FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-12618
SIMON PROPERTY GROUP, L.P.
(Exact name of registrant as specified in its charter)
Delaware 35-1903854
(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
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
<TABLE>
SIMON PROPERTY GROUP, L.P.
Consolidated Condensed Balance Sheets
(Unaudited and dollars in thousands)
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
ASSETS:
Investment properties, at cost $2,190,944 $2,162,161
Less _ accumulated depreciation 175,094 152,817
2,015,850 2,009,344
Cash and cash equivalents 45,145 62,721
Tenant receivables and accrued revenue, net 138,901 144,400
Notes receivable and advances due from
Management Company 91,478 102,522
Investment in partnerships and joint
ventures, at equity 120,069 117,332
Deferred costs, net 80,261 81,398
Other assets 40,844 38,719
Total assets $2,532,548 $2,556,436
LIABILITIES AND PARTNERS' EQUITY:
Mortgages and other notes payable $1,995,620 $1,980,759
Accounts payable and accrued expenses 91,225 113,131
Accrued distributions 47,203 48,594
Cash distributions and losses in
partnerships and joint ventures, at equity 54,709 54,120
Investment in Management Company 20,223 20,612
Other liabilities 29,120 19,582
Total liabilities 2,238,100 2,236,798
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY:
Preferred units, 4,000,000 authorized,
issued and outstanding 99,923 99,923
General Partner, 58,560,225 and 58,360,195
units outstanding at March 31, 1996 and
December 31, 1995, respectively 123,076 135,710
Limited Partners, 37,282,628 units outstanding 78,366 86,692
Unamortized restricted stock award (6,917) (2,687)
Total partners' equity 294,448 319,638
Total liabilities and partners' equity $2,532,548 $2,556,436
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
SIMON PROPERTY GROUP, L.P.
Consolidated Condensed Statements of Operations
(Unaudited and dollars in thousands, except per unit amounts)
<CAPTION>
For the three months
ended March 31,
1996 1995
<S> <C> <C>
REVENUE:
Minimum rent $ 78,454 $ 72,998
Overage rent 4,967 4,823
Tenant reimbursements 46,656 44,141
Other income 9,367 7,528
Total revenue 139,444 129,490
EXPENSES:
Property operating 26,185 25,326
Depreciation and amortization 24,672 21,107
Real estate taxes 13,808 12,920
Repairs and maintenance 7,410 5,850
Advertising and promotion 2,720 2,098
Other 3,576 3,324
Total operating expenses 78,371 70,625
OPERATING INCOME 61,073 58,865
INTEREST EXPENSE 38,566 38,933
INCOME BEFORE MINORITY INTEREST 22,507 19,932
MINORITY INTEREST (503) (377)
GAIN ON SALE OF ASSET -- 2,350
INCOME BEFORE UNCONSOLIDATED ENTITIES 22,004 21,905
INCOME FROM UNCONSOLIDATED ENTITIES 1,828 302
INCOME BEFORE EXTRAORDINARY ITEM 23,832 22,207
EXTRAORDINARY ITEMLoss on extinguishment of debt (265) --
NET INCOME 23,567 22,207
GENERAL PARTNER PREFERRED UNIT REQUIREMENT 2,031 --
NET INCOME AVAILABLE TO UNITHOLDERS $ 21,536 $ 22,207
NET INCOME AVAILABLE TO UNITHOLDERS ATTRIBUTABLE TO:
General Partner $ 13,154 $ 12,647
Limited Partners 8,382 9,560
$ 21,536 $ 22,207
EARNINGS PER UNIT:
Income before extraordinary item $ 0.23 $ 0.26
Extraordinary item -- --
Net income $ 0.23 $ 0.26
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
SIMON PROPERTY GROUP, L.P.
Consolidated Condensed Statements of Cash Flows
(Unaudited and dollars in thousands)
<CAPTION>
For the three months
ended March 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 23,567 $ 22,207
Adjustments to reconcile net income to net cash
provided by operating activities_
Depreciation and amortization 26,728 23,468
Loss on extinguishment of debt 265 --
Gain on sale of asset -- (2,350)
Straight-line rent 137 (169)
Minority interest 503 377
Equity in income of unconsolidated entities (1,828) (302)
Changes in assets and liabilities_
Tenant receivables and accrued revenue 5,883 12,185
Deferred costs and other assets 115 (264)
Accounts payable, accrued expenses and other
liabilities (16,122) (13,417)
Net cash provided by operating activities 39,248 41,735
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (25,249) (15,142)
Cash of consolidated joint ventures -- 3,374
Proceeds from sale of asset -- 2,550
Investments in unconsolidated entities (5,093) (3,103)
Distributions from unconsolidated entities 11,772 358
Net cash used in investing activities (18,570) (11,963)
CASH FLOWS FROM FINANCING ACTIVITIES:
Minority interest distributions (1,649) (517)
Partnership distributions (50,625) (40,807)
Mortgage proceeds, net of transaction costs 105,568 68,143
Mortgage, bond and other payments (91,548) (66,353)
Net cash used in financing activities (38,254) (39,534)
DECREASE IN CASH AND CASH EQUIVALENTS (17,576) (9,762)
CASH AND CASH EQUIVALENTS, beginning of period 62,721 105,139
CASH AND CASH EQUIVALENTS, end of period $ 45,145 $ 95,377
The accompanying notes are an integral part of these statements.
</TABLE>
SIMON PROPERTY GROUP, L.P.
Notes to Unaudited Consolidated Condensed Financial Statements
(Dollars in thousands, except per unit/share amounts)
Note 1 - Basis of Presentation
The accompanying consolidated condensed financial statements are
unaudited; however, they have been prepared in accordance with generally
accepted accounting principles for interim financial information and in
conjunction with the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the disclosures required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting solely of normal
recurring matters) necessary for a fair presentation of the consolidated
condensed financial statements for these interim periods have been included.
The results for the interim period ended March 31, 1996 are not necessarily
indicative of the results to be obtained for the full fiscal year. These
unaudited consolidated condensed financial statements should be read in
conjunction with the December 31, 1995 audited financial statements and notes
thereto included in the Simon Property Group, L.P. Annual Report on Form 10-K.
The accompanying unaudited consolidated condensed financial statements of
Simon Property Group, L.P. (the "Operating Partnership") include all the
accounts of the Operating Partnership and subsidiary entities. Simon Property
Group, Inc. (the "Company") is the sole general partner and owned 61.1% and
61.0% of the Operating Partnership as of March 31, 1996 and December 31, 1995,
respectively. Properties which are wholly owned or controlled by the Operating
Partnership have been consolidated. All significant intercompany amounts have
been eliminated. The income of the Operating Partnership is allocated to the
partners based on each partner's ownership interest in the Operating
Partnership during the period. The Company's weighted average ownership
interest in the Operating Partnership for the three months ended March 31, 1996
and 1995 were 61.1% and 57.0%, respectively.
The Operating Partnership equity interests in certain partnerships and
joint ventures which represent noncontrolling 14.7% to 50.0% ownership
interests and the investment in M.S. Management Associates, Inc. (the
"Management Company" - see Note 5) are accounted for under 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.
Note 2 - Reclassifications
Certain reclassifications of prior period amounts have been made in the
financial statements to conform to the 1996 presentation.
Note 3 - Cash Flow Information
Cash paid for interest, net of amounts capitalized, during the three
months ended March 31, 1996 was $37,612, as compared to $37,034 for the same
period in 1995. Accrued and unpaid distributions as of March 31, 1996 and 1995
were $47,203, and $43,379, respectively. All distributions due in 1996 on the
preferred units were paid by March 31, 1996.
Note 4 - Per Share Data
Per unit data is based on the weighted average number of units of
partnership interest ("Units") outstanding during the period. As used herein,
the term Units does not include units of partnership interests entitled to
preferential distribution of cash ("Preferred Units"). The weighted average
number of Units used in the computation for the three months ended March 31,
1996 and 1995 was 95,664,804 and 86,757,624, respectively. Units may be
exchanged for shares of common stock of the Company on a one-for-one basis in
certain circumstances. Additionally, Preferred Units may be converted into
common stock of the Company beginning in October of 1997 at an initial
conversion ratio equal to 0.9524. The stock options outstanding under the
Stock Option Plans and the Preferred Units have not been included in the
computations of per Unit data, as they did not have a dilutive effect.
Note 5 - Investment in Unconsolidated Entities
Summary financial information of partnerships and joint ventures accounted
for using the equity method of accounting, and a summary of the Operating
Partnership's investment in and share of income (loss) from such partnerships
and joint ventures follows:
<TABLE>
PARTNERSHIPS AND JOINT
VENTURES
March 31, December 31,
BALANCE SHEETS 1996 1995
<S> <C> <C>
Assets:
Investment properties at cost, net $ 1,196,889 $ 1,156,066
Cash and cash equivalents 40,330 52,624
Tenant receivables 35,567 35,306
Other assets 36,887 32,626
Total assets $ 1,309,674 $ 1,276,622
Liabilities and Partners' Equity:
Mortgage and other notes payable $ 420,872 $ 410,652
Accounts payable, accrued expenses and
other liabilities 130,420 127,322
Total liabilities 551,292 537,974
Partners' equity 758,381 738,648
Total liabilities and partners' equity $ 1,309,673 $ 1,276,622
Operating Partnership's Share of:
Total assets $ 303,153 $ 290,802
Partners' equity:
Investment in partnerships and joint ventures, at
equity 120,069 117,332
Cash distributions and losses in partnerships and
joint ventures, at equity (54,709) (54,120)
$ 65,360 $ 63,212
</TABLE>
<TABLE>
PARTNERSHIPS AND JOINT
VENTURES
For the three months
ended March 31,
STATEMENTS OF OPERATIONS 1996 1995
<S> <C> <C>
Revenue:
Minimum rent $ 27,964 $ 19,064
Overage rent 762 511
Tenant reimbursements 14,069 9,426
Other income 4,769 1,293
Total revenue 47,564 30,294
Operating Expenses:
Operating expenses and other 17,568 10,830
Depreciation and amortization 10,670 5,444
Total operating expenses 28,238 16,274
Operating Income 19,326 14,020
Interest Expense 7,847 7,271
Net Income 11,479 6,749
Third Party Investors' Share of Net Income 10,022 6,999
The Operating Partnership's Share of Net Income (Loss) $ 1,457 $ (250)
</TABLE>
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 interest held by each general or limited
partner or joint venturer, primarily due to partner preferences.
Summary financial information of the Management Company accounted for
using the equity method of accounting, and a summary of the Operating
Partnership's investment in and share of income from the Management Company
follows:
<TABLE>
MANAGEMENT COMPANY
March 31, December 31,
BALANCE SHEETS 1996 1995
<S> <C> <C>
Assets:
Current assets $ 27,004 $ 40,964
Undeveloped land and mortgage notes 45,746 45,769
Other assets 14,930 13,813
Total assets $ 87,680 $ 100,546
Liabilities and Shareholders' Deficit:
Current liabilities $ 16,162 $ 18,435
Notes payable and advances due to the
Operating Partnership at 11%, due 2008 91,478 102,522
Total liabilities 107,640 120,957
Shareholders' deficit (19,960) (20,411)
Total liabilities and shareholders' deficit $ 87,680 $ 100,546
Operating Partnership's Share of:
Total assets $ 78,912 $ 80,437
Shareholders' deficit $ (20,223) $ (20,612)
</TABLE>
<TABLE>
MANAGEMENT COMPANY
For the three months
ended March 31,
STATEMENTS OF OPERATIONS 1996 1995
<S> <C> <C>
Revenue:
Management fees $ 5,156 $ 4,961
Development and leasing fees 2,325 3,999
Cost-sharing income and other 2,410 1,642
Total revenue 9,891 10,602
Expenses:
Operating expenses 6,852 7,214
Depreciation 622 522
Interest 1,616 1,784
Total expenses 9,090 9,520
Net Income 801 1,082
Preferred Dividends 350 315
Net Income Available for Common Shareholders $ 451 $ 767
The Operating Partnership's Share of Net Income $ 371 $ 552
</TABLE>
The management, development and leasing activities related to the non-
wholly owned and other third-party properties are conducted by the Management
Company.
The Operating Partnership's share of allocated common costs for the three
months ended March 31, 1996 and 1995 was $7,763 and $6,552, respectively.
Note 6 - Debt
On February 23, 1996, the Operating Partnership borrowed the initial
$100,000 tranche of a $184,000 two tranche loan facility for the Forum Shops at
Caesar's ("Forum") and retired the existing $89,701 mortgage debt for Forum.
The initial funding bears interest at LIBOR plus 100 basis points and matures
in February 2000. The remaining proceeds will be used to provide funds for the
approximately 250,000-square-foot phase II expansion of this property.
During the first quarter of 1996, the Operating Partnership drew an
additional $6,364 on its construction loan for Cottonwood Mall in Albuquerque,
New Mexico. As of March 31, 1996, a total of $28,763 was outstanding on the
loan.
At March 31, 1996, the Operating Partnership had consolidated debt of
$1,995,620 of which $1,230,557 is fixed-rate debt and $765,062 is variable-rate
debt. As of March 31, 1996 and 1995, the Operating Partnership had interest-
rate protection agreements related to $551,196 of variable-rate debt. The
agreements are generally in effect until the related variable-rate debt
matures. As a result of the various interest rate protection agreements,
interest savings were $453 and $1,010 for the three months ended March 31, 1996
and 1995, respectively. The Operating Partnership's pro rata share of
indebtedness of the unconsolidated joint venture properties as of March 31,
1996 and 1995 was $170,801 and $166,581, respectively.
Note 7 - Partners' Equity
The following table summarizes the change in the Operating Partnership's
Partners' equity since December 31, 1995.
<TABLE>
General Partner Limited Partners Unamortized
Preferred Restricted
Units Amounts Units Amounts Units Amounts Stock Award Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1995 4,000,000 $ 99,923 58,360,195 $ 135,710 37,282,628 $ 86,692 $ (2,687) $ 319,638
Stock Incentive
Program 200,030 4,751 (4,751) --
Amortization of
stock incentive 521 521
Adjustment to
allocate net
equity of the
Operating
Partnership (1,654) 1,654 --
Other (44) (44)
Distributions (2,031) (28,841) (18,362) (49,234)
Net Income 2,031 13,154 8,382 23,567
Balance at
March 31, 1996 4,000,000 $ 99,923 58,560,225 $ 123,076 37,282,628 $ 78,366 $ (6,917) $ 294,448
</TABLE>
Stock Incentive Program
Under the Employee Stock Plan of the Company and the Operating
Partnership, the Company's Compensation Committee approved a five-year 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 award dates, is charged
to partners' equity and subsequently amortized against earnings of the
Operating Partnership over the vesting period.
On March 22, 1995, an aggregate of 1,000,000 shares of restricted stock
was awarded to 50 executives, subject to the performance standards and other
terms of the Stock Incentive Program, described above. On March 22, 1995 and
1996 the board of directors of the Company approved the issuances of 144,196
and 200,030 shares of common stock of the Company, respectively, to the
eligible executives. These shares are being amortized pro-rata over the four-
year vesting period. Approximately $1,439 has been amortized through March 31,
1996.
Note 8 - Proposed DeBartolo Merger
In March 1996, the Company and DeBartolo Realty Corporation ("DeBartolo")
signed a definitive agreement to merge the two companies. The merger is
expected to be completed in the third quarter of 1996 and is subject to
approval by the shareholders of both companies as well as customary regulatory
and other conditions. Under the terms of the agreement, the shareholders of
DeBartolo will receive 0.68 shares of common stock of the Company for each
share of DeBartolo common stock held. The purchase price, including
indebtedness which would be assumed, is estimated at $2.97 billion.
Note 9 - Subsequent Events
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 interest. The
purchase price included approximately $44,000 cash and the assumption of the
joint venture partner's share of existing debt. The $44,000 purchase price and
the refinancing of $54,000 of existing debt were funded using the Operating
Partnership's revolving credit facility. 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.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
For the Three Months Ended March 31, 1996 vs. the Three Months Ended March 31,
1995
Four property ownership changes (the "Property Transactions") affect the
comparison of the three-month periods. Effective February 23, 1995, the
Operating Partnership acquired an additional 50% interest in White Oaks Mall
("White Oaks") and subsequently began including White Oaks in the financial
statements using the consolidated method of accounting. Effective July 31,
1995, the Operating Partnership acquired the remaining 50% interest in
Crossroads Mall ("Crossroads") and subsequently began including Crossroads in
the financial statements using the consolidated method of accounting.
Effective September 25, 1995, the Operating Partnership acquired the remaining
55% interest in East Towne Mall ("East Towne") and subsequently began including
East Towne in the financial statements using the consolidated method of
accounting. Effective July 1, 1995, the Operating Partnership relinquished its
ability to solely direct certain activities related to the control of North
East Mall, and as a result began accounting for the property using the equity
method of accounting.
Total revenue increased $10.0 million or 7.7% for the three months ended
March 31, 1996, as compared to the same period in 1995. Of this increase, $5.1
million is a result of the Property Transactions. The remaining increase is
the result of increases in every component of revenue, primarily minimum rent
($2.5 million) and other income ($1.8 million).
Total operating expenses increased $7.7 million, or 11.0%, for the three
months ended March 31, 1996, as compared to the same period in 1995. Of this
increase, $2.7 million is a result of the Property Transactions. The remaining
$5.0 million increase is primarily due to increases in repairs and maintenance
($1.2 million) and depreciation and amortization ($2.7 million).
The gain on sale of an asset in the three months ended March 31, 1995
($2.4 million) relates to the sale of a minority partnership interest in land
previously held for development in Denver, Colorado.
Income from unconsolidated entities increased $1.5 million for the three
months ended March 31, 1996 as compared to the same period in 1995. This is
primarily due to the Operating Partnership's acquisition, in December of 1995,
of a 25% share of Smith Haven Mall, resulting in additional income of $0.7
million, and the Operating Partnership's share of a gain on the sale of a
peripheral property ($0.8 million).
The extraordinary loss of $0.3 million in the three months ended March 31,
1996 resulted from the early extinguishment of debt.
Income of the Operating Partnership was $23.6 million for the three months
ended March 31, 1996 as compared to $22.2 million for the same period in 1995,
reflecting an increase of $1.4 million, for the reasons discussed above, and
was allocated first to holders of the Preferred Units, then to the partners
based on each partner's ownership interest in the Operating Partnership during
the period.
Liquidity and Capital Resources
At March 31, 1996, the Operating Partnership's balance of cash and cash
equivalents was $45.1 million, not including its proportionate share of cash
held by the joint venture properties and the Management Company. In addition
to its cash reserves, the Operating Partnership had unused capacity under its
unsecured revolving credit facility totaling $204.0 million.
Financing and Refinancing. On February 23, 1996, the Operating
Partnership borrowed the initial $100.0 million tranche of a $184.0 million two
tranche loan facility for Forum and retired the existing $89.7 mortgage debt
for Forum. The initial funding bears interest at LIBOR plus 100 basis points
and matures in February 2000. The remaining proceeds will be used to provide
funds for the approximately 250,000-square-foot phase II expansion of this
property.
On March 8, 1996, the joint venture which owns Smith Haven Mall entered
into an agreement to refinance $115.0 million of the purchase price of Smith
Haven Mall with a 10-year interest-only mortgage which carries interest at 113
basis points over 10-year treasury bills. Proceeds from the loan, which is
expected to close early in the summer of 1996, will be used to repay a portion
of the partners' equity contributions made at the time of the property
acquisition of approximately $221 million.
During the first quarter of 1996, the Operating Partnership drew an
additional $6.4 million on its construction loan for Cottonwood Mall in
Albuquerque, New Mexico. As of March 31, 1996, a total of $28.8 million was
outstanding on this construction loan.
On April 11, 1996, the Operating Partnership drew an additional $115.0
million on its revolving credit facility primarily to finance the acquisition
of the remaining interest in Ross Park Mall ($44 million) and to refinance a
portion of the property's debt ($54 million).
Development, Expansions and Renovations. The Operating Partnership is
involved in several development, expansion and renovation efforts.
Groundbreaking on The Source, a 730,000-square-foot retail development
project in Westbury (Long Island), New York, took place on February 2, 1996.
This new $145 million development will adjoin an existing Fortunoff store and
is expected to open in 1997. The Operating Partnership owns 50% of this joint
venture development.
The Operating Partnership has also begun demolition of the existing Bakery
Centre in South Miami, Florida in preparation for the development of The Shops
at Sunset Place. Pre-development efforts continue for this 75%-owned 550,000-
square-foot retail and entertainment center.
Construction also continues on the following projects:
* Cottonwood Mall, a 1.0 million-square-foot project is scheduled to open
during the summer of 1996, in Albuquerque, New Mexico. This project is
wholly-owned by the Operating Partnership.
* A 250,000-square-foot phase II expansion of Forum, in which the Operating
Partnership has a 55% ownership interest, is scheduled to open in the Fall
of 1997. The approximately $90 million costs of the Forum project will be
funded with a portion of a $184 million financing facility which closed
February 23, 1996.
* Ontario Mills, a 1.4 million-square-foot value-oriented regional mall in
Ontario, California, in which the Operating Partnership has a 25% ownership
interest, is scheduled to open in November 1996. This approximately $165
million project, a partnership venture with The Mills Corporation, is
anticipated to be funded with third-party financing which is not yet
finalized. The Operating Partnership has agreed to funding commitments
of up to $15.0 million relating to the construction of this project.
* The Tower Shops at Stratosphere, in Las Vegas, Nevada, is an approximately
$42 million, 122,000-square-foot retail development project in which the
Operating Partnership owns a 50% interest. This two-phase retail
development is currently under construction and phase I is scheduled to open
in the summer of 1996, with phase II scheduled to open in the fall of 1996.
The project has a 15% equity commitment to fund the initial $6.4 million of
construction costs before the remaining construction funding of
approximately $36 million will be advanced by the lender.
Management is also considering renovation and expansion projects at
various other properties. It is anticipated that these projects will be
financed principally with external borrowings, existing corporate credit
facilities and cash flows from operations.
Debt. At March 31, 1996, the Operating Partnership had consolidated debt
of $1,995.6 million, of which $1,230.6 million is fixed-rate debt and $765.0
million is variable-rate debt. As of March 31, 1996 and 1995, the Operating
Partnership had interest-rate protection agreements relating to $551.2 million
of the variable-rate debt. The agreements are generally in effect until the
related variable-rate debt matures.
The Operating Partnership's ratio of consolidated debt-to-market
capitalization was approximately 46.3% at March 31, 1996.
Distributions. The Operating Partnership declared a distribution of
$0.4925 per Unit in the first quarter of 1996. Future distributions will be
determined based on actual results of operations and cash available for
distribution. Preferred distributions of $0.5078 per Preferred Unit were also
incurred during this period.
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 holders of
Preferred Units and Units.
Management continues to actively review and evaluate a number of property
acquisition opportunities. Management believes that funds on hand and amounts
available under the Operating Partnership's unsecured revolving credit
facility, together with the ability to issue shares of common stock of the
Company and/or Units, 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 three months ended March 31, 1996 was $18.6 million, including capital
expenditures, tenant allowances and development related costs of $9.2 million,
$4.0 million and $12.0 at Cottonwood Mall, Forum, and various other properties,
respectively; and advances to unconsolidated joint ventures totaling $5.1
million, partially offset by a note repayment received from M.S. Management
Associates of $11.8 million. Cash used in investing activities for the three
months ended March 31, 1995 included $15.1 million for tenant allowances,
capital expenditures and development related costs and $3.1 million for the
acquisition of a joint venture interest in a parcel of land to be held for
development in Little Rock, Arkansas, partially offset by $2.6 of net proceeds
from the sale of a joint venture interest in land held for development and cash
of $3.4 million related to the acquisition of interest in White Oaks Mall.
Cash used in financing activities for the three months ended March 31,
1996 was $1.3 less than the three months ended March 31, 1995. Cash used in
1996 included an increase of $9.3 million in distributions to partners
(including $3.5 million paid to the holder of the Preferred Units representing
distributions from October 27, 1995 to March 31, 1996) offset by an increase in
net mortgage borrowings of $12.3 million. These borrowings included $9.7
million from the refinancing of Forum debt and a $6.4 million increase on the
Cottonwood Mall construction loan.
EBITDA-Earnings from Operating Results before Interest, Taxes, Depreciation and
Amortization
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 portfolio properties increased from $101.8 million
for the three months ended March 31, 1995 to $115.7 million for the same period
in 1996, representing a growth rate of 13.7%. This increase is primarily
attributable to the three malls opened during 1995 and 1995 acquisitions.
During this period, the operating profit margin decreased slightly from 62.2%
to 61.9%.
The significant contributing factors are as follows:
Aggregate Tenant Sales Volume. For the three months ended March 31, 1995
compared to the same period in 1996, total reported retail sales for mall and
freestanding stores at the regional malls and all stores at the community
shopping centers for GLA owned by the Operating Partnership ("Owned GLA")
increased 10.5% from $934 million to $1,032 million. 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.
Occupancy Levels. Occupancy levels for regional malls decreased from 84.3%
at March 31, 1995 to 83.0% at March 31, 1995. Occupancy levels for community
shopping centers decreased from 94.0% at March 31, 1995 to 93.1% at March 31,
1996. These decreases are the result of store closings by several retailers
which filed bankruptcy in 1995 and the de-leasing efforts at two malls in
anticipation of de-malling these properties. Management expects to re-lease
substantially all of the space lost to these bankruptcies at generally higher
rents. Owned GLA has increased 2.8 million square feet from March 31, 1995 to
March 31, 1996, primarily as a result of the 1995 opening of three new regional
malls and the acquisition of Smith Haven Mall.
Average Base Rents. Average base rents per square foot of mall and
freestanding stores at regional mall Owned GLA increased 10.7%, from $17.79 to
$19.70 in the first quarter of 1996 as compared to the same period in 1995. In
community shopping centers, average base rents per square foot of Owned GLA
increased 2.1%, from $7.21 to $7.36 during this same period.
Inflation
Inflation has remained relatively low during the past three 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
In March 1996, the Company and DeBartolo Realty Corporation ("DeBartolo")
signed a definitive agreement to merge the two companies. The merger is
expected to be completed in the third quarter of 1996 and is subject to
approval by the shareholders of both companies as well as customary regulatory
and other conditions. Under the terms of the agreement, the shareholders of
DeBartolo will receive 0.68 shares of common stock of the Company for each
share of DeBartolo common stock held. The purchase price, including
indebtedness which would be assumed, is estimated at $2.97 billion.
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.
Management recognizes the retail industry is currently experiencing some
difficulty, which is reflected in sales trends and in the bankruptcies and
continued restructuring of several prominent retail organizations.
Continuation of these trends could impact future earnings performance.
Part II - Other Information
Item 1: Legal Proceedings
Neither the Operating Partnership, the Company nor any of the portfolio
properties is currently a party to any material pending legal proceedings nor,
to management's knowledge, is any material legal proceeding currently
contemplated by governmental authorities against the Operating Partnership, the
Company or the portfolio properties. The entities that own portfolio
properties are parties to a variety of routine litigation arising in the
ordinary course of business. Most of such proceedings are covered by liability
insurance. All of such proceedings, taken together, are not expected to have a
material adverse effect on the Operating Partnership's operating or financial
results.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits - The Exhibit Index attached hereto is hereby
incorporated by reference to this Item.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements 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 PROPERTY GROUP, L.P.
By: SIMON PROPERTY GROUP, INC.,
General Partner
Date: May 13, 1996 By /s/ David Simon
David Simon
Chief Executive Officer and President
Date: May 13, 1996 By /s/ Dennis Cavanagh
Dennis Cavanagh
Principal Financial and Accounting Officer
INDEX TO EXHIBITS
Exhibits
- - --------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This financial data schedule is prepared for use by the United States Securities
and Exchange Commission only, and is unaudited.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 45,145
<SECURITIES> 0
<RECEIVABLES> 138,901<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 2,190,944
<DEPRECIATION> 175,094
<TOTAL-ASSETS> 2,532,548
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 1,995,620
0
0
<COMMON> 0
<OTHER-SE> 294,448<F3>
<TOTAL-LIABILITY-AND-EQUITY> 2,532,548
<SALES> 0
<TOTAL-REVENUES> 139,444
<CGS> 0
<TOTAL-COSTS> 78,371
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,566
<INCOME-PRETAX> 23,832
<INCOME-TAX> 23,832
<INCOME-CONTINUING> 23,832
<DISCONTINUED> 0
<EXTRAORDINARY> (265)
<CHANGES> 0
<NET-INCOME> 23,567
<EPS-PRIMARY> 0.23<F4>
<EPS-DILUTED> 0.23<F4>
<FN>
<F1> Receivables are stated net of allowances and include accrued revenues also.
<F2> The Operating Partnership does not use a classified Balance Sheet.
<F3> The registrant is a partnership. The amount reported is Partners' Equity.
<F4> Amounts are actually earnings per unit.
</FN>
</TABLE>
