minimum rent, lease settlements and miscellaneous
income of $9.3 million, $1.8 million and $2.3 million, respectively, partially
offset by a net decrease in tenant reimbursements of $11.8 million. The minimum
rent increase results from increases of $1.50 and $0.36 in average base minimum
rents per square foot for regional mall stores and community shopping centers,
respectively. Regional mall store leases executed during 1996 were $4.86 per
square foot greater than leases expiring; community shopping center leases were
$2.02 greater.
Total operating expenses increased $113.7 million, or 37.6%, in 1996
as compared to 1995. Of this increase, $85.1 million and $18.6 million are the
result of the Merger (including $7.2 million of integration costs) and the
Property Transactions, respectively. The remaining $10.0 million increase is
primarily the result of a net increase in depreciation and amortization ($8.9
million).
Interest expense increased $52.0 million, or 34.6%, to $202.2 million
for 1996 as compared to $150.2 million for 1995. Of this increase, $41.1 million
and $15.4 million are attributable to the Merger and the Property Transactions,
respectively. In addition, the Operating Partnership realized incremental
interest expenses in 1996 related to borrowings used to acquire additional
ownership interests in and/or make equity investments in unconsolidated joint
venture properties of $4.9 million. Offsetting these increases were interest
savings realized as a result of restructuring the Operating Partnership's credit
facilities, from the proceeds of the Company's 6,000,000 common share offering
on April 19, 1995, and from the proceeds of the Series A preferred stock
offering and a portion ($34.4 million) of the proceeds of the Series B preferred
stock offering, which were used to paydown debt (described under "Financing and
Debt").
Income (loss) from unconsolidated entities increased from $1.4 million
in 1995 to $9.5 million in 1996, primarily resulting from an increase in the
Operating Partnership's share of the Management Company income ($9.2 million),
partially offset by a decrease in its share of income from partnerships and
joint ventures ($1.1 million). The increase in Management Company income is
primarily the result of the Merger ($4.4 million) and the Management Company's
losses in 1995 related to the settlement of a mortgage receivable ($3.9 million)
and the liquidation of a partnership investment ($1.0 million).
Extraordinary items of $3.5 million in 1996 and $3.3 million in 1995
result from costs associated with the refinancing or early extinguishment of
debt.
Net income of the Operating Partnership increased from $98.2 million
in 1995 to $131.1 million in 1996, an increase of $32.9 million, for the reasons
discussed above, and was allocated to the Company after considering the
Preferred Unit requirement based on the Company's Partnership interest during
the period.
Preferred Unit requirement increased by $11.2 million in 1996 as a
result of the Company's issuance of $100 million of 8 1/8% Series A convertible
preferred stock on October 27, 1995, and $200 million of 8 3/4% Series B
cumulative redeemable preferred stock on September 27, 1996. The proceeds were
contributed to the Operating Partnership in exchange for Preferred Units with
terms identical to the preferred stock issued by the Company.
YEAR ENDED DECEMBER 31, 1995 VS. YEAR ENDED DECEMBER 31, 1994
Total revenue increased $80.0 million, or 16.9%, in 1995. Of this
increase, $72.8 million is attributable to the 1995 Property Transactions, and
the full-year impact in 1995 of the 1994 Property Transactions. The remaining
increase is primarily the result of an increase in minimum rent revenue
resulting from increases of $1.25 and $0.18 in average base minimum rents per
square foot for regional mall stores and community shopping centers as evidenced
by leasing spreads for regional mall store and community shopping center leases
executed during 1995 over those leases expiring in 1995 of $5.38 and $1.22 per
square foot, respectively. These increases are partially offset by a decrease in
overage rent resulting primarily from static sales in the portfolio and a
decline of $1.8 million in overage rent at Texas border properties due to the
devaluation of the Mexican peso. Management expects these properties to return
to their prior performance level, as they have done historically after previous
peso devaluations.
36
Total operating expenses increased $43.1 million, or 16.6%, in 1995.
Of this increase, $37.9 million, or 87.9%, is the result of the Property
Transactions. Other than increases from the Property Transactions, total
operating expenses experienced an increase of only 2.0%, attributable to
increased depreciation and amortization derived from an increase in investment
properties.
Interest expense, excluding prior year nonrecurring interest expense,
increased a net of $27.2 million, or 22.2%, to $150.2 million for 1995 as
compared to $123.0 million for 1994. Of this increase, $26.5 million, or 97.4%
is the result of the Property Transactions. Interest savings were realized as a
result of restructuring the Operating Partnership's credit facilities and from
the proceeds of the Company's 6,000,000 common share offering on April 19, 1995.
The net gain on the sale of assets in 1995 resulted from a gain of
$2.4 million on the sale of a minority partnership interest in land previously
held for development in Denver, Colorado, partially offset by a loss of $0.5
million on the sale of an equity investment in Arborland Mall.
Income (loss) from unconsolidated entities increased from a loss of
$0.1 million in 1994 to income of $1.4 million in 1995, resulting from an
increase in the Operating Partnership's share of income from partnerships and
joint ventures, partially offset by an increase in its share of losses of the
Management Company. The Operating Partnership's share of income from
partnerships and joint ventures improved $4.1 million from $1.0 million in 1994
to $5.1 million in 1995. This increase is primarily attributable to gains from
sales of peripheral property ($3.4 million) and the change to accounting for
North East Mall using the equity method of accounting ($1.7 million). The
Operating Partnership's share of the Management Company's results declined $2.6
million from an allocated net loss of $1.1 million for 1994 to an allocated net
loss of $3.7 million for 1995. This decrease is the result of the Management
Company's losses related to the settlement of a mortgage receivable and the
liquidation of a partnership investment in 1995, partially offset by a $1.6
million increase in the Management Company's operating income.
Extraordinary items of $3.3 million in 1995 and $18.0 million in 1994
result from costs associated with the refinancing of debt.
Net income of the Operating Partnership after extraordinary items
increased from $42.3 million for 1994 to $98.2 million for 1995, an increase of
$55.9 million, for the reasons discussed above, and was allocated to the Company
after considering the Preferred Unit requirement based on the Company's
Partnership interest during the period.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Operating Partnership's balance of
unrestricted cash and cash equivalents was $64.3 million. In addition to its
cash balance, the Operating Partnership has a $750 million unsecured revolving
credit facility which had $510 million available after outstanding borrowings
and letters of credit at December 31, 1996. As discussed below under "Financing
and Debt," the Operating Partnership also has access to debt markets through
various shelf registrations.
FINANCING AND DEBT. The Operating Partnership's ratio of
debt-to-market capitalization was 41.5% and 44.9% at December 31, 1996 and 1995,
respectively.
On April 11, 1996, the Operating Partnership drew $115 million on its
revolving credit facility. The funds were used primarily to finance the
acquisition of the remaining economic ownership interest in Ross Park Mall ($44
million) and to retire a portion of the property's debt ($54 million).
On June 28, 1996, the Operating Partnership obtained an additional
$200 million unsecured revolving credit facility. The facility bore interest at
LIBOR plus 132.5 basis points and had a maturity date of August 1998. Terms for
the facility were identical to the existing revolving credit facility.
On August 9, 1996, in connection with the Merger, the Operating
Partnership assumed consolidated mortgages and notes payable valued at
approximately $955.7 million, a securitized debt financing (see below) of $463.7
million and $112.0 million of credit line debt and received $57.5 million in
unrestricted cash and cash equivalents from DRC (the acquired company). As
required by purchase accounting, the debt assumed in the Merger was reflected at
current value.
The Operating Partnership is in default on a loan where the property's
cash flow is insufficient to service the $40.7 million loan (of which $6.6
million is guaranteed and $34.1 million is nonrecourse). The property and its
related debt were assumed during the Merger. The Operating Partnership is
continuing negotiations with the lender.
The Operating Partnership holds securitized debt financing (the
"Securitized Debt Financing") in the face amount of $453.5 million at December
37
31, 1996. The debt is secured by assets of 17 of the wholly-owned properties.
The debt's commercial mortgage pass-through certificate covenants require the
affiliate to fund into escrow reserves for renovations, repairs and maintenance
and tenant allowances and to maintain minimum debt service coverage ratios (as
defined) and other restrictive covenants. The affiliate has obtained an
extension to the cure period for failing to comply with the covenants related to
one of the properties. The lack of compliance and cure provisions relate solely
to the individual property and not to the remaining properties in the
Securitized Debt Financing pool. Management intends to complete any required
changes within the extended cure period, which is expected to be extended until
December 1998.
On September 10, 1996, the DRC secured line of credit, which bore
interest at LIBOR plus 175 basis points, was retired with proceeds from Simon
Property Group, L.P.'s ("SPG, LP") two unsecured credit facilities.
On September 27, 1996, the Company completed a $200 million public
offering (the "Preferred Offering") of 8,000,000 shares of 8 3/4% Series B
cumulative redeemable preferred stock, generating net proceeds of approximately
$193 million. The Company contributed the proceeds of such offering to the
Operating Partnership, in exchange for Preferred Units in the Operating
Partnership. The Operating Partnership used the net proceeds to repay $142.8
million of outstanding mortgage indebtedness and $34.4 million under SPG, LP's
two unsecured credit facilities, $12.1 million for the acquisition of the
remaining ownership of North East Mall in Hurst, Texas, and the remainder for
working capital.
Also on September 27, 1996, the Operating Partnership obtained a $750
million unsecured three-year credit facility (the "Credit Facility"), with a
one-year extension at the option of the Operating Partnership, which initially
bears interest at LIBOR plus 90 basis points, and retired the outstanding
borrowings of SPG, LP in the aggregate principal amount of $323 million under
SPG, LP's two unsecured credit facilities, which bore interest at LIBOR plus
132.5 basis points. In addition, the Credit Facility contains a $150.0 million
competitive bid feature, which can further reduce interest costs. The Credit
Facility increased the Operating Partnership's available capital by $150
million. SDG, LP and SPG, LP are co-borrowers under this credit facility.
On November 21, 1996, the Securities and Exchange Commission declared
effective a shelf registration statement filed by the Operating Partnership to
provide for the offering, from time to time, of up to $750 million in aggregate
principal amount of nonconvertible investment-grade unsecured debt securities
(the "Notes") of the Operating Partnership. The Notes issuable by SDG, LP are
guaranteed by SPG, LP. On November 26, 1996, the Operating Partnership completed
the sale of $250 million of Notes. The Notes bear interest semiannually at
6.875% and mature on November 15, 2006. The net proceeds of $247.5 million were
used primarily to reduce the Operating Partnership's overall interest rates by
retiring a $62 million mortgage loan on Boynton Beach Mall, construction loan
indebtedness of $57 million relating to Cottonwood Mall, $108 million of the
outstanding balance on the Credit Facility, with the remainder going into
working capital. The Operating Partnership is currently finalizing the
allocation of $300 million of this shelf registration to a Medium-Term Note
Program, although management has no immediate plans to issue securities under
the program.
In addition, SPG, LP has an effective shelf registration for $500
million of nonconvertible investment-grade debt securities. No securities have
been issued under this registration statement.
On December 6, 1996, the Operating Partnership completed a $100
million private placement of putable asset trust securities ("PATS"). The PATS
bear interest at 6.75% and mature on November 15, 2003. Proceeds from the
placement were used to reduce outstanding borrowings on the Credit Facility. The
PATS issued by SDG, LP are guaranteed by SPG, LP.
At December 31, 1996, the Operating Partnership had consolidated debt
of $3,682.0 million, of which $2,804.7 million is fixed-rate debt and $877.3
million is variable-rate debt. As of December 31, 1996, the Operating
Partnership had interest rate protection agreements related to $524.6 million of
variable-rate debt, of which $130.5 million expires in April 1997.
On January 31, 1997, the Operating Partnership completed a refinancing
transaction involving debt on four consolidated properties. The transaction
consisted of the payoff of one loan totaling $43.4 million, the buyout of the
contingent interest feature on the remaining three loans for $21 million, a
principal reduction of $3.9 million to be applied to two of the properties, and
a restatement of the interest amount on the three remaining loans. This
transaction was funded using the Credit Facility.
Scheduled principal payments of mortgage indebtedness over the next
five years is $1,948.9 million, with $1,720.6 million thereafter.
38
ACQUISITION ACTIVITY. Prior to April 11, 1996, the Operating
Partnership held a 50% joint venture interest in Ross Park Mall in Pittsburgh,
Pennsylvania. On April 11, 1996, the Operating Partnership acquired the
remaining economic ownership interest. The purchase price included approximately
$44.0 million in cash and the assumption of the joint venture partner's share of
existing debt ($57.0 million). The purchase price in excess of the net assets
acquired of $49.1 million was allocated to investment properties. Effective
April 11, 1996, the property is being accounted for using the consolidated
method of accounting. It was previously accounted for using the equity method of
accounting. In addition, the remaining 11% ownership in Ross Park Mall was
acquired by the Operating Partnership on January 21, 1997.
As described earlier, on August 9, 1996, the Company acquired the
national shopping center business of DRC. Pursuant to the Merger, the Company
acquired all the outstanding common stock of DRC (55,712,529 shares), at an
exchange ratio of 0.68 shares of the Company's common stock for each share of
DRC common stock (the "Exchange Ratio"). A total of 37,873,965 shares of the
Company's common stock was issued by the Company to the DRC shareholders. DRC
and the acquisition subsidiary merged. DRC became a 99.9% subsidiary of the
Company. This portion of the transaction was valued at approximately $923.2
million, based upon the number of DRC shares of common stock acquired
(55,712,529), the Exchange Ratio and the last reported sales price of the
Company's common stock on August 9, 1996 ($24.375). In connection therewith, SPG
changed its name to Simon DeBartolo Group, Inc. and DRC changed its name to SD
Property Group, Inc.
In connection with the Merger, the general and limited partners of
SPG, LP contributed 49.5% (47,442,212 Units of partnership interest) of the
total outstanding Units of partnership interest ("Units") in SPG, LP to the
operating partnership of DRC, DeBartolo Realty Partnership, L.P. ("DRP, LP"), in
exchange for 47,442,212 Units of partnership interest in DRP, LP, whose name was
changed to Simon DeBartolo Group, L.P. ("SDG, LP"). The Company retained a 50.5%
partnership interest (48,400,614 Units) in SPG, LP but assigned its rights to
receive distributions of profits on 49.5% (47,442,212 Units) of the outstanding
Units of partnership interest in SPG, LP to SDG, LP. The limited partners of
DRP, LP approved the contribution made by the partners of SPG, LP and
simultaneously exchanged their 38.0% (34,203,623 Units) partnership interest in
DRP, LP, adjusted for the Exchange Ratio, for a smaller partnership interest in
SDG, LP. The exchange of the limited partners' 38.0% partnership interest in
DRP, LP for Units of SDG, LP has been accounted for as an acquisition of
minority interest by the Company and is valued based on the estimated fair value
of the consideration issued (approximately $566.9 million). The Units of SDG, LP
may under certain circumstances be exchangeable for common stock of the Company
on a one-for-one basis. Therefore, the value of the acquisition of the DRP, LP
limited partners' interest acquired was based upon the number of DRP, LP Units
exchanged (34,203,623), the Exchange Ratio and the last reported sales price per
share of the Company's common stock on August 9, 1996 ($24.375). The limited
partners of SPG, LP received a 23.7% partnership interest in SDG, LP (37,282,628
Units) for the contribution of their 38.9% partnership interest in SPG, LP
(37,282,628 Units) to SDG, LP. The interests transferred by the partners of SPG,
LP to DRP, LP have been appropriately reflected at historical costs.
It is currently expected that subsequent to the first anniversary of
the date of the Merger, reorganizational transactions will be effected so that
SDG, LP will directly own all of the assets and partnership interests now owned
by SPG, LP. However, there can be no assurance that such reorganizational
transactions will be so effected.
The Merger resulted in the addition of 49 regional malls, 11 community
centers and 1 mixed-use property. These properties included 47,052,267 square
feet of retail space GLA and 558,636 of office GLA. Of these properties, 40
regional malls, 10 community centers and the mixed-use property are being
accounted for using the consolidated method of accounting. The remaining
properties are being accounted for using the equity method of accounting, with
the exception of West Town Mall, which is accounted for using the cost method of
accounting.
Prior to October 4, 1996, the Operating Partnership held a 50% joint
venture interest in North East Mall in Hurst, Texas. On October 4, 1996, in
connection with the settlement of certain outstanding litigation, the Operating
Partnership acquired for cash an additional 20% limited partnership interest in
North East Mall. At the same time, the Operating Partnership exercised its
option to acquire the remaining 30% limited partnership interest in North East
Mall owned by Melvin Simon, Herbert Simon and certain of their affiliates
(collectively, the "Simons") in exchange for 472,410 Units in the Operating
Partnership, as well as the Simons' 50% general partnership interest which the
Operating Partnership acquired for nominal consideration. The Simons had
previously contributed the right to receive distributions relating to its 50%
general partnership interest to the Operating Partnership in exchange for Units.
As a result of these transactions, the Operating Partnership owns 100% of North
East Mall and accounts for it using the consolidated method of accounting.
See Note 3 to the consolidated financial statements for details of
1995 and 1994 acquisition activity.
39
DEVELOPMENT ACTIVITY. Development activities are an ongoing part
of the Operating Partnership's business. The Operating Partnership opened two
new regional malls, one specialty retail center and one value-oriented
super-regional mall during 1996. The new regional malls include the 1.0 million
square foot Cottonwood Mall in Albuquerque, New Mexico, which opened on July 31,
and the 800,000 square foot Indian River Mall, which opened in Vero Beach,
Florida, on November 15. The new specialty retail center is the 60,000 square
foot Tower Shops in Las Vegas, Nevada, which opened in November. The
value-oriented super-regional mall is the 1.3 million square foot Ontario Mills,
which opened in Ontario, California, on November 14. In addition, Indian River
Commons, a 265,000 square foot community shopping center opened in March 1997,
in Vero Beach, Florida. Other than Cottonwood Mall, which is wholly-owned and
accounted for using the consolidated method of accounting, the Operating
Partnership has joint venture partners on each of the projects recently opened
and accounts for them using the equity method of accounting.
Construction also continues on the following projects:
o The Source, a 730,000 square foot value-oriented retail and
entertainment development project in Westbury (Long Island), New
York, is expected to open in August 1997. This new $150 million
development will adjoin an existing Fortunoff store. The Operating
Partnership has a total equity investment of $25.3 million in this
50%-owned joint venture project. Construction financing of $120
million closed on this property in July 1996. The loan initially
bears interest at LIBOR plus 170 basis points and matures on July
16, 1999.
o Arizona Mills, a 1,230,000 square foot retail development project
in Tempe, Arizona, broke ground on August 1, 1996. This $184
million value-oriented super-regional mall is expected to open in
November 1997. In January 1997, the joint venture closed on a
five-year $145 million construction loan with interest at LIBOR
plus 150 basis points. The Operating Partnership had an $13.5
million equity investment through December 31, 1996 and a 25%
ownership interest in this joint venture development.
o Grapevine Mills, a 1,480,000 square foot retail development
project in Grapevine (Dallas/Fort Worth), Texas, broke ground on
July 10, 1996. This $202 million value-oriented super-regional
mall development project is expected to open in October 1997. A
commitment has been obtained for a four-year $157 million
construction loan (plus a one-year extension) with an initial
interest rate of LIBOR plus 165 basis points. The Operating
Partnership has a $14 million equity commitment on this
37.5%-owned joint venture project, and advanced its initial
contribution of $7.9 million in January 1997.
o The Shops at Sunset Place, a destination-oriented retail and
entertainment project containing approximately 500,000 square feet
of GLA is scheduled to open in 1998 in South Miami, Florida. The
Operating Partnership owns 75% of this $143 million project. The
Operating Partnership expects to have construction financing for
the majority of the development costs of this project in place
during the second quarter of 1997.
In addition, the Operating Partnership is in the preconstruction
development phase on two new community center projects, each of which is
immediately adjacent to an existing regional mall in the portfolio. Lakeline
Plaza, an approximately $39 million development, is scheduled to open in Austin,
Texas, in 1998. The Operating Partnership has a 50% ownership interest in this
391,000 square foot joint venture development project. Muncie Plaza, a $16
million development project, is scheduled to open in Muncie, Indiana, in 1998.
This 200,000 square foot development project is wholly-owned.
STRATEGIC EXPANSIONS AND RENOVATIONS. A key objective of the Operating
Partnership is to increase the profitability and market share of its portfolio
properties through the completion of strategic renovations and expansions. In
1996, the Operating Partnership completed construction and opened eight
expansion and/or renovation projects; Greenwood Plus in Greenwood, Indiana;
Muncie Mall in Muncie, Indiana; Summit Mall in Akron, Ohio; University Park Mall
in South Bend, Indiana; College Mall in Bloomington, Indiana; Century III Mall
in Pittsburgh, Pennsylvania; Coral Square in Coral Springs, Florida; and The
Florida Mall in Orlando, Florida.
The Operating Partnership currently has three major expansion projects
under construction, and is in the preconstruction development stage with two
additional major expansion projects. The aggregate cost of the projects is
approximately $530 million.
o A 235,000 square foot phase II expansion of Forum in Las Vegas, in
which the Operating Partnership has a 55% ownership interest, is
40
scheduled to open in August 1997. The costs of the phase II
project are being funded with a portion of the $184 million
two-tranche financing facility which closed on February 23, 1996.
The loan bears interest on a weighted average basis at LIBOR plus
137 basis points and matures in February 2000.
o A 255,000 square foot small shop expansion of Aventura Mall in
Miami, Florida, is scheduled to open in December 1997. The
Operating Partnership has a 33% ownership interest in this
project.
o A 180,000 square foot small shop expansion of The Florida Mall in
Orlando, Florida, as well as the addition of Burdines is scheduled
for completion in the winter of 1998. Dillard's, Gayfers,
JCPenney, and Sears are also expanding. The Operating Partnership
has a 50% ownership interest in this project.
o A 130,000 square foot small shop expansion of Mission Viejo Mall,
in Mission Viejo, California, is underway along. This project also
includes the addition of Nordstrom and another department store
and a new food court, plus the expansion of Macy's. It is
scheduled for completion in 1999.
o A 200,000 square foot small shop expansion of North East Mall, in
Hurst, Texas, also includes a renovation and is scheduled for
completion in 1999. The addition of Nordstrom and another
department store and a second level of small shops is part of this
project as well.
The Operating Partnership has a number of smaller renovation and/or
expansion projects currently under construction including the following,
aggregating approximately $120 million:
Expected Date
of Completion Property Name Property Location
- ------------- ------------- -----------------
March 1997 Smith Haven Mall Lake Grove (Long Island), NY
April 1997 St. Charles Towne Center Waldorf (Washington, D.C.), MD
July 1997 Lafayette Square Indianapolis, IN
August 1997 Orange Park Mall Jacksonville, FL
October 1997 Alton Square Alton, IL
November 1997 Chautauqua Mall Jamestown, NY
November 1997 East Towne Mall Knoxville, TN
November 1997 Southern Park Mall Youngstown, OH
November 1997 Richmond Square Richmond, IN
November 1997 Northgate Mall Seattle, WA
March 1998 West Town Mall Knoxville, TN
Preconstruction development continues on a number of project
expansions, renovations, and anchor additions at a number of other properties as
well. The Operating Partnership expects to commence construction on many of
these projects in next 12 to 24 months.
In addition, preconstruction development continues on a number of
project expansions, renovations and anchor additions at additional properties.
The Operating Partnership expects to commence construction on many of these
projects in the next 12 to 24 months.
It is anticipated that these projects will be financed principally
with access to debt and equity markets, existing corporate credit facilities and
cash flow from operations.
CAPITAL EXPENDITURES. Capital expenditures were $267.5 million, $135.4
million and $252.5 million for the periods ended December 31, 1996, 1995 and
1994, respectively.
1996 1995 1994
-------- -------- --------
New Developments $ 80.1 $ 29.7 $ 2.9
Renovations and Expansions 86.3 38.9 22.7
Tenant Allowances--Retail 24.0 17.2 10.1
Tenant Allowances--Offices 6.1 4.3 2.5
Capital Expenditures Recoverable from Tenants 11.4 8.0 3.2
Acquisitions 56.1 32.5 205.2
Other 3.5 4.8 5.9
-------- -------- --------
Total $ 267.5 $ 135.4 $ 252.5
======== ======== ========
41
DISTRIBUTIONS. The Operating Partnership declared distributions in
1996 and 1995 aggregating $1.63 per Unit and 1.97 per Unit, respectively. The
1996 distribution included a distribution of $0.1515 per Unit on August 9, 1996,
in connection with the Merger, designated to align the time periods of
distribution payments of the merged entities. On January 23, 1997, the Operating
Partnership declared a distribution of $0.4925 per Unit payable on February 21,
1997, to Unitholders of record on February 7, 1997. The current annual
distribution rate is $1.97 per Unit. For federal income tax purposes, 64% of the
1996 distributions and 25% of the 1995 distributions represented a return of
capital. Future distributions will be determined based on actual results of
operations and cash available for distribution.
CAPITAL RESOURCES. Management anticipates that cash generated from
operating performance will provide the necessary funds on a short- and long-term
basis for its operating expenses, interest expense on outstanding indebtedness,
recurring capital expenditures, and distributions to Unit holders. Sources of
capital for nonrecurring capital expenditures, such as major building
renovations and expansions, as well as for scheduled principal payments,
including balloon payments, on outstanding indebtedness are expected to be
obtained from: (i) excess cash generated from operating performance; (ii)
working capital reserves; (iii) additional debt financing; and (iv) additional
equity raised in the public markets by the Company.
Management continues to actively review and evaluate a number of
individual property and portfolio acquisition opportunities. Management believes
that funds on hand, amounts available under the Credit Facility, together with
the ability of the Company to issue shares of common stock and/or Units by the
Operating Partnership, provide the means to finance certain acquisitions. No
assurance can be given that the Operating Partnership will not be required to,
or will not elect to, even if not required to, obtain funds from outside
sources, including through the sale of debt or equity securities, to finance
significant acquisitions, if any.
INVESTING AND FINANCING ACTIVITIES. Cash used in investing activities
for the year ended December 31, 1996, was $199.7 million, including
approximately $44 million for the acquisition of the remaining economic
ownership interest in Ross Park Mall; $12.1 million for the acquisition of the
remaining ownership of North East Mall in Hurst, Texas; and capital expenditures
and development related costs of $195.8 million, including $40.4 million, $34.9
million, $11.1 million and $6.9 million at Cottonwood Mall, Forum, Muncie Mall,
and The Shops at Sunset Place, respectively. In addition, advances to
unconsolidated joint ventures totaling approximately $62.1 million includes
$21.4 million, $15.0 million, $13.5 million and $3.2 million in equity
contributions made to The Source, Ontario Mills, Arizona Mills and The Tower
Shops, respectively, to fund development activity. These expenditures are
partially offset by net cash received from the Merger of $37.1 million, cash
received from unconsolidated entities of $75.3 million, including a $28.3
million return of equity from Smith Haven Mall, and $38.6 million of note
repayments received from M.S. Management Associates.
Cash used in financing activities for the year ended December 31, 1996
was $35.1 million as compared to $14.1 million in 1995. This increase is
primarily the result of an increase in distributions to Unitholders ($79.7
million), and a decrease in contributions from the Company from net proceeds
from sales of common and preferred stock ($40.7 million), partially offset by a
net increase in mortgage and other note borrowings ($100.7 million). The
increase in distributions is primarily the result of distributions and Units
issued in connection with the Merger ($30.1 million), special distributions paid
in connection with the Merger ($18.4 million), increased distributions paid on
the Preferred Units ($14.2 million), and additional Units issued in the
comparative periods. Although the timing of distribution was realized, the
distribution rate has remained at $1.97 per Unit in both periods. Increased
mortgage and other note borrowings are primarily due to increased capital
expenditure activities in 1996 as described in investing activities above and an
increase in debt paydowns and refinancing by the Company.
42
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
("EBITDA")
Management believes that there are several important factors that
contribute to the ability of the Operating Partnership to increase rent and
improve profitability of its shopping centers, including aggregate tenant sales
volume, sales per square foot, occupancy levels and tenant costs. Each of these
factors has a significant effect on EBITDA. Management believes that EBITDA is
an effective measure of shopping center operating performance because: (i) it is
industry practice to evaluate real estate properties based on operating income
before interest, taxes, depreciation and amortization, which is generally
equivalent to EBITDA; and (ii) EBITDA is unaffected by the debt and equity
structure of the property owner. EBITDA: (i) does not represent cash flow from
operations as defined by generally accepted accounting principles; (ii) should
not be considered as an alternative to net income as a measure of the Operating
Partnership's operating performance; (iii) is not indicative of cash flows from
operating, investing and financing activities; and (iv) is not an alternative to
cash flows as a measure of the Operating Partnership's liquidity.
Total EBITDA for the properties owned in whole or through joint
ventures (the "Portfolio Properties") increased from $316.5 million in 1992 to
$615.3 million in 1996, representing a compound annual growth rate of 14.2%. Of
this growth, $111.4 million, or 37.3%, is a result of the Merger. The remaining
growth in total EBITDA reflects the addition of GLA to the Portfolio Properties
through property acquisitions, developments and expansions, increased rental
rates, increased tenant sales, improved occupancy levels and effective control
of operating costs. During this period, the operating profit margin increased
from 57.6% to 62.5%. This improvement is also primarily attributable to
aggressive leasing of new and existing space and effective control of operating
costs.
The following summarizes total EBITDA for the Portfolio Properties and
the operating profit margin of such properties, which is equal to total EBITDA
expressed as a percentage of total revenue:
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands)
EBITDA of Wholly-Owned and
consolidated Joint Venture Properties $ 467,292 $ 343,875 $ 290,243 $ 244,397 $ 224,170
EBITDA of unconsolidated Joint Venture
Properties 148,030 93,673 96,592 102,282 92,365
-------------- -------------- -------------- ------------- -------------
Total EBITDA of Portfolio Properties (1) $ 615,322 $ 437,548 $ 386,835 $ 346,679 $ 316,535
============== ============== ============== ============= =============
EBITDA after minority interest (2) $ 497,215 $ 357,158 $ 307,372 $ 256,169 $ 227,931
============== ============== ============== ============= =============
Increase in total EBITDA from prior
period 40.6% 13.1% 11.6% 9.5% 12.1%
Increase in EBITDA after minority
interest from prior period 39.2% 16.2% 20.0% 12.4% 8.2%
Operating profit margin of the
Portfolio Properties (3) 62.5% 63.1% 61.9% 58.6% 57.6%
(1) EBITDA for 1996 includes the acquired properties from the Merger
date forward. On a pro forma basis, assuming the Merger had
occurred on January 1, 1995, EBITDA would be $805.3 million and
$770.7 million in 1996 and 1995, respectively, representing a 4.5%
growth.
(2) EBITDA after minority interest represents earnings before
interest, taxes, depreciation and amortization for all Properties
after distribution to the third-party joint ventures' partners.
(3) The 1996 operating profit margin, excluding the $7.2 million
Merger integration costs, is 63.2%.
FUNDS FROM OPERATIONS ("FFO")
FFO, as defined by NAREIT, means the consolidated net income of the
Operating Partnership and its subsidiaries without giving effect to real estate
related depreciation and amortization, gains or losses from extraordinary items,
gains or losses on sales of real estate, gains or losses on investments in
marketable securities and any provision/benefit for income taxes for such
period, plus the allocable portion, based on the Operating Partnership's
ownership interest, of funds from operations of unconsolidated joint ventures,
all determined on a consistent basis in accordance with generally accepted
43
accounting principles. Management believes that FFO is an important and widely
used measure of the operating performance of REITs which provides a relevant
basis for comparison among REITs. FFO is presented to assist investors in
analyzing the performance of the Operating Partnership. FFO: (i) does not
represent cash flow from operations as defined by generally accepted accounting
principles; (ii) should not be considered as an alternative to net income as a
measure of the Operating Partnership's operating performance or to cash flows
from operating, investing and financing activities; and (iii) is not an
alternative to cash flows as a measure of the Operating Partnership's liquidity.
In March 1995, NAREIT modified its definition of FFO. The modified definition
provides that amortization of deferred financing costs and depreciation of
nonrental real estate assets are no longer to be added back to net income in
arriving at FFO. This modification was adopted by the Operating Partnership
beginning in 1996. Additionally the FFO for prior periods has been restated to
reflect the modification in order to make the amounts comparative. Under the
previous definition, FFO for the years ended December 31, 1995 and 1994, was
$208.3 million and $176.4 million, respectively.
The following summarizes FFO of the Operating Partnership and
reconciles income before extraordinary items to FFO for the periods presented:
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994
---------------- --------------- ----------------
(In thousands)
FFO of the Operating Partnership $ 281,495 $ 197,909 $ 167,761
================ =============== ================
Increase in FFO from prior period 42.2% 18.0% N/A
================ =============== ================
Reconciliation:
Income before extraordinary items $ 134,663 $ 101,505 $ 60,308
Plus:
Depreciation and amortization from consolidated properties 135,226 92,274 75,663
The Operating Partnership's share of depreciation and
amortization from unconsolidated affiliates 20,159 6,466 7,251
Merger integration costs 7,236 -- --
The Operating Partnership's share of (gains) or losses on
sales of real estate (88) 2,054 --
Unusual item -- -- 27,184
Less:
Minority interest portion of depreciation and amortization (3,007) (2,900) (2,645)
Preferred distributions (12,694) (1,490) --
---------------- --------------- ----------------
FFO of the Operating Partnership $ 281,495 $ 197,909 $ 167,761
================ =============== ================
PORTFOLIO DATA
Operating statistics give effect to the Merger and are based upon the
business and properties of the Operating Partnership and DeBartolo Realty
Corporation on a combined basis for all periods presented. The purpose of this
presentation is to provide a more comparable set of statistics on the portfolio
as a whole. The following statistics exclude Ontario Mills and Charles Towne
Square. Ontario Mills is a new value-oriented super-regional mall in a category
by itself. The Operating Partnership intends to create a separate reporting
category for its Mills Properties in 1997, following the expected openings of
Grapevine Mills and Arizona Mills. The Operating Partnership is preparing to
demolish the existing Charles Towne Square in order to convert the property into
a community center.
AGGREGATE TENANT SALES VOLUME AND SALES PER SQUARE FOOT. From 1993 to
1996, total reported retail sales at mall and freestanding GLA owned by the
Operating Partnership ("Owned GLA") in the regional malls and all reporting
tenants at community shopping centers increased 9.0% from $7,268 million to
$7,921 million, a compound annual growth rate of 2.9%. Retail sales at Owned GLA
affect revenue and profitability levels because they determine the amount of
minimum rent that can be charged, the percentage rent realized, and the
recoverable expenses (common area maintenance, real estate taxes, etc.) the
tenants can afford to pay.
44
The following illustrates the total reported sales of tenants at Owned
GLA:
ANNUAL
TOTAL TENANT PERCENTAGE
YEAR ENDED DECEMBER 31, SALES (IN MILLIONS) INCREASE
----------------------- ------------------- --------
1996 $7,921 3.6%
1995 7,649 0.5
1994 7,611 4.7
1993 7,268 N/A
Regional mall sales per square foot increased 5.9% in 1996 to $290 as
compared to $274 in 1995. In addition, sales per square foot of reporting
tenants operating for at least two consecutive years ("Comparable Sales")
increased from $278 to $298, or 7.2%, from 1995 to 1996. The Operating
Partnership believes its strong sales growth in 1996 is the result of its
aggressive retenanting efforts and the redevelopment of many of the Portfolio
Properties. Sales per square foot at the community shopping centers decreased in
1996 to $187 as compared to $194 in 1995.
OCCUPANCY LEVELS. Occupancy levels for regional malls decreased
slightly from 85.5% at December 31, 1995, to 84.7% at December 31, 1996.
Occupancy levels for community shopping centers also decreased, from 93.6% at
December 31, 1995, to 91.6% at December 31, 1996. The Operating Partnership
believes that occupancy levels have been hampered by the magnitude of retail
bankruptcies. Owned GLA has increased 30.2 million square feet from December 31,
1995, to December 31, 1996, primarily as a result of the Merger and the 1996
mall openings.
Occupancy Levels
----------------------------------
Community
Regional Shopping
YEAR ENDED DECEMBER 31, Malls Centers
----------------------- ----- -------
1996 84.7% 91.6%
1995 85.5 93.6
1994 85.6 93.9
1993 85.9 N/A
Tenant Occupancy Costs. Tenant occupancy costs as a percentage of
sales decreased from 11.6% in 1995 to 11.4% in 1996 in the regional mall
portfolio. A tenant's ability to pay rent is affected by the percentage of its
sales represented by occupancy costs, which consist of rent and expense
recoveries. As sales levels increase, if expenses subject to recovery are
controlled, the tenant can pay higher rent. Management believes the Operating
Partnership is one of the lowest-cost providers of retail space, which has
permitted the rents in both regional malls and community shopping centers to
increase without raising a tenant's total occupancy cost beyond its ability to
pay. Management believes continuing efforts to increase sales while controlling
property operating expenses will continue the trend of increasing rents at the
Properties.
AVERAGE BASE RENTS. Average base rents per square foot of mall and
freestanding Owned GLA at regional malls increased 16.8%, from $17.70 in 1993 to
$20.68 in 1996. In community shopping centers, average base rents of Owned GLA
increased 7.4%, from $7.12 in 1994 to $7.65 in 1996.
45
The following highlights this trend:
Average Base Rent per Square Foot
----------------------------------------------------
Mall and
Freestanding Community
Stores at % Shopping %
YEAR ENDED DECEMBER 31, Regional Malls Change Centers Change
----------------------- -------------- ------ ------- ------
1996 $20.68 7.8% $7.65 4.9%
1995 19.18 4.4 7.29 2.4
1994 18.37 3.8 7.12 N/A
1993 17.70 5.0 N/A N/A
INFLATION
Inflation has remained relatively low during the past four years and
has had a minimal impact on the operating performance of the Properties.
Nonetheless, substantially all of the tenants' leases contain provisions
designed to lessen the impact of inflation. Such provisions include clauses
enabling the Operating Partnership to receive percentage rentals based on
tenants' gross sales, which generally increase as prices rise, and/or escalation
clauses, which generally increase rental rates during the terms of the leases.
In addition, many of the leases are for terms of less than ten years, which may
enable the Operating Partnership to replace existing leases with new leases at
higher base and/or percentage rentals if rents of the existing leases are below
the then-existing market rate. Substantially all of the leases, other than those
for anchors, require the tenants to pay a proportionate share of operating
expenses, including common area maintenance, real estate taxes and insurance,
thereby reducing the Operating Partnership's exposure to increases in costs and
operating expenses resulting from inflation.
However, inflation may have a negative impact on some of the Operating
Partnership's other operating items. Interest and general and administrative
expenses may be adversely affected by inflation as these specified costs could
increase at a rate higher than rents. Also, for tenant leases with stated rent
increases, inflation may have a negative effect as the stated rent increases in
these leases could be lower than the increase in inflation at any given time.
OTHER
The shopping center industry is seasonal in nature, particularly in
the fourth quarter during the holiday season, when tenant occupancy and retail
sales are typically at their highest levels. In addition, shopping malls achieve
most of their temporary tenant rents during the holiday season. As a result of
the above, earnings are generally highest in the fourth quarter of each year.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Index to Financial Statements contained in
Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
46
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company is a general partner of SDG, LP and sole general partner
of SPG, LP. SD Property Group, Inc., a majority owned subsidiary of the Company,
is the managing general partner of SPG, LP. The information required by this
item is incorporated herein by reference to the Company's definitive Proxy
Statement for its annual meeting of shareholders to be filed with the Commission
pursuant to Regulation 14A and is included under the caption "EXECUTIVE OFFICERS
OF THE REGISTRANT" in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement for its annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP PF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement for its annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement for its annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A.
47
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS Page No.
- --- --- -------------------- --------
SIMON DEBARTOLO GROUP, L.P.
Report of Independent Public Accountants 40
Simon DeBartolo Group, L.P. Consolidated Balance Sheets 41
as of December 31, 1996 and 1995
Simon DeBartolo Group, L.P. Consolidated Statements of Operations for the years 42
ended December 31, 1996, 1995 and 1994
Simon DeBartolo Group, L.P. Consolidated Statements of Changes in Partners' 43
Equity for the years ended December 31, 1996, 1995 and 1994
Simon DeBartolo Group, L.P. Consolidated Statements of Cash Flows for the years 44
ended December 31, 1996, 1995 and 1994
Notes to Financial Statements 45
SIMON PROPERTY GROUP, L.P. (GUARANTOR)
Report of Independent Public Accountants 40
Simon Property Group, L.P. Consolidated Balance Sheets 41
as of December 31, 1996 and 1995
Simon Property Group, L.P. Consolidated Statements of Operations for the years 42
ended December 31, 1996, 1995 and 1994
Simon Property Group, L.P. Consolidated Statements of Changes in Partners' 43
Equity (Deficit) for the years ended December 31, 1996, 1995 and 1994
Simon Property Group, L.P. Consolidated Statements of Cash Flows for the years 44
ended December 31, 1996, 1995 and 1994
Notes to Financial Statements 45
(2) FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants 70
Schedule III-- Schedule of Real Estate and Accumulated Depreciation 71
Notes to Schedule III 74
(3) EXHIBITS
The Exhibit Index attached hereto is hereby incorporated by reference to this Item. 75
(b) REPORTS ON FORM 8-K
None.
48
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To
Simon DeBartolo Group, Inc.:
We have audited the accompanying consolidated balance sheets of SIMON DeBARTOLO
GROUP, L.P. (a Delaware limited partnership) and subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of operations, partners'
equity (deficit) and cash flows for the years ended December 31, 1996, 1995 and
1994. These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Simon DeBartolo
Group, L.P. and subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1996, 1995 and 1994, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana
February 18, 1997
49
BALANCE SHEETS
SIMON DEBARTOLO GROUP, L.P. CONSOLIDATED
(Dollars in thousands, except per unit amounts)
December 31,
--------------------------
1996 1995
----------- -----------
ASSETS:
Investment properties, at cost $ 5,301,021 $ 2,162,161
Less-- accumulated depreciation 279,072 152,817
----------- -----------
5,021,949 2,009,344
Cash and cash equivalents 64,309 62,721
Restricted cash 6,110 --
Tenant receivables and accrued revenue, net 166,119 144,400
Notes receivable from Management Company and affiliate 75,452 102,522
Investment in partnerships and joint ventures, at equity 394,409 117,332
Deferred costs, net 91,925 81,398
Other assets 46,567 30,985
Minority interest 29,070 7,734
----------- -----------
=========== ===========
Total assets $ 5,895,910 $ 2,556,436
=========== ===========
LIABILITIES:
Mortgages and other notes payable $ 3,681,984 $ 1,980,759
Accounts payable and accrued expenses 170,203 113,131
Accrued distributions -- 48,594
Cash distributions and losses in partnerships and joint ventures, at equity 17,106 54,120
Investment in Management Company and affiliates 8,567 20,612
Other liabilities 72,876 19,582
----------- -----------
Total liabilities 3,950,736 2,236,798
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 13)
LIMITED PARTNERS' EQUITY INTEREST, 0 and 37,282,628 units outstanding,
respectively, at redemption value (Note 10) -- 908,764
PARTNERS' EQUITY:
Preferred units, 12,000,000 and 4,000,000 units outstanding, respectively 292,912 99,923
General Partner, 96,880,415 and 55,360,195 units outstanding, respectively 1,017,333 135,710
Limited Partner, 60,974,050 and 0 units outstanding, respectively 640,283 --
Adjustment to reflect Limited Partners' equity interest at redemption value (Note 10) -- (822,072)
Unamortized restricted stock award (5,354) (2,687)
----------- -----------
Total partners' equity (1,945,174) (589,126)
----------- -----------
Total liabilities and partners' equity $ 5,895,910 $ 2,556,436
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
50
STATEMENTS OF OPERATIONS
SIMON DEBARTOLO GROUP, L.P. CONSOLIDATED
(Dollars in thousands, except per unit amounts)
For the Year Ended December 31,
---------------------------------------------
1996 1995 1994
--------- --------- ---------
REVENUE:
Minimum rent $ 438,089 $ 307,857 $ 255,716
Overage rent 30,810 23,278 25,463
Tenant reimbursements 233,974 192,994 163,588
Other income 44,831 29,528 28,909
--------- --------- ---------
Total revenue 747,704 553,657 473,676
--------- --------- ---------
EXPENSES:
Property operating 122,796 96,851 85,672
Depreciation and amortization 135,780 92,739 75,945
Real estate taxes 69,173 53,941 44,502
Repairs and maintenance 38,077 24,614 22,940
Advertising and promotion 24,756 18,888 17,000
Merger integration costs 7,236 -- --
Provision for credit losses 3,460 2,858 3,417
Other 14,914 12,630 9,902
--------- --------- ---------
Total operating expenses 416,192 302,521 259,378
--------- --------- ---------
OPERATING INCOME 331,512 251,136 214,298
INTEREST EXPENSE 202,182 150,224 122,980
NON-RECURRING INTEREST EXPENSE -- -- 27,184
--------- --------- ---------
INCOME BEFORE MINORITY INTEREST 129,330 100,912 64,134
MINORITY INTEREST (4,300) (2,681) (3,759)
GAIN ON SALE OF ASSETS, NET 88 1,871 --
--------- --------- ---------
INCOME BEFORE UNCONSOLIDATED ENTITIES 125,118 100,102 60,375
INCOME (LOSS) FROM UNCONSOLIDATED ENTITIES 9,545 1,403 (67)
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEMS 134,663 101,505 60,308
EXTRAORDINARY ITEMS (3,521) (3,285) (17,980)
--------- --------- ---------
NET INCOME 131,142 98,220 42,328
PREFERRED UNIT REQUIREMENT 12,694 1,490 --
--------- --------- ---------
NET INCOME AVAILABLE TO UNITHOLDERS $ 118,448 $ 96,730 $ 42,328
========= ========= =========
NET INCOME AVAILABLE TO UNITHOLDERS
ATTRIBUTABLE TO:
General Partner $ 72,561 $ 57,781 $ 23,377
Limited Partners $ 45,887 $ 38,949 $ 18,951
--------- --------- ---------
$ 118,448 $ 96,730 $ 42,328
========= ========= =========
EARNINGS PER UNIT:
Income before extraordinary items $ 1.02 $ 1.08 $ 0.71
Extraordinary items (0.03) (0.04) (0.21)
--------- --------- ---------
Net income $ 0.99 $ 1.04 $ 0.50
========= ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
51
STATEMENTS OF PARTNERS' EQUITY
SIMON DEBARTOLO GROUP, L.P. CONSOLIDATED
(Dollars in thousands)
LIMITED
UNAMORTIZED TOTAL PARTNERS'
PREFERRED GENERAL LIMITED RESTRICTED STOCK PARTNERS' EQUITY
UNITS PARTNER PARTNER AWARD EQUITY INTEREST
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1993 $ -- $ ( 791,820) $ -- $ -- $ (791,820) $ 848,373
General Partner Contributions
(7,462,445 units) 164,334 164,334
Adjustment to allocate net equity
to the Operating Partnership (69,650) (69,650) 69,650
Adjustment to reflect limited
partners' equity interest at
Redemption Value (Note 10) (43,579) (43,579) 43,579
Net income 23,377 23,377 18,951
Distributions (90,275) (90,275) (71,247)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1994 -- (807,613) -- -- (807,613) 909,306
General Partner Contributions
(9,470,977 units) 216,545 216,545
Limited Partners' Contributions
(120,000 units) -- (16,869)
Preferred unit contributions, net of
issuance costs (4,000,000 units) 99,923 99,923
Acquisition of Limited Partners' interest
and other [333,462 and (334,522)
units, respectively] 5,036 5,036 (301)
Stock incentive program (143,311 units) 3,608 (3,605) 3
Amortization of stock incentive 918 918
Adjustment to allocate net equity
of the Operating Partnership (94,035) (94,035) 94,035
Adjustment to reflect limited
partners' equity interest at
Redemption Value (Note 10) 42,848 42,848 (42,848)
Net income 59,271 59,271 38,949
Distributions (112,022) (112,022) (73,508)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1995 99,923 (686,362) -- (2,687) (589,126) 908,764
1996 Adjustment to reflect limited
partners' interest at Historical
Value (Note 10) 822,072 86,692 908,764 (908,764)
----------- ----------- ----------- ----------- ----------- -----------
99,923 135,710 86,692 (2,687) 319,638 --
===========
Stock options exercised (372,151 units) 8,677 8,677
Units issued in connection with Merger
(37,877,965 and 23,219,012 units,
respectively) 922,379 565,448 1,487,827
Other unit issuances (70,074 and
472,410 units, respectively) 1,841 275 2,116
Preferred units issued, net of
issuance costs (8,000,000 units) 192,989 192,989
Stock incentive program (200,030 units) 4,751 (4,751) --
Amortization of stock incentive 2,084 2,084
Adjustment to allocate net equity
of the Operating Partnership (14,382) 14,382 --
Net income 12,694 72,561 45,887 131,142
Distributions (12,694) (114,142) (72,401) (199,237)
Other (62) (62)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1996 $ 292,912 $ 1,017,333 640,283 $ (5,354) $ 1,945,174
=========== =========== =========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
52
STATEMENTS OF CASH FLOWS
SIMON DEBARTOLO GROUP, L.P. CONSOLIDATED
(Dollars in thousands)
For the Year Ended December 31,
---------------------------------------------
1996 1995 1994
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 131,142 $ 98,220 $ 42,328
Adjustments to reconcile net income to net cash provided
by operating activities--
Depreciation and amortization 143,582 101,262 83,196
Loss on extinguishments of debt 3,521 3,285 17,980
Gain on sale of assets, net (88) (1,871) --
Straight-line rent (3,502) (1,126) (4,326)
Minority interest 4,300 2,681 3,759
Equity in income of unconsolidated entities (9,545) (1,403) 67
Changes in assets and liabilities--
Tenant receivables and accrued revenue (6,422) 5,502 (3,908)
Deferred costs and other assets (12,756) (14,290) 1,099
Accounts payable, accrued expenses and other liabilities (13,768) 2,076 (12,172)
----------- ----------- -----------
Net cash provided by operating activities 236,464 194,336 128,023
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (56,069) (32,547) (227,312)
Capital expenditures (195,833) (98,220) (42,765)
Cash from Merger and consolidation of joint ventures, net of
Merger costs 37,053 4,346 8,924
Decrease in restricted cash 1,474 -- --
Proceeds from sale of assets 399 2,550 --
Investments in unconsolidated entities (62,096) (77,905) (1,056)
Distributions from unconsolidated entities 36,786 6,214 5,842
Investments in and advances to/(from) Management Company 38,544 (27,117) (10,405)
----------- ----------- -----------
Net cash used in investing activities (199,742) (222,679) (266,772)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Minority interest distributions (5,115) (3,680) (2,148)
Partnership contributions 201,704 242,377 106,773
Partnership distributions (257,403) (177,726) (120,711)
Mortgage and other note proceeds, net of transaction costs 1,293,582 456,520 405,430
Mortgage and other note principal payments (1,267,902) (531,566) (256,081)
----------- ----------- -----------
Net cash provided by (used in) financing activities (35,134) (14,075) 133,263
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,588 (42,418) (5,486)
CASH AND CASH EQUIVALENTS, beginning of period 62,721 105,139 110,625
=========== =========== ===========
CASH AND CASH EQUIVALENTS, end of period $ 64,309 $ 62,721 $ 105,139
=========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
53
SIMON DEBARTOLO GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
1. ORGANIZATION
Simon DeBartolo Group, Inc. (the "Company"), formerly known as Simon
Property Group, Inc., is a self-administered and self-managed real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended.
On August 9, 1996, the Company acquired the national shopping center business of
DeBartolo Realty Corporation ("DRC"), The Edward J. DeBartolo Corporation and
their affiliates as the result of the Merger described in Note 3.
Simon DeBartolo Group, L.P. ("SDG, LP") is a subsidiary partnership of
the Company. Simon Property Group, L.P. ("SPG, LP") is a subsidiary partnership
of SDG, LP and of the Company. SDG, LP and SPG, LP are hereafter collectively
referred to as the "Operating Partnership." Prior to the Merger date, references
to the Operating Partnership refer to SPG, LP only. The Operating Partnership,
is engaged primarily in the ownership, operation, management, leasing,
acquisition, expansion and development of real estate properties, primarily
regional malls and community shopping centers. As of December 31, 1996, the
Operating Partnership owns or holds an interest in 186 income-producing
properties, which consist of 113 regional malls, 65 community shopping centers,
three specialty retail centers, four mixed-use properties and one value-oriented
super-regional mall in 33 states (the "Properties"). The Operating Partnership
also owns interests in two specialty retail centers, two value-oriented
super-regional malls and one community center currently under construction and
six parcels of land held for future development. The Operating Partnership also
holds substantially all of the economic interest in M.S. Management Associates,
Inc. (the "Management Company"). See Note 7 for a description of the activities
of the Management Company.
The Operating Partnership is subject to risks incidental to the
ownership and operation of commercial real estate. These include, among others,
the risks normally associated with changes in the general economic climate,
trends in the retail industry, creditworthiness of tenants, competition for
tenants, changes in tax laws, interest rate levels, the availability of
financing, and potential liability under environmental and other laws. Like most
retail properties, the Operating Partnership's regional malls and community
shopping centers rely heavily upon anchor tenants. As of December 31, 1996, 231
of the approximately 650 anchor stores in the Properties were occupied by
JCPenney Company, Inc., Sears Roebuck & Co. and Dillard Department Stores, Inc.
An affiliate of JCPenney Company, Inc. is a limited partner in the Operating
Partnership. In addition, the Chief Operating Officer of Dillard Department
Stores, Inc. is a director of the Company.
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements of the Operating
Partnership include the accounts of all entities owned or controlled by the
Operating Partnership. All significant intercompany amounts have been
eliminated. The accompanying consolidated financial statements have been
prepared in accordance with generally accepted accounting principles, which
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses during the reported
periods. Actual results could differ from these estimates.
Properties which are wholly-owned ("Wholly-Owned Properties") or owned
less than 100% and are controlled by the Operating Partnership ("Minority
Interest Properties") have been consolidated. Control is demonstrated by the
ability of the general partner to manage day-to-day operations, refinance debt
and sell the assets of the partnership without the consent of the limited
partner and the inability of the limited partner to replace the general partner.
Investments in partnerships and joint ventures which represent noncontrolling
14.7% to 50.0% ownership interests ("Joint Venture Properties") and the
investment in the Management Company (see Note 7) are accounted for using the
equity method of accounting. These investments are recorded initially at cost
and subsequently adjusted for net equity in income (loss) and cash contributions
and distributions. In addition, the investment in a partnership which represents
a 2% noncontrolling ownership interest in one Portfolio Property is accounted
for using the cost method of accounting.
Net operating results of the Operating Partnership are allocated after
preferred distributions (see Note 10), based on its partners' ownership
interests. The Company's weighted average ownership interest in the Operating
Partnership during 1996, 1995 and 1994 was 61.2%, 60.3% and 55.6%, respectively.
At December 31, 1996 and 1995, the Company's ownership interest was 61.4% and
61.0%, respectively.
54
The following schedule identifies each Property included in the
accompanying consolidated financial statements and the method of accounting
utilized for each Property as of December 31, 1996:
CONSOLIDATED METHOD:
- --------------------
REGIONAL MALLS
ALTON SQUARE GREAT LAKES MALL PRIEN LAKE MALL
AMIGOLAND MALL GREENWOOD PARK MALL RALEIGH SPRINGS MALL
ANDERSON MALL GULF VIEW SQUARE RANDALL PARK MALL
BARTON CREEK SQUARE HERITAGE PARK MALL RICHARDSON SQUARE
BATTLEFIELD MALL HUTCHINSON MALL RICHMOND MALL
BAY PARK SQUARE INDEPENDENCE CENTER RICHMOND SQUARE
BERGEN MALL INGRAM PARK MALL ROSS PARK MALL
BILTMORE SQUARE IRVING MALL ST. CHARLES TOWNE CENTER
BOYNTON BEACH MALL JEFFERSON VALLEY MALL SOUTH PARK MALL
BROADWAY SQUARE LA PLAZA MALL SOUTHERN PARK MALL
BRUNSWICK SQUARE LAFAYETTE SQUARE SOUTHGATE MALL
CASTLETON SQUARE LIMA MALL SOUTHTOWN MALL
CENTURY MALL LINCOLNWOOD TOWN CENTER SUMMIT MALL
CHARLES TOWNE SQUARE LONGVIEW MALL SUNLAND PARK MALL
CHAUTAUQUA MALL MACHESNEY PARK MALL TACOMA MALL
CHELTENHAM SQUARE MALL OF THE MAINLAND TIPPECANOE MALL
CHESAPEAKE SQUARE MARKLAND MALL TOWNE EAST SQUARE
CIELO VISTA MALL MCCAIN MALL TOWNE WEST SQUARE
COLLEGE MALL MELBOURNE SQUARE TREASURE COAST SQUARE
COLUMBIA CENTER MEMORIAL MALL TYRONE SQUARE
COTTONWOOD MALL MIAMI INTERNATIONAL MALL UNIVERSITY MALL (ARKANSAS)
CROSSROADS MALL MIDLAND PARK MALL UNIVERSITY MALL (FLORIDA)
CRYSTAL RIVER MALL MILLER HILL MALL UNIVERSITY PARK MALL
DESOTO SQUARE MISSION VIEJO MALL UPPER VALLEY MALL
EAST TOWNE MALL MOUNDS MALL VALLE VISTA MALL
EASTERN HILLS MALL MUNCIE MALL VIRGINIA CENTER COMMONS
EASTGATE CONSUMER MALL NORTH EAST MALL WASHINGTON SQUARE
EASTLAND MALL NORTH TOWNE SQUARE WEST RIDGE MALL
FOREST MALL NORTHGATE MALL WHITE OAKS MALL
FOREST VILLAGE PARK MALL NORTHWOODS MALL WICHITA MALL
FREMONT MALL ORANGE PARK MALL WINDSOR PARK MALL
GLEN BURNIE MALL PADDOCK MALL WOODVILLE MALL
GOLDEN RING MALL PORT CHARLOTTE TOWN CENTER
SPECIALTY RETAIL CENTERS MIXED-USE PROPERTIES
FORUM SHOPS AT CAESARS, THE NEW ORLEANS CENTRE
TROLLEY SQUARE O'HARE INTERNATIONAL CENTER
RIVERWAY
55
COMMUNITY CENTERS
ARVADA PLAZA GRIFFITH PARK PLAZA NEW CASTLE PLAZA
AURORA PLAZA GROVE AT LAKELAND SQUARE, THE NORTH RIDGE PLAZA
BLOOMINGDALE COURT HAMMOND SQUARE NORTH RIVERSIDE PARK PLAZA
BOARDMAN PLAZA HIGHLAND LAKES CENTER NORTHLAND PLAZA
BRIDGEVIEW COURT INGRAM PLAZA NORTHWOOD PLAZA
BRIGHTWOOD PLAZA LAKE PLAZA PARK PLAZA
BRISTOL PLAZA LAKE VIEW PLAZA REGENCY PLAZA
BUFFALO GROVE TOWNE CENTER LIMA CENTER ST. CHARLES TOWNE PLAZA
CELINA PLAZA LINCOLN CROSSING TEAL PLAZA
CHESAPEAKE CENTER MAINLAND CROSSING TERRACE AT THE FLORIDA MALL
COHOES COMMONS MAPLEWOOD SQUARE TIPPECANOE PLAZA
COUNTRYSIDE PLAZA MARKLAND PLAZA UNIVERSITY CENTER
EAST TOWNE COMMONS MARTINSVILLE PLAZA WABASH VILLAGE
EASTLAND PLAZA MARWOOD PLAZA WASHINGTON PLAZA
FOREST PLAZA MATTESON PLAZA WEST RIDGE PLAZA
FOX RIVER PLAZA MEMORIAL PLAZA WHITE OAKS PLAZA
GREAT LAKES PLAZA MOUNDS MALL CINEMA WOOD PLAZA
GREENWOOD PLUS
EQUITY METHOD:
- --------------
REGIONAL MALLS COMMUNITY CENTERS VALUE-ORIENTED SUPER-REGIONAL MALL
AVENTURA MALL COBBLESTONE COURT ONTARIO MILLS
AVENUES, THE CRYSTAL COURT
CENTURY III MALL FAIRFAX COURT MIXED-USE PROPERTY
CIRCLE CENTRE GAITWAY PLAZA THE FASHION CENTRE AT PENTAGON CITY
CORAL SQUARE GREAT NORTHEAST PLAZA
FLORIDA MALL, THE PLAZA AT BUCKLAND HILLS, THE SPECIALTY RETAIL CENTER
INDIAN RIVER MALL RIDGEWOOD COURT THE TOWER SHOPS
LAKELAND SQUARE ROYAL EAGLE PLAZA
LAKELINE MALL VILLAGE PARK PLAZA
NORTHFIELD SQUARE WEST TOWN CORNERS
PALM BEACH MALL WESTLAND PARK PLAZA
ROLLING OAKS MALL WILLOW KNOLLS COURT
SEMINOLE TOWNE CENTER YARDS PLAZA, THE
SMITH HAVEN MALL
COST METHOD:
- ------------
REGIONAL MALL
WEST TOWN MALL
THE DEFICIT MINORITY INTEREST BALANCE IN THE ACCOMPANYING
CONSOLIDATED BALANCE SHEETS REPRESENTS OUTSIDE PARTNERS' INTERESTS IN THE NET
EQUITY OF CERTAIN PROPERTIES. DEFICIT MINORITY INTERESTS WERE RECORDED WHEN A
PARTNERSHIP AGREEMENT PROVIDED FOR THE SETTLEMENT OF DEFICIT CAPITAL ACCOUNTS
BEFORE DISTRIBUTING THE PROCEEDS FROM THE SALE OF PARTNERSHIP ASSETS AND/OR FROM
THE INTENT (LEGAL OR OTHERWISE) AND ABILITY OF THE PARTNER TO FUND ADDITIONAL
CAPITAL CONTRIBUTIONS.
56
3. MERGERS AND REAL ESTATE ACQUISITIONS AND DEVELOPMENTS
MERGERS
DRC. On August 9, 1996, the Company acquired the national shopping
center business of DRC (the "Merger") for an aggregate value of $3.0 billion.
The acquired portfolio consisted of 49 regional malls, 11 community centers and
one mixed-use Property. These Properties included 47,052,267 square feet of
retail space gross leasable area ("GLA") and 558,636 of office GLA. Pursuant to
the Merger, the Company acquired all the outstanding common stock of DRC
(55,712,529 shares), at an exchange ratio of 0.68 share of the Company's common
stock for each share of DRC common stock (the "Exchange Ratio"). A total of
37,873,965 shares of the Company's common stock was issued by the Company to the
DRC shareholders. DRC and the acquisition subsidiary merged. DRC became a 99.9%
subsidiary of the Company and changed its name to SD Property Group, Inc. This
portion of the transaction was valued at approximately $923,179, based upon the
number of DRC shares of common stock acquired (55,712,529 shares), the Exchange
Ratio and the last reported sales price of the Company's common stock on August
9, 1996 ($24.375). In connection therewith, the Company changed its name to
Simon DeBartolo Group, Inc.
In connection with the Merger, the general and limited partners of
SPG, LP contributed 49.5% (47,442,212 units of partnership interest) of the
total outstanding units of partnership interest ("Units") in SPG, LP to the
operating partnership of DRC, DeBartolo Realty Partnership, L.P. ("DRP, LP") in
exchange for 47,442,212 Units of partnership interest in DRP, LP, whose name was
changed to Simon DeBartolo Group, L.P. ("SDG, LP"). The Company retained a 50.5%
partnership interest (48,400,641 Units) in SPG, LP but assigned its rights to
receive distributions of profits on 49.5% (47,442,212 Units) of the outstanding
Units of partnership interest in SPG, LP to SDG, LP. The limited partners of
DRP, LP approved the contribution made by the partners of SPG, LP and
simultaneously exchanged their 38.0% (34,203,623 Units) partnership interest in
DRP, LP, adjusted for the Exchange Ratio, for a smaller partnership interest in
SDG, LP. The exchange of the limited partners' 38.0% partnership interest in
DRP, LP for Units of SDG, LP has been accounted for as an acquisition of
minority interest by the Company and is valued based on the estimated fair value
of the consideration issued (approximately $566,900). The Units of SDG, LP may
under certain circumstances be exchangeable for common stock of the Company on a
one-for-one basis. Therefore, the value of the acquisition of the DRP, LP
limited partners' interest acquired was based upon the number of DRP, LP Units
exchanged (34,203,623), the Exchange Ratio and the last reported sales price per
share of the Company's common stock on August 9, 1996 ($24.375). The limited
partners of SPG, LP received a 23.7% partnership interest in SDG, LP (37,282,628
Units) for the contribution of their 38.9% partnership interest in SPG, LP
(37,282,628 Units) to SDG, LP. The interests transferred by the partners of SPG,
LP to DRP, LP have been appropriately reflected at historical costs.
Upon completion of the Merger, the Company became a general partner of
SDG, LP with 36.9% (57,605,796 Units) of the outstanding partnership Units in
SDG, LP and became through SD Property Group, Inc. the managing general partner
of SDG, LP with 24.3% (37,873,965 Units in SPG, LP) of the outstanding
partnership Units in SDG, LP. The Company remained the sole general partner of
SPG, LP with 1% of the outstanding partnership Units (958,429 Units) and 49.5%
interest in the capital of SPG, LP, and SDG, LP became a special limited partner
in SPG, LP with 49.5% (47,442,212 Units) of the outstanding partnership Units in
SPG, LP and an additional 49.5% interest in the profits of SPG, LP. SPG, LP did
not acquire any interest in SDG, LP. Upon completion of the Merger, the Company
directly and indirectly owned a controlling 61.2% (95,479,761 Units) partnership
interest in SDG, LP.
For financial reporting purposes, the completion of the Merger
resulted in a reverse acquisition by the Company, using the purchase method of
accounting, directly or indirectly, of 100% of the net assets of DRP, LP for
consideration valued at $1.5 billion, including related transaction costs. The
purchase price has been allocated to the fair value of the assets and
liabilities of DRP, LP at December 31, 1996. Certain assumptions were made which
management of the General Partners believes are reasonable. Final adjustments to
the purchase price allocation were not completed at December 31, 1996. While no
material changes to the allocation are anticipated, changes will be recorded in
1997.
Although the Company was the accounting acquirer, SDG, LP (formerly
DRP, LP) became the primary operating partnership through which the future
business of the Company will be conducted. As a result of the Merger, the
Company's initial operating partnership, SPG, LP, became a subsidiary of SDG, LP
with 99% of the profits allocable to SDG, LP and 1% of the profits allocable to
the Company. Cash flow allocable to the Company's 1% profit interest in SDG, LP
is absorbed by public company costs and related expenses incurred by the
Company. However, because the Company was the accounting acquirer and, upon
completion of the Merger, acquired majority control of SDG, LP; SPG, LP is the
predecessor to SDG, LP for financial reporting purposes. Accordingly, the
financial statements of SDG, LP for the post-Merger periods and for all
pre-Merger comparative periods reflect the reverse acquisition of DRP, LP by the
57
Company using the purchase method of accounting, and the financial statements of
SDG, LP reflect the financial statements of SPG, LP as the predecessor to SDG,
LP for financial reporting purposes.
It is currently expected that subsequent to the first anniversary of
the date of the Merger, reorganizational transactions will be effected so that
SDG, LP will directly own all of the assets and partnership interests now owned
by SPG, LP. However, there can be no assurance that such reorganizational
transactions will be so effected.
MSA REALTY CORPORATION ("MSAR"). On September 1, 1994, the Company
issued an additional 1,799,945 shares of common stock in conjunction with the
merger of MSAR. Each outstanding share of MSAR common stock as of August 31,
1994, was converted into 0.31 shares of the Company's common stock. The
acquisition price, including related transaction costs, was $48,031. The
Company's investment in MSAR was contributed to the Operating Partnership for
1,799,945 Units, which increased the Company's ownership of the Operating
Partnership by 1.0% to 56.4%. As a result of the acquisition, the Operating
Partnership now owns 100% of fourteen centers in which it previously held a 50%
interest and substantially all of the ownership interest in one community
shopping center in which it held a minority interest. In addition, the Operating
Partnership obtained a noncontrolling 50% interest in a regional mall. This
transaction was accounted for using the purchase method of accounting. The
purchase price in excess of the net assets acquired of $26,507 was allocated to
investment properties. The Operating Partnership's interest in the assets and
liabilities of these centers prior to this transaction is reflected at
predecessor cost. Subsequent to September 1, 1994, each of the Properties
involved in this merger was accounted for using the consolidated method of
accounting.
ACQUISITIONS AND DEVELOPMENTS
INDEPENDENCE CENTER. On December 1, 1994, the Operating Partnership
acquired Independence Center in Independence, Missouri. Included in the purchase
are approximately 47 acres of undeveloped land adjacent to the mall. Under the
terms of the sale, the Operating Partnership paid $51,413, including transaction
costs, funded through the use of the Operating Partnership's credit facilities.
BROADWAY SQUARE, ORANGE PARK MALL AND UNIVERSITY MALL. On December 29,
1994, the Operating Partnership acquired Broadway Square in Tyler, Texas; Orange
Park Mall in Jacksonville, Florida; and University Mall in Pensacola, Florida.
Under the terms of the sale, the Operating Partnership paid $153,874, including
transaction costs, funded through the use of the Operating Partnership's credit
facilities. Included in the purchase price were approximately 14 acres and 10
acres of undeveloped land adjacent to Orange Park Mall and University Mall,
respectively.
WHITE OAKS MALL. At the time of the Company's initial public offering
in December 1993, the Teacher's Retirement System of the State of Illinois
("TRS") held an option to put its 50% general and limited partnership interests
in White Oaks Mall in Springfield, Illinois, to the Operating Partnership. TRS
exercised this option on January 23, 1995, and the purchase closed February 23,
1995. The Units which TRS received upon exercise of the options were exchanged
for 2,022,247 shares of common stock of the Company. The Operating Partnership
now owns 77% of White Oaks Mall. The issuance of the additional shares increased
the Company's ownership interest in the Operating Partnership by 1.0% to 57.6%.
The White Oaks Mall transaction, valued at $45,000, was accounted for using the
purchase method of accounting. The purchase price in excess of the net assets
acquired of $10,905 was allocated to investment properties. The Operating
Partnership's interest in the assets and liabilities of this Property prior to
this transaction is reflected at predecessor cost. Effective February 23, 1995,
White Oaks Mall was being accounted for in the accompanying consolidated
financial statements using the consolidated method of accounting. It was
previously accounted for using the equity method of accounting.
CROSSROADS MALL. Prior to July 31, 1995, the Operating Partnership held
a 50% joint venture interest in Crossroads Mall in Omaha, Nebraska. On July 31,
1995, the Operating Partnership acquired the remaining 50% ownership in the
Property from Melvin Simon, Herbert Simon, and certain of their affiliates
(collectively, the "Simons") in exchange for 120,000 Units. The acquisition was
reflected at predecessor cost. Concurrent with the acquisition, a debt
restructuring was completed which included the issuance of 1,200,000 shares of
common stock of the Company to the lender (New York State Teachers' Retirement
System) in exchange for a $30,000 reduction of the outstanding loan balance
which included accrued interest. In addition, the effective interest rate on the
remaining balance of $41,400 was reduced from 10.5% to 7.75%. The loan matures
on July 31, 2002. Effective July 31, 1995, Crossroads Mall was included in the
accompanying consolidated financial statements using the consolidated method of
accounting. It was previously accounted for using the equity method of
accounting.
58
THE SHOPS AT SUNSET PLACE. On August 15, 1995, the Operating
Partnership acquired for $11,406 a controlling 75% joint venture interest in a
redevelopment project to be named "The Shops at Sunset Place" in South Miami,
Florida, using borrowings from its unsecured revolving credit facility. The
Operating Partnership began construction on this 500,000 square foot development
property in November 1996, and it is scheduled for completion in 1998. The
Operating Partnership expects to have construction financing for the majority of
the development costs of this project in place before the end of the second
quarter of 1997. This project is included in the accompanying consolidated
financial statements using the consolidated method of accounting.
EAST TOWNE MALL. Prior to September 25, 1995, the Operating
Partnership held a 45.0% joint venture interest in East Towne Mall in Knoxville,
Tennessee. On September 25, 1995, the Operating Partnership acquired the
remaining interest for $18,500 and the assumption of 55% of the $75,000 of
existing mortgage debt. In connection with the transaction, the Operating
Partnership refinanced the $75,000 mortgage. These transactions were funded
through a new loan of $55,000 and $38,500 in borrowings from the Operating
Partnership's unsecured revolving credit facility. The transaction was accounted
for using the purchase method of accounting. The purchase price in excess of the
net assets acquired of $21,982 was allocated to investment properties. Effective
September 25, 1995, East Towne Mall was included in the accompanying
consolidated financial statements using the consolidated method of accounting.
It was previously accounted for using the equity method of accounting.
THE SOURCE. On December 22, 1995, a joint venture, in which the
Operating Partnership has a noncontrolling 50% joint venture interest acquired a
development project located in Westbury (Long Island), New York, for $30,253.
This transaction was initially financed using borrowings from the Operating
Partnership's unsecured revolving credit facility. When construction financing
of $120,000 closed on this property in July 1996, the Operating Partnership was
repaid its $27,500 loan. The construction loan carries interest at LIBOR plus
170 basis points and matures on July 16, 2001. Construction commenced in
February 1996 and this 730,000 square foot value-oriented retail center
development is expected to open in August 1997. This joint venture is being
accounted for using the equity method of accounting.
SMITH HAVEN MALL. On December 28, 1995, a joint venture in which the
Operating Partnership owns a noncontrolling 25% interest purchased Smith Haven
Mall, a 1.3 million square foot regional mall located in Lake Grove (Long
Island), New York, for $221,000. The Operating Partnership's contribution of
$55,725 to the purchase price of $221,000 was financed using borrowings from the
Operating Partnership's unsecured revolving credit facility. On June 17, 1996,
the joint venture closed on a $115,000 interest-only mortgage maturing June 1,
2006. Subsequently, the Operating Partnership received a reimbursement of
$28,256 of its contribution. This joint venture is being accounted for using the
equity method of accounting.
ROSS PARK MALL. Prior to April 11, 1996, the Operating Partnership
held a 50% joint venture interest in Ross Park Mall in Pittsburgh, Pennsylvania.
On April 11, 1996, the Operating Partnership acquired the remaining economic
ownership interest. The purchase price included approximately $44,000 cash and
the assumption of the joint venture partner's share of existing debt ($57,000).
The purchase price in excess of the net assets acquired of $49,074 was allocated
to investment properties. Effective April 11, 1996, the property is being
accounted for using the consolidated method of accounting. It was previously
accounted for using the equity method of accounting.
COTTONWOOD MALL. Cottonwood Mall opened on July 31, 1996, in
Albuquerque, New Mexico. This 1.0 million square foot regional mall is
wholly-owned by the Operating Partnership. The development costs were financed
through a $60,000 construction loan, which bore interest at the lower of the
prime rate plus 25 basis points or LIBOR plus 200 basis points and had a
scheduled maturity of February 1, 1999. On November 26, 1996, using proceeds
from the sale of the Notes (See Note 8) the Operating Partnership retired the
entire $57,000 outstanding balance.
NORTH EAST MALL. Prior to October 4, 1996, the Operating Partnership
held a 50% joint venture interest in North East Mall in Hurst, Texas. On October
4, 1996, in connection with the settlement of certain outstanding litigation,
the Operating Partnership acquired for $12,100 an additional 20% limited
partnership interest in North East Mall. At the same time, the Operating
Partnership exercised its option to acquire the remaining 30% limited
partnership interest in North East Mall owned by the Simons in exchange for
472,410 Units in the Operating Partnership, as well as the Simons' 50% general
partnership interest which the Operating Partnership acquired for nominal
consideration. The Simons had previously contributed the right to receive
distributions relating to its 50% general partnership interest to the Operating
Partnership, in exchange for Units. As a result of these transactions, the
Operating Partnership owns 100% of North East Mall and accounts for it using the
consolidated method of accounting.
59
MILLS DEVELOPMENTS. On December 29, 1995, the Operating Partnership
entered into arrangements with The Mills Corporation to develop value-oriented
super-regional malls in Ontario (Los Angeles), California; Grapevine
(Dallas/Fort Worth), Texas; and Tempe (Phoenix), Arizona. Ontario Mills, a
25%-owned, 1.3 million square foot super-regional mall, opened on November 14,
1996, in Ontario, California. The Operating Partnership financed its $15,000
equity commitment for this project in 1996. Grapevine Mills, a 37.5%-owned, 1.5
million square foot development project, broke ground on July 10, 1996, and is
expected to open in October 1997. The Operating Partnership has a $14,000 equity
commitment on this $211,000 development project. Arizona Mills, a 25%-owned, 1.2
million square foot development project, broke ground on August 1, 1996, and is
expected to open in November 1997. The Operating Partnership has a $13,500
equity investment in this $183,000 development project. These projects are being
accounted for using the equity method of accounting.
JOINT VENTURE PROPERTY OPENINGS. The Operating Partnership opened
three new Joint Venture Properties during 1996. Ontario Mills, described above,
opened on November 14, 1996. Indian River Mall opened on November 15, 1996, in
Vero Beach, Florida. The Operating Partnership has a noncontrolling 50.0%
ownership interest in this approximately 750,000 square foot regional mall. The
Tower Shops in Las Vegas, Nevada, also opened in November 1996. The Operating
Partnership has a noncontrolling 50.0% ownership interest in this approximately
60,000 square foot specialty retail center. Each of these properties is being
accounted for using the equity method of accounting.
The Operating Partnership also opened three new regional malls during
1995. Circle Centre opened on September 8, 1995, in Indianapolis, Indiana. The
Operating Partnership has a 14.7% ownership interest in this approximately
800,000 square foot regional mall. Seminole Towne Center opened on September 22,
1995, in Sanford, Florida. The Operating Partnership has a 45.0% ownership
interest in this approximately 1.1 million square foot regional mall. Lakeline
Mall opened on October 18, 1995, in Austin, Texas. The Operating Partnership has
a noncontrolling 50.0% ownership interest in this approximately 1.1 million
square foot regional mall. Each of these regional malls is being accounted for
using the equity method of accounting.
PRO FORMA
The following unaudited pro forma summary financial information
combines the consolidated results of operations of the Operating Partnership as
if the Merger had occurred as of January 1, 1995, and was carried forward
through December 31, 1996. Preparation of the pro forma summary information was
based upon assumptions deemed appropriate by the Operating Partnership. The pro
forma summary information is not necessarily indicative of the results which
actually would have occurred if the Merger had been consummated at January 1,
1995, nor does it purport to represent the future financial position and results
of operations for future periods.
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995
---------------- ----------------
Revenue $ 956,407 $ 889,714
================ ================
Net income available for unitholders 155,007 164,534
General Partner 95,128 99,708
================ ================
Limited Partners 59,879 64,826
================ ================
Net income per Unit $ 0.99 $ 1.07
================ ================
Weighted average number of Units 157,073,785 153,763,446
================ ================
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT PROPERTIES
Investment properties are recorded at the lower of cost (predecessor
cost for Properties acquired from the Simons) or net realizable value. Net
realizable value of investment Properties for financial reporting purposes is
reviewed for impairment on a Property-by-Property basis whenever events or
changes in circumstances indicate that the carrying amount of investment
properties may not be recoverable. Impairment of investment properties is
recognized when estimated undiscounted operating income is less than the
carrying value of the Property. To the extent an impairment has occurred, the
excess of carrying value of the Property over its estimated net realizable value
will be charged to income. The Operating Partnership adopted Statement of
Financial Accounting Standards ("SFAS") No. 121 (Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of) on January 1,
1996. The adoption of this pronouncement had no impact on the accompanying
60
consolidated financial statements. Investment properties include costs of
acquisition, development, construction, tenant allowances and improvements,
interest and real estate taxes incurred during construction, certain capitalized
improvements and replacements, and certain allocated overhead.
Depreciation on buildings and improvements is provided utilizing the
straight-line method over an estimated original useful life of 10 to 45 years,
resulting in an average composite life of approximately 30 years. Depreciation
on tenant allowances and improvements is provided utilizing the straight-line
method over the term of the related lease.
Certain improvements and replacements are capitalized when they extend
the useful life, increase capacity, or improve the efficiency of the asset. All
other repair and maintenance items are expensed as incurred.
CAPITALIZED INTEREST
Interest is capitalized on projects during periods of construction.
Interest capitalized by the Operating Partnership during 1996, 1995 and 1994 was
$5,831, $1,515 and $1,586, respectively.
DEFERRED COSTS
Deferred costs consist primarily of financing fees incurred to obtain
long-term financing, costs of interest rate protection agreements, and internal
and external leasing commissions and related costs. Deferred financing costs,
including interest rate protection agreements, are amortized on a straight-line
basis over the terms of the respective loans or agreements. Deferred leasing
costs are amortized on a straight-line basis over the terms of the related
leases. Deferred costs consist of the following:
DECEMBER 31,
------------------------------------
1996 1995
--------------- ---------------
Deferred financing costs $ 64,931 $ 68,042
Leasing costs and other 97,380 88,094
--------------- ---------------
162,311 156,136
Less-accumulated amortization 70,386 74,738
--------------- ---------------
Deferred costs, net $ 91,925 $ 81,398
=============== ===============
Included in interest expense in the accompanying Consolidated
Statements of Operations is amortization of deferred financing costs of $8,434,
$8,523 and $7,251 for 1996, 1995 and 1994, respectively.
REVENUE RECOGNITION
The Operating Partnership, as a lessor, has retained substantially all
of the risks and benefits of ownership of the investment Properties and accounts
for its leases as operating leases. Minimum rents are accrued on a straight-line
basis over the terms of their respective leases. Overage rents are recognized
when earned.
Reimbursements from tenants for real estate taxes and other
recoverable operating expenses are recognized as revenue in the period the
applicable expenditures are incurred.
61
ALLOWANCE FOR CREDIT LOSSES
A provision for credit losses is recorded based on management's
judgment of tenant creditworthiness. The activity in the allowance for credit
losses during 1996, 1995 and 1994 was as follows:
Balance at Provision Accounts Balance at
Beginning for Credit Written End of
Year Ended of Year Losses Off Year
------------- --------------- ------------- --------------
December 31, l996 $ 4,259 $ 3,460 $ (1,027) $ 6,692
============= =============== ============= ==============
December 31, l995 $ 2,943 $ 2,858 $ (1,542) $ 4,259
============= =============== ============= ==============
December 31, l994 $ - $ 3,417 $ (474) $ 2,943
============= =============== ============= ==============
INCOME TAXES
As a partnership, the allocated share of income or loss for each year
is included in the income tax returns of the partners, accordingly, no
accounting for income taxes is required in the accompanying consolidated
financial statements. State and local taxes are not material.
Taxable income of the Operating Partnership for the years ended
December 31, 1996 and 1995, is estimated to be $124,616 and was $100,915 and
$44,683 for the years ended December 31, 1995 and 1994, respectively.
Reconciling differences between book income and tax income primarily result from
timing differences consisting of (i) depreciation expense, (ii) prepaid rental
income and (iii) straight-line rent. Furthermore, the Operating Partnership's
share of income or loss from the affiliated Management Company is excluded from
the tax return of the Operating Partnership.
PER UNIT DATA
The net income per unit is based on the weighted average number of
units outstanding during the period. The weighted average number of units used
in the computation for 1996, 1995 and 1994 was 120,181,895; 92,666,469; and
84,509,597 , respectively. Units held by limited partners in SDG, LP may be
exchanged for shares of common stock of the Company on a one-for-one basis in
certain circumstances (see Note 10). The outstanding stock options, the Units
which are exchangeable for common stock of the Company and the preferred units,
which can be converted into Units, have not been considered in the computations
of per unit data as they did not have a dilutive effect.
The Operating Partnership declared distributions in 1996 aggregating
$1.63 per share. This includes a $0.1515 distribution on August 9, 1996, in
connection with the Merger, designated to align the time periods of distribution
payments. The current annual distribution rate is $1.97 per unit. The following
is a summary of distributions per unit declared in 1996 and 1995, which
represented a return of capital measured using generally accepted accounting
principles:
62
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------
Distributions per Unit 1996 1995
- ----------------------------------------------- -------------------- ---------------------
From book net income $ 0.99 $1.04
Representing return of capital 0.64 0.93
-------------------- ---------------------
Total distributions $ 1.63 $1.97
==================== =====================
On a federal income tax basis, 64% of the 1996 distributions and 25%
of the 1995 distributions represented return of capital.
STATEMENTS OF CASH FLOWS
For purposes of the Statements of Cash Flows, all highly liquid
investments purchased with an original maturity of 90 days or less are
considered as cash and cash equivalents. Cash equivalents are carried at cost,
which approximates market value. Cash equivalents generally consist of
commercial paper, bankers acceptances, Eurodollars, repurchase agreements and
Dutch auction securities. Cash and cash equivalents do not include restricted
cash of $6,110 as of December 31, 1996. Cash is restricted primarily for
renovations, redevelopment and other activities of the 17 properties which
collateralize commercial pass-through certificates (defined in Note 8). There
were no restrictions on cash and cash equivalents in 1995.
Cash paid for interest, net of any amounts capitalized, during 1996,
1995 and 1994 were $197,796, $142,345 and $140,106 respectively. The 1994 amount
includes a $27,184 nonrecurring interest charge.
NONCASH TRANSACTIONS
In connection with the Employee Plan of the Company (see Note 11), on
March 22, 1995, an aggregate of 1,000,000 shares of restricted stock was
reserved for 50 executives, subject to the performance standards and other terms
of the plan. During 1996 and 1995, 200,030 and 144,196 shares of common stock
were granted, respectively, under the Stock Incentive Program. The value of
these shares is being amortized pro-rata over the respective four-year vesting
period. Approximately $2,084 and $918 were amortized in 1996 and 1995,
respectively, relating to this program. Effective October 4, 1996, the Operating
Partnership reflected North East Mall using the consolidated method of
accounting. See Note 3 for certain other noncash transactions.
Accrued and unpaid distributions as of December 31, 1996 and 1995,
were $0 and $47,104, respectively. Accrued and unpaid distributions at December
31, 1995, included $1,490 related to the Series A convertible preferred units .
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation. These reclassifications
have no impact on net operating results previously reported.
63
5. INVESTMENT PROPERTIES
Investment properties consist of the following:
DECEMBER 31,
--------------------------------------
1996 1995
----------------- -----------------
Land $ 1,003,221 $ 283,722
Buildings and improvements 4,270,244 1,860,203
----------------- -----------------
Total land, buildings and improvements 5,273,465 2,143,925
Furniture, fixtures and equipment 27,556 18,236
----------------- -----------------
Investment properties at cost 5,301,021 2,162,161
Less--accumulated depreciation 279,072 152,817
----------------- -----------------
Investment properties at cost, net $ 5,021,949 $ 2,009,344
================= =================
Building and improvements include $86,461 and $40,676 of construction
in progress at December 31, 1996 and 1995, respectively.
6. INVESTMENT IN PARTNERSHIPS AND JOINT VENTURES
As of December 31, 1996, the unamortized excess of the Operating
Partnership's investment over its share of the equity in the underlying net
assets of the partnerships and joint ventures ("Excess Investment") was
approximately $232,927. This Excess Investment is being amortized generally over
the life of the related Properties. Amortization included in income from
unconsolidated entities for 1996 was $5,127.
Summary financial information of partnerships and joint ventures
accounted for using the equity method and a summary of the Operating
Partnership's investment in and share of income from such partnerships and joint
ventures follows.
DECEMBER 31,
-------------------------------------
BALANCE SHEETS 1996 1995
---------------- ----------------
ASSETS:
Investment properties at cost, net $ 1,887,555 $ 1,156,066
Cash and cash equivalents 61,267 52,624
Tenant receivables 58,548 35,306
Other assets 69,365 32,626
---------------- ----------------
Total assets $ 2,076,735 $ 1,276,622
================ ================
LIABILITIES AND PARTNERS' EQUITY:
Mortgages and other notes payable $ 1,121,804 $ 410,652
Accounts payable, accrued expenses and other liabilities 213,394 127,322
---------------- ----------------
Total liabilities 1,335,198 537,974
Partners' equity 741,537 738,648
---------------- ----------------
Total liabilities and partners' equity $ 2,076,735 $ 1,276,622
================ ================
THE OPERATING PARTNERSHIP'S SHARE OF:
Total assets $ 602,084 $ 290,802
================ ================
Partners' equity $ 144,376 $ 63,212
Add: Excess Investment 232,927 --
---------------- ----------------
Operating Partnership's net Investment in joint ventures $ 377,303 $ 63,212
================ ================
64
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------
STATEMENTS OF OPERATIONS 1996 1995 1994
-------------- ------------- --------------
Revenue:
Minimum rent $ 144,166 $ 83,905 $ 92,380
Overage rent 7,872 2,754 3,655
Tenant reimbursements 73,492 39,500 45,440
Other income 11,178 13,980 10,131
-------------- -------------- -------------
Total revenue 236,708 140,139 151,606
OPERATING EXPENSES:
Operating expenses and other 88,678 46,466 55,949
Depreciation and amortization 50,328 26,409 26,409
-------------- -------------- -------------
Total operating expenses 139,006 72,875 82,358
-------------- -------------- -------------
OPERATING INCOME 97,702 67,264 69,248
INTEREST EXPENSE 48,918 28,685 38,124
EXTRAORDINARY ITEMS (1,314) (2,687) --
-------------- -------------- -------------
NET INCOME 47,470 35,892 31,124
THIRD-PARTY INVESTORS' SHARE OF NET INCOME 38,283 30,752 30,090
-------------- -------------- -------------
THE OPERATING PARTNERSHIP'S SHARE
OF NET INCOME $ 9,187 $ 5,140 $ 1,034
AMORTIZATION OF EXCESS INVESTMENT 5,127 -- --
-------------- -------------- -------------
INCOME FROM UNCONSOLIDATED ENTITIES $ 4,060 $ 5,140 $ 1,034
============== ============== =============
The net income or net loss for each partnership and joint venture is
allocated in accordance with the provisions of the applicable partnership or
joint venture agreement. The allocation provisions in these agreements are not
always consistent with the ownership interests held by each general or limited
partner or joint venturer, primarily due to partner preferences. The Operating
Partnership receives substantially all of the economic benefit of Biltmore
Square, Chesapeake Square, Northfield Square and Port Charlotte Town Center,
resulting from advances made to these joint ventures.
7. INVESTMENT IN MANAGEMENT COMPANY
The Operating Partnership holds 80% of the outstanding common stock,
5% of the outstanding voting common stock, and all of the preferred stock of the
Management Company. The remaining 20% of the outstanding common stock of the
Management Company (representing 95% of the voting common stock) is owned
directly by Melvin, Herbert and David Simon. The Management Company, including
its consolidated subsidiaries, provides management, leasing, development,
accounting, legal, marketing and management information systems services to 33
Minority Interest and Joint Venture Properties, Melvin Simon & Associates, Inc.
("MSA"), and certain other nonowned properties. Because the Operating
Partnership exercises significant influence over the financial and operating
policies of the Management Company, it is reflected in the accompanying
statements using the equity method of accounting.
In connection with the Merger, the Management Company purchased 95% of
the voting stock (665 shares of common stock) of DeBartolo Property Management,
Inc. ("DPMI"), a DRC management company, for $2,500 in cash. DPMI provides
architectural, design, construction and other services primarily to the
Properties. During 1996, DPMI formed a captive insurance company, which provided
property damage and general liability insurance for certain Properties in 1996.
The Operating Partnership paid a total of $2,383 to this wholly-owned subsidiary
of the Management Company for insurance coverage during 1996. The Management
Company accounts for both DPMI and the captive insurance company using the
consolidated method of accounting.
During 1995, the Operating Partnership advanced a net of $27,500 to
the Management Company, which bears interest at 11%. The proceeds were used to
acquire a $27,500 mortgage note due from The Source, in which the Operating
Partnership has a noncontrolling 50% interest. In July 1996, the joint venture
which owns The Source closed on a $120,000 construction loan and retired the
mortgage note. The Management Company in turn repaid the Operating Partnership
the $27,500 advanced in 1995. The Management Company also liquidated in 1995 its
interest in a partnership investment which held a 9.8-acre parcel of land in
Rosemont, Illinois. The sale of that parcel resulted in a loss of $958 to the
Management Company. Further, an undeveloped two-acre parcel of land in
Washington, D.C., for which the Management Company held a mortgage, was sold in
December 1995. The Management Company forwarded $11,000 of the net proceeds from
65
this sale to the Operating Partnership in January 1996 to reduce its outstanding
loan balance. The Management Company recorded a loss in connection with this
transaction of $3,949.
Management, development and leasing fees charged to the Operating
Partnership relating to the Minority Interest Properties were $6,916, $5,353 and
$2,352 for the years ended December 31, 1996, 1995 and 1994, respectively.
Architectural, contracting and engineering fees charged to the Operating
Partnership for 1996 were $21,650. Fees for services provided by the Management
Company to MSA were $4,000, $4,572 and $7,239 for the years ended December 31,
1996, 1995 and 1994, respectively, and are included in cost-sharing income and
other in the Management Company's Statements of Operations.
At December 31, 1996 and 1995, total notes receivable and advances due
from the Management Company and consolidated affiliates were $75,452 and
$102,522, respectively. The 1996 amount includes $11,474 due from DPMI. Unpaid
interest income receivable from the Management Company at December 31, 1996 and
1995, was $0 and $84, respectively. All preferred dividends due from the
Management Company were paid by December 31, 1996 and 1995. These interest and
preferred dividend receivables are reflected in tenant receivables and accrued
revenue in the accompanying Consolidated Balance Sheets.
Summarized consolidated financial information of the Management
Company, accounted for using the equity method, and a summary of the Operating
Partnership's investment in and share of income (loss) from the Management
Company follows.
DECEMBER 31,
---------------------------------
BALANCE SHEETS 1996 1995
--------------- ---------------
ASSETS:
Current assets $ 69,708 $ 40,964
Undeveloped land and mortgage notes 16,177 45,769
Other assets 24,378 13,813
Total assets 110,263 $ 100,546
=============== ===============
LIABILITIES AND SHAREHOLDERS' DEFICIT:
Current liabilities $ 46,690 $ 18,435
Notes payable and advances due to the Operating Partnership at 11%, due 2008 75,452 102,522
--------------- ---------------
Total liabilities 122,142 120,957
Shareholders' deficit (11,879) (20,411)
--------------- ---------------
Total liabilities and shareholders' deficit $ 110,263 $ 100,546
=============== ===============
THE OPERATING PARTNERSHIP'S SHARE OF:
Total assets $ 96,316 $ 80,437
=============== ===============
Shareholders' deficit $ (13,567) $ (20,612)
=============== ===============
66
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------
STATEMENTS OF OPERATIONS 1996 1995 1994
--------------- --------------- ---------------
REVENUE:
Management fees $ 20,529 $ 20,106 $ 18,587
Architectural, contracting and engineering fees 35,546 -- --
Development and leasing fees 10,611 15,451 9,683
Cost-sharing income and other 11,979 7,561 10,077
--------------- --------------- ---------------
Total revenue 78,665 43,118 38,347
EXPENSES:
Operating expenses and costs of construction 60,508 31,163 27,944
Depreciation 2,852 2,275 1,406
Interest 6,232 7,694 8,623
--------------- --------------- ---------------
Total expenses 69,592 41,132 37,973
--------------- --------------- ---------------
OPERATING INCOME 9,073 1,986 374
LOSS ON DISPOSITION OF ASSETS -- (4,907) --
--------------- --------------- ---------------
NET INCOME (LOSS) 9,073 (2,921) 374
PREFERRED DIVIDENDS 1,400 1,400 1,400
--------------- --------------- ---------------
NET INCOME (LOSS) AVAILABLE FOR
COMMON SHAREHOLDERS $ 7,673 $ (4,321) $ (1,026)
=============== =============== ===============
THE OPERATING PARTNERSHIP'S SHARE
OF NET INCOME (LOSS) $ 7,025 $ (3,737) $ (1,101)
INTERCOMPANY PROFIT ELIMINATION 1,540 -- --
--------------- --------------- ---------------
THE OPERATING PARTNERSHIP'S SHARE
OF NET INCOME (LOSS) $ 5,485 $ (3,737) $ (1,101)
=============== =============== ===============
The Operating Partnership manages all Wholly-Owned Properties and
substantially all of the Minority Interest and Joint Venture Properties that
were owned by DRC prior to the Merger, and, accordingly, it reimburses the
Administrative Services Partnership ("ASP"), a subsidiary of the Management
Company, for costs incurred, including management, leasing, development,
accounting, legal, marketing, and management information systems. Substantially
all employees (other than direct field personnel) are employed by ASP, which is
owned 1% by the Operating Partnership and 99% by the Management Company. The
Management Company's Statements of Operations report costs net of amounts
reimbursed by the Operating Partnership. Common costs are allocated based on
payroll and related costs. In management's opinion, allocations under the
cost-sharing arrangement are reasonable. The Operating Partnership's share of
allocated common costs was $29,262, $21,874 and $15,619 for 1996, 1995 and 1994,
respectively.
Amounts payable by the Operating Partnership under the cost-sharing
arrangement and management contracts were $3,288 and $1,175 at December 31, 1996
and 1995, respectively, and are reflected in accounts payable and accrued
expenses in the accompanying Consolidated Balance Sheets.
8. INDEBTEDNESS
Mortgages and other notes payable consist of the following:
DECEMBER 31,
---------------------------------------
1996 1995
----------------- ----------------
FIXED-RATE DEBT
Mortgages and other notes payable, net $ 2,076,428 $ 1,232,360
Commercial mortgage pass-through certificates, net 377,650 --
6 7/8% unsecured notes, net of $839 discount 249,161 --
6 3/4% putable asset trust securities,
including $1,472 premium 101,472 --
67
----------------- ----------------
Total fixed-rate Debt 2,804,711 1,232,360
VARIABLE-RATE DEBT
Mortgages and other notes payable, net $ 561,985 $ 530,000
Credit facility 230,000 196,000
Commercial mortgage pass-through certificates, net 85,288 --
Construction loan -- 22,399
----------------- ----------------
Total variable-rate debt 877,273 748,399
----------------- ----------------
Total mortgages and other notes payable $ 3,681,984 $ 1,980,759
================= ================
68
FIXED-RATE DEBT
MORTGAGE LOANS & OTHER NOTES. The fixed-rate mortgage loans and
other notes bear interest ranging from 5.81% to 10.00% (weighted average of
7.68%), require monthly payments of principal and/or interest and have various
due dates through 2026 (average maturity of 6.7 years). Certain of the
Properties are pledged as collateral to secure the related mortgage note. The
fixed and variable mortgage notes are nonrecourse but have partial guarantees by
affiliates of approximately $506,406. Certain of the Properties are
cross-defaulted and cross-collateralized as part of a group of Properties. Under
certain of the cross-default provisions, a default under any mortgage included
in the cross-defaulted package may constitute a default under all such mortgages
and may lead to acceleration of the indebtedness due on each Property within the
collateral package. Certain of the Properties are subject to a provision in
which the lender participates in a percentage of gross revenues above a
specified base or after deduction of debt service and various expenses.
Contingent interest incurred under these arrangements was $1,645, $1,929 and
$1,527 for the years ended December 31, 1996, 1995 and 1994, respectively.
Certain of the Properties are subject to financial performance covenants
relating to debt-to-market capitalization, minimum earnings before interest,
taxes, depreciation and amortization ("EBITDA") ratios and minimum equity
values.
The Operating Partnership is currently in default on a loan where the
Property's cash flow is insufficient to service the $40,700 loan (of which
$6,600 is guaranteed and $34,100 is nonrecourse). The Property and its related
debt were assumed during the Merger. The Operating Partnership is continuing
negotiations with the lender.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
DeBartolo Capital Partnership ("DCP"), a Delaware general partnership
whose interest is owned 100% by affiliated entities, holds commercial mortgage
pass-through certificates in the face amount of $453,546 at December 31, 1996.
The commercial mortgage pass-through certificates bear interest at fixed-rates
from 7.59% to 9.24% (weighted average 8.12%) and are due in April 2001. The
variable-rate certificates bear interest at LIBOR, subject to an interest rate
swap agreement plus 56 basis points (5.31% at December 31, 1996), and are due in
April 2001. The debt is secured by assets of 17 of the Wholly-Owned Properties,
and the debt's commercial mortgage pass-through certificate covenants require
DCP to fund into escrow reserves for renovations, repairs and maintenance and
tenant allowances, and to maintain minimum debt service coverage ratios (as
defined) and other restrictive covenants. DCP has obtained an extension to the
cure period for a default related to one of the Properties. The default
provisions relate solely to one individual Property and not to the remaining
Properties in the Securitized Debt Financing pool. Management intends to
complete the required changes within the extended cure period, which is expected
to be extended to December 1998.
6 7/8% UNSECURED NOTES. The nonconvertible investment-grade unsecured
debt securities (the "Notes") were issued on November 21, 1996. The Notes pay
interest semiannually, mature in 2006, are guaranteed by SDG, LP and SPG, LP,
and contain leverage ratios and minimum EBITDA and unencumbered EBITDA ratios.
The Notes were issued under the Operating Partnership's $750,000 shelf
registration which became effective in November 1996, of which $500,000 remains
available.
6 3/4% PUTABLE ASSET TRUST SECURITIES (PATS). The PATS, issued
December 1996, pay interest semiannually at 6.75% and mature in 2003. The notes,
pursuant to Rule 144A under the Securities Act of 1933, are guaranteed by SPG,
LP and contain leverage ratios and minimum EBITDA and unencumbered EBITDA
ratios.
$500,000 SHELF REGISTRATION. SPG, LP has a $500,000 debt shelf
registration which became effective in December 1995. At December 31, 1996, no
securities have been issued under this registration statement.
VARIABLE-RATE DEBT
MORTGAGES AND OTHER NOTES. The variable-rate mortgage loans and other
notes bear interest ranging from 5.31% to 7.59% (weighted average of 6.30% at
December 31, 1996) and are due at various dates through 2002 (average maturity
of 2.6 years). Certain of the Properties are subject to the collateral,
cross-default and cross-collateral agreements, participation agreements or other
covenants relating to debt-to-market capitalization, minimum EBITDA ratios and
minimum equity values.
CREDIT FACILITY. On September 27, 1996, the Operating Partnership
obtained a $750,000 three-year unsecured facility (the "Credit Facility") which
69
has a one-year extension available at the option of the Operating Partnership.
The Credit Facility bears interest at LIBOR plus 90 basis points and is
guaranteed by the Operating Partnership. The maximum and average amounts
outstanding during 1996 under the Credit Facility were $438,000 and $292,350,
respectively. The Credit Facility is primarily used for funding acquisition,
renovation and expansion and predevelopment opportunities. At December 31, 1996,
the Credit Facility had an interest rate of 6.43%, with $510,000 available after
outstanding borrowings and letters of credit. The Credit Facility contains
financial covenants relating to a market capitalization value, minimum EBITDA
and unencumbered EBITDA ratios and minimum equity values.
On January 31, 1997, the Operating Partnership completed a refinancing
transaction involving debt on four Properties. The transaction consisted of the
payoff of one loan totaling $43,375, the buyout of the contingent interest
feature on all four loans for $21,000 and a restatement of the interest amount
on the three remaining loans. This transaction was funded using the Credit
Facility.
DEBT MATURITY AND OTHER
As of December 31, 1996, scheduled principal repayments on
indebtedness were as follows:
1997 $ 49,829
1998 367,699
1999 476,255
2000 395,147
2001 659,950
Thereafter 1,720,645
--------------
Total principal maturities 3,669,525
Net unamortized debt premiums 12,459
--------------
Total mortgages and other notes payable $ 3,681,984
==============
Debt premiums and discounts are being amortized over the terms of the
related debt instruments. Certain mortgages and notes payable may be prepaid but
are generally subject to a prepayment of a yield-maintenance premium.
The unconsolidated partnerships and joint ventures have $1,121,804 and
$410,652 of mortgages and other notes payable at December 31, 1996 and 1995,
respectively. The Operating Partnership's share of this debt was $448,218 and
$167,644 at December 31, 1996 and 1995, respectively. This debt becomes due in
installments over various terms extending to January 1, 2006, with interest
rates ranging from 5.72% to 9.52% (weighted average rate of 7.24% at December
31, 1996). The debt matures $15,224 in 1997, $177,168 in 1998, $261,980 in 1999,
$79,446 in 2000, $66,683 in 2001 and $521,303 thereafter.
Net extraordinary losses of $3,521, $3,285 and $17,980 for the years
ended December 31, 1996, 1995 and 1994, respectively, were incurred, resulting
from the early extinguishment or refinancing of debt.
INTEREST RATE PROTECTION AGREEMENTS
The Operating Partnership has entered into certain interest rate
protection agreements, in the form of "cap" or "swap" arrangements, with respect
to the majority of its variable-rate mortgages and other notes payable. Cap
arrangements, which effectively limit the amount by which variable interest
rates may rise, have been entered into for $394,079 principal amount of debt and
cap LIBOR at rates ranging from 5.0% to 8.7% through the related debt's
maturity. Swap arrangements, which effectively fix the Operating Partnership's
interest rate on the respective borrowings, have been entered into for $217,682
principal amount of debt, with various maturities through March 2001. Costs of
the caps ($7,792) are amortized over the life of the agreements. The unamortized
balance of the cap arrangements was $3,343 as of December 31, 1996. The
Operating Partnership's hedging activity as a result of interest swaps and caps
resulted in interest savings of $2,165 and $3,528 for the years ended December
31, 1996 and 1995, respectively. This did not materially impact the Operating
Partnership's weighted average borrowing rate.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 requires disclosure about fair value for all financial
instruments. The carrying value of variable-rate mortgages and other loans and
70
interest rate protection agreements represents their fair values. The fair value
of fixed-rate mortgages and other notes payable was approximately $3,000,000 and
$1,375,000 at December 31, 1996 and 1995, respectively. The fair value of the
interest rate protection agreements at December 31, 1996 and 1995, was $5,616
and $3,900, respectively. At December 31, 1996 and 1995, the estimated discount
rates were 7.25% and 7.00%, respectively.
9. RENTALS UNDER OPERATING LEASES
The Operating Partnership receives rental income from the leasing of
retail and mixed-use space under operating leases. Future minimum rentals to be
received under noncancelable operating leases for each of the next five years
and thereafter, excluding tenant reimbursements of operating expenses and
percentage rent based on tenant sales volume, as of December 31, 1996, are as
follows:
1997 $ 475,751
1998 440,017
1999 398,641
2000 351,520
2001 303,979
Thereafter 1,190,176
---------------
$ 3,160,084
===============
Approximately 2.3% of future minimum rents to be received are
attributable to leases with JCPenney Company, Inc., an affiliate of a limited
partner in the Operating Partnership.
10. PARTNERS' EQUITY
On October 27, 1995, the Company completed a $100,000 private
placement of 4,000,000 shares of Series A preferred stock. Dividends on the
preferred stock are paid quarterly at the greater of 8.125% per annum or the
dividend rate payable under the underlying common stock. The holders of the
preferred stock have the right to convert the preferred stock into common stock
after two years at an initial conversion ratio equal to 0.9524. The Company may
redeem the preferred stock after five years upon payment of premiums that
decline to $25.00 per share over the following seven years. The holders of the
preferred stock are entitled to vote on all matters submitted to a vote of
holders of common stock, based on the number of shares of common stock into
which the preferred stock can be converted. The Company contributed the proceeds
to the Operating Partnership in exchange for Preferred Units. The Operating
Partnership pays a preferred distribution to the Company equal to the dividends
paid on the preferred stock.
On December 21, 1995, a limited partner in the Operating Partnership
exchanged 121,348 Units for 121,348 shares of common stock.
On September 27, 1996, the Company completed a $200,000 public
offering (the "Preferred Offering") of 8,000,000 shares of Series B cumulative
redeemable preferred stock, generating net proceeds of approximately $193,000.
Dividends on the preferred stock are paid quarterly in arrears at 8.75% per
annum. The Company may redeem the preferred stock any time on or after September
29, 2006, at a redemption price of $25.00 per share, plus accrued and unpaid
dividends. The redemption price (other than the portion thereof consisting of
accrued and unpaid dividends) is payable solely out of the sale proceeds of
other capital shares of the Company, which may include other series of preferred
shares. The Company contributed the proceeds to the Operating Partnership in
exchange for Preferred Units. The Operating Partnership pays a preferred
distribution to the Company equal to the dividends paid on the preferred stock.
EXCHANGE RIGHTS
The former limited partners in the SPG, LP Partnership had the right
at any time after December 1994 to exchange all or any portion of their Units
for shares of common stock of the Company on a one-for-one basis or cash, as
selected by the Company's Board of Directors. If the Company selects to use
cash, the Company could cause SPG, LP to redeem the units. The amount of cash to
be paid if the exchange right was exercised and the cash option was selected
would have been based on the trading price of the Company's common stock at that
time. In the periods when the Operating Partnership did not control whether cash
would be used to settle the limited partners' exchange rights, the limited
partners' equity interest was excluded from partners' equity and was reflected
in the consolidated balance sheet at redemption value.
71
In connection with the merger, the Simon Operating Partnership
agreement was amended eliminating the exchange right provision. However, the
limited partners' in the SPG, LP exchanged their interest for limited
partnership units in SDG, LP. SDG, LP extended rights to its limited partners'
similar to the rights previously held by the limited partners of the SPG, LP.
However, on November 13, 1996, an agreement was reached between the Company and
SDG, LP which restricts the Company's ability to cause SDG, LP to redeem for
cash the limited partners' units without contributing cash to SDG, LP as
partners' equity sufficient to effect the redemption. If sufficient cash is not
contributed, the Company will be deemed to have elected to acquire the limited
partners' units for shares of the Company's common stock. As a result of these
arrangements, the limited partners' equity interest in the Operating Partnership
has been included as partners' equity at historical carrying value. Previous
adjustments to exclude limited partners' equity interest from partners' equity
have been reversed.
The Operating Partnership has the right to issue Units and Preferred
Units under certain circumstances. As of December 31, 1996, the Company has
reserved 60,974,050 shares of common stock for issuance upon the exchange of
Units.
11. STOCK OPTION PLANS
The Company and the Operating Partnership adopted an Employee Stock
Plan (the "Employee Plan"). The Company also adopted a Director Stock Option
Plan (the "Director Plan" and, together with the Employee Plan, the "Stock
Option Plans") for the purpose of attracting and retaining eligible officers,
directors and employees. The Company has reserved for issuance 4,595,000 shares
of common stock under the Employee Plan and 100,000 shares of common stock under
the Director Plan. If stock options granted in connection with the Stock Option
Plans are exercised at any time or from time to time, the partnership agreement
requires the Company to sell to the Operating Partnership, at fair market value,
shares of the Company's common stock sufficient to satisfy the exercised stock
options. The Company also is obligated to purchase Units for cash in an amount
equal to the fair market value of such shares.
EMPLOYEE PLAN
The Employee Plan is currently administered by the Company's
Compensation Committee (the "Committee"). During the ten-year period following
the adoption of the Employee Plan, the Committee may, subject to the terms of
the Employee Plan and in certain instances subject to board approval, grant to
key employees (including officers and directors who are employees) of the
Operating Partnership or its "affiliates" (as defined in the Employee Plan) the
following types of awards: stock options (including options with a reload
feature), stock appreciation rights, performance units and shares of restricted
or unrestricted common stock. Awards granted under the Employee Plan become
exercisable over the period determined by the Committee. The exercise price of
an option may not be less than the fair market value of the shares of the common
stock on the date of grant. The options vest 40% on the first anniversary of the
date of grant, an additional 30% on the second anniversary of the grant date and
become fully vested three years after the grant date. The options expire ten
years from the date of grant.
DIRECTOR PLAN
Directors of the Company who are not also employees of the Company or
its "affiliates" (as defined in the Director Plan) participate in the Director
Plan. Under the Director Plan, each eligible director is automatically granted
options ("Director Options") to purchase 5,000 shares of common stock upon the
director's initial election to the Board of Directors and 3,000 shares of common
stock upon each reelection of the director to the Board of Directors. The
exercise price of the options is equal to 100% of the fair market value of the
Company's common stock on the date of grant. Director Options become exercisable
on the first anniversary of the date of grant or at such earlier time as a
"change in control" of the Company occurs and will remain exercisable through
the tenth anniversary of the date of grant (the "Expiration Date"). Prior to
their Expiration Dates, Director Options will terminate 30 days after the
optionee ceases to be a member of the Board of Directors.
SFAS No. 123, "Accounting for Stock-Based Compensation," requires
entities to measure compensation costs related to awards of stock-based
compensation using either the fair value method or the intrinsic value method.
Under the fair value method, compensation expense is measured at the grant date
based on the fair value of the award. Under the intrinsic value method,
compensation expense is equal to the excess, if any, of the quoted market price
of the stock at the grant date over the amount the employee must pay to acquire
the stock. Entities electing to measure compensation costs using the intrinsic
value method must make pro forma disclosures of net income and earnings per
share as if the fair value method had been applied. The Operating Partnership
has elected to account for stock-based compensation programs using the intrinsic
value method consistent with existing accounting policies and, therefore, the
72
standard will not have an effect on the consolidated financial statements. The
impact on pro forma net income and earnings per share as a result of applying
the intrinsic value method was not material.
Information relating to the Stock Option Plans from January 1, 1994
through December 31, 1996 is as follows:
DIRECTOR PLAN EMPLOYEE PLAN
------------------------------- --------------------------------
OPTION PRICE OPTION PRICE
OPTIONS PER SHARE OPTIONS PER SHARE
-------------- --------------- --------------- ---------------
SHARES UNDER OPTION AT JANUARY 1, 1994 25,000 $ 22.25 735,000 $ 22.25
GRANTED 15,000 27.00 1,363,272 23.44 - 25.25
EXERCISED - - - -
FORFEITED - - (28,125) 23.44
-------------- --------------- --------------- ---------------
SHARES UNDER OPTION AT DECEMBER 31, 1994 40,000 22.25 - 27.00 2,070,147 22.25 - 25.25
GRANTED 15,000 24.94 (1) - -
EXERCISED - - (6,876) 23.44
FORFEITED - - (49,137) 23.44 - 25.25
SHARES UNDER OPTION AT DECEMBER 31, 1995 55,000 $22.25 - 27.00 2,014,134 $22.25 - 25.25
GRANTED 40,000 24.37 (1) - -
EXERCISED (5,000) 24.75 (367,151) 24.88 - 30.75
FORFEITED - - (24,000) 23.44 - 25.25
SHARES UNDER OPTION AT DECEMBER 31, 1996 90,000 $22.25 - 27.38 1,622,983 $22.25 - 25.25
============== =============== =============== ===============
OPTIONS EXERCISABLE AT DECEMBER 31, 1996 50,000 $24.59 (1) 1,496,117 $22.97 (1)
============== =============== =============== ===============
SHARES AVAILABLE FOR GRANT AT DECEMBER 31, 1996 5,000 1,597,990
============== ===============
(1) Represents the average price.
STOCK INCENTIVE PROGRAMS
Two stock incentive programs are currently in effect.
In October 1994, under the Employee Plan of the Company and the
Operating Partnership, the Company's Compensation Committee approved a five-year
stock incentive program (the "Stock Incentive Program"), under which restricted
stock award shares have been granted to certain employees at no cost. The
outstanding restricted stock award shares vest in four installments of 25% each
on January 1 of each year following the year in which the restricted shares are
awarded. The cost of restricted stock awards, based on the stock's fair market
value at the determination dates, is charged to shareholders' equity and
subsequently amortized against earnings of the Operating Partnership over the
vesting period.
In March 1995, an aggregate of 1,000,000 shares of restricted stock was
allocated to 50 executives, subject to the performance standards and other terms
of the Stock Incentive Program. During 1996 and 1995, 200,030 and 144,196 shares
of common stock, respectively, were granted under the Stock Incentive Program.
Approximately $2,084 and $918 relating to this program were amortized in 1996
and 1995, respectively.
Under the terms of the second stock incentive plan, which was
originated by DRC prior to the Merger (the "DRC Plan"), 2,108,000 shares of
common stock are available for grant, subject to certain performance standards
and other terms of the plan. A total of 1,865,240 shares of common stock have
been approved by the Compensation Committee of the Board of Directors. The DRC
Plan was recently amended so that its terms and conditions are substantially the
same as those of the Stock Incentive Program.
73
12. EMPLOYEE BENEFIT PLANS
The Operating Partnership and affiliated entities currently maintain
two tax-qualified retirement 401(k) savings plans. The second plan is in place
as a result of the Merger. The two plans will be merged into one plan effective
in 1997. Under the plans, eligible employees can participate in a cash or
deferred arrangement permitting them to defer up to a maximum of 12% of their
compensation, subject to certain limitations. Participants' salary deferrals are
matched at specified percentages, and one plan provides annual contributions of
3% of eligible employees' compensation. The Operating Partnership contributed
$2,350, $1,716 and $1,628 to the plans in 1996, 1995 and 1994, respectively.
Except for the 401(k) plans, the Operating Partnership offers no other
postretirement or postemployment benefits to its employees.
13. COMMITMENTS AND CONTINGENCIES
LITIGATION
CARLO ANGOSTINELLI ET AL. V. DEBARTOLO REALTY CORP. ET AL. On October
16, 1996, a complaint was filed in the Court of Common Pleas of Mahoning County,
Ohio, captioned Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. The
---------------------------------------------------------
named defendants are SD Property Group, Inc., a 99%-owned subsidiary of the
Company, and DeBartolo Properties Management, Inc., and the plaintiffs are 27
former employees of the defendants. In the complaint, the plaintiffs allege that
they were recipients of deferred stock grants under the DRC Plan and that these
grants immediately vested under the DRC Plan's "change in control" provision as
a result of the Merger. Plaintiffs assert that the defendants' refusal to issue
them approximately 661,000 shares of DRC common stock, which is equivalent to
approximately 450,000 shares of common stock of the Company computed at the 0.68
Exchange Ratio used in the Merger, constitutes a breach of contract and a breach
of the implied covenant of good faith and fair dealing under Ohio law.
Plaintiffs seek damages equal to such number of shares of DRC common stock, or
cash in lieu thereof, equal to all deferred stock ever granted to them under the
DRC Plan, dividends on such stock from the time of the grants, compensatory
damages for breach of the implied covenant of good faith and fair dealing, and
punitive damages.
The complaint was served on the defendants on October 28, 1996, and
pretrial proceedings have just commenced. The Company is of the opinion that it
has meritorious defenses and accordingly intends to defend this action
vigorously. While it is difficult for the Company to predict the outcome of this
litigation at this stage based on the information known to the Company to date,
the Company does not expect this action will have a material adverse effect on
the Company.
ROEL VENTO ET AL. V. TOM TAYLOR ET AL. An affiliate of the Company is
a defendant in litigation entitled Roel Vento et al. v. Tom Taylor et al., in
-------------------------------------
the District Court of Cameron County, Texas, in which a judgment in the amount
of $7,800 has been entered against all defendants. This judgment includes
approximately $6,500 of punitive damages and is based upon a jury's findings on
four separate theories of liability including fraud, intentional infliction of
emotional distress, tortuous interference with contract and civil conspiracy
arising out of the sale of a business operating under a temporary license
agreement at Valle Vista Mall, in Harlingen, Texas. The Company is seeking to
overturn the award and has appealed the verdict. Although the Company is
optimistic that it may be able to reverse or reduce the verdict, there can be no
assurance thereof. Management, based upon the advice of counsel, believes that
the ultimate outcome of this action will not have a material adverse effect on
the Company.
The Operating Partnership currently is not subject to any other
material litigation other than routine litigation and administrative proceedings
arising in the ordinary course of business. On the basis of consultation with
counsel, management believes that these items will not have a material adverse
impact on the Operating Partnership 's financial position or results of
operations.
FINANCING COMMITMENTS
The Operating Partnership has agreed to equity funding commitments of
$14,000 and $31,103 relating to the construction of Grapevine Mills and The
Source , respectively. The Operating Partnership had satisfied $24,241 of its
commitment on The Source at December 31, 1996.
LEASE COMMITMENTS
74
As of December 31, 1996, a total of 29 of the Properties are
subject to ground leases. The termination dates of these ground leases range
from 1998 to 2087. These ground leases generally require payments by the
Operating Partnership of a fixed annual rent, or a fixed annual rent plus a
participating percentage over a base rate. Ground lease expense incurred by the
Operating Partnership for the years ended December 31, 1996, 1995 and 1994, was
$8,506, $6,700 and $5,808, respectively.
Future minimum lease payments due under such ground leases for each of
the next five years ending December 31 and thereafter are as follows:
1997 $ 6,153
1998 6,146
1999 6,152
2000 6,162
2001 6,057
Thereafter 364,756
----------------
$ 395,426
================
ENVIRONMENTAL MATTERS
Substantially all of the Properties have been subjected to Phase I
environmental audits. Such audits have not revealed nor is management aware of
any environmental liability that management believes would have a material
adverse impact on the Operating Partnership's financial position or results of
operations. Management is unaware of any instances in which it would incur
significant environmental costs if any or all Properties were sold, disposed of
or abandoned.
OTHER
The Operating Partnership's partner in Rolling Oaks Mall has the right
to transfer its ownership interest to the Operating Partnership in exchange for
Units based on the fair market value of the ownership interest at the time of
the exchange. This right expires on January 1, 2002. Rolling Oaks Mall is a
Joint Venture Property accounted for using the equity method of accounting.
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly 1996 and 1995 data is as follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
-------------- -------------- -------------- -------------- --------------
1996
- ---------------------------------
Total revenue $ 139,444 $ 143,761 $ 202,436 $ 262,063 $ 747,704
Operating income 61,073 63,051 82,715 124,673 331,512
Income before extraordinary
items 21,271 21,934 20,296 51,426 114,927
Net income available to
unitholders 21,536 21,937 24,085 50,890 118,448
Net income before extraordinary
items per unit 0.23 0.23 0.20 0.33 1.02
Net income per unit $ 0.23 $ 0.23 $ 0.18 $ 0.32 $ 0.99
1995
- ---------------------------------
Total revenue $ 129,490 $ 130,765 $ 138,042 $ 155,360 $ 553,657
Operating income 58,865 58,115 64,191 69,965 251,136
Income before extraordinary
items 22,207 23,528 26,946 27,334 100,015
Net income available to
unitholders 22,207 23,280 24,310 26,933 96,730
Net income before extraordinary
items per unit 0.26 0.25 0.28 0.29 1.08
75
Net income per unit $ 0.26 $ 0.25 $ 0.25 $ 0.28 $ 1.04
Primarily due to the cyclical nature of earnings available for units
and the issuance of 37,873,965 additional units in connection with the Merger,
the sum of the quarterly earnings per unit in 1996 varies from the annual
earnings per unit .
76
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Simon DeBartolo Group, Inc.:
We have audited the accompanying consolidated balance sheets of SIMON PROPERTY
GROUP, L.P. (a Delaware limited partnership) and subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of operations, partners'
equity (deficit) and cash flows for the years ended December 31, 1996, 1995 and
1994. These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Simon Property
Group, L.P. and subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1996, 1995 and 1994, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana
February 18, 1997
77
BALANCE SHEETS
SIMON PROPERTY GROUP, L.P. CONSOLIDATED
(Dollars in thousands, except per unit amounts)
December 31,
-------------------------
1996 1995
----------- -----------
ASSETS:
Investment properties, at cost $ 2,467,779 $ 2,162,161
Less-- accumulated depreciation 238,167 152,817
----------- -----------
2,229,612 2,009,344
Cash and cash equivalents 50,009 62,721
Tenant receivables and accrued revenue, net 136,496 144,400
Notes receivable from Management Company 63,978 102,522
Investment in partnerships and joint ventures, at equity 139,711 117,332
Deferred costs, net 84,295 81,398
Other assets 45,370 30,985
Minority interest 9,712 7,734
----------- -----------
=========== ===========
Total assets $ 2,759,183 $ 2,556,436
=========== ===========
LIABILITIES:
Mortgages and other notes payable $ 2,042,254 $ 1,980,759
Advances from Simon DeBartolo Group, L.P. 259,382 --
Accounts payable and accrued expenses 113,027 113,131
Accrued distributions -- 48,594
Cash distributions and losses in partnerships and joint ventures, at equity 17,106 54,120
Investment in Management Company and affiliates 18,519 20,612
Minority interest 12,128 --
Other liabilities 42,139 19,582
----------- -----------
Total liabilities 2,504,555 2,236,798
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 13)
LIMITED PARTNERS' EQUITY INTEREST, 0 and 37,282,628 units outstanding,
respectively, at redemption value (Note 10) -- 908,764
PARTNERS' EQUITY (DEFICIT) (Notes 3 and 10):
Preferred units, 4,000,000 units authorized, issued and outstanding 99,923 99,923
General Partner, 958,429 and 58,360,195 units outstanding, respectively 1,601 135,710
Special Limited Partner, 95,356,834 and 0 units outstanding, respectively 158,458 --
Adjustment to reflect Limited Partners' equity interest at redemption value -- (822,072)
Unamortized restricted stock award (5,354) 2,687
----------- -----------
Total partners' equity (deficit) 254,628 (589,126)
----------- -----------
=========== ===========
Total liabilities and partners' equity (deficit) $ 2,759,183 $ 2,556,436
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
78
STATEMENTS OF OPERATIONS
SIMON PROPERTY GROUP, L.P. CONSOLIDATED
(Dollars in thousands, except per unit amounts)
For the Year Ended December 31,
-------------------------------------
1996 1995 1994
--------- --------- ---------
REVENUE:
Minimum rent $ 339,120 307,857 255,716
Overage rent 23,300 23,278 25,463
Tenant reimbursements 194,507 192,994 163,588
Other income 34,977 29,528 28,809
--------- --------- ---------
Total revenue 591,904 553,657 473,676
--------- --------- ---------
EXPENSES:
Property operating 104,643 96,851 85,672
Depreciation and amortization 108,435 92,739 75,945
Real estate taxes 55,597 53,941 44,502
Repairs and maintenance 25,361 24,614 22,940
Advertising and promotion 21,119 18,888 17,000
Provision for credit losses 2,991 2,858 3,417
Other 12,937 12,630 9,902
--------- --------- ---------
Total operating expenses 331,083 302,521 259,378
--------- --------- ---------
OPERATING INCOME 260,821 251,136 214,298
INTEREST EXPENSE 162,485 150,224 122,980
NON-RECURRING INTEREST EXPENSE -- -- 27,184
--------- --------- ---------
INCOME BEFORE MINORITY INTEREST 98,336 100,912 64,134
MINORITY INTEREST (2,748) (2,681) (3,759)
GAIN ON SALE OF ASSETS, NET 88 1,871 --
--------- --------- ---------
INCOME BEFORE UNCONSOLIDATED ENTITIES 95,676 100,102 60,375
INCOME (LOSS) FROM UNCONSOLIDATED ENTITIES 5,223 1,403 (67)
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEMS 100,899 101,505 60,308
EXTRAORDINARY ITEMS (3,723) (3,285) (17,980)
--------- --------- ---------
NET INCOME 97,176 98,220 42,328
PREFERRED UNIT REQUIREMENT 8,125 1,490 --
--------- --------- ---------
NET INCOME AVAILABLE TO UNITHOLDERS $ 89,051 $ 96,730 $ 42,328
========= ========= =========
NET INCOME AVAILABLE TO UNITHOLDERS
ATTRIBUTABLE TO:
General Partner $ 31,125 $ 57,781 $ 23,377
Limited Partners 57,926 38,949 18,951
========= ========= =========
$ 89,051 $ 96,730 $ 42,328
========= ========= =========
EARNINGS PER UNIT:
Income before extraordinary items $ 0.97 $ 1.08 $ 0.71
Extraordinary items (0.04) (0.04) (0.21)
--------- --------- ---------
Net income $ 0.93 $ 1.04 $ 0.50
========= ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
79
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
SIMON PROPERTY GROUP, L.P. CONSOLIDATED
(Dollars in thousands)
LIMITED
SPECIAL UNAMORTIZED TOTAL PARTNERS'
PREFERRED GENERAL LIMITED RESTRICTED STOCK PARTNERS' EQUITY
UNITS PARTNER PARTNER AWARD EQUITY INTEREST
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1993 $ -- ($791,820) $ -- $ -- $(791,820) $848,373
General Partner Contributions
(7,462,445 units) 164,334 164,334
Adjustment to allocate net equity (69,650) (69,650) 69,650
Adjustment to reflect limited
partners' equity interest at
Redemption Value (Note 10) (43,579) (43,579) 43,579
Net income 23,377 23,377 18,951
Distributions (90,275) (90,275) (71,247)
--------- ----------- ------------- ----------- ------------ --------------
BALANCE AT DECEMBER 31, 1994 -- (807,613) -- -- (807,613) 909,306
General Partner Contributions
(9,470,977 units) 216,545 216,545
Limited Partners' Contributions
(120,000 units) -- (16,869)
Preferred unit contributions,
net of issuance costs
(4,000,000 units) 99,923 99,923
Acquisition of Limited Partners'
interest and other [333,462 and
(334,522) units, respectively] 5,036 5,036 (301)
Stock incentive program (143,311 units) 3,608 (3,605) 3
Amortization of stock incentive 918 918
Adjustment to allocate net equity (94,035) (94,035) 94,035
Adjustment to reflect limited
partners' equity interest at
Redemption Value (Note 10) 42,848 42,848 (42,848)
Net income 59,271 59,271 38,949
Distributions (112,022) (112,022) (73,508)
--------- ----------- ------------- ----------- ------------ --------------
BALANCE AT DECEMBER 31, 1995 99,923 (686,362) -- (2,687) (589,126) 908,764
Transfer of limited partners'
interest to equity at
Historical Value (Note 10) 822,072 86,692 908,764 (908,764)
--------- ----------- ------------- ----------- ------------ --------------
99,923 135,710 86,692 (2,687) 319,638 --
==============
Unit issuances (472,410 units) 275 275
Stock incentive program (200,030 units) 4,751 (4,751) --
Amortization of stock incentive 2,084 2,084
Adjustment to allocate net equity (102,897) 102,897 --
Net income 8,125 31,125 57,926 97,176
Distributions (8,125) (67,026) (89,332) (164,483)
Other (62) (62)
--------- ----------- ------------- ----------- ------------
BALANCE AT DECEMBER 31, 1996 $99,923 $ 1,601 $158,458 $ (5,354) $ 254,628
========= =========== ============= =========== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
80
STATEMENTS OF CASH FLOWS
SIMON PROPERTY GROUP, L.P. CONSOLIDATED
(Dollars in thousands)
For the Year Ended December 31,
---------------------------------------------
1996 1995 1994
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 97,176 $ 98,220 $ 42,328
Adjustments to reconcile net income to net cash provided
by operating activities--
Depreciation and amortization 116,846 101,262 83,196
Loss on extinguishments of debt 3,723 3,285 17,980
Gain on sale of assets, net (88) (1,871) --
Straight-line rent (469) (1,126) (4,326)
Minority interest 2,748 2,681 3,759
Equity in income of unconsolidated entities (5,223) (1,403) 67
Changes in assets and liabilities--
Tenant receivables and accrued revenue 7,501 5,502 (3,908)
Deferred costs and other assets (13,736) (14,290) 1,099
Accounts payable, accrued expenses and other liabilities (3,537) 2,076 (12,172)
----------- ----------- -----------
Net cash provided by operating activities 204,941 194,336 128,023
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (43,941) (32,547) (227,312)
Capital expenditures (151,842) (98,220) (42,765)
Cash from acquisitions and consolidation of joint ventures 2,033 4,346 8,924
Proceeds from sale of assets 399 2,550 --
Investments in unconsolidated entities (57,281) (77,905) (1,056)
Distributions from unconsolidated entities 35,754 6,214 5,842
Investments in and advances to/(from) Management Company 38,544 (27,117) (10,405)
----------- ----------- -----------
Net cash used in investing activities (176,334) (222,679) (266,772)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from public offering, net (62) -- --
Advances from affiliate 259,382 -- --
Minority interest distributions (4,755) (3,680) (2,148)
Partnership contributions -- 242,377 106,773
Partnership distributions (213,078) (177,726) (120,711)
Mortgage and other note proceeds, net of transaction costs 936,051 456,520 405,430
Mortgage and other note principal payments (1,018,857) (531,566) (256,081)
----------- ----------- -----------
Net cash provided by (used in) financing activities (41,319) (14,075) 133,263
----------- ----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (12,712) (42,418) (5,486)
CASH AND CASH EQUIVALENTS, beginning of period 62,721 105,139 110,625
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 50,009 $ 62,721 $ 105,139
=========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
81
SIMON PROPERTY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
1. ORGANIZATION
Simon DeBartolo Group, Inc. (the "Company"), formerly known as Simon
Property Group, Inc., is a self-administered and self-managed real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended.
On August 9, 1996, the Company acquired the national shopping center business of
DeBartolo Realty Corporation ("DRC"), The Edward J. DeBartolo Corporation and
their affiliates as the result of the Merger described in Note 3.
As of December 31, 1996, Simon Property Group, L.P. ("SPG, LP" or the
"Simon Operating Partnership") was a subsidiary partnership of Simon DeBartolo
Group, L.P. ("SDG, LP"). The Simon Operating Partnership, is engaged primarily
in the ownership, operation, management, leasing, acquisition, expansion and
development of real estate properties, primarily regional malls and community
shopping centers. As of December 31, 1996, the Simon Operating Partnership owns
or holds an interest in 124 income-producing properties, which consist of 63
regional malls, 54 community shopping centers, three specialty retail centers,
three mixed-use properties and one value-oriented super-regional mall in 30
states (the "Properties"). The Simon Operating Partnership also owns interests
in two specialty retail centers and two value-oriented super-regional malls five
parcels of land held for future development. The Simon Operating Partnership
also holds substantially all of the economic interest in M.S. Management
Associates, Inc. (the "Management Company"). See Note 7 for a description of the
activities of the Management Company.
The Simon Operating Partnership is subject to risks incidental to the
ownership and operation of commercial real estate. These include, among others,
the risks normally associated with changes in the general economic climate,
trends in the retail industry, creditworthiness of tenants, competition for
tenants, changes in tax laws, interest rate levels, the availability of
financing, and potential liability under environmental and other laws. Like most
retail properties, the Simon Operating Partnership's regional malls and
community shopping centers rely heavily upon anchor tenants. As of December 31,
1996, 131 of the approximately 438 anchor stores in the Properties were occupied
by JCPenney Company, Inc., Sears Roebuck & Co. and Dillard Department Stores,
Inc. An affiliate of JCPenney Company, Inc. is a limited partner in the Simon
Operating Partnership. In addition, the Chief Operating Officer of Dillard
Department Stores, Inc. is a director of the Company.
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements of the Simon
Operating Partnership include the accounts of all entities owned or controlled
by the Simon Operating Partnership. All significant intercompany amounts have
been eliminated. The accompanying consolidated financial statements have been
prepared in accordance with generally accepted accounting principles, which
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses during the reported
periods. Actual results could differ from these estimates.
Properties which are wholly-owned ("Wholly-Owned Properties") or owned
less than 100% and are controlled by the Simon Operating Partnership ("Minority
Interest Properties") have been consolidated. Control is demonstrated by the
ability of the general partner to manage day-to-day operations, refinance debt
and sell the assets of the partnership without the consent of the limited
partner and the inability of the limited partner to replace the general partner.
Investments in partnerships and joint ventures which represent noncontrolling
14.7% to 50.0% ownership interests (" Joint Venture Properties") and the
investment in the Management Company (see Note 7) are accounted for using the
equity method of accounting. These investments are recorded initially at cost
and subsequently adjusted for net equity in income (loss) and cash contributions
and distributions.
Effective April 1, 1994, the Simon Operating Partnership demonstrated
its ability to control the operating activities of The Forum Shops at Caesars
("Forum"). Subsequent to April 1, 1994, Forum is included in the accompanying
financial statements using the consolidated method of accounting. Prior to the
demonstration of control, Forum was reflected in the accompanying financial
statements using the equity method of accounting.
Effective July 1, 1995, the Simon Operating Partnership relinquished
its ability to solely direct certain activities related to the control of North
East Mall. As a result, the Property was no longer consolidated.
82
Net operating results of the Simon Operating Partnership are allocated
after preferred distributions (see Note 10), based on its partners' ownership
interests. The Company's direct and indirect weighted average ownership interest
in the Simon Operating Partnership during 1996, 1995 and 1994 was 61.0%, 60.3%
and 55.6%, respectively. At December 31, 1996 and 1995, the Company's ownership
interest was 60.8% and 61.0%, respectively.
The following schedule identifies each Property included in the
accompanying consolidated financial statements and the method of accounting
utilized for each Property as of December 31, 1996:
CONSOLIDATED METHOD:
- --------------------
REGIONAL MALLS
ALTON SQUARE NORTH TOWNE SQUARE NORTHWOODS MALL
AMIGOLAND MALL HERITAGE PARK MALL ORANGE PARK MALL
ANDERSON MALL HUTCHINSON MALL PRIEN LAKE MALL
BARTON CREEK SQUARE INDEPENDENCE CENTER ROSS PARK MALL
BATTLEFIELD MALL INGRAM PARK MALL ST. CHARLES TOWNE CENTER
BROADWAY SQUARE IRVING MALL SOUTH PARK MALL
CENTURY MALL JEFFERSON VALLEY MALL SOUTHGATE MALL
CHARLES TOWNE SQUARE LA PLAZA MALL SOUTHTOWN MALL
CIELO VISTA MALL LINCOLNWOOD TOWN CENTER SUNLAND PARK MALL
COLLEGE MALL LONGVIEW MALL TIPPECANOE MALL
COTTONWOOD MALL MACHESNEY PARK MALL TOWNE EAST SQUARE
CROSSROADS MALL MARKLAND MALL TOWNE WEST SQUARE
EAST TOWNE MALL MCCAIN MALL UNIVERSITY MALL (ARKANSAS)
EASTGATE CONSUMER MALL MEMORIAL MALL UNIVERSITY MALL (FLORIDA)
EASTLAND MALL MIDLAND PARK MALL VALLE VISTA MALL
FOREST MALL MILLER HILL MALL WEST RIDGE MALL
FOREST VILLAGE PARK MALL MOUNDS MALL WHITE OAKS MALL
FREMONT MALL MUNCIE MALL WICHITA MALL
GOLDEN RING MALL NORTH EAST MALL WINDSOR PARK MALL
GREENWOOD PARK MALL
SPECIALTY RETAIL CENTERS MIXED-USE PROPERTIES
FORUM SHOPS AT CAESARS, THE O'HARE INTERNATIONAL CENTER
TROLLEY SQUARE RIVERWAY
COMMUNITY CENTERS
ARVADA PLAZA GREENWOOD PLUS NEW CASTLE PLAZA
AURORA PLAZA GRIFFITH PARK PLAZA NORTH RIDGE PLAZA
BLOOMINGDALE COURT HAMMOND SQUARE NORTH RIVERSIDE PARK PLAZA
BRIDGEVIEW COURT INGRAM PLAZA NORTHLAND PLAZA
BRIGHTWOOD PLAZA LAKE PLAZA NORTHWOOD PLAZA
BRISTOL PLAZA LAKE VIEW PLAZA PARK PLAZA
BUFFALO GROVE TOWNE CENTER LINCOLN CROSSING REGENCY PLAZA
CELINA PLAZA MAPLEWOOD SQUARE ST. CHARLES TOWNE PLAZA
COHOES COMMONS MARKLAND PLAZA TEAL PLAZA
COUNTRYSIDE PLAZA MARTINSVILLE PLAZA TIPPECANOE PLAZA
EAST TOWNE COMMONS MARWOOD PLAZA WABASH VILLAGE
EASTLAND PLAZA MATTESON PLAZA WEST RIDGE PLAZA
FOREST PLAZA MEMORIAL PLAZA WHITE OAKS PLAZA
FOX RIVER PLAZA MOUNDS MALL CINEMA WOOD PLAZA
83
EQUITY METHOD:
- --------------
REGIONAL MALLS COMMUNITY CENTERS VALUE-ORIENTED SUPER-REGIONAL MALL
Circle Centre Cobblestone Court Ontario Mills
Lakeline Mall Crystal Court
Rolling Oaks Mall Fairfax Court MIXED-USE PROPERTY
Seminole Towne Center Gaitway Plaza The Fashion Centre at Pentagon City
Smith Haven Mall Plaza at Buckland Hills, The
Ridgewood Court SPECIALTY RETAIL CENTER
Royal Eagle Plaza The Tower Shops
Village Park Plaza
West Town Corners
Westland Park Plaza
Willow Knolls Court
Yards Plaza, The
The deficit minority interest balance in the accompanying
Consolidated Balance Sheets represents outside partners' interests in the net
equity of certain Properties. Deficit minority interests were recorded when a
partnership agreement provided for the settlement of deficit capital accounts
before distributing the proceeds from the sale of partnership assets and/or from
the intent (legal or otherwise) and ability of the partner to fund additional
capital contributions.
3. MERGERS AND REAL ESTATE ACQUISITIONS AND DEVELOPMENTS
MERGERS
DRC. On August 9, 1996, the Company acquired the national shopping
center business of DRC (the "Merger") for an aggregate value of $3.0 billion.
The acquired portfolio consisted of 49 regional malls, 11 community centers and
one mixed-use Property. These Properties included 47,052,267 square feet of
retail space gross leasable area ("GLA") and 558,636 of office GLA. Pursuant to
the Merger, the Company acquired all the outstanding common stock of DRC
(55,712,529 shares), at an exchange ratio of 0.68 share of the Company's common
stock for each share of DRC common stock (the "Exchange Ratio"). A total of
37,873,965 shares of the Company's common stock was issued by the Company, to
the DRC shareholders. DRC and the acquisition subsidiary merged. DRC became a
99.9% subsidiary of the Company and changed its name to SD Property Group, Inc.
This portion of the transaction was valued at approximately $923,179, based upon
the number of DRC shares of common stock acquired (55,712,529 shares), the
Exchange Ratio and the last reported sales price of the Company's common stock
on August 9, 1996 ($24.375). In connection therewith, the Company changed its
name to Simon DeBartolo Group, Inc.
In connection with the Merger, the general and limited partners of
SPG, LP contributed 49.5% (47,442,212 units of partnership interest) of the
total outstanding units of partnership interest ("Units") in SPG, LP to the
operating partnership of DRC, DeBartolo Realty Partnership, L.P. ("DRP, LP") in
exchange for 47,442,212 Units of partnership interest in DRP, LP, whose name was
changed to Simon DeBartolo Group, L.P. ("SDG, LP"). The Company retained a 50.5%
partnership interest (48,400,641 Units) in SPG, LP but assigned its rights to
receive distributions of profits on 49.5% (47,442,212 Units) of the outstanding
Units of partnership interest in SPG, LP to SDG, LP. The limited partners of
DRP, LP approved the contribution made by the partners of SPG, LP and
simultaneously exchanged their 38.0% (34,203,623 Units) partnership interest in
DRP, LP, adjusted for the Exchange Ratio, for a smaller partnership interest in
SDG, LP. The exchange of the limited partners' 38.0% partnership interest in
DRP, LP for Units of SDG, LP has been accounted for as an acquisition of
minority interest by the Company and is valued based on the estimated fair value
of the consideration issued (approximately $566,900). The Units of SDG, LP may
under certain circumstances be exchangeable for common stock of the Company on a
one-for-one basis. Therefore, the value of the acquisition of the DRP, LP
limited partners' interest acquired was based upon the number of DRP, LP Units
exchanged (34,203,623), the Exchange Ratio and the last reported sales price per
share of the Company's common stock on August 9, 1996 ($24.375). The limited
partners of SPG, LP received a 23.7% partnership interest in SDG, LP (37,282,628
Units) for the contribution of their 38.9% partnership interest in SPG, LP
(37,282,628 Units) to SDG, LP. The interests transferred by the partners of SPG,
LP to DRP, LP have been appropriately reflected at historical costs.
84
Upon completion of the Merger, the Company became a general partner of
SDG, LP with 36.9% (57,605,796 Units) of the outstanding partnership Units in
SDG, LP and became through SD Property Group, Inc. the managing general partner
of SDG, LP with 24.3% (37,873,965 Units in SPG, LP) of the outstanding
partnership Units in SDG, LP. The Company remained the sole general partner of
SPG, LP with 1% of the outstanding partnership Units (958,429 Units) and 49.5%
interest in the capital of SPG, LP, and SDG, LP became the special limited
partner in SPG, LP with 49.5% (47,442,212 Units) of the outstanding partnership
Units in SPG, LP and an additional 49.5% interest in the profits of SPG, LP.
SPG, LP did not acquire any interest in SDG, LP. Upon completion of the Merger,
the Company directly and indirectly owned a controlling 61.2% (95,479,761 Units)
partnership interest in SDG, LP.
For financial reporting purposes, the completion of the Merger
resulted in a reverse acquisition by the Company, using the purchase method of
accounting, directly or indirectly, of 100% of the net assets of DRP, LP for
consideration valued at $1.5 billion, including related transaction costs. The
purchase price has been allocated to the fair value of the assets and
liabilities of DRP, LP at December 31, 1996. Certain assumptions were made which
management of the General Partners believes are reasonable. Final adjustments to
the purchase price allocation were not completed at December 31, 1996. While no
material changes to the allocation are anticipated, changes will be recorded in
1997.
Although the Company was the accounting acquirer, SDG, LP (formerly
DRP, LP) became the primary operating partnership through which the future
business of the Company will be conducted. As a result of the Merger, the
Company's initial operating partnership, SPG, LP, became a subsidiary of SDG, LP
with 99% of the profits allocable to SDG, LP and 1% of the profits allocable to
the Company. Cash flow allocable to the Company's 1% profit interest in SDG, LP
is absorbed by public company costs and related expenses incurred by the
Company. However, because the Company was the accounting acquirer and, upon
completion of the Merger, acquired majority control of SDG, LP; SPG, LP is the
predecessor to SDG, LP for financial reporting purposes. Accordingly, the
financial statements of SDG, LP for the post-Merger periods reflect the reverse
acquisition of DRP, LP by the Company using the purchase method of accounting
and for all pre-Merger comparative periods, and the financial statements of SDG,
LP reflect the financial statements of SPG, LP as the predecessor to SDG, LP for
financial reporting purposes.
It is currently expected that subsequent to the first anniversary of
the date of the Merger, reorganizational transactions will be effected so that
SDG, LP will directly own all of the assets and partnership interests now owned
by SPG, LP. However, there can be no assurance that such reorganizational
transactions will be so effected.
MSA REALTY CORPORATION ("MSAR"). On September 1, 1994, the Company
issued an additional 1,799,945 shares of common stock in conjunction with the
merger of MSAR. Each outstanding share of MSAR common stock as of August 31,
1994, was converted into 0.31 shares of the Company's common stock. The
acquisition price, including related transaction costs, was $48,031. The
Company's investment in MSAR was contributed to the Simon Operating Partnership
for 1,799,945 Units, which increased the Company's ownership of the Simon
Operating Partnership by 1.0% to 56.4%. As a result of the acquisition, the
Simon Operating Partnership now owns 100% of fourteen centers in which it
previously held a 50% interest and substantially all of the ownership interest
in one community shopping center in which it held a minority interest. In
addition, the Simon Operating Partnership obtained a noncontrolling 50% interest
in a regional mall. This transaction was accounted for using the purchase method
of accounting. The purchase price in excess of the net assets acquired of
$26,507 was allocated to investment properties. The Simon Operating
Partnership's interest in the assets and liabilities of these centers prior to
this transaction is reflected at predecessor cost. Subsequent to September 1,
1994, each of the Properties involved in this merger was accounted for using the
consolidated method of accounting.
ACQUISITIONS AND DEVELOPMENTS
INDEPENDENCE CENTER. On December 1, 1994, the Simon Operating
Partnership acquired Independence Center in Independence, Missouri. Included in
the purchase are approximately 47 acres of undeveloped land adjacent to the
mall. Under the terms of the sale, the Simon Operating Partnership paid $51,413,
including transaction costs, funded through the use of the Simon Operating
Partnership's credit facilities.
BROADWAY SQUARE, ORANGE PARK MALL AND UNIVERSITY MALL. On December 29,
1994, the Simon Operating Partnership acquired Broadway Square in Tyler, Texas;
Orange Park Mall in Jacksonville, Florida; and University Mall in Pensacola,
Florida. Under the terms of the sale, the Simon Operating Partnership paid
$153,874, including transaction costs, funded through the use of the Simon
Operating Partnership's credit facilities. Included in the purchase price were
approximately 14 acres and 10 acres of undeveloped land adjacent to Orange Park
Mall and University Mall, respectively.
85
WHITE OAKS MALL. At the time of the Company's initial public offering
in December 1993, the Teacher's Retirement System of the State of Illinois
("TRS") held an option to put its 50% general and limited partnership interests
in White Oaks Mall in Springfield, Illinois, to the Simon Operating Partnership.
TRS exercised this option on January 23, 1995, and the purchase closed February
23, 1995. The Units which TRS received upon exercise of the options were
exchanged for 2,022,247 shares of common stock of the Company. The Simon
Operating Partnership now owns 77% of White Oaks Mall. The issuance of the
additional shares increased the Company's ownership interest in the Simon
Operating Partnership by 1.0% to 57.6%. The White Oaks Mall transaction, valued
at $45,000, was accounted for using the purchase method of accounting. The
purchase price in excess of the net assets acquired of $10,905 was allocated to
investment properties. The Simon Operating Partnership's interest in the assets
and liabilities of this Property prior to this transaction is reflected at
predecessor cost. Effective February 23, 1995, White Oaks Mall was being
accounted for in the accompanying consolidated financial statements using the
consolidated method of accounting. It was previously accounted for using the
equity method of accounting.
CROSSROADS MALL. Prior to July 31, 1995, the Simon Operating
Partnership held a 50% joint venture interest in Crossroads Mall in Omaha,
Nebraska. On July 31, 1995, the Simon Operating Partnership acquired the
remaining 50% ownership in the Property from Melvin Simon, Herbert Simon, and
certain of their affiliates (collectively, the "Simons") in exchange for 120,000
Units. The acquisition was reflected at predecessor cost. Concurrent with the
acquisition, a debt restructuring was completed which included the issuance of
1,200,000 shares of common stock of the Company to the lender (New York State
Teachers' Retirement System) in exchange for a $30,000 reduction of the
outstanding loan balance which included accrued interest. In addition, the
effective interest rate on the remaining balance of $41,400 was reduced from
10.5% to 7.75%. The loan matures on July 31, 2002. Effective July 31, 1995,
Crossroads Mall was included in the accompanying consolidated financial
statements using the consolidated method of accounting. It was previously
accounted for using the equity method of accounting.
THE SHOPS AT SUNSET PLACE. On August 15, 1995, the Simon Operating
Partnership acquired for $11,406 a controlling 75% joint venture interest in a
redevelopment project to be named "The Shops at Sunset Place" in South Miami,
Florida, using borrowings from its unsecured revolving credit facility. The
Simon Operating Partnership began construction on this 500,000 square foot
development property in November 1996, and it is scheduled for completion in
1998. The Simon Operating Partnership expects to have construction financing for
the majority of the development costs of this project in place before the end of
the second quarter of 1997. This project is included in the accompanying
consolidated financial statements using the consolidated method of accounting.
EAST TOWNE MALL. Prior to September 25, 1995, the Simon Operating
Partnership held a 45.0% joint venture interest in East Towne Mall in Knoxville,
Tennessee. On September 25, 1995, the Simon Operating Partnership acquired the
remaining interest for $18,500 and the assumption of 55% of the $75,000 of
existing mortgage debt. In connection with the transaction, the Simon Operating
Partnership refinanced the $75,000 mortgage. These transactions were funded
through a new loan of $55,000 and $38,500 in borrowings from the Simon Operating
Partnership's unsecured revolving credit facility. The transaction was accounted
for using the purchase method of accounting. The purchase price in excess of the
net assets acquired of $21,982 was allocated to investment properties. Effective
September 25, 1995, East Towne Mall was included in the accompanying
consolidated financial statements using the consolidated method of accounting.
It was previously accounted for using the equity method of accounting.
THE SOURCE. On December 22, 1995, a joint venture, in which the Simon
Operating Partnership has a noncontrolling 50% joint venture interest acquired a
development project located in Westbury (Long Island), New York, for $30,253.
This transaction was initially financed using borrowings from the Simon
Operating Partnership's unsecured revolving credit facility. When construction
financing of $120,000 closed on this property in July 1996, the Simon Operating
Partnership was repaid its $27,500 loan. The construction loan carries interest
at LIBOR plus 170 basis points and matures on July 16, 2001. Construction
commenced in February 1996 and this 730,000 square foot value-oriented retail
center development is expected to open in August 1997. This joint venture is
being accounted for using the equity method of accounting.
SMITH HAVEN MALL. On December 28, 1995, a joint venture in which the
Simon Operating Partnership owns a noncontrolling 25% interest, purchased Smith
Haven Mall, a 1.3 million square foot regional mall located in Lake Grove (Long
Island), New York, for $221,000. The Simon Operating Partnership's contribution
of $55,725 to the purchase price of $221,000 was financed using borrowings from
the Simon Operating Partnership's unsecured revolving credit facility. On June
17, 1996, the joint venture closed on a $115,000 interest-only mortgage maturing
June 1, 2006. Subsequently, the Simon Operating Partnership received a
reimbursement of $28,256 of its contribution. This joint venture is being
accounted for using the equity method of accounting.
86
ROSS PARK MALL. Prior to April 11, 1996, the Simon Operating
Partnership held a 50% joint venture interest in Ross Park Mall in Pittsburgh,
Pennsylvania. On April 11, 1996, the Simon Operating Partnership acquired the
remaining economic ownership interest. The purchase price included approximately
$44,000 cash and the assumption of the joint venture partner's share of existing
debt ($57,000). The purchase price in excess of the net assets acquired of
$49,074 was allocated to investment properties. Effective April 11, 1996, the
property is being accounted for using the consolidated method of accounting. It
was previously accounted for using the equity method of accounting.
COTTONWOOD MALL. Cottonwood Mall opened on July 31, 1996, in
Albuquerque, New Mexico. This 1.0 million square foot regional mall is
wholly-owned by the Simon Operating Partnership. The development costs were
financed through a $60,000 construction loan, which bore interest at the lower
of the prime rate plus 25 basis points or LIBOR plus 200 basis points and had a
scheduled maturity of February 1, 1999. On November 26, 1996, using proceeds
from the sale of the Notes (See Note 8) the Simon Operating Partnership retired
the entire $57,000 outstanding balance.
NORTH EAST MALL. Prior to October 4, 1996, the Simon Operating
Partnership held the right to receive 50% of the Partnership results of North
East Mall in Hurst, Texas. On October 4, 1996, in connection with the settlement
of certain outstanding litigation, the SDG, LP acquired for $12,100 an
additional 20% limited partnership interest in North East Mall. At the same
time, the Simon Operating Partnership exercised its option to acquire the
remaining 30% limited partnership interest in North East Mall owned by the
Simons in exchange for 472,410 Units in the Simon Operating Partnership, as well
as the Simons' 50% general partnership interest. The Simons had previously
contributed the right to receive distributions relating to its 50% general
partnership interest to the Simon Operating Partnership, in exchange for Units.
As a result of these transactions, the Simon Operating Partnership owns 80% of
North East Mall and accounts for it using the consolidated method of accounting.
SDG, LP owns the remaining 20%.
MILLS DEVELOPMENTS. On December 29, 1995, the Simon Operating
Partnership entered into arrangements with The Mills Corporation to develop
value-oriented super-regional malls in Ontario (Los Angeles), California;
Grapevine (Dallas/Fort Worth), Texas; and Tempe (Phoenix), Arizona. Ontario
Mills, a 25%-owned, 1.3 million square foot super-regional mall, opened on
November 14, 1996, in Ontario, California. The Simon Operating Partnership
financed its $15,000 equity commitment for this project in 1996. Grapevine
Mills, a 37.5%-owned, 1.5 million square foot development project, broke ground
on July 10, 1996, and is expected to open in October 1997. The Simon Operating
Partnership has a $14,000 equity commitment on this $211,000 development
project. Arizona Mills, a 25%-owned, 1.2 million square foot development
project, broke ground on August 1, 1996, and is expected to open in November
1997. The Simon Operating Partnership has a $13,500 equity investment in this
$183,000 development project. These projects are being accounted for using the
equity method of accounting.
JOINT VENTURE PROPERTY OPENINGS. The Simon Operating Partnership
opened two new Joint Venture Properties during 1996. Ontario Mills, described
above, opened on November 14, 1996, and the Tower Shops in Las Vegas, Nevada
opened in November 1996. The Simon Operating Partnership has a noncontrolling
50.0% ownership interest in this approximately 60,000 square foot specialty
retail center. These properties are being accounted for using the equity method
of accounting.
The Simon Operating Partnership also opened three new regional malls
during 1995. Circle Centre opened on September 8, 1995, in Indianapolis,
Indiana. The Simon Operating Partnership has a 14.7% ownership interest in this
approximately 800,000 square foot regional mall. Seminole Towne Center opened on
September 22, 1995, in Sanford, Florida. The Simon Operating Partnership has a
45.0% ownership interest in this approximately 1.1 million square foot regional
mall. Lakeline Mall opened on October 18, 1995, in Austin, Texas. The Simon
Operating Partnership has a noncontrolling 50.0% ownership interest in this
approximately 1.1 million square foot regional mall. Each of these regional
malls is being accounted for using the equity method of accounting.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT PROPERTIES
Investment properties are recorded at the lower of cost (predecessor
cost for Properties acquired from the Simons) or net realizable value. Net
realizable value of investment properties for financial reporting purposes is
reviewed for impairment on a Property-by-Property basis whenever events or
changes in circumstances indicate that the carrying amount of investment
properties may not be recoverable. Impairment of investment properties is
recognized when estimated undiscounted operating income is less than the
carrying value of the Property. To the extent an impairment has occurred, the
87
excess of carrying value of the Property over its estimated net realizable value
will be charged to income. The Simon Operating Partnership adopted Statement of
Financial Accounting Standards ("SFAS") No. 121 (Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of) on January 1,
1996. The adoption of this pronouncement had no impact on the accompanying
consolidated financial statements. Investment properties include costs of
acquisition, development, construction, tenant allowances and improvements,
interest and real estate taxes incurred during construction, certain capitalized
improvements and replacements, and certain allocated overhead.
Depreciation on buildings and improvements is provided utilizing the
straight-line method over an estimated original useful life of 10 to 45 years,
resulting in an average composite life of approximately 30 years. Depreciation
on tenant allowances and improvements is provided utilizing the straight-line
method over the term of the related lease.
Certain improvements and replacements are capitalized when they extend
the useful life, increase capacity, or improve the efficiency of the asset. All
other repair and maintenance items are expensed as incurred.
CAPITALIZED INTEREST
Interest is capitalized on projects during periods of construction.
Interest capitalized by the Simon Operating Partnership during 1996, 1995 and
1994 was $5,156, $1,515 and $1,586, respectively.
DEFERRED COSTS
Deferred costs consist primarily of financing fees incurred to obtain
long-term financing, costs of interest rate protection agreements, and internal
and external leasing commissions and related costs. Deferred financing costs,
including interest rate protection agreements, are amortized on a straight-line
basis over the terms of the respective loans or agreements. Deferred leasing
costs are amortized on a straight-line basis over the terms of the related
leases. Deferred costs consist of the following:
DECEMBER 31,
------------------------------------
1996 1995
--------------- ---------------
Deferred financing costs $ 59,968 $ 68,042
Leasing costs and other 94,103 88,094
--------------- ---------------
154,071 156,136
Less-accumulated amortization 69,776 74,738
--------------- ---------------
Deferred costs, net $ 84,295 $ 81,398
=============== ===============
Included in interest expense in the accompanying Consolidated
Statements of Operations is amortization of deferred financing costs of $8,418,
$8,523 and $7,251 for 1996, 1995 and 1994, respectively.
REVENUE RECOGNITION
The Simon Operating Partnership, as a lessor, has retained
substantially all of the risks and benefits of ownership of the investment
Properties and accounts for its leases as operating leases. Minimum rents are
accrued on a straight-line basis over the terms of their respective leases.
Overage rents are recognized when earned.
Reimbursements from tenants for real estate taxes and other
recoverable operating expenses are recognized as revenue in the period the
applicable expenditures are incurred.
ALLOWANCE FOR CREDIT LOSSES
A provision for credit losses is recorded based on management's
judgment of tenant creditworthiness. The activity in the allowance for credit
losses during 1996, 1995 and 1994 was as follows:
88
Balance at Provision Accounts Balance at
Beginning for Credit Written End of
Year Ended of Year Losses Off Year
------------- --------------- ------------- --------------
December 31, l996 $ 4,259 $ 2,991 $ (1,027) $ 6,223
============= =============== ============= ==============
December 31, l995 $ 2,943 $ 2,858 $ (1,542) $ 4,259
============= =============== ============= ==============
December 31, l994 $ - $ 3,417 $ (474) $ 2,943
============= =============== ============= ==============
INCOME TAXES
As a partnership, the allocated share of income or loss for each year
is included in the income tax returns of the partners, accordingly, no
accounting for income taxes is required in the accompanying consolidated
financial statements. State and local taxes are not material.
Taxable income of the Simon Operating Partnership for the year ended
December 31, 1996, is estimated to be $100,228 and was $100,915 and $44,683 for
the years ended 1995 and 1994, respectively. Reconciling differences between
book income and tax income primarily result from timing differences consisting
of (i) depreciation expense, (ii) prepaid rental income and (iii) straight-line
rent. Furthermore, the Simon Operating Partnership's share of income or loss
from the affiliated Management Company is excluded from the tax return of the
Simon Operating Partnership.
PER UNIT DATA
The net income per unit is based on the weighted average number of
units outstanding during the period. The weighted average number of units used
in the computation for 1996, 1995 and 1994 was 95,913,460; 92,666,469; and
84,509,597, respectively. The stock options outstanding under the Stock Option
Plan (see note 10) and the Preferred Units have not been considered in the
computations of per unit data, as they did not have a dilutive effect.
It is the Simon Operating Partnership's policy, to accrue
distributions when they are declared. The Simon Operating Partnership declared
distributions in 1996 aggregating $1.63 per unit. The 1996 distributions include
a $0.1515 distribution on August 9, 1996, in connection with the Merger,
designated to align the time periods of distribution payments of the merged
entities. The current annual distribution rate is $1.97 per share. The following
is a summary of distributions per unit declared in 1996 and 1995, which
represented a return of capital measured using generally accepted accounting
principles:
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------
Distributions per Unit 1996 1995
- ----------------------------------------------- -------------------- ---------------------
From book net income $ 0.93 $1.04
Representing return of capital 0.70 0.93
-------------------- ---------------------
Total distributions $ 1.63 $1.97
==================== =====================
On a federal income tax basis, 64% of the 1996 distributions and 25%
of the 1995 distributions represented return of capital.
STATEMENTS OF CASH FLOWS
For purposes of the Statements of Cash Flows, all highly liquid
investments purchased with an original maturity of 90 days or less are
considered as cash and cash equivalents. Cash equivalents are carried at cost,
which approximates market value. Cash equivalents generally consist of
commercial paper, bankers acceptances, Eurodollars, repurchase agreements and
Dutch auction securities.
Cash paid for interest, net of any amounts capitalized, during 1996,
1995 and 1994 were $161,133, $142,345 and $140,106 respectively. The 1994 amount
includes a $27,184 nonrecurring interest charge.
89
NONCASH TRANSACTIONS
The following is a summary of significant non-cash transactions.
As described in Note 2, effective April 1, 1994, the Simon Operating
Partnership reflected Forum using the consolidated method of accounting.
As described in Note 3, on September 1, 1994, the Simon Operating
Partnership issued 1,799,945 Units in conjunction with the merger of MSAR. On
February 23, 1995, the Simon Operating Partnership issued 2,022,247 Units in
connection with the acquisition of an additional joint venture interest in White
Oaks Mall. On July 31, 1995, the Simon Operating Partnership issued 120,000
Units in exchange for the Simons' 50% interest in Crossroads Mall. The Simon
Operating Partnership issued 1,200,000 Units of common stock in connection with
the reduction of the outstanding loan and accrued interest at Crossroads Mall.
Effective October 4, 1996, the Simon Operating Partnership reflected North East
Mall using the consolidated method of accounting.
Accrued and unpaid distributions as of December 31, 1996 and 1995 were
$0 and $47,104, respectively. Accrued and unpaid distributions at December 31,
1995, included $1,490 on the preferred units.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation. These reclassifications
have no impact on net operating results previously reported.
5. INVESTMENT PROPERTIES
Investment properties consist of the following:
DECEMBER 31,
----------------------------------------
1996 1995
----------------- -----------------
Land $ 312,683 $ 283,722
Buildings and improvements 2,131,475 1,860,203
----------------- -----------------
Total land, buildings and improvements 2,444,158 2,143,925
Furniture, fixtures and equipment 23,621 18,236
----------------- -----------------
Investment properties at cost 2,467,779 2,162,161
Less--accumulated depreciation (238,167) 152,817
----------------- -----------------
Investment properties at cost, net $ 2,229,612 $ 2,009,344
================= =================
Building and improvements include $74,500 and $40,676 of construction
in progress at December 31, 1996 and 1995, respectively.
6. INVESTMENT IN PARTNERSHIPS AND JOINT VENTURES
Summary financial information of partnerships and joint ventures
accounted for using the equity method and a summary of the Simon Operating
Partnership's investment in and share of income from such partnerships and joint
ventures follows.
90
DECEMBER 31,
-------------------------------------
BALANCE SHEETS 1996 1995
---------------- ---------------
ASSETS:
Investment properties at cost, net $ 1,328,600 $ 1,156,066
Cash and cash equivalents 41,270 52,624
Tenant receivables 37,067 35,306
Other assets 54,981 32,626
--------------- ---------------
Total assets $ 1,461,918 $ 1,276,622
=============== ===============
LIABILITIES AND PARTNERS' EQUITY:
Mortgages and other notes payable $ 569,433 $ 410,652
Accounts payable, accrued expenses and other liabilities 161,552 127,322
--------------- ---------------
Total liabilities 730,985 537,974
Partners' equity 730,933 738,648
--------------- ---------------
Total liabilities and partners' equity $ 1,461,918 $ 1,276,622
================ ================
THE SIMON OPERATING PARTNERSHIP'S SHARE OF:
Total assets $ 340,449 $ 290,802
================ ================
Investment in partnerships and joint ventures, at equity $ 139,711 $ 117,332
Cash distribution and losses in partnerships and joint
ventures, at equity (17,106) (54,120)
Partners' equity $ 122,605 $ 63,212
================ ================
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------
STATEMENTS OF OPERATIONS 1996 1995 1994
-------------- ------------- --------------
Revenue:
Minimum rent $ 110,221 $ 83,905 $ 92,380
Overage rent 3,890 2,754 3,655
Tenant reimbursements 53,909 39,500 45,440
Other income 10,206 13,980 10,131
-------------- -------------- -------------
Total revenue 178,226 140,139 151,606
OPERATING EXPENSES:
Operating expenses and other 68,421 46,466 55,949
Depreciation and amortization 41,839 26,409 26,409
-------------- -------------- -------------
Total operating expenses 110,260 72,875 82,358
-------------- -------------- -------------
OPERATING INCOME 67,966 67,264 69,248
INTEREST EXPENSE 30,823 28,685 38,124
EXTRAORDINARY ITEMS (1,314) (2,687) --
-------------- -------------- -------------
NET INCOME 35,829 35,892 31,124
THIRD-PARTY INVESTORS' SHARE OF NET INCOME 31,717 30,752 30,090
-------------- -------------- -------------
THE SIMON OPERATING PARTNERSHIP'S SHARE
NET INCOME $ 4,112 $ 5,140 $ 1,034
============== ============== =============
The net income or net loss for each partnership and joint venture is
allocated in accordance with the provisions of the applicable partnership or
joint venture agreement. The allocation provisions in these agreements are not
always consistent with the ownership interests held by each general or limited
partner or joint venturer, primarily due to partner preferences.
7. INVESTMENT IN MANAGEMENT COMPANY
The Simon Operating Partnership holds 80% of the outstanding common
stock, 5% of the outstanding voting common stock, and all of the preferred stock
of the Management Company. The remaining 20% of the outstanding common stock of
the Management Company (representing 95% of the voting common stock) is owned
directly by the Simons. The Management Company, including its consolidated
subsidiaries, provides management, leasing, development, accounting, legal,
marketing and management information systems services to 33 Minority Interest
and Joint Venture Properties, Melvin Simon & Associates, Inc. ("MSA"), and
certain other nonowned properties. Because the Simon Operating Partnership
exercises significant influence over the financial and operating policies of the
Management Company, it is reflected in the accompanying statements using the
equity method of accounting.
91
In connection with the Merger, the Management Company purchased 95% of
the voting stock (665 shares of common stock) of DeBartolo Property Management,
Inc. ("DPMI"), a DRC management company, for $2,500 in cash. DPMI provides
architectural, design, construction and other services primarily to the
Properties. During 1996, DPMI formed a captive insurance company, which provided
property damage and general liability insurance to certain DeBartolo Properties
in 1996. SDG, LP paid a total of $2,383 to this wholly-owned subsidiary of the
Management Company for insurance coverage during 1996. The Management Company
accounts for both DPMI and the captive insurance company using the consolidated
method of accounting.
During 1995, the Simon Operating Partnership advanced a net of $27,500
to the Management Company, which bears interest at 11%. The proceeds were used
to acquire a $27,500 mortgage note due from The Source, in which the Simon
Operating Partnership has a noncontrolling 50% interest. In July 1996, the joint
venture which owns The Source closed on a $120,000 construction loan and retired
the mortgage note. The Management Company in turn repaid the Simon Operating
Partnership the $27,500 advanced in 1995. The Management Company also liquidated
in 1995 its interest in a partnership investment which held a 9.8-acre parcel of
land in Rosemont, Illinois. The sale of that parcel resulted in a loss of $958
to the Management Company. Further, an undeveloped two-acre parcel of land in
Washington, D.C., for which the Management Company held a mortgage, was sold in
December 1995. The Management Company forwarded $11,000 of the net proceeds from
this sale to the Simon Operating Partnership in January 1996 to reduce its
outstanding loan balance. The Management Company recorded a loss in 1995 in
connection with this transaction of $3,949.
Management, development and leasing fees charged to the Simon
Operating Partnership and SDG, LP relating to Minority Interest Properties were
$6,916, $5,353 and $2,352 for the years ended December 31, 1996, 1995 and 1994,
respectively. Architectural, contracting and engineering fees charged to the
Simon Operating Partnership and SDG, LP for 1996 were $21,650. Fees for services
provided by the Management Company to MSA were $4,000, $4,572 and $7,239 for the
years ended December 31, 1996, 1995 and 1994, respectively, and are included in
cost-sharing income and other in the Management Company's Statements of
Operations.
At December 31, 1996 and 1995, total notes receivable and advances due
from the Management Company and consolidated affiliates were $63,978 and
$102,522, respectively. Unpaid interest income receivable from the Management
Company at December 31, 1996 and 1995, was $0 and $84, respectively. All
preferred dividends due from the Management Company were paid by December 31,
1996 and 1995. Interest and preferred dividend receivables, if any, are
reflected in tenant receivables and accrued revenue in the accompanying
Consolidated Balance Sheets.
92
Summarized consolidated financial information of the Management
Company, accounted for using the equity method, and a summary of the Simon
Operating Partnership's investment in and share of income (loss) from the
Management Company follows.
DECEMBER 31,
------------------------------------
BALANCE SHEETS 1996 1995
--------------- ---------------
ASSETS:
Current assets $ 69,708 $ 40,964
Undeveloped land and mortgage notes 16,177 45,769
Other assets 24,378 13,813
--------------- ---------------
Total assets $ 110,263 $ 100,546
=============== ===============
LIABILITIES AND SHAREHOLDERS' DEFICIT:
Current liabilities $ 46,690 $ 18,435
Notes payable and advances due to Simon Operating Partnership at 11%, due 2008 63,978 102,522
SDG, LP Advances and minority interest in DPMI 17,601 --
--------------- ---------------
Total liabilities 128,269 120,957
Shareholders' deficit (18,006) (20,411)
--------------- ---------------
Total liabilities and shareholders' deficit $ 110,263 $ 100,546
=============== ===============
THE SIMON OPERATING PARTNERSHIP'S SHARE OF:
Total assets $ 96,316 $ 80,437
=============== ===============
Shareholders' deficit $ (18,519) $ (20,612)
=============== ===============
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------
STATEMENTS OF OPERATIONS 1996 1995 1994
--------------- --------------- ---------------
REVENUE:
Management fees $ 20,529 $ 20,106 $ 18,587
Architectural, contracting and engineering fees 35,546 -- --
Development and leasing fees 10,611 15,451 9,683
Cost-sharing income and other 11,979 7,561 10,077
--------------- --------------- ---------------
Total revenue 78,665 43,118 38,347
EXPENSES:
Operating expenses and costs of construction 60,508 31,163 27,944
Depreciation 2,852 2,275 1,406
Interest 6,232 7,694 8,623
--------------- --------------- ---------------
Total expenses 69,592 41,132 37,973
--------------- --------------- ---------------
OPERATING INCOME 9,073 1,986 374
LOSS ON DISPOSITION OF ASSETS -- (4,907) --
--------------- --------------- ---------------
NET INCOME (LOSS) 9,073 (2,921) 374
PREFERRED DIVIDENDS 1,400 1,400 1,400
--------------- --------------- ---------------
NET INCOME (LOSS) AVAILABLE FOR
COMMON SHAREHOLDERS $ 7,673 $ (4,321) $ (1,026)
=============== =============== ===============
THE SIMON OPERATING PARTNERSHIP'S SHARE
OF NET INCOME (LOSS) $ 2,093 $ (3,737) $ (1,101)
INTERCOMPANY PROFIT ELIMINATION 982 -- --
--------------- --------------- ---------------
THE SIMON OPERATING PARTNERSHIP'S SHARE
OF NET INCOME (LOSS) $ 1,111 $ (3,737) $ (1,101)
=============== =============== ===============
The Simon Operating Partnership manages all of its wholly owned
properties. SDG, LP manages all Wholly-Owned Properties and substantially all of
the Minority Interest and Joint Venture Properties that were owned by DRC prior
93
to the Merger. Accordingly, they reimburse the Administrative Services
Partnership ("ASP"), a subsidiary of the Management Company, for costs incurred,
including management, leasing, development, accounting, legal, marketing, and
management information systems. Substantially all employees (other than direct
field personnel) are employed by ASP which is owned 1% by the Simon Operating
Partnership and 99% by the Management Company. The Management Company's
Statements of Operations report costs net of amounts reimbursed by the Simon
Operating Partnership. Common costs are allocated based on payroll and related
costs. In management's opinion, allocations under the cost-sharing arrangement
are reasonable. The Simon Operating Partnership and SDG, LP's share of allocated
common costs was $29,262, $21,874 and $15,619 for 1996, 1995 and 1994,
respectively.
Amounts receivable from the Simon Operating Partnership and SDG, LP
under the cost-sharing arrangement and management contracts were $3,288 and
$1,175 at December 31, 1996 and 1995, respectively.
8. INDEBTEDNESS
Mortgages and other notes payable consist of the following:
DECEMBER 31,
---------------------------------------
1996 1995
----------------- ----------------
FIXED-RATE DEBT
---------------
Mortgages and other notes payable, net $ 1,326,518 $ 1,232,360
----------------- ----------------
Total fixed-rate Debt 1,326,518 1,232,360
VARIABLE-RATE DEBT
------------------
Mortgages and other notes payable, net $ 485,736 $ 530,000
Credit facility 230,000 196,000
Construction loan -- 22,399
----------------- ----------------
Total variable-rate debt 715,736 748,399
----------------- ----------------
Total mortgages and other notes payable $ 2,042,254 $ 1,980,759
================= ================
FIXED-RATE DEBT
MORTGAGE LOANS & OTHER NOTES. The fixed-rate mortgage loans and
other notes bear interest ranging from 5.81% to 10.00% (weighted average of
7.75%), require monthly payments of principal and/or interest and have various
due dates through 2026 (average maturity of 6.8 years). Certain of the
Properties are pledged as collateral to secure the related mortgage note. The
fixed and variable mortgage notes are nonrecourse but have partial guarantees by
affiliates of approximately $398,906. Certain of the Properties are
cross-defaulted and cross-collateralized as part of a group of properties. Under
certain of the cross-default provisions, a default under any mortgage included
in the cross-defaulted package may constitute a default under all such mortgages
and may lead to acceleration of the indebtedness due on each property within the
collateral package. Certain of the Properties are subject to a provision in
which the lender participates in a percentage of gross revenues above a
specified base or after deduction of debt service and various expenses.
Contingent interest incurred under these arrangements was $1,645, $1,929 and
$1,527 for the years ended December 31, 1996, 1995 and 1994, respectively.
Certain of the Properties are subject to financial performance covenants
relating to debt-to-market capitalization, minimum earnings before interest,
taxes, depreciation and amortization ("EBITDA") ratios and minimum equity
values.
$500,000 SHELF REGISTRATION. SPG, LP has a $500,000 debt shelf
registration which became effective December 1995. At December 31, 1996, no
securities have been issued under this registration statement.
VARIABLE-RATE DEBT
MORTGAGES AND OTHER NOTES. The variable-rate mortgage loans and other
notes bear interest ranging from 6.05% to 7.59% (weighted average of 6.66% at
December 31, 1996) and are due at various dates through 2000 (average maturity
94
of 2.2 years). Certain of the Properties are subject to the collateral,
cross-default and cross-collateral agreements, participation agreements or other
covenants relating to debt-to-market capitalization, minimum EBITDA ratios and
minimum equity values.
CREDIT FACILITY. On September 27, 1996, the SPG, LP and SDG, LP
obtained a $750,000 three-year unsecured facility (the "Credit Facility") which
has a one-year extension available at the option of SPG, LP and SDG, LP. The
Credit Facility bears interest at LIBOR plus 90 basis points and is guaranteed
by SPG, LP and SDG, LP. The maximum and average amounts outstanding during 1996
under the Credit Facility were $438,000 and $292,350, respectively. The Credit
Facility is primarily used for funding acquisition, renovation and expansion and
predevelopment opportunities. At December 31, 1996, the Credit Facility had an
interest rate of 6.43%, with $510,000 available after outstanding borrowings and
letters of credit. The Credit Facility contains financial covenants relating to
a market capitalization value, minimum EBITDA and unencumbered EBITDA ratios and
minimum equity values.
DEBT MATURITY AND OTHER
As of December 31, 1996, scheduled principal repayments on
indebtedness were as follows:
1997 $ 40,777
1998 357,873
1999 457,261
2000 383,457
2001 14,585
Thereafter 788,301
-------------
Total mortgages and other notes payable $ 2,042,254
=============
Certain mortgages and notes payable may be prepaid but are generally
subject to a prepayment of a yield-maintenance premium.
The unconsolidated partnerships and joint ventures have $569,433 and
$410,652 of mortgages and other notes payable at December 31, 1996 and 1995,
respectively. The Simon Operating Partnership's share of this debt was $193,310
and $167,644 at December 31, 1996 and 1995, respectively. This debt becomes due
in installments over various terms extending into 2006, with interest rates
ranging from 6.03% to 8.20% (weighted average rate of 7.14% at December 31,
1996). The debt matures $0 in 1997, $0 in 1998, $221,900 in 1999, $119 in 2000,
$64,252 in 2001 and $283,162 thereafter.
Net extraordinary losses of $3,723, $3,285 and $17,980 for the years
ended December 31, 1996, 1995 and 1994, respectively, were incurred, resulting
from the early extinguishment or refinancing of debt.
6 7/8% UNSECURED NOTES. Nonconvertible investment-grade unsecured debt
securities (the "Notes") were issued by SDG, LP on November 21, 1996. The Notes
pay interest semiannually, mature in 2006, and contain leverage ratios and
minimum EBITDA and unencumbered EBITDA ratios. The Notes were issued under SDG,
LP's $750,000 shelf registration which became effective in November 1996, of
which $500,000 remains available. Notes issued under this shelf registration are
guaranteed by Simon Operating Partnership.
6 3/4% PUTABLE ASSET TRUST SECURITIES (PATS). The $100,000 of PATS,
issued by SDG, LP in December 1996, pay interest semiannually and mature in
2003. These securities contain leverage ratios and minimum EBITDA and
unencumbered EBITDA ratios and are guaranteed by Simon Operating Partnership.
On January 31, 1997, the Simon Operating Partnership completed a
refinancing transaction involving debt on four Properties. The transaction
consisted of the payoff of one loan totaling $43,375, the buyout of the
contingent interest feature on all four loans for $21,000 and a restatement of
the interest amount on the three remaining loans. This transaction was funded
using the Credit Facility.
INTEREST RATE PROTECTION AGREEMENTS
The Simon Operating Partnership has entered into certain interest rate
protection agreements, in the form of "cap" or "swap" arrangements, with respect
to the majority of its variable-rate mortgages and other notes payable. Cap
arrangements, which effectively limit the amount by which variable interest
95
rates may rise, have been entered into for $394,079 principal amount of debt and
cap LIBOR at rates ranging from 5.0% to 8.7% through the related debt's
maturity. Costs of the caps ($7,792) are amortized over the life of the
agreements. The unamortized balance of the cap arrangements was $3,343 as of
December 31, 1996. The Simon Operating Partnership's hedging activity as a
result of interest swaps and caps resulted in interest savings of $1,553 and
$3,528 for the years ended December 31, 1996 and 1995, respectively. This did
not materially impact the Simon Operating Partnership's weighted average
borrowing rate.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 requires disclosure about fair value for all financial
instruments. The carrying value of variable-rate mortgages and other loans and
interest rate protection agreements represents their fair values. The fair value
of fixed-rate mortgages and other notes payable was approximately $1,752,000 and
$1,375,000 at December 31, 1996 and 1995, respectively. The fair value of the
interest rate protection agreements at December 31, 1996 and 1995, was $3,158
and $3,900, respectively. At December 31, 1996 and 1995, the estimated discount
rates were 7.25% and 7.00%, respectively.
ADVANCES FROM SDG, LP
Net advances due SDG, LP of $259,382 result from debt and equity
instruments issued by SDG, LP for which a portion of the proceeds were advanced
to the Simon Operating Partnership to retire mortgages and other notes payable
and amounts outstanding under the Credit Facility. The Simon Operating
Partnership has recognized interest costs based on the terms of the instruments
issued by SDG, LP.
9. RENTALS UNDER OPERATING LEASES
The Simon Operating Partnership receives rental income from the
leasing of retail and mixed-use space under operating leases. Future minimum
rentals to be received under noncancelable operating leases for each of the next
five years and thereafter, excluding tenant reimbursements of operating expenses
and percentage rent based on tenant sales volume, as of December 31, 1996, are
as follows:
1997 $ 292,871
1998 275,085
1999 249,075
2000 219,372
2001 186,613
Thereafter 696,959
---------------
$1,919,975
===============
Approximately 2.64% of future minimum rents to be received are
attributable to leases with JCPenney Company, Inc., an affiliate of a limited
partner in the Simon Operating Partnership.
10. PARTNERS' EQUITY
In January 1995, the Company filed a shelf registration with the
Securities and Exchange Commission covering 15,000,000 shares of common stock.
In April 1995, 6,000,000 of these shares were sold in an underwritten offering.
In May 1995, the underwriters closed on a portion (241,854 shares) of the
over-allotment option granted them in connection with the above offering.
Proceeds from these transactions were contributed to the Simon Operating
Partnership in exchange for 6,241,854 Units and subsequently were used to repay
debt.
On February 10, 1995, one of the Simon Operating Partnership's limited
partners exchanged its 212,114 Units for 212,114 shares of common stock.
On October 27, 1995, the Company completed a $100,000 private
placement of 4,000,000 shares of Series A preferred stock. Dividends on the
preferred stock are paid quarterly at the greater of 8.125% per annum or the
dividend rate payable under the underlying common stock. The holders of the
preferred stock have the right to convert the preferred stock into common stock
after two years at an initial conversion ratio equal to 0.9524. The Company may
redeem the preferred stock after five years upon payment of premiums that
decline to $25.00 per share over the following seven years. The holders of the
preferred stock are entitled to vote on all matters submitted to a vote of
96
holders of common stock, based on the number of shares of common stock into
which the preferred stock can be converted. The Company contributed the proceeds
to the Simon Operating Partnership in exchange for Preferred Units. The Simon
Operating Partnership pays a preferred distribution to the Company equal to the
dividends paid on the preferred stock.
On December 21, 1995, a limited partner in the Simon Operating
Partnership exchanged 121,348 Units for 121,348 shares of common stock.
On September 27, 1996, the Company completed a $200,000 public
offering (the "Preferred Offering") of 8,000,000 shares of Series B cumulative
redeemable preferred stock, generating net proceeds of approximately $193,000.
Dividends on the preferred stock are paid quarterly in arrears at 8.75% per
annum. The Company may redeem the preferred stock any time on or after September
29, 2006, at a redemption price of $25.00 per share, plus accrued and unpaid
dividends. The redemption price (other than the portion thereof consisting of
accrued and unpaid dividends) is payable solely out of the sale proceeds of
other capital shares of the Company, which may include other series of preferred
shares. The Company contributed the proceeds to SDG, LP in exchange for
Preferred Units. SDG, LP pays a preferred distribution to the Company equal to
the dividends paid on the preferred stock. SDG, LP loaned a portion of the
proceeds ($34,400) to the Simon Operating Partnership which used the advanced
proceeds to reduce outstanding debt.
EXCHANGE RIGHTS
The former limited partners in the Simon Operating Partnership had the
right at any time after December 1994 to exchange all or any portion of their
Units for shares of common stock of the Company on a one-for-one basis or cash,
as selected by the Company's Board of Directors. If the Company had selected to
use cash, the Company could cause the Simon Operating Partnership to redeem the
Units. The amount of cash to be paid if the exchange right was exercised and the
cash option was selected would have been based on the trading price of the
Company's common stock at that time. In the periods when the Simon Operating
Partnership did not control whether cash would be used to settle the limited
partners' exchange rights, the limited partners' equity interest was excluded
from partners' equity and was reflected in the consolidated balance sheet at
redemption value.
In connection with the merger, the Simon Operating Partnership
agreement was amended eliminating the exchange right provision. Accordingly, the
limited partners' equity interest in the Simon Operating Partnership has been
included as partners' equity at historical carrying value. Previous transfers of
limited partners' equity interest from partners' equity have been reversed. This
reversal occurred in the financial statements of the Simon Operating
Partnership, effective August 9, 1996.
11. STOCK OPTION PLANS
The Company and the Simon Operating Partnership adopted an Employee
Stock Plan (the "Employee Plan"). The Company also adopted a Director Stock
Option Plan (the "Director Plan" and, together with the Employee Plan, the
"Stock Option Plans") for the purpose of attracting and retaining eligible
officers, directors and employees. The Company has reserved for issuance
4,595,000 shares of common stock under the Employee Plan and 100,000 shares of
common stock under the Director Plan. If stock options granted in connection
with the Stock Option Plans are exercised at any time or from time to time, the
partnership agreement requires the Company to sell to the Simon Operating
Partnership, at fair market value, shares of the Company's common stock
sufficient to satisfy the exercised stock options. The Company also is obligated
to purchase Units for cash in an amount equal to the fair market value of such
shares.
EMPLOYEE PLAN
The Employee Plan is currently administered by the Company's
Compensation Committee (the "Committee"). During the ten-year period following
the adoption of the Employee Plan, the Committee may, subject to the terms of
the Employee Plan and in certain instances subject to board approval, grant to
key employees (including officers and directors who are employees) of the Simon
Operating Partnership or its "affiliates" (as defined in the Employee Plan) the
following types of awards: stock options (including options with a reload
feature), stock appreciation rights, performance units and shares of restricted
or unrestricted common stock. Awards granted under the Employee Plan become
exercisable over the period determined by the Committee. The exercise price of
an option may not be less than the fair market value of the shares of the common
stock on the date of grant. The options vest 40% on the first anniversary of the
date of grant, an additional 30% on the second anniversary of the grant date and
become fully vested three years after the grant date. The options expire ten
years from the date of grant.
97
DIRECTOR PLAN
Directors of the Company who are not also employees of the Company or
its "affiliates" (as defined in the Director Plan) participate in the Director
Plan. Under the Director Plan, each eligible director is automatically granted
options ("Director Options") to purchase 5,000 shares of common stock upon the
director's initial election to the Board of Directors and 3,000 shares of common
stock upon each reelection of the director to the Board of Directors. The
exercise price of the options is equal to 100% of the fair market value of the
Company's common stock on the date of grant. Director Options become exercisable
on the first anniversary of the date of grant or at such earlier time as a
"change in control" of the Company occurs and will remain exercisable through
the tenth anniversary of the date of grant (the "Expiration Date"). Prior to
their Expiration Dates, Director Options will terminate 30 days after the
optionee ceases to be a member of the Board of Directors.
SFAS No. 123, "Accounting for Stock-Based Compensation," requires
entities to measure compensation costs related to awards of stock-based
compensation using either the fair value method or the intrinsic value method.
Under the fair value method, compensation expense is measured at the grant date
based on the fair value of the award. Under the intrinsic value method,
compensation expense is equal to the excess, if any, of the quoted market price
of the stock at the grant date over the amount the employee must pay to acquire
the stock. Entities electing to measure compensation costs using the intrinsic
value method must make pro forma disclosures of net income and earnings per
share as if the fair value method had been applied. The Simon Operating
Partnership has elected to account for stock-based compensation programs using
the intrinsic value method consistent with existing accounting policies and,
therefore, the standard will not have an effect on the consolidated financial
statements. The impact on pro forma net income and earnings per share as a
result of applying the intrinsic value method was not material.
Information relating to the Stock Option Plans from January 1, 1994
through December 31, 1996 is as follows:
DIRECTOR PLAN EMPLOYEE PLAN
------------------------------- -------------------------------
OPTION PRICE OPTION PRICE
OPTIONS PER SHARE OPTIONS PER SHARE
-------------- --------------- --------------- ---------------
SHARES UNDER OPTION AT JANUARY 1, 1994 25,000 $ 22.25 735,000 $ 22.25
GRANTED 15,000 27.00 1,363,272 23.44 - 25.25
EXERCISED - - - -
FORFEITED - - (28,125) 23.44
-------------- --------------- --------------- ---------------
SHARES UNDER OPTION AT DECEMBER 31, 1994 40,000 22.25 - 27.00 2,070,147 22.25 - 25.25
GRANTED 15,000 24.94 (1) - -
EXERCISED - - (6,876) 23.44
FORFEITED - - (49,137) 23.44 - 25.25
SHARES UNDER OPTION AT DECEMBER 31, 1995 55,000 $22.25 - 27.00 2,014,134 $22.25 - 25.25
GRANTED 40,000 24.37 (1) - -
EXERCISED (5,000) 24.75 (367,151) 24.88 - 30.75
FORFEITED - - (24,000) 23.44 - 25.25
SHARES UNDER OPTION AT DECEMBER 31, 1996 90,000 $22.25 - 27.38 1,622,983 $22.25 - 25.25
============== =============== =============== ===============
OPTIONS EXERCISABLE AT DECEMBER 31, 1996 50,000 $24.59 (1) 1,496,117 $22.97 (1)
============== =============== =============== ===============
SHARES AVAILABLE FOR GRANT AT DECEMBER 31, 1996 5,000 1,597,990
============== ===============
(1) REPRESENTS THE AVERAGE PRICE.
STOCK INCENTIVE PROGRAM
98
In October 1994, under the Employee Plan of the Company and the Simon
Operating Partnership, the Company's Compensation Committee approved a five-year
stock incentive program (the "Stock Incentive Program"), under which restricted
stock award shares have been granted to certain employees at no cost. The
outstanding restricted stock award shares vest in four installments of 25% each
on January 1 of each year following the year in which the restricted shares are
awarded. The cost of restricted stock awards, based on the stock's fair market
value at the determination dates, is charged to partners' equity and
subsequently amortized against earnings of the Simon Operating Partnership over
the vesting period.
In March 1995, an aggregate of 1,000,000 shares of restricted stock was
allocated to 50 executives, subject to the performance standards and other terms
of the Stock Incentive Program. During 1996 and 1995, 200,030 and 144,196 shares
of common stock, respectively, were granted under the Stock Incentive Program.
Approximately $2,084 and $918 relating to this program were amortized in 1996
and 1995, respectively.
12. EMPLOYEE BENEFIT PLANS
The Simon Operating Partnership and affiliated entities currently
maintains a tax-qualified retirement 401(k) savings plan. Under the plan,
eligible employees can participate in a cash or deferred arrangement permitting
them to defer up to a maximum of 12% of their compensation, subject to certain
limitations. Participants' salary deferrals are matched at specified
percentages, and one plan provides annual contributions of 3% of eligible
employees' compensation. The Simon Operating Partnership contributed $2,123,
$1,716 and $1,628 to the plans in 1996, 1995 and 1994, respectively.
Except for the 401(k) plan, the Company offers no other postretirement
or postemployment benefits to its employees.
13. COMMITMENTS AND CONTINGENCIES
LITIGATION
CARLO ANGOSTINELLI ET AL. V. DEBARTOLO REALTY CORP. ET AL. On October
16, 1996, a complaint was filed in the Court of Common Pleas of Mahoning County,
Ohio, captioned Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. The
named defendants are SD Property Group, Inc., a 99%-owned subsidiary of the
Company, and DeBartolo Properties Management, Inc., and the plaintiffs are 27
former employees of the defendants. In the complaint, the plaintiffs allege that
they were recipients of deferred stock grants under the DRC Plan and that these
grants immediately vested under the DRC Plan's "change in control" provision as
a result of the Merger. Plaintiffs assert that the defendants' refusal to issue
them approximately 661,000 shares of DRC common stock, which is equivalent to
approximately 450,000 shares of common stock of the Company computed at the 0.68
Exchange Ratio used in the Merger, constitutes a breach of contract and a breach
of the implied covenant of good faith and fair dealing under Ohio law.
Plaintiffs seek damages equal to such number of shares of DRC common stock, or
cash in lieu thereof, equal to all deferred stock ever granted to them under the
DRC Plan, dividends on such stock from the time of the grants, compensatory
damages for breach of the implied covenant of good faith and fair dealing, and
punitive damages.
The complaint was served on the defendants on October 28, 1996, and
pretrial proceedings have just commenced. The Company is of the opinion that it
has meritorious defenses and accordingly intends to defend this action
vigorously. While it is difficult for the Company to predict the outcome of this
litigation at this stage based on the information known to the Company to date,
the Company does not expect this action will have a material adverse effect on
the Company.
ROEL VENTO ET AL. V. TOM TAYLOR ET AL. An affiliate of the Simon
Operating Partnership is a defendant in litigation entitled Roel Vento et al. v.
-------------------
Tom Taylor et al., in the District Court of Cameron County, Texas, in which a
- ----------------
judgment in the amount of $7,800 has been entered against all defendants. This
judgment includes approximately $6,500 of punitive damages and is based upon a
jury's findings on four separate theories of liability including fraud,
intentional infliction of emotional distress, tortuous interference with
contract and civil conspiracy arising out of the sale of a business operating
under a temporary license agreement at Valle Vista Mall in Harlingen, Texas. The
Simon Operating Partnership is seeking to overturn the award and has appealed
the verdict. Although the Simon Operating Partnership is optimistic that it may
be able to reverse or reduce the verdict, there can be no assurance thereof.
Management, based upon the advice of counsel, believes that the ultimate outcome
of this action will not have a material adverse effect on the Company or the
Simon Operating Partnership.
The Company or the Simon Operating Partnership currently are not
subject to any other material litigation other than routine litigation and
administrative proceedings arising in the ordinary course of business. On the
99
basis of consultation with counsel, management believes that these items will
not have a material adverse impact on the Company's or the Simon Operating
Partnership's financial position or results of operations.
FINANCING COMMITMENTS
The Simon Operating Partnership has agreed to equity funding
commitments of $14,000 and $31,103 relating to the construction of Grapevine
Mills and The Source, respectively. The Simon Operating Partnership had
satisfied $24,241 of its commitment on The Source at December 31, 1996.
LEASE COMMITMENTS
As of December 31, 1996, a total of 25 of the Properties are
subject to ground leases. The termination dates of these ground leases range
from 1998 to 2087. These ground leases generally require payments by the Simon
Operating Partnership of a fixed annual rent, or a fixed annual rent plus a
participating percentage over a base rate. Ground lease expense including
contingent rent incurred by the Simon Operating Partnership for the years ended
December 31, 1996, 1995 and 1994, was $7,497, $6,700 and $5,808, respectively.
Future minimum lease payments due under such ground leases for each of
the next five years ending December 31 and thereafter are as follows:
1997 $ 3,806
1998 3,799
1999 3,805
2000 3,815
2001 3,710
Thereafter 141,495
------------
$ 160,430
============
ENVIRONMENTAL MATTERS
Substantially all of the Properties have been subjected to Phase I
environmental audits. Such audits have not revealed nor is management aware of
any environmental liability that management believes would have a material
adverse impact on the Simon Operating Partnership's financial position or
results of operations. Management is unaware of any instances in which it would
incur significant environmental costs if any or all Properties were sold,
disposed of or abandoned.
OTHER
The Simon Operating Partnership's partner in Rolling Oaks Mall has the
right to transfer its ownership interest to the Simon Operating Partnership in
exchange for Units based on the fair market value of the ownership interest at
the time of the exchange. This right expires on January 1, 2002. Rolling Oaks
Mall is a Joint Venture Property accounted for using the equity method of
accounting.
100
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly 1996 and 1995 data is as follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
-------------- -------------- -------------- -------------- --------------
1996
- -----------------------------------
Total revenue $ 139,444 $ 143,761 $ 146,396 $ 162,303 $ 591,904
Operating income 61,073 63,051 63,001 73,696 260,821
Income before extraordinary items
21,801 21,937 20,396 28,640 92,774
Net income available to Unitholders
21,536 21,937 17,866 27,712 89,051
Net income before extraordinary
items per Unit 0.23 0.23 0.21 0.30 0.97
Net income per Unit $ 0.23 $ 0.23 $ 0.19 $ 0.29 $ 0.93
1995
- -----------------------------------
Total revenue $ 129,490 $ 130,765 $ 138,042 $ 155,360 $ 553,657
Operating income 58,865 58,115 64,191 69,965 251,136
Income before extraordinary items
22,207 23,528 26,946 27,334 100,015
Net income available to Unitholders
22,207 23,280 24,310 26,933 96,730
Net income before extraordinary
items per Unit 0.26 0.25 0.28 0.29 1.08
Net income per Unit $ 0.26 $ 0.25 $ 0.25 $ 0.28 $ 1.04
Primarily due to the cyclical nature of earnings to unitholders, the
sum of the quarterly earnings per unit in 1996 varies from the annual earnings
per unit.
101
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIMON DEBARTOLO GROUP, L.P.
BY SIMON DEBARTOLO GROUP, INC.
By /s/ David Simon
---------------------------
David Simon
Chief Executive Officer
March 11, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE Capacity Date
/s/ David Simon Chief Executive Officer March 11, 1997
- -------------------------------------
David Simon and Director (Principal Executive Officer)
/s/ Herbert Simon Co-Chairman of the Board of Directors March 11, 1997
- -------------------------------------
Herbert Simon
/s/ Melvin Simon Co-Chairman of the Board of Directors March 11, 1997
- -------------------------------------
Melvin Simon
/s/ Richard Sokolov President, Chief Operating Officer March 11, 1997
- -------------------------------------
Richard Sokolov and Director
/s/ Edward J. DeBartolo, Jr. Director March 11, 1997
- -------------------------------------
Edward J. DeBartolo, Jr.
/s/ M. Denise DeBartolo York Director March 11, 1997
- -------------------------------------
M. Denise DeBartolo York
/s/ Birch Bayh Director March 11, 1997
- -------------------------------------
Birch Bayh
/s/ William T. Dillard, II Director March 11, 1997
- -------------------------------------
William T. Dillard, II
/s/ G. William Miller Director March 11, 1997
- -------------------------------------
G. William Miller
/s/ Fredrick W. Petri Director March 11, 1997
- -------------------------------------
Fredrick W. Petri
/s/ Terry S. Prindiville Director March 11, 1997
- -------------------------------------
Terry S. Prindiville
102
/s/ J. Albert Smith Director March 11, 1997
- -------------------------------------
J. Albert Smith
/s/ Philip J. Ward Director March 11, 1997
- -------------------------------------
Philip J. Ward
/s/ Stephen E. Sterrett Treasurer (Principal Financial Officer) March 11, 1997
- -------------------------------------
Stephen E. Sterrett
/s/ Dennis L. Cavanagh Senior Vice President, Financial Services March 11, 1997
- -------------------------------------
Dennis L. Cavanagh (Principal Accounting Officer)
103
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULE
To Simon DeBartolo Group, Inc.:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of SIMON DeBARTOLO GROUP, L.P. included in
this Form 10-K, and have issued our report thereon dated February 18, 1997. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule is the responsibility of Simon
DeBartolo Group, L.P.'s management and is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of the basic
financial statements. The schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
February 18, 1997
104
SIMON DEBARTOLO GROUP, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996 SCHEDULE III
(DOLLARS IN THOUSANDS)
COST CAPITALIZED GROSS AMOUNTS
SUBSEQUENT TO WHICH CARRIED AT
INITIAL COST ACQUISITION CLOSE OF PERIOD
--------------------- ------------------ ------------------
BUILDINGS AND BUILDINGS AND BUILDINGS AND ACCUMULATED DATE OF
NAME, LOCATION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION
- -------------- ------------ ---- ------------ ---- ------------ ---- ------------ ----- ------------ ------------
REGIONAL MALLS
Alton Square, Alton,
IL $ 0 $ 154 $ 7,641 $ 0 $ 1,174 $ 154 $ 8,815 $ 8,969 $ 917 1993 (Note 3)
Amigoland Mall,
Brownsville, TX 0 1,045 4,518 0 875 1,045 5,393 6,438 1,085 1974
Anderson Mall,
Anderson, SC 19,000 1,838 18,122 1,363 1,785 3,201 19,907 23,108 2,752 1972
Barton Creek Square,
Austin, TX 63,549 4,413 20,699 771 15,849 5,184 36,548 41,732 4,058 1981
Battlefield Mall,
Springfield, MO 50,724 4,040 29,783 3,225 29,388 7,265 59,171 66,436 6,980 1976
Bay Park Square,
Green Bay, WI 11,961 6,997 25,623 0 0 6,997 25,623 32,620 310 1996 (Note 4)
Bergen Mall,
Paramus, NJ 0 11,020 92,541 0 3,962 11,020 96,503 107,523 686 1996 (Note 4)
Biltmore Square,
Asheville, NC 28,265 10,907 19,315 0 78 10,907 19,393 30,300 234 1996 (Note 4)
Boynton Beach Mall,
Boynton Beach, FL 0 33,758 67,710 0 26 33,758 67,736 101,494 836 1996 (Note 4)
Broadway Square,
Tyler, TX 0 11,470 32,450 0 1,327 11,470 33,777 45,247 2,042 1994 (Note 3)
Brunswick Square,
East Brunswick, NJ 22,927 8,436 55,838 0 373 8,436 56,211 64,647 674 1996 (Note 4)
Castleton Square,
Indianapolis, IN 0 45,011 80,963 0 93 45,011 81,056 126,067 981 1996 (Note 4)
Century Consumer
Mall, Merrillville, 0
IN 0 2,190 9,589 0 1,314 2,190 10,903 13,093 2,054 1992 (Note 3)
Charles Town Square,
Charleston, SC 0 539 2,825 500 530 1,039 3,355 4,394 575 1976
Chautauqua Mall,
Lakewood, NY 4,984 3,258 9,659 0 2,499 3,258 12,158 15,416 111 1996 (Note 4)
Cheltenham Square,
Philadelphia, PA 16,945 14,226 43,799 0 0 14,226 43,799 58,025 528 1996 (Note 4)
Chesapeake Square,
Chesapeake, VA 52,576 11,533 70,461 0 5 11,533 70,466 81,999 847 1996 (Note 4)
Cielo Vista Mall,
El Paso, TX 58,652 1,307 18,512 608 12,621 1,915 31,133 33,048 5,267 1974
College Mall,
Bloomington, IN 43,429 1,012 16,245 722 16,298 1,734 32,543 34,277 4,790 1965
Columbia Center,
Kennewick, WA 43,369 27,170 58,185 0 517 27,170 58,702 85,872 742 1996 (Note 4)
Cottonwood Mall,
Albuquerque, NM 0 0 0 12,555 69,173 12,555 69,173 81,728 1,337 1993
Crossroads Mall,
Omaha, NE 41,440 884 37,293 409 21,636 1,293 58,929 60,222 2,619 1994 (Note 3)
Crystal River Mall,
Crystal River, FL 16,000 11,679 14,252 0 228 11,679 14,480 26,159 171 1996 (Note 4)
DeSoto Square,
Bradenton, FL 40,869 9,531 52,716 0 2,050 9,531 54,766 64,297 641 1996 (Note 4)
East Towne Mall,
Knoxville, TN 55,000 5,269 22,965 3,699 20,083 8,968 43,048 52,016 2,216 1984
Eastern Hills Mall,
Buffalo, NY 40,869 15,444 47,604 0 77 15,444 47,681 63,125 604 1996 (Note 4)
Eastgate Consumer
Mall, Indianapolis,
IN 25,429 425 4,722 187 2,826 612 7,548 8,160 2,683 1991 (Note 3)
Eastland Mall,
Tulsa, OK 30,000 3,124 24,035 518 5,692 3,642 29,727 33,369 3,341 1986
Forest Mall,
Fond Du Lac, WI 12,800 754 4,498 0 903 754 5,401 6,155 1,035 1973
Forest Village Park,
Forestville, MD 20,600 1,212 4,625 757 3,401 1,969 8,026 9,995 1,171 1980
Fremont Mall,
Fremont, NE 0 26 1,280 265 1,718 291 2,998 3,289 237 1983
Glen Burnie Mall,
Glen Burnie, MD 6,978 7,422 22,878 0 0 7,422 22,878 30,300 275 1996 (Note 4)
Golden Ring Mall,
Baltimore, MD 29,750 1,130 8,955 572 8,436 1,702 17,391 19,093 2,486 1974 (Note 3)
Great Lakes Mall,
Cleveland, OH 62,856 14,608 100,362 0 318 14,608 100,680 115,288 1,216 1996 (Note 4)
Greenwood Park Mall,
Greenwood, IN 36,374 2,606 23,500 5,275 50,895 7,881 74,395 82,276 8,648 1977
Gulf View Square,
Port Richey, FL 38,600 13,689 39,997 0 11 13,689 40,008 53,697 481 1996 (Note 4)
Heritage Park,
Midwest City, OK 0 598 6,213 0 705 598 6,918 7,516 1,118 1978
Hutchinson Mall,
Hutchison, KS 11,523 1,777 18,427 0 2,174 1,777 20,601 22,378 2,753 1985
105
COST CAPITALIZED GROSS AMOUNTS
SUBSEQUENT TO WHICH CARRIED AT
INITIAL COST ACQUISITION CLOSE OF PERIOD
--------------------- ------------------ ------------------
BUILDINGS AND BUILDINGS AND BUILDINGS AND ACCUMULATED DATE OF
NAME, LOCATION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION
- -------------- ------------ ---- ------------ ---- ------------ ---- ------------ ----- ------------ ------------
Independence Center,
Independence, MO 0 5,539 45,822 0 2,080 5,539 47,902 53,441 2,838 1994 (Note 3)
Ingram Park Mall,
San Antonio, TX 56,107 820 17,182 169 11,562 989 28,744 29,733 4,167 1979
Irving Mall,
Irving, TX 43,375 6,736 17,479 2,533 10,673 9,269 28,152 37,421 4,966 1971
Jefferson Valley
Mall, Yorktown, NY 50,000 4,869 30,304 0 2,649 4,869 32,953 37,822 4,240 1983
La Plaza,
McAllen, TX 50,526 2,194 9,828 0 2,042 2,194 11,870 14,064 1,571 1976
Lafayette Square,
Indianapolis, IN 0 25,546 43,294 0 1,988 25,546 45,282 70,828 483 1996 (Note 4)
Lima Mall,
Lima, OH 19,412 7,910 35,495 0 219 7,910 35,714 43,624 431 1996 (Note 4)
Lincolnwood Town
Center,
Lincolnwood, IL 63,000 11,197 63,490 28 0 11,225 63,490 74,715 5,926 1990
Longview Mall,
Longview, TX 22,100 278 3,602 124 2,437 402 6,039 6,441 1,208 1978
Machesney Park Mall,
Rockford, IL 0 613 7,460 120 3,025 733 10,485 11,218 1,683 1979
Mall of the
Mainland,
Galveston, TX 40,706 1,861 4,708 0 0 1,861 4,708 6,569 57 1996 (Note 4)
Markland Mall,
Kokomo, IN 10,000 0 7,568 0 901 0 8,469 8,469 913 1983
Mc Cain Mall,
N. Little Rock, AR 26,304 0 9,515 0 5,303 0 14,818 14,818 2,856 1973
Melbourne Square,
Melbourne, FL 40,214 20,552 51,110 0 48 20,552 51,158 71,710 616 1996 (Note 4)
Memorial Mall,
Sheboygan, WI 0 175 4,881 0 624 175 5,505 5,680 740 1980
Miami International
Mall, Miami, FL 47,500 18,685 69,959 0 22 18,685 69,981 88,666 9,104 1996 (Note 4)
Midland Park Mall,
Midland, TX 22,500 704 9,613 0 2,510 704 12,123 12,827 1,996 1980
Miller Hill Mall,
Duluth, MN 34,500 2,537 18,114 0 1,522 2,537 19,636 22,173 2,556 1973
Mission Viejo Mall,
Mission Viejo, CA 0 9,139 54,445 0 9,595 9,139 64,040 73,179 701 1996 (Note 4)
Mounds Mall,
Anderson, IN 0 0 2,689 0 1,536 0 4,225 4,225 681 1964
Muncie Mall,
Muncie, IN 44,000 210 5,964 0 12,906 210 18,870 19,080 1,434 1975
North East Mall,
Hurst, TX 22,442 1,440 13,473 784 15,447 2,224 28,920 31,144 369 1996 (Note 4)
North Towne Square,
Toledo, OH 23,500 579 8,382 0 1,411 579 9,793 10,372 2,205 1980
Northgate Shopping
Center, Seattle 80,983 89,991 57,873 0 283 89,991 58,156 148,147 699 1996 (Note 4)
Northwoods Mall,
Peoria, IL 0 1,202 12,779 1,449 17,574 2,651 30,353 33,004 4,484 1983 (Note 3)
Orange Park Mall,
Orange Park, FL 0 13,345 65,173 0 2,241 13,345 67,414 80,759 3,881 1994 (Note 3)
Paddock Mall,
Ocala, FL 30,700 20,420 30,490 0 32 20,420 30,522 50,942 368 1996 (Note 4)
Port Charlotte Town
Center, Port
Charlotte, FL 46,548 5,561 59,381 0 9 5,561 59,390 64,951 715 1996 (Note 4)
Prien Lake Mall,
Lake Charles, LA 0 1,926 2,829 725 3,338 2,651 6,167 8,818 821 1972
Raleigh Springs
Mall, Memphis, TN 24,921 9,137 28,604 0 34 9,137 28,638 37,775 339 1996 (Note 4)
Randall Park Mall,
Cleveland, OH 34,269 4,421 52,456 0 480 4,421 52,936 57,357 650 1996 (Note 4)
Richardson Square,
Dallas, TX 15,948 4,867 6,329 0 101 4,867 6,430 11,297 101 1996 (Note 4)
Richmond Mall,
Cleveland, OH 0 2,666 12,112 0 2 2,666 12,114 14,780 146 1996 (Note 4)
Richmond Square,
Richmond, IN 6,977 4,309 11,343 0 488 4,309 11,831 16,140 137 1996 (Note 4)
Ross Park Mall,
Pittsburgh, PA 60,000 15,269 50,995 9,617 40,162 24,886 91,157 116,043 2,554 1996 (Note 4)
South Park Mall,
Shreveport, LA 24,748 855 13,691 74 2,193 929 15,884 16,813 2,682 1975
Southern Park Mall,
Youngstown, OH 55,822 16,982 77,774 97 2,792 17,079 80,566 97,645 947 1996 (Note 4)
Southgate Mall,
Yuma, AZ 0 1,817 7,974 0 2,826 1,817 10,800 12,617 1,282 1988 (Note 3)
Southtown Mall,
Ft. Wayne, IN 0 2,059 13,288 0 959 2,059 14,247 16,306 3,395 1969
106
COST CAPITALIZED GROSS AMOUNTS
SUBSEQUENT TO WHICH CARRIED AT
INITIAL COST ACQUISITION CLOSE OF PERIOD
--------------------- ------------------ ------------------
BUILDINGS AND BUILDINGS AND BUILDINGS AND ACCUMULATED DATE OF
NAME, LOCATION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION
- -------------- ------------ ---- ------------ ---- ------------ ---- ------------ ----- ------------ ------------
St Charles Towne
Center Waldorf, MD 0 9,328 52,974 1,180 8,786 10,508 61,760 72,268 7,909 1990
Summit Mall,
Akron, OH 29,904 25,037 45,036 0 7,106 25,037 52,142 77,179 493 1996 (Note 4)
Sunland Park Mall,
El Paso, TX 40,149 2,896 28,900 0 1,664 2,896 30,564 33,460 4,771 1988
Tacoma Mall,
Tacoma, WA 94,752 39,504 125,826 0 859 39,504 126,685 166,189 1,520 1996 (Note 4)
Tippecanoe Mall,
Lafayette, IN 47,556 4,320 8,474 5,355 30,307 9,675 38,781 48,456 4,500 1973
Towne East Square,
Wichita, KS 57,419 9,495 18,479 2,042 7,134 11,537 25,613 37,150 4,540 1975
Towne West Square,
Wichita, KS 40,250 988 21,203 76 3,493 1,064 24,696 25,760 4,050 1980
Treasure Coast
Square, Stuart, FL 54,581 11,124 73,108 0 0 11,124 73,108 84,232 882 1996 (Note 4)
Tyrone Square,
St. Petersburg, FL 68,780 15,638 120,962 0 125 15,638 121,087 136,725 1,442 1996 (Note 4)
University Mall,
Little Rock, AR 0 123 17,411 0 320 123 17,731 17,854 2,824 1967
University Mall,
Pensacola, FL 0 4,741 26,657 0 1,113 4,741 27,770 32,511 1,636 1994 (Note 3)
University Park
Mall, South
Bend, IN 59,500 15,105 61,466 0 4,019 15,105 65,485 80,590 6,587 1996 (Note 4)
Upper Valley Mall,
Springfield, OH 27,911 8,422 38,745 0 153 8,422 38,898 47,320 473 1996 (Note 4)
Valle Vista Mall,
Harlingen, TX 34,837 1,398 17,266 372 6,692 1,770 23,958 25,728 3,161 1983
Virginia Center
Commons 0 9,765 64,285 0 397 9,765 64,682 74,447 449 1996 (Note 4)
Washington Square,
Indianapolis, IN 42,861 20,146 41,248 0 218 20,146 41,466 61,612 505 1996 (Note 4)
West Ridge Mall,
Topeka, KS 50,005 5,775 34,132 197 2,317 5,972 36,449 42,421 4,573 1988
White Oaks Mall,
Springfield, IL 16,500 3,024 35,692 1,153 12,835 4,177 48,527 52,704 3,269 1977
Wichita Mall,
Wichita, KS 0 0 4,535 0 384 0 4,919 4,919 865 1981
Windsor Park Mall,
San Antonio, TX 14,960 1,194 16,940 130 3,197 1,324 20,137 21,461 3,087 1976
Woodville Mall,
Toledo, OH 0 1,830 4,454 0 0 1,830 4,454 6,284 54 1996 (Note 4)
COMMUNITY SHOPPING
CENTERS
Arvada Plaza,
Arvada, CO 0 70 342 0 581 70 923 993 119 1966
Aurora Plaza,
Aurora, CO 0 35 5,754 0 908 35 6,662 6,697 1,009 1966
Bloomingdale Court,
Bloomingdale, IL 29,009 9,735 26,184 0 648 9,735 26,832 36,567 2,209 1987
Boardman Plaza,
Youngstown, OH 13,955 8,189 26,355 0 134 8,189 26,489 34,678 318 1996 (Note 4)
Bridgeview Court,
Bridgeview, IL 0 308 3,638 0 0 308 3,638 3,946 383 1988
Brightwood Plaza,
Indianapolis, IN 0 65 128 0 208 65 336 401 61 1965
Bristol Plaza,
Bristol, VA 0 61 325 0 21 61 346 407 94 1966
Buffalo Grove Towne
Center,
Buffalo Grove, IL 0 2,044 6,602 0 209 2,044 6,811 8,855 225 1988
Celina Plaza,
El Paso, TX 0 138 815 0 13 138 828 966 108 1977
Chesapeake Center,
Chesapeake, VA 6,563 5,500 12,279 0 23 5,500 12,302 17,802 148 1996 (Note 4)
Cohoes Commons,
Rochester, NY 0 1,698 8,426 0 51 1,698 8,477 10,175 1,282 1984
Countryside Plaza,
Countryside, IL 0 1,243 8,507 0 481 1,243 8,988 10,231 1,410 1977
East Towne Commons,
Knoxville, TN 0 3,921 5,345 0 1,604 3,921 6,949 10,870 632 1990
Eastland Plaza,
Tulsa, OK 0 908 3,709 0 29 908 3,738 4,646 374 1987
Forest Plaza,
Rockford, IL 16,904 4,270 16,818 453 364 4,723 17,182 21,905 1,231 1985
Fox River Plaza,
Elgin, IL 12,654 2,907 9,453 0 60 2,907 9,513 12,420 716 1985
Great Lakes Plaza,
Cleveland, OH 0 1,027 2,025 0 925 1,027 2,950 3,977 26 1996 (Note 4)
Greenwood Plus,
Greenwood, IN 0 1,350 1,792 0 3,914 1,350 5,706 7,056 507 1979 (Note 3)
107
COST CAPITALIZED GROSS AMOUNTS
SUBSEQUENT TO WHICH CARRIED AT
INITIAL COST ACQUISITION CLOSE OF PERIOD
--------------------- ------------------ ------------------
BUILDINGS AND BUILDINGS AND BUILDINGS AND ACCUMULATED DATE OF
NAME, LOCATION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION
- -------------- ------------ ---- ------------ ---- ------------ ---- ------------ ----- ------------ ------------
Griffith Park Plaza,
Griffith, IN 0 0 2,412 0 93 0 2,505 2,505 398 1979
Grove at Lakeland
Square, The,
Lakeland, FL 3,750 5,237 6,016 0 42 5,237 6,058 11,295 73 1996 (Note 4)
Hammond Square,
Sandy Springs, GA 0 0 27 0 1 0 28 28 4 1974
Highland Lakes
Center, Orlando, FL 14,377 13,950 18,490 0 6 13,950 18,496 32,446 223 1996 (Note 4)
Ingram Plaza,
San Antonio, TX 0 421 1,802 4 22 425 1,824 2,249 338 1980
Lake Plaza,
Waukegan, IL 0 2,868 6,420 0 203 2,868 6,623 9,491 445 1986
Lake View Plaza,
Orland Park, IL 22,169 4,775 17,586 0 256 4,775 17,842 22,617 1,239 1986
Lima Center
Lima, OH 0 1,808 5,151 0 0 1,808 5,151 6,959 58 1996 (Note 4)
Lincoln Crossing,
O'Fallon, IL 997 1,079 2,692 0 36 1,079 2,728 3,807 329 1990
Mainland Crossing,
Galveston, TX 3,516 1,850 1,737 0 2 1,850 1,739 3,589 82 1996 (Note 4)
Maplewood Square,
Omaha, NE 0 466 1,249 0 42 466 1,291 1,757 220 1987
Markland Plaza,
Kokomo, IN 0 210 1,258 0 356 210 1,614 1,824 282 1975
Martinsville Plaza,
Martinsville, VA 0 0 584 0 45 0 629 629 199 1980
Marwood Plaza,
Indianapolis, IN 0 52 3,597 0 82 52 3,679 3,731 402 1962
Matteson Plaza,
Matteson, IL 11,159 1,830 9,737 0 1,496 1,830 11,233 13,063 813 1988
Memorial Plaza,
Sheboygan, WI 0 250 436 0 129 250 565 815 156 1966
Mounds Mall Cinema,
Anderson, IN 0 88 158 0 1 88 159 247 30 1975
New Castle Plaza,
New Castle, IN 0 128 1,621 0 426 128 2,047 2,175 337 1966
North Ridge Plaza,
Joliet, IL 0 2,831 7,699 0 30 2,831 7,729 10,560 653 1985
North Riverside Park
Plaza,
N. Riverside, IL 7,785 1,062 2,490 0 195 1,062 2,685 3,747 454 1977
Northland Plaza,
Columbus, OH 0 4,490 8,893 0 271 4,490 9,164 13,654 602 1988
Northwood Plaza,
Fort Wayne, IN 0 304 2,922 0 330 304 3,252 3,556 494 1977
Park Plaza,
Hopkinsville, KY 0 300 1,572 0 24 300 1,596 1,896 224 1968
Regency Plaza, St.
Charles, MO 1,878 616 4,963 0 126 616 5,089 5,705 319 1988
St. Charles Towne
Plaza, Waldorf, MD 30,887 8,835 18,993 0 0 8,835 18,993 27,828 1,412 1987
Teal Plaza,
Lafayette, IN 0 99 878 0 93 99 971 1,070 96 1986
Terrace at The
Florida Mall,
Orlando, FL 4,688 5,647 4,126 0 930 5,647 5,056 10,703 57 1996 (Note 4)
Tippecanoe Plaza,
Lafayette, IN 0 265 440 305 3,315 570 3,755 4,325 355 1962
University Center,
South Bend, IN 0 2,388 5,214 0 3 2,388 5,217 7,605 1,031 1996 (Note 4)
Wabash Village,
West Lafayette, IN 0 0 976 0 58 0 1,034 1,034 175 1976
Washington Plaza,
Indianapolis, IN 0 942 1,697 0 0 942 1,697 2,639 233 1996 (Note 4)
West Ridge Plaza,
Topeka, KS 4,612 1,491 4,620 0 508 1,491 5,128 6,619 310 1988
White Oaks Plaza,
Springfield, IL 12,345 3,265 14,267 0 154 3,265 14,421 17,686 1,022 1986
Wood Plaza,
Fort Dodge, IA 0 45 380 0 701 45 1,081 1,126 158 1967
SPECIALTY RETAIL
CENTERS
The Forum Shops at
Caesars,
Las Vegas, NV 122,716 0 72,866 0 39,931 0 112,797 112,797 8,220 1992
Trolley Square,
Salt Lake City, UT 27,141 4,899 27,539 263 639 5,162 28,178 33,340 2,968 1986 (Note 3)
MIXED-USE PROPERTIES
New Orleans Centre,
New Orleans, LA 20,934 3,769 41,231 0 701 3,769 41,932 45,701 491 1996 (Note 4)
108
COST CAPITALIZED GROSS AMOUNTS
SUBSEQUENT TO WHICH CARRIED AT
INITIAL COST ACQUISITION CLOSE OF PERIOD
--------------------- ------------------ ------------------
BUILDINGS AND BUILDINGS AND BUILDINGS AND ACCUMULATED DATE OF
NAME, LOCATION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION
- -------------- ------------ ---- ------------ ---- ------------ ---- ------------ ----- ------------ ------------
O Hare International
Center,
Rosemont, IL 27,500 172 60,287 1 8,210 173 68,497 68,670 11,270 1986
Riverway,
Rosemont, IL 131,450 8,738 129,175 16 5,886 8,754 135,061 143,815 21,580 1988
DEVELOPMENT PROJECTS
Bowie Town Center,
Bowie, MD 6,000 0 0 11 6,000 11 6,011 0 1996 (Note 4)
Indian River
Peripheral,
Vero Beach, FL 826 0 0 57 826 57 883 0 1996 (Note 4)
The Shops at Sunset
Place,
South Miami, FL 0 11,898 3,210 399 12,960 12,297 16,170 28,467 0 1995
Other 0 0 674 0 884 0 1,558 1,558 0 1995
---------- ------------------- ---------------- --------------------- ---------- ----------
$3,089,525 $944,129 $3,648,643 $59,092 $621,601 $1,003,221 $4,270,244 $5,273,465 $ 270,637
========== =================== ================ ===================== ========== ==========
109
SIMON DEBARTOLO GROUP, L.P.
NOTES TO SCHEDULE III AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(1) Reconciliation of Real Estate Properties:
The changes in real estate assets for the years ended December 31,
1996 and 1995 are as follows:
1996 1995
------------------ -----------------
BALANCE, BEGINNING OF YEAR $2,143,925 $1,887,122
ACQUISITIONS 2,843,287 32,547
IMPROVEMENTS 224,605 73,097
DISPOSALS (19,579) (12,722)
CONSOLIDATION 81,227 163,881
------------------ -----------------
BALANCE, CLOSE OF YEAR $5,273,465 $2,143,925
================== =================
The aggregate net book value for federal income tax purposes as of
December 31, 1996 was $3,161,185.
(2) Reconciliation of Accumulated Depreciation:
The changes in accumulated depreciation and amortization for the years
ended December 31, 1996 and 1995 are as follows:
1996 1995
----------------- ----------------
Balance, beginning of year $ 147,341 $ 68,222
Carryover of minority partners' interest in 13,505 --
accumulated depreciation of DeBartolo Properties
Depreciation expense 120,565 79,126
Disposals (10,774) (7)
----------------- ----------------
Balance, close of year $ 270,637 $ 147,341
================= ================
Depreciation of Simon DeBartolo Group, L.P.'s investment in buildings
and improvements reflected in the statements of operations is calculated over
the estimated original lives of the assets as follows:
Buildings - typically 35 years
Improvements - shorter of lease term or useful life
(3) Initial cost represents net book value at December 20, 1993.
(4) Not developed/constructed by the Simons or the DeBartolos. The date of
construction represents acquisition date.
110
INDEX TO EXHIBITS
EXHIBITS
2.1 Agreement and Plan of Merger among SPG, Sub and DRC, dated as of
March 26, 1996, as amended (included as Annex I to the
Prospectus/Joint Proxy Statement filed as part of Form S-4 of
Simon Property Group, Inc. (Registration No. 333-06933)
****3.3 Articles Supplementary with respect to the Series B Preferred
Stock of the Company to the Amended and Restated Charter.
*4.1 Secured Promissory Note and Open-End Mortgage and Security
Agreement from Simon Property Group, L.P. in favor of
Principal Mutual Life Insurance Company (Pool 1).
*4.2 Secured Promissory Note and Open-End Mortgage and Security
Agreement from Simon Property Group, L.P. in favor of
Principal Mutual Life Insurance Company (Pool 2).
****4.3 Credit Agreement dated as of September 27, 1996 among the
Operating Partnership and Morgan Guaranty Trust Company of New
York, Union Bank of Switzerland and Chase Manhattan Bank as
Lead Agents.
*9.1 Voting Trust Agreement, Voting Agreement and Proxy between MSA,
on the one hand, and Melvin Simon, Herbert Simon and David
Simon, on the other hand.
10.1 Fifth Amended and Restated Limited Partnership Agreement of
Simon DeBartolo Group, L.P. (Incorporated by Reference to
Exhibit 10.1.1 of the Company's Form S-4 (Registration No.
333-06933))
10.2 Third Amended and Restated Agreement of Limited Partnership of
Simon Property Group, L.P. (Incorporated by Reference to
Exhibit 10.1.2 of the Company's Form S-4 (Registration No.
333-06933))
*10.3 Noncompetition Agreement dated as of December 1, 1993 between
the Company and each of Melvin Simon and Herbert Simon.
*10.4 Noncompetition Agreement dated as of December 1, 1993 between
the Company and David Simon.
*10.5 Restriction and Noncompetition Agreement dated as of December 1,
1993 among the Company and the Management Companies.
*10.6 Simon Property Group, L.P. Employee Stock Plan.
*10.7 Simon DeBartolo Group, Inc. Director Stock Option Plan.
****10.8 Restated Indemnity Agreement dated as of August 9, 1996 between
the Company and its directors and officers.
*10.9 Option Agreement to acquire the Excluded Retail Properties.
(Previously filed as Exhibit 10.10.)
*10.10 Option Agreement to acquire the Excluded Properties--Land.
(Previously filed as Exhibit 10.11.)
*10.11 Registration Rights Agreement dated as of December 1, 1993
between the Company, certain Limited Partners and certain
other parties. (Previously filed as Exhibit 10.12.)
*10.12 Option Agreements dated as of December 1, 1993 between the
Management Company and Simon Property Group, L.P. (Previously
filed as Exhibit 10.20.)
*10.13 Option Agreement dated as of December 1, 1993 to acquire
Development Land. (Previously filed as Exhibit 10.22.)
*10.14 Option Agreement dated December 1, 1993 between the Management
Company and Simon Property Group, L.P. (Previously filed as
Exhibit 10.25.)
*10.15 Option Agreement dated December 1, 1993 between Simon
Enterprises, Inc. and Simon Property Group, L.P. (Previously
filed as Exhibit 10.26.)
*10.16 Lock-Up Agreement dated December 20, 1993 between MSA and Simon
Property Group, L.P. (Previously filed as Exhibit 10.27.)
***10.17 Operating Agreement of Summit Mall Company, L.L.C. dated
February 23, 1995.
***10.18 Series A Preferred Stock Purchase Agreement between the Company
and Algemeen Burgerlijk Pensioenfonds dated as of October 27,
1995.
111
10.19 Partnership Agreement of DeBartolo Capital Partnership (the
"Financing Partnership") (Incorporated by reference to the 1994
DRC Form 10-K Exhibit 10(b).)
10.20 Amended and Restated Articles of Incorporation of DPMI
(Incorporated by reference to the 1994 DRC Form 10-K Exhibit
10(c).)
10.21 Amended and Restated Code of Regulations of DPMI (Incorporated
by reference to the 1994 DRC Form 10-K Exhibit 10(d).)
10.22 Assignment and Assumption of Management, Leasing and Development
Agreements between DPMI and DRP, LP (Incorporated by reference
to the 1995 DRC Form 10-K Exhibit 10.14.)
10.23 Assignment and Assumption of Corporate Services Agreement DPMI
and DRP, LP (Incorporated by reference to the 1995 DRC Form 10-K
Exhibit 10.15.)
10.24 Bill of Sale between DPMI and DRP, LP (Incorporated by reference
to the 1995 DRC Form 10-K Exhibit 10.16.)
10.25 First Amendment to the Corporate Services Agreement between DRC
and DPMI (Incorporated by reference to the 1995 DRC Form 10-K
Exhibit 10.17.)
10.26 Service Agreement between EJDC and DPMI (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10.(f).)
10.27 Master Services Agreement between DRP, LP and DPMI (Incorporated
by reference to the 1994 DRC Form 10-K Exhibit 10(g).)
10.28 First Amendment to Master Services Agreement between DRP, LP and
DPMI (Incorporated by reference to the 1995 DRC Form 10-K
Exhibit 10.20.)
10.29 Restated Master Services Agreement between the Financing
Partnership and DPMI (Incorporated by reference to the 1995 DRC
Form 10-K Exhibit 10.22.)
10.30 Master Services Agreement between the Financing Partnership and
DRP, LP (Incorporated by reference to the 1995 DRC Form 10-K
Exhibit 10.23.)
10.31 Form of Mortgage or Securitized Debt Financing (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(i).)
10.32 Loan Agreement for Securitized Debt Financing (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(j).)
10.33 DRC 1994 Stock Incentive Plan (Incorporated by reference to the
1994 DRC Form 10-K Exhibit 10(k).)
10.34 Purchase Option and Right of First Refusal Agreement between
DRP, LP and Edward J. DeBartolo (for Northfield Square)
(Incorporated by reference to the 1994 DRC Form 10-K Exhibit
10(o).)
10.35 Indemnification Agreement between DRC and its directors and
officers (Incorporated by reference to the 1994 DRC Form 10-K
Exhibit 10(u).)
10.36 Amendment to Indemnification Agreement between DRP, LP and the
directors and officers of DPMI (Incorporated by reference to the
1995 DRC Form 10-K Exhibit 10.49.)
10.37 Indemnification Agreement between DRP, LP and the directors and
officers of DPMI (Incorporated by reference to the 1995 DRC Form
10-K Exhibit 10.50.)
10.38 Indemnification Agreement between DPMI and its directors and
officers (Incorporated by reference to the 1995 DRC Form 10-K
Exhibit 10.51.)
10.39 Form of Partnership Interest Exchange Agreement among DRC; DRP,
LP; and certain DeBartolo Employees (Relating to November 29,
1993 Private Placement) (Incorporated by reference to the 1994
DRC Form 10-K Exhibit 10(ac)(1).)
10.40 Form of Partnership Interest Exchange Agreement among DRC; DRP,
LP; and certain DeBartolo Employees (Relating to April 1, 1994
Private Placement) (Incorporated by reference to the 1994 DRC
Form 10-K Exhibit 10(ac)(2).)
10.41 Form of Partnership Interest Purchase Agreement with Amendment
among DRC and certain DeBartolo Employees (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(ad).)
10.42 Letter Agreement regarding Access to Confidential Information
among DRC; DRP, LP; and EJDC (Incorporated by reference to the
1994 DRC Form 10-K Exhibit 10(ae).)
112
10.43 Office Lease between DRP, LP and an affiliate of EJDC
(Southwoods Executive Center) (Incorporated by reference to the
1995 DRC Form 10-K Exhibit 10.69.)
10.44 Sublease between DRP, LP and DPMI (Incorporated by reference to
the 1995 DRC Form 10-K Exhibit 10.70.)
10.45 Purchase Option and Right of First Refusal Agreement between
DRP, LP and Robinson Mall, Inc. (for The Mall at Robinson Town
Center) (Incorporated by reference to the 1994 DRC Form 10-K
Exhibit 10(p)(1).)
10.46 Purchase Option and Right of First Refusal Agreement between
DRP, LP and EJDC (for SouthPark Center Development Site)
(Incorporated by reference to the 1994 DRC Form 10-K Exhibit
10(p)(2).)
10.47 Purchase Option and Right of First Refusal Agreement between
DRP, LP and Washington Mall Associates (for Washington,
Pennsylvania Site) (Incorporated by reference to the 1994 DRC
Form 10-K Exhibit 10(p)(3).)
10.48 Purchase Option and Right of First Offer Agreement between DRP,
LP and Cutler Ridge Mall, Inc. (for Cutler Ridge Mall)
(Incorporated by reference to the 1994 DRC Form 10-K Exhibit
10(q)(1).)
10.49 Purchase Option and Right of First Offer Agreement between DRP,
LP and Almonte, Inc. (for Red Bird Mall) (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(q)(2).)
10.50 Purchase Option and Right of First Refusal Agreement between
DRP, LP and DeBartolo-Stow Associates (for University Town
Center) (Incorporated by reference to the 1994 DRC Form 10-K
Exhibit 10(r).)
10.51 Acquisition Option Agreement between DRP, LP and Coral Square
Associates (for Coral Square) (Incorporated by reference to the
1994 DRC Form 10-K Exhibit 10(s)(1).)
10.52 Acquisition Option Agreement between DRP, LP and Lakeland Square
Associates (for Lakeland Square) (Incorporated by reference to
the 1994 DRC Form 10-K Exhibit 10(s)(2).)
****10.53 Amended and Restated Articles of Incorporation of SD Property
Group, Inc.
****10.54 Amended and Restated Regulations of SD Property Group, Inc.
****10.55 Indemnity Agreement by and between the Company and its new
Directors, dated as of August 9, 1996
****10.56 Contribution Agreement, dated as of June 25, 1996, by and among
DRC and the former limited partners of SPG, LP., excluding JCP
Realty, Inc. and Brandywine Realty, Inc.
****10.57 JCP Contribution Agreement, dated as of August 8, 1996, by and
among DRC and JCP Realty, Inc., and Brandywine Realty, Inc.
****10.58 Subscription Agreement by and between Day Acquisition Corp., and
the Purchaser (as defined in this Exhibit)
****10.59 Amendment to Service Agreement dated as of August 9, 1996,
between EJDC and DPMI
****10.60 Registration Rights Agreement (the "Agreement"), dated as of
August 9, 1996, by and among the "Simon Family Members" (As
defined in the Agreement), SPG, Inc., JCP Realty, Inc.,
Brandywine Realty, Inc., and the Estate of Edward J. DeBartolo
Sr., Edward J. DeBartolo, Jr., Marie Denise DeBartolo York,
and the Trusts and other entities listed on Schedule 2 of the
Agreement, and any of their respective successors-in-interest
and permitted assigns.
****10.61 Fourth Amendment to Purchase Option Agreement, dated as of July
15, 1996, between JCP Realty, Inc., and DRP, LP.
****21.1 List of Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
****99.1 Agreement dated November 13, 1996 between Simon DeBartolo Group,
Inc. and Simon DeBartolo Group, L.P. (Incorporated by
reference to Amendment No. 3 of Form S-3 filed by Simon
DeBartolo Group, L.P. and Simon Property Group, L.P. on
November 20, 1996 under Registration No. 333-11491)
113
* Incorporated by reference to the exhibit with the same number (or as
indicated) that was filed with the Company's Form 10-K for the fiscal
year ended December 31, 1993.
** Incorporated by reference to the exhibit numbered as indicated that
was filed with the Company's Form 10-K for the fiscal year ended
December 31, 1994.
*** Incorporated by reference to the exhibit numbered as indicated that
was filed with the Company's Form 10-K for the fiscal year ended
December 31, 1995.
**** Incorporated by reference to the exhibit numbered as indicated that
was filed with the Company's Form 10-K for the fiscal year ended
December 31, 1996.
114