SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 9, 1996
SIMON PROPERTY GROUP, L.P.
- ---------------------------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE 33-98364 35-1903854
---------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
115 WEST WASHINGTON STREET, INDIANAPOLIS, INDIANA 46204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 636-1600
- -----------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
- -------------------------------------------
(a) and (b) Financial statements of DeBartolo Realty Partnership LP
acquired by SPG, LP and pro forma financial information
follows beginning at Page F-1.
(c) Exhibits
The items listed on the Exhibit Index attached hereto
are filed with or made a part of this Current Report
on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Date: August 28, 1996
SIMON PROPERTY GROUP, L.P.
By: Simon DeBartolo Group, Inc.
---------------------------
Its General Partner
By: /s/ James M. Barkley
--------------------
Name: James M. Barkley
Title: Secretary/General Counsel
<PAGE>
========================================================================
Simon-DeBartolo Group, L.P. Pro Forma Combined Condensed
Financial Information
(Unaudited)
The accompanying financial statements present the unaudited pro
forma combined condensed Balance Sheet of the Simon-DeBartolo
Group, L.P. ("SDG, LP") as of June 30, 1996 and the unaudited pro
forma combined condensed Statements of Operations of SDG, LP for
the six-month period ended June 30, 1996 and for the year ended
December 31, 1995.
The unaudited pro forma combined condensed Balance Sheet as of
June 30, 1996 is presented as if the Merger and the Other
Transactions had occurred on June 30, 1996. The unaudited pro
forma combined condensed Statements of Operations for the six-
month period ended June 30, 1996 and for the year ended December
31, 1995 are presented as if the Merger and the Other
Transactions had occurred as of January 1, 1995 and carried
forward through June 30, 1996.
Preparation of the pro forma financial information was based on
assumptions deemed appropriate by management. The assumptions
give effect to the Merger and the Other Transactions under the
purchase method of accounting in accordance with generally
accepted accounting principles. The pro forma financial
information is unaudited and is not necessarily indicative of the
results which actually would have occurred if the transactions
had been consummated at the beginning of the periods presented,
nor does it purport to represent the future financial position
and results of operations for future periods. The pro forma
information should be read in conjunction with the historical
financial statements of Simon Property Group, L.P. ("SPG, LP")
included in SPG, LP Annual Report on Form 10-K for the year ended
December 31, 1995 and Quarterly Report on Form 10-Q for the
period ended June 30, 1996 and the historical financial statements
of DeBartolo Realty Partnership, L.P. ("DRP, LP") included
herein.
<PAGE> F-1
<TABLE>
Simon-DeBartolo Group, L.P.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
As of June 30, 1996
(In thousands)
(Unaudited)
Merger and
Other Pro
Transactions Forma
SPG, LP DRP, LP Pro Forma Combined
(Historical)(A) (Historical)(A) Adjustments Condensed
<S> <C> <C> <C> <S> <C>
ASSETS:
Investment in properties,
partnerships and
joint ventures, net $2,243,674 $1,349,147 $1,636,203 (B) $5,229,024
Cash, cash equivalents and
short-term investments 65,556 45,938 (34,400) (C) 77,094
Receivables 141,520 40,754 (26,934) (D) 155,340
Note receivable from the
SPG, LP Management
Company 91,478 -- -- 91,478
Other assets 120,734 118,136 (59,312) (E) 179,558
---------- ---------- ---------- ----------
Total assets $2,662,962 $1,553,975 $1,515,557 $5,732,494
========== ========== ========== ==========
LIABILITIES AND PARTNERS'
EQUITY:
LIABILITIES:
Mortgages and other notes
payable $2,178,539 $1,479,515 $22,423 (F) $3,680,477
Accounts payable, accrued
expenses and other
liabilities 194,998 80,035 (2,801) (G) 272,232
Investment in the SPG, LP
Management Company 19,740 -- -- 19,740
---------- ---------- ---------- ----------
Total liabilities 2,393,277 1,559,550 19,622 3,972,449
---------- ---------- ---------- ----------
PARTNERS' EQUITY:
Preferred units 99,923 -- -- 99,923
General Partner 107,633 (3,449) 919,058 (H) 1,023,242
Limited Partners 68,525 (2,126) 576,877 (H) 643,276
Unamortized restricted
stock award (6,396) -- -- (6,396)
---------- ---------- ---------- ----------
Total partners' equity 269,685 (5,575) 1,495,935 1,760,045
---------- ---------- ---------- ----------
Total liabilities and
partners' equity $2,662,962 $1,553,975 $1,515,557 $5,732,494
========== ========== ========== ==========
The accompanying notes and management's assumptions are an integral part of
this statement.
</TABLE>
<PAGE> F-2
<TABLE>
Simon-DeBartolo Group, L.P.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996
(In thousands, except unit and per unit amounts)
(Unaudited)
Pro Forma
SPG , LP DRP, LP Pro Forma Combined
(Historical) (Historical) Adjustments Condensed
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUE
Minimum rent $159,076 $114,086 $1,700 (A) $274,862
Overage rent 10,751 5,635 -- 16,386
Tenant reimbursements 93,696 45,456 -- 139,152
Other income 19,681 11,455 -- 31,136
-------- -------- -------- --------
Total revenue 283,204 176,632 1,700 461,760
======== ======== ======== ========
EXPENSES
Property and other operating
expenses 107,773 66,484 (5,000) (B) 169,257
Depreciation and amortization 51,307 32,432 5,821 (C) 89,560
Merger and Other Transaction
expenses -- 10,200 (10,200) (D) --
-------- -------- -------- --------
Total expenses 159,080 109,116 (9,379) 258,817
-------- -------- -------- --------
OPERATING INCOME 124,124 67,516 11,079 202,719
INTEREST EXPENSE 79,134 60,759 (7,437) (E) 132,456
-------- -------- -------- --------
INCOME BEFORE MINORITY INTEREST 44,990 6,757 18,524 70,271
MINORITY PARTNERS' INTEREST (1,175) (325) -- (1,500)
-------- -------- ------- --------
INCOME BEFORE UNCONSOLIDATED
ENTITIES 43,815 6,432 18,524 68,771
INCOME FROM UNCONSOLIDATED
ENTITIES 3,985 8,236 -- 12,221
-------- -------- ------- --------
NET INCOME FROM CONTINUING
OPERATIONS 47,800 14,668 18,524 80,992
GENERAL PARTNER PREFERRED UNIT
REQUIREMENT 4,062 -- -- 4,062
-------- -------- -------- --------
NET INCOME FROM CONTINUING
OPERATIONS AVAILABLE TO
UNITHOLDERS $ 43,738 $ 14,668 $ 18,524 $ 76,930
======== ======== ======== ========
NET INCOME AVAILABLE TO
UNITHOLDERS ATTRIBUTABLE TO:
General Partner $ 26,855 $ 9,075 $ 11,305 $ 47,235
Limited Partners 16,883 5,593 7,219 (F) 29,695
-------- -------- --------- --------
$ 43,738 $ 14,668 $ 18,524 $ 76,930
======== ======== ========= ========
NET INCOME PER UNIT $0.46 $0.49
==== ====
WEIGHTED AVERAGE UNITS
OUTSTANDING 95,753,829 156,896,812 (G)
========== ===========
The accompanying notes and management's assumptions are an integral part of this
statement.
</TABLE>
<PAGE> F-3
<TABLE>
Simon-DeBartolo Group, L.P.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(In thousands, except unit and per unit amounts)
(Unaudited)
Merger and
Other
Transactions Pro Forma
SPG , LP DRP, LP Pro Forma Combined
(Historical) (Historical) Adjustments Condensed
------------ ------------ ------------ -----------
<S> <C> <C> <C> <S> <C>
REVENUE
Minimum rent $ 307,849 $205,056 $3,400 (A) $516,305
Overage rent 23,278 12,924 -- 36,202
Tenant reimbursements 191,535 82,147 -- 273,682
Other income 30,995 32,530 -- 63,525
--------- -------- -------- --------
Total revenue 553,657 332,657 3,400 889,714
--------- -------- -------- --------
EXPENSES
Property and other operating
expenses 209,782 118,498 (10,000) (B) 318,280
Depreciation and amortization 92,739 58,603 11,641 (C) 162,983
--------- -------- -------- --------
Total expenses 302,521 177,101 1,641 481,263
OPERATING INCOME 251,136 155,556 1,759 408,451
INTEREST EXPENSE 150,224 124,567 (23,678) (E) 251,113
--------- -------- -------- --------
INCOME BEFORE MINORITY INTEREST 100,912 30,989 25,437 157,338
MINORITY PARTNERS' INTEREST (2,681) 1,029 -- (1,652)
GAIN ON SALE OF ASSET 1,871 5,460 -- 7,331
--------- -------- -------- --------
INCOME BEFORE UNCONSOLIDATED
ENTITIES 100,102 37,478 25,437 163,017
INCOME FROM UNCONSOLIDATED
ENTITIES 1,403 8,865 -- 10,268
--------- -------- -------- --------
NET INCOME FROM CONTINUING
OPERATIONS 101,505 46,343 25,437 173,285
GENERAL PARTNER PREFERRED UNIT
REQUIREMENT 1,490 -- -- 1,490
--------- -------- -------- ---------
NET INCOME FROM CONTINUING
OPERATIONS AVAILABLE TO
UNITHOLDERS $ 100,015 $ 46,343 $ 25,437 $ 171,795
========= ======== ======== =========
NET INCOME AVAILABLE TO
UNITHOLDERS ATTRIBUTABLE TO:
General Partner $ 59,718 $ 27,628 $ 16,762 $ 104,108
Limited Partners 40,297 18,715 8,675 (F) 67,687
--------- -------- -------- ---------
$ 100,015 $ 46,343 $ 25,437 $ 171,795
========= ======== ======== =========
NET INCOME PER UNIT $ 1.08 $ 1.12
====== ======
WEIGHTED AVERAGE UNITS
OUTSTANDING 92,666,469 153,809,452 (G)
========== ===========
The accompanying notes and management's assumptions are an integral part of this
statement.
</TABLE>
<PAGE> F-4
Simon-DeBartolo Group, L.P.--Notes and Management Assumptions to Pro Forma
Combined Condensed Financial Information (Unaudited, in thousands, except unit
and per unit amounts)
1. Accounting Treatment
The merger and other related transactions, in which the partners of Simon
Property Group, L.P. ("SPG,LP") contributed their interests in SPG, LP to
DeBartolo Realty Partnership, L.P. ("DRP, LP") in exchange for a majority of
the partnership interest in DRP, LP, which changed it's name to Simon DeBartolo
Group, L.P. ("SDG, LP") and became the primary Operating Partnership of Simon
DeBartolo Group, Inc. ("SDG"), results in a reverse acquisition for financial
reporting purposes. In substance, all of the assets and liabilities of DRP, LP
were acquired and accordingly, they have been adjusted to fair value using the
purchase method of accounting. At the operating partnership level, SPG, LP is
the accounting acquirer. The interests transferred by the partners of SPG, LP
to DRP, LP have been appropriately reflected at historical cost.
2. Adjustments To Pro Forma Combined Condensed Balance Sheet
(A) Certain reclassifications have been made to the SPG, LP and DRP, LP
historical balance sheets to conform to the desired pro forma combined
condensed balance sheets presentation.
(B) Represents adjustments to record the reverse merger in accordance with
the purchase method of accounting, based upon an assumed purchase price
of $1,512,960 assuming a market value of the DRP, LP interests of
$24.375 (which is based on the closing price of SPG's Common Stock on
August 9, 1996), and the Exchange Ratio of 0.68. Units of the
partnerships may be exchanged for common stock on a one-for-one basis.
Value of 89,916,152 DRP, LP interests
multiplied by the Exchange Ratio and the
market value of SPG Common Stock $1,490,360
Merger and the Other Transactions costs (see
below) 22,600
----------
$1,512,960
==========
Estimated fees and expenses related to the
Merger and the Other Transactions, as
follows:
Advisory fees $11,000
Legal and accounting 6,200
Severance and relocation costs 19,000
--------
36,200
Less DRP, LP expenses (13,600)
--------
SPG, LP transaction costs $22,600
========
Adjustment to reflect investment in
properties, partnerships and joint ventures,
net at fair value:
Purchase price (see above) $1,512,960
Historical book value of DRP, LP partners'
(equity) deficit acquired as of the
Effective Time:
Historical book value of DRP, LP 5,575
To adjust equity for the Stay Bonus and to
reflect accelerated vesting of accrued
compensation in accordance with terms of
the Merger and the Other Transactions 5,599
To reflect DRP, LP's expenses associated
with the Merger and the Other
Transactions of $13,600 less $10,200
recognized as expense in the six-month
period ended June 30, 1996 ($1,800 was
paid with the balance of $8,400 accrued) 3,400
Adjustments to reflect certain assets and
liabilities of DRP, LP at fair value:
Receivables (see Note (D)) 26,934
Other assets (see Note (E)) 59,312
Mortgages and other notes payable (see
Note (F)) 22,423
----------
Adjustment required to reflect investment in
properties, partnerships and joint
ventures, net at fair value $1,636,203
==========
(C) To reflect the decrease in cash and cash
equivalents due to the estimated Merger and
the Other Transactions costs, including
expenses of DRP, LP, of $36,200 less cash
payments made of $1,800 $(34,400)
=========
(D) To reflect the adjustment to eliminate DRP,
LP's deferred asset related to the straight-
lining of rent related to leases $(26,934)
=========
(E) To reflect the following adjustments to other
assets:
To eliminate deferred financing, interest
rate buy-downs and similar costs related to
mortgages and other notes payable and
organization costs $(53,536)
To adjust DRP, LP's historical basis in the
DRP, LP Management Company to estimated fair
market value of $15,000 13,428
To eliminate deferred leasing costs (19,204)
---------
$(59,312)
=========
(F) To record a premium required to adjust
mortgages and other notes payable to fair
value using a discount rate estimated on an
instrument by instrument basis $22,423
=======
(G) To reflect the following adjustments to
accounts payable, accrued liabilities and
other liabilities:
1. To record accrued compensation expense
related to the Stay Bonus ($8,467)
less the portion which vests immediately
for which DRC Common Stock was issued
($1,325) and to reflect the accelerated
vesting of accrued compensation
settled with DRC Common Stock ($1,543) $ 5,599
2. To eliminate accrued DRP, LP Merger and
Other Transactions Costs paid in (C)
above (8,400)
---------
$ (2,801)
=========
(H) To adjust partners' equity to reflect the
reverse acquisition of DRP, LP for accounting
purposes, general partner interest
(55,712,529) and DRP, LP limited partners'
interest (34,203,623) at the Exchange Ratio
based on the closing price of SPG's Common
Stock of $24.375 on August 9, 1996, as
follows:
Equity
before
preferred
General Limited units and
Partners' Partners' unrestricted
equity equity stock award
---------- ---------- ------------
Value of Shares and
Interests Acquired $ 923,435 $ 566,925 $1,490,360
Historical Value of SPG, LP 107,633 68,525 176,158
---------- ---------- ----------
Combined Equity 1,031,068 635,450 1,666,518
========== ========== ==========
Pro Forma Ownership 61.4% 38.6% 100.0%
===== ===== ======
Pro Forma Equity 1,023,242 643,276 1,666,518
Less Historical Value of
SPG, LP 107,633 68,525 176,158
Less Historical Value of
DRP, LP (3,449) (2,126) (5,575)
---------- ---------- ----------
Pro Forma Adjustments $ 919,058 $ 576,877 $1,495,935
========== ========== ==========
3. Adjustments To Pro Forma Combined Condensed Statements of Operations
Immediately prior to the Merger and the Other Transactions, DRP, LP will
expense $8,424 in connection with the Stay Bonus which has not been included in
the Pro Forma Combined Condensed Statements of Operations. DRP, LP will also
incur $13,600 of expenses in connection with the Merger and the Other
Transactions, of which $10,200 was accrued as of June 30, 1996, which have not
been included in the Pro Forma Combined Condensed Statements of Operations.
For the Year
For the Six Ended
Months Ended December 31,
June 30,1996 1995
------------- -------------
(A) To recognize revenue from straight-
lining rent related to leases
which will be reset in connection
with the Merger and the Other
Transactions $ 1,700 $ 3,400
======= =======
(B) To reflect cost savings to
eliminate duplicative public
company costs and other identified
redundancies which have been
estimated based upon historical
costs for those items as a result
of the Merger and the Other
Transactions $(5,000) $(10,000)
======== =========
(C) To reflect the increase in
depreciation as a result of
recording the investment
properties of DRP, LP at
acquisition value versus
historical cost and utilizing an
estimated useful life of 35 years
offset by the decrease in
amortization expense as a result
of the elimination of deferred
leasing costs $5,821 $11,641
====== ======
(D) To reflect the elimination of costs
related to the Merger and the
Other Transactions expensed
during the six month period ended
June 30, 1996 $10,200 $ --
======= =========
(E) To reflect the following
adjustments to interest expense:
(1) To reflect the elimination of
amortization of deferred
mortgage costs related to
DRP, LP, written-off in
connection with the Merger
and the Other Transactions $(5,062) $(18,929)
(2) To reflect the amortization
of the premium required to
adjust mortgages and other
notes payable to fair value (2,375) (4,749)
-------- ---------
$(7,437) $(23,678)
======== =========
(F) To adjust the allocation of the
Limited Partners' interest in the
net income of the Operating
Partnership, after consideration
of the preferred unit distribution.
The Limited Partners' weighted
average pro forma ownership
interest for the six months ended
June 30, 1996 and
for the year ended December 31,
1995 was 38.6% and 39.4%,
respectively $7,219 $8,675
===== =====
(G) The pro forma weighted average
units outstanding is computed as
follows:
SPG, LP Historical Weighted
Average Units Outstanding 95,753,829 92,666,469
Issuance of units in connection
with the Merger and the Other
Transactions (assuming that
there are 89,916,152 units of
DRP, LP interests outstanding
immediately prior to the
Effective Time) 61,142,983 61,142,983
----------- -----------
156,896,812 153,809,452
=========== ===========
<PAGE> F-5
=============================================================================
DEBARTOLO REALTY PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands except unit data)
As of As of
June 30, December 31,
1996 1995
----------- -----------
Assets:
Investment properties (Note 4) $1,968,344 $1,793,663
Less accumulated depreciation 632,762 574,338
1,335,582 1,219,325
Cash and cash equivalents 32,486 25,851
Restricted cash (Note 3) 12,477 13,910
Short term investments 975 14,057
Accounts receivable, less allowance
for doubtful accounts of $9,031 and
$10,070 in 1996 and 1995 40,754 39,103
Investments in and advances to
nonconsolidated joint ventures
(Notes 4 and 5) 61,872 116,725
Minority interest in capital deficits
of consolidated joint ventures 34,456 25,496
Deferred charges and prepaid expenses 83,680 77,103
---------- ----------
$1,602,282 $1,531,570
========== ==========
Liabilities and Partners' Equity:
Liabilities:
Mortgages and notes payable (Note 4) $1,479,515 $1,348,573
Accounts payable and accrued expenses 51,779 38,810
Distributions payable 28,256 28,225
Deficits in nonconsolidated joint
ventures (Notes 4 and 5) 48,307 71,147
---------- ----------
1,607,857 1,486,755
---------- ----------
Commitments and contingencies -- --
Partners' Equity (Deficit):
Preferred Units, 10,000,000 units authorized,
none issued and outstanding -- --
General Partner, 55,496,757 and 55,329,162
units outstanding in 1996 and 1995 (3,449) 27,673
Limited Partners, 34,203,623 and
34,272,532 units in 1996 and 1995
outstanding, respectively (2,126) 17,142
---------- ----------
Total Partners' Equity (5,575) 44,815
---------- ----------
$1,602,282 $1,531,570
========== ==========
See accompanying notes
<PAGE> F-6
DEBARTOLO REALTY PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per unit data)
Six Months Ended June 30,
--------------------------
1996 1995
--------- ---------
Revenues:
Minimum rents $114,086 $106,191
Tenant recoveries 45,456 39,844
Percentage rents 5,635 5,632
Other 11,455 8,785
-------- --------
Total revenues 176,632 160,452
Expenses: -------- --------
Shopping Center Expenses:
Property operating 19,695 16,962
Repairs and maintenance 15,130 12,791
Real estate taxes 18,338 16,806
Advertising & promotion 3,778 2,761
Management expenses 4,143 2,797
Provision for doubtful accounts 1,502 1,493
Ground leases 1,450 1,207
Other 2,343 2,776
-------- --------
Total shopping center expenses 66,379 57,593
Deferred stock compensation expense 105 105
Interest expense 60,759 61,338
Depreciation and amortization 32,432 28,348
Merger expenses (Note 4) 10,200 --
-------- --------
169,875 147,384
Gain on sale of assets -- 3,779
Income from nonconsolidated
joint ventures (Notes 4 and 5) 8,236 4,182
Minority partners' interest in
consolidated joint ventures (325) 536
--------- --------
Income before extraordinary item 14,668 21,565
Extraordinary item (Note 4) 9,191 --
--------- --------
Net income $ 23,859 $ 21,565
========= ========
Net Income Available to
Unitholders Attributable to:
General Partner $ 14,762 $ 12,674
Limited Partners 9,097 8,891
--------- -----------
Net income available to unitholders $ 23,859 $ 21,565
========= ===========
EARNINGS PER UNIT (Note 6):
Income before extraordinary item $ 0.17 $ 0.26
Extraordinary item 0.10 ---
--------- -----------
Net income $ 0.27 $ 0.26
========= ===========
WEIGHTED AVERAGE UNITS
OUTSTANDING (000's) 89,822 83,150
========= ===========
See accompanying notes
<PAGE> F-7
DEBARTOLO REALTY PARTNERSHIP, L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per unit data)
Three Months Ended June 30,
--------------------------
1996 1995
Revenues: --------- ---------
Minimum rents $ 57,532 $ 52,957
Tenant recoveries 22,416 20,090
Percentage rents 2,841 2,667
Other 5,417 5,509
--------- ---------
Total revenues 88,206 81,223
Expenses:
Shopping Center Expenses:
Property operating 9,841 8,383
Repairs and maintenance 6,958 6,614
Real estate taxes 9,555 8,323
Advertising & promotion 1,782 1,413
Management expenses 2,021 1,400
Provision for doubtful accounts 904 879
Ground leases 744 638
Other 1,470 1,739
---------- ---------
Total shopping center expenses 33,275 29,389
Deferred stock compensation expense 52 52
Interest expense 31,235 30,465
Depreciation and amortization 16,907 14,188
Merger expenses (Note 4) 10,200 --
---------- ---------
91,669 74,094
---------- ---------
Gain on sale of assets -- 18
Income from nonconsolidated joint
ventures (Notes 4 and 5) 4,755 2,427
Minority partners' interest in
consolidated joint ventures (390) 252
--------- --------
Net income $ 902 $ 9,826
========= ========
Net Income Available to Unitholders Attributable to:
General Partner $ 558 $ 5,777
Limited Partners 344 4,049
--------- ---------
Net income available to unitholders $ 902 $ 9,826
========= =========
EARNINGS PER UNIT (Note 6): $ 0.01 $ 0.12
========= =========
WEIGHTED AVERAGE UNITS 89,823 83,150
OUTSTANDING (000's) ========= =========
See accompanying notes
<PAGE> F-8
DEBARTOLO REALTY PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended June 30,
1996 1995
-------- --------
Cash Flow From Operating Activities:
Net income $ 23,859 $ 21,565
Adjustments to reconcile net income to net
cash provided by Operating Activities:
Amortization of formation costs 4,838 6,531
Amortization of interest rate protection
agreements and deferred loan costs 224 1,556
Gain on sale of assets -- (3,779)
Depreciation and amortization 32,432 28,348
Extraordinary item (9,191) --
Deferred stock compensation expense 105 105
Minority partners' interests in
consolidated joint ventures 325 (536)
Income from nonconsolidated
joint ventures (8,236) (4,182)
Decrease in restricted cash 1,433 7,746
Decrease (increase) in short term investments 13,082 (7,333)
Decrease in accounts receivable 1,214 2,805
(Decrease) increase in prepaid expenses
and other 1,317 (4,074)
Increase in accounts payable and
accrued expenses 16,794 8,144
-------- --------
Net Cash Provided By Operating Activities 78,196 56,896
-------- --------
Cash Flows From Investing Activities:
Additions to investment properties (36,146) (22,274)
Cash paid for tenant allowances (3,735) (2,144)
Purchase of partnership interests (5,375) --
Additions to deferred charges for lease
costs and other (3,640) (1,612)
Distributions from nonconsolidated
joint ventures 36,811 11,058
Advances to and investments in
nonconsolidated joint ventures (12,055) (888)
Net proceeds from sale of assets 307 3,750
-------- --------
Net Cash Used In Investing Activities (23,833) (12,110)
-------- --------
Cash Flows From Financing Activities:
Proceeds from issuance of debt 41,904 15,263
Scheduled principal payments on mortgages (3,301) (3,340)
Other payments on debt (30,248) (9,545)
Loan costs paid (294) (444)
Minority partner distributions (1,600) (127)
Distributions paid (56,480) (52,186)
Decrease in affiliate receivables 2,291 499
-------- --------
Net Cash Used in Financing Activities (47,728) (49,880)
-------- --------
Net (Decrease) Increase in Cash 6,635 (5,094)
Cash and Cash Equivalents:
Beginning of period 25,851 38,899
-------- --------
End of period $32,486 $ 33,805
======== ========
Supplemental Information:
Interest Paid $ 53,878 $ 50,254
======== ========
Supplemental schedule of non-cash
and financing activities:
Step-up in connection with acquisition of
additional interest in joint venture $ 7,296 $ --
======== ========
Historical cost basis of net investment
properties consolidated as a result of
acquisitions of additional interests
in joint ventures $121,245 $ --
======== ========
Mortgages on those properties consolidated
as a result of acquisitions of additional
interests in joint ventures $136,009 $ --
======== ========
Historical cost basis of net investment
property disposed $(4,040) $ --
======== ========
Mortgage extinguishment relating to
property disposition $(13,372) $ --
======== ========
Acquisition of certain businesses
of Property Manager $ 4,020 $ --
======== ========
See accompanying notes
<PAGE> F-9
DEBARTOLO REALTY PARTNERSHIP, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Dollars in Thousands)
Note 1 - Organization and Ownership
The accompanying consolidated financial statements 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 information and footnotes 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
financial statements for these interim periods have been included. The
results for the interim period ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the full fiscal year.
These financial statements should be read in conjunction with the
DeBartolo Realty Partnership, L.P. December 31, 1995 audited
consolidated financial statements and notes thereto included herein.
DeBartolo Realty Partnership, L.P., a Delaware Limited Partnership (the
"Operating Partnership") and an affiliate, DeBartolo Capital
Partnership, a Delaware general partnership, are engaged in the
ownership, development, management, leasing, acquisition and expansion
of super-regional and regional malls and community shopping centers.
The Operating Partnership's sole general partner is DeBartolo Realty
Corporation (the "Company"), an Ohio corporation which operates as a self-
administered and self-managed real estate investment trust ("REIT"),
which at June 30, 1996 holds a 61.9% interest in the Operating
Partnership.
The Operating Partnership was formed to continue and expand the shopping
mall ownership, management and development business of The Edward J.
DeBartolo Corporation ("EJDC") in a portfolio which, as of June 30,
1996, consisted of 50 super-regional and regional malls (the "DeBartolo
Malls"), 11 community centers and land held for future development
(collectively, the "DeBartolo Properties"). As of June 30, 1996, EJDC
and certain affiliates (collectively, the "DeBartolo Group") and certain
current and former employees of EJDC, along with JCP Realty, Inc.
("JCP"), own the remaining 38.1% interest in the Operating Partnership.
In addition, the Operating Partnership owns 100% of the non-voting
preferred stock and a non-controlling common stock interest (5%) in
DeBartolo Properties Management, Inc. (the "Property Manager") which
provides certain architectural, design, construction and other services
to substantially all of the DeBartolo Properties, as well as, certain
other regional malls and community shopping centers owned by third
parties.
Note 2 - Basis of Presentation
The financial statements of the Operating Partnership are presented on a
consolidated basis. Properties which are controlled through majority
ownership have been consolidated and all significant intercompany
transactions and accounts have been eliminated. Properties where the
Operating Partnership owns less than a majority interest have been
accounted for under the equity method. One property, which is owned 2%
by the Operating Partnership, is accounted for under the cost method.
The Operating Partnership owns 5% of the voting common stock and all of
the nonvoting preferred stock of the Property Manager. The Operating
Partnership accounts for the investment in the Property Manager under
the equity method.
Note 3 - Restricted Cash
Cash is restricted primarily for renovations and redevelopment of the 17
DeBartolo Properties in connection with a securitized commercial pass-
through certificate issuance simultaneously with the IPO.
Note 4 - Mergers, Acquisitions and Dispositions
The parent company of the Operating Partnership entered into an
Agreement and Plan of Merger, dated as of March 26, 1996 (the
"Agreement"), among Simon Property Group, Inc., a Maryland corporation
("SPG"), its merger subsidiary and the Company, pursuant to which the
Company agreed to merge with the merger subsidiary. The Agreement
provides for the exchange of all outstanding Company common stock for
SPG common stock, $0.0001 par value (the "SPG Common Stock"), at an
exchange ratio of 0.68 shares of SPG Common Stock for each share of
Company common stock. The merger and other related transactions closed
on August 9, 1996. Shareholders of the Company received approximately 37.9
million shares of SPG common stock valued at $24.375 per share. During the
six-month period ended June 30, 1996, the Company incurred $10,200 of
underwriting, legal, accounting and other expenses associated with the merger.
These costs were charged to expense.
During January, 1996, the Property Manager acquired partnership
interests of 33 1/3% and 25% in two joint ventures, respectively, from
an unrelated joint venture partner. As a result, the Operating
Partnership effectively owns 65% and 74% of these joint ventures and
includes the financial position and results of operations and cash flows
of these joint ventures in its consolidated financial statements.
Effective March 31, 1996, the Operating Partnership acquired an
additional 10% partnership interest in Miami International Mall. As a
result, the Operating Partnership owns 60% of this joint venture and
includes the financial position and results of operations and cash flows
in its consolidated financial statements effective April 1, 1996.
The Operating Partnership transferred ownership of one property to its
lender, as of March 1, 1996, fully satisfying the property's mortgage
note payable. This property no longer met the Operating Partnership's
criteria for its ongoing strategic plan. The Operating Partnership has
recognized an extraordinary gain on this transaction of $9.2 million.
The Operating Partnership's share of this property's net income (loss)
for 1993, 1994 and 1995 was $9, ($760) and ($513), respectively. The
Operating Partnership's share of this property's cash generated before
debt payments and capital expenditures ("FFO") for 1993, 1994 and 1995
was $512, ($237) and $48, respectively.
Effective January 1, 1996, the Operating Partnership acquired the
management, leasing and certain other operating divisions of the
Property Manager. The operating results of these divisions are included
in the Operating Partnership's consolidated financial statements net of
eliminated intercompany transactions. The Property Manager continues to
provide architectural, engineering and construction services for the
Operating Partnership.
Note 5 - Investment in Nonconsolidated Joint Ventures
As a result of the above-discussed acquisitions, the combined Balance
Sheet of the nonconsolidated joint ventures includes the financial
position of nine joint ventures at June 30, 1996 and twelve joint
ventures at December 31, 1995. Three joint ventures, in which the
Operating Partnership acquired additional partnership interests during
the first quarter of 1996, are included in the Operating Partnership's
consolidated Balance Sheet at June 30, 1996 (see Note 4 above).
June 30, December 31,
---------- ----------
1996 1995
Balance Sheets
Investment properties (net) $ 505,288 $ 599,234
Other assets 42,471 43,094
---------- ----------
Total assets 547,759 642,328
---------- ----------
Mortgages and notes payable 508,341 584,495
Other liabilities 46,980 90,549
---------- ----------
Total liabilities 555,321 675,044
---------- ----------
Accumulated equity (deficit) (7,562) (32,716)
Less: Outside partners' equity (9,740) 180
Advances to nonconsolidated joint
ventures 30,867 78,474
---------- ----------
Net surplus in nonconsolidated
joint ventures $ 13,565 $ 45,578
========== ==========
Net surplus (deficits) in
nonconsolidated joint ventures is
presented in the accompanying
consolidated balance sheets as
follows:
Investments in nonconsolidated
joint ventures $ 31,005 $ 38,251
Advances to nonconsolidated
joint ventures 30,867 78,474
---------- ---------
Total investments in and advances to
nonconsolidated joint ventures 61,872 116,725
Deficits in nonconsolidated joint ventures (48,307) (71,147)
---------- ----------
$ 13,565 $ 45,578
========== ==========
The combined statements of operations for the nonconsolidated joint
ventures include the operating results of ten joint ventures for the
three month period ended March 31, 1996, nine joint ventures for the
three months ended June 30, 1996 and twelve joint ventures in 1995. The
operating results of two joint ventures, in which the Operating
Partnership acquired additional partnership interest in January 1996,
are included in the Operating Partnership's consolidated operating
statement. The operating results of one joint venture, in which the
Operating Partnership acquired additional partnership interest effective
March 31, 1996, are included in the Operating Partnership's consolidated
operating statement effective April 1, 1996.
Six Months Ended
June 30,
----------------------
1996 1995
---------- ---------
Statements of Operations
Revenues:
Minimum rents $ 41,183 $ 46,571
Tenant recoveries 19,549 21,971
Percentage rents 2,251 2,860
Other 5,238 3,294
---------- ---------
Total revenues 68,221 74,696
---------- ---------
Expenses:
Shopping Center Expenses:
Property operating 6,197 6,968
Repairs and maintenance 5,050 5,704
Real estate taxes 8,124 9,367
Advertising and promotion 1,833 2,019
Management fees to affiliate 2,329 2,477
Provision for doubtful accounts 554 467
Ground leases 60
Other 539 674
--------- ---------
24,626 27,736
Interest expense 20,150 28,604
Depreciation and amortization 10,559 11,814
--------- ---------
55,335 68,154
--------- ---------
Net income $ 12,886 $ 6,542
========= =========
DeBartolo Realty Partnership, L.P.'s share of:
Revenues less shopping center expenses $ 19,982 $ 20,275
Interest expense 7,333 9,866
Depreciation, amortization and other 4,413 6,227
--------- ----------
Net income $ 8,236 $ 4,182
========= ==========
Note 6 - Earnings Per Unit
Earnings per Unit is based on the weighted average number of units of
partnership interest ("units") outstanding for the six months ended June
30, 1996. Common stock awarded but not yet issued under the deferred
stock plan (42,400 shares) and the Company and the Operating
Partnership's long-term incentive plan (80,400 shares) have been
included in the computations of per unit data for the six months ended
June 30, 1996.
Note 7 - Distributions
The Operating Partnership paid a distribution of $0.315 per unit on
July 22, 1996 for the period of April 1, 1996 through June 28, 1996. On
August 9, 1996, the Operating Partnership paid a prorated distribution
of $0.1454 per unit for the period June 29, 1996 through August 9, 1996
(the closing date of the merger with SPG).
<PAGE> F-10
=============================================================================
REPORT OF INDEPENDENT AUDITORS
To the Partners of
DeBartolo Realty Partnership, L.P.
We have audited the accompanying consolidated balance sheets of DeBartolo
Realty Partnership, L.P. as of December 31, 1995 and 1994, and the
related consolidated statements of operations, partners' equity and
cash flows for the year ended December 31, 1995 and for the period April
21, 1994 (Commencement of Operations) to December 31, 1994, and the
combined statements of operations, accumulated deficit and cash flows of
DeBartolo Retail Group (Predecessor), as described in Note 2, for the
period January 1, 1994 to April 20, 1994 and the year ended December 31,
1993. These financial statements are the responsibility of DeBartolo
Realty Partnership, L.P.'s 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of DeBartolo Realty Partnership, L.P., at December 31, 1995 and 1994,
and the consolidated results of their operations and their cash flows
for the year ended December 31, 1995 and for the period April 21, 1994
to December 31, 1994, and the combined results of operations and cash
flows of DeBartolo Retail Group (Predecessor) for the period January 1,
1994 to April 20, 1994 and the year ended December 31, 1993, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 14, 1996, except for Note 16,
first paragraph, as to which the date is
March 1, 1996
<PAGE>
DEBARTOLO REALTY PARTNERSHIP, L.P.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except unit data)
As of December 31,
------------------------
1995 1994
---------- ----------
Assets:
Investment properties (Notes 4 and 8) $1,793,663 $1,737,592
Less accumulated depreciation 574,338 519,754
---------- ----------
1,219,325 1,217,838
Cash and cash equivalents 25,851 38,899
Restricted cash (Note 3) 13,910 35,751
Short term investments 14,057 4,339
Accounts receivable, less allowance
for doubtful accounts of $10,070 and
$9,462 in 1995 and 1994 39,103 40,083
Affiliate receivables (Note 11) 3,007 356
Investments in and advances to
nonconsolidated joint ventures (Note 5) 116,725 110,845
Minority interest in capital deficits
of consolidated joint ventures 25,920 27,249
Deferred charges and prepaid expenses (Note7) 74,096 97,610
---------- ----------
$1,531,994 $1,572,970
========== ==========
Liabilities and Partners' Equity:
Liabilities:
Mortgages and notes payable (Note 8) $1,348,573 $1,409,827
Accounts payable and accrued expenses 38,810 39,325
Distributions payable 28,225 26,093
Deficits in nonconsolidated joint
ventures (Note 5) 71,147 69,842
Minority interest in consolidated
joint ventures 424 604
---------- ----------
1,487,179 1,545,691
========== ==========
Commitments and contingencies
(Notes 3, 8, 9, 10 and 15) --- ---
Partners' Equity (Note 12):
Preferred Units, 10,000,000 authorized,
none issued and outstanding --- ---
General Partner, 55,329,162 and 48,666,153
units outstanding, respectively 27,673 16,026
Limited Partners, 34,272,532 and
34,168,347 units outstanding, respectively 17,142 11,253
---------- ----------
Total Partners' Equity 44,815 27,279
---------- ----------
$1,531,994 $1,572,970
========== ==========
See accompanying notes
<PAGE>
<TABLE>
DEBARTOLO REALTY PARTNERSHIP, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS AND
DEBARTOLO RETAIL GROUP (PREDECESSOR)
COMBINED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit data)
DeBartolo Realty DeBartolo Retail
Partnership, L.P. Group
------------------------- -----------------------
1995 1994 1994 1993
----------- ----------- --------- -----------
January 1 April 21 January 1 January 1
through through through through
December 31 December 31 April 20 December 31
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Revenues (Note 11):
Minimum rents $ 205,056 $ 140,909 $ 61,898 $ 194,643
Tenant recoveries 82,147 56,720 24,361 81,967
Percentage rents 12,924 9,122 3,653 14,060
Other 32,530 22,192 5,360 18,285
--------- --------- ---------- ---------
Total revenues 332,657 228,943 95,272 308,955
--------- --------- ---------- ---------
Expenses:
Shopping Center Expenses:
Property operating 34,707 23,575 10,272 33,966
Repairs and maintenance 28,060 20,469 8,710 29,602
Real estate taxes 33,223 23,371 9,807 33,015
Advertising and promotion 7,403 5,499 1,348 6,400
Management fees to
affiliate (Note 11) 5,674 3,274 2,246 7,167
Provision for doubtful accounts 2,671 910 1,535 3,747
Ground leases (Note 10) 2,413 1,499 754 2,232
Other 4,137 2,038 976 3,399
--------- --------- ---------- ---------
Total shopping center expenses 118,288 80,635 35,648 119,528
Deferred stock compensation
expense (Note 12) 210 4,058 --- ---
Interest expense 124,567 87,040 44,119 152,683
Depreciation and amortization 58,603 39,578 16,616 54,227
--------- --------- ---------- ---------
301,668 211,311 96,383 326,438
--------- --------- ---------- ---------
Gain on sale of assets (Note 13) 5,460 1,952 3,286 4,960
Income (loss) from nonconsolidated
joint ventures (Note 5) 8,865 7,554 842 (304)
Minority partners' interest in
consolidated joint ventures. 1,029 530 888 3,065
--------- --------- ---------- ---------
Income (loss) before
extraordinary items 46,343 27,668 3,905 (9,762)
Extraordinary item - loss on early
extinguishment of debt (Note 14) (11,267) (8,932) --- ---
--------- --------- ---------- ---------
Net income (loss) available
to Unitholders $ 35,076 $ 18,736 $ 3,905 $ (9,762)
========= ========= ========= =========
Net Income (loss) available to
Unitholders attributable to:
General Partner $ 20,911 $ 11,008 $ 3,905 $ (9,762)
Limited Partners 14,165 7,728 --- ---
--------- --------- ---------- ---------
$ 35,076 $ 18,736 $ 3,905 $ (9,762)
========= ========= ========= =========
EARNINGS PER UNIT:
Income before extraordinary items $ 0.53 $ 0.34
Extraordinary items (0.13) (0.11)
--------- ---------
$0.40 $0.23
========= =========
WEIGHTED AVERAGE UNITS
OUTSTANDING (000's) 85,722 82,540
========= =========
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
Debartolo Realty Partnership
Consolidated Statements of Partnership Equity
And
DeBartolo Retail Group (Predecessor)
Combined Statements of Owners' Equity
(Dollars in Thousands, except for unit data)
Predecessor
Equity
DeBartolo Realty Limited Total (Deficit)
Corporation Partners
------------------------ --------------------- ----------------- ----------
Units Units Units
---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1993 $ (79,524)
Contributions 8,198
Distributions (33,614)
Net loss (9,762)
---------
Balance at December 31,1993 (114,702)
Contributions 8,818
Distributions (14,095)
Net income for the period
January 1, 1994 to
April 20, 1994 3,905
Affiliated receivables
not contributed to the
Operating Partnership (201,014)
Distribution of net
affiliated receivables
and payables (23,464)
Distributions to
predecessor's parent (130,400)
Minority partners'
interest exchanges
for Operating
Partnership (11,923)
Other cash and
non-cash
contributions
to equity 3,740
-----------
Accumulated Deficit
at commencement
of operations - $ - - $ - - $ - $ (479,135)
Contributions of
proceeds from
Initial Public
Offering, net of
transaction costs 41,336,900 545,670 - - 41,336,900 545,670 -
Exchange of debt
for partnership
interest 982,237 14,488 - - 982,237 14,488 -
Transfer of
predecessor
accumulated
deficit - (479,135) - - - (479,135) 479,135
Establishment of
in the Operating
Partnership - (33,422) 40,515,363 33,422 40,515,363 - -
Transfer of limited
partners' interest
to DeBartolo Realty
Corporation 6,347,016 - (6,347,016) - - - -
Distributions from
April 21, 1994 to
December 31, 1994 - (42,583) - (29,897) - (72,480) -
Net income from April
21, 1994 to
December 31, 1994 - 11,008 - 7,728 - 18,736 -
---------- --------- ---------- -------- ---------- -------- -----------
Balance at December
31, 1994 48,666,153 16,026 34,168,347 11,253 82,834,500 27,279 -
Contributions relating
to incentive plans 96,006 785 - 535 96,006 1,320 -
Contributions relating
second stock offering 6,000,000 49,417 - 30,953 6,000,000 80,370 -
Contributions relating
to purchase of
minority partners'
interest in five
properties - 5,514 671,188 3,921 671,188 9,435 -
Transfer of limited
partners' interest
DeBartolo Realty
Corporation 567,003 567 (567,003) (567) - - -
Distributions - (65,547) - (43,118) - (108,665) -
Net income - 20,911 - 14,165 - 35,076 -
---------- --------- ---------- -------- ---------- -------- -----------
Balance at December 31,1995 55,329,162 $ 27,673 34,272,532 $ 17,142 89,601,694 $ 44,815 $ -
========== ========= ========== ======== ========== ======== ===========
</TABLE>
<PAGE>
<TABLE>
DEBARTOLO REALTY PARTNERSHIP, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
AND DEBARTOLO RETAIL GROUP (PREDECESSOR)
COMBINED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
DeBartolo Realty DeBartolo Retail
Partnership, L.P. Group
------------------------- -----------------------
1995 1994 1994 1993
----------- ----------- --------- -----------
January 1 April 21 January 1 January 1
through through through through
December 31 December 31 April 20 December 31
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Cash Flow From Operating Activities:
Net income (loss) $ 35,076 $ 18,736 $ 3,905 $ (9,762)
Adjustments to reconcile net income
to net cash provided by
Operating Activities:
Amortization of formation and
loan costs included in
interest expense 11,616 10,528 1,354 4,390
Amortization and write-off of
interest rate protection agreements 7,307 2,112 -- --
Extraordinary loss on early
extinguishment of debt 11,267 8,932 -- --
Gain on sale of assets (5,460) (1,952) (3,286) (4,960)
Depreciation and amortization 58,603 39,578 16,616 54,227
Deferred stock compensation expense 210 4,058 -- --
Minority partners' interests in
consolidated joint ventures (1,029) (530) (888) (3,065)
(Income) loss from nonconsolidated
joint ventures (8,865) (7,554) (842) 304
Decrease (increase) in restricted cash -- 7,143 (2,829) (344)
Decrease (increase) in accounts
receivable 980 (642) 172 1,286
Decrease (increase) in prepaid
expenses and other (984) 5,219 (5,995) (429)
Increase (decrease) in accounts
payable and accrued expenses 179 (12,228) 7,938 (4,832)
Net Cash Provided By --------- --------- ---------- ---------
Operating Activities 108,900 73,400 16,145 36,815
Cash Flows From Investing Activities:
Additions to investment properties (51,339) (24,089) (3,018) (28,981)
Acquisition of development land -- (21,000) -- --
Purchase of properties and
partnership interests -- (1,818) -- --
Additions to deferred charges for
lease costs and other (3,625) (1,927) (501) (3,436)
Distributions from nonconsolidated
joint ventures 19,379 7,132 5,777 15,498
Advances to and investments in
nonconsolidated joint ventures (8,521) (53,585) (258) (1,784)
Net proceeds from sale of assets 6,282 3,035 4,547 8,206
Purchase of short term investments (9,718) (4,339) -- --
Net Cash Provided By (Used In) --------- --------- ---------- ---------
Investing Activities (47,542) (96,591) 6,547 10,497)
Cash Flows From Financing Activities:
Proceeds from issuance of debt 116,828 481,736 4,173 29,611
Partnership contributions 80,370 543,852 8,818 8,198
Scheduled principal payments on mortgages (6,647) (4,587) (3,657) (7,797)
Other payments on debt (171,436) (681,435) (626) (5,919)
Loan costs and interest rate buydowns (1,941) (70,822) (87) (3,205)
Distribution to predecessor parent -- (130,400) -- --
Prepayment penalties on early
extinguishment of mortgage
notes payable (3,390) (4,478) -- --
Partnership distributions (106,533) (46,387) (14,095) (20,936)
Minority partner distributions (847) (574) (144) (1,500)
(Increase) decrease in restricted cash 21,841 (39,000) -- --
Decrease (increase) in affiliate
receivables (net of affiliated payables) (2,651) 1,901 (14,672) (23,776)
Net Cash Provided By (Used In) --------- --------- ---------- ---------
Financing Activities (74,406) 49,806 (20,290) (25,324)
--------- --------- ---------- ---------
Net Increase (Decrease) In Cash (13,048) 26,615 2,402 994
Cash and Cash Equivalents:
Beginning of period 38,899 12,284 9,882 8,888
--------- --------- ---------- ---------
End of period $ 25,851 $ 38,899 $ 12,284 $ 9,882
========= ========= ========== =========
Supplemental Information:
Interest Paid $ 105,501 $ 81,306 $ 41,434 $ 147,646
========= ========= ========== =========
Supplemental Schedule of Non-Cash
and Financing Activities:
Distribution of affiliate
receivables and payables $ -- $ -- $ 23,464 $12,678
Exchange of debt for Operating
Partnership interest $ -- $14,488 $ -- $ --
Minority partners' interest exchanged
for Operating Partnership interest $ 9,435 $11,923 $ -- $ --
Affiliate receivables not contributed
to Operating Partnership $ -- $ -- $201,014 $ --
Distribution of affiliate payables to
minority partners $ -- $ -- $ -- $(1,264)
Limited Partners' interest exchanged
for General Partner Units $ 567 $ -- $ -- $ --
See accompanying notes
</TABLE>
<PAGE>
DEBARTOLO REALTY PARTNERSHIP, L.P. NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS AND
DEBARTOLO RETAIL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in Thousands)
Note 1 - Organization and Formation
DeBartolo Realty Partnership, L.P. (the "Operating Partnership" or "OP") was
formed as a Delaware limited partnership in 1993 in connection with DeBartolo
Realty Corporation's ( the "Company") initial public offering (the "IPO"). On
April 21, 1994, the Company raised $498 million in net proceeds through the
Company's IPO.
The proceeds of the IPO were used to acquire general partnership interests in
the OP, and indirectly, interest in DeBartolo Capital Partnership, a Delaware
general partnership ("FP"). The Company acquired a 47.8% general partner
interest in the OP in exchange for its contribution of these net proceeds to the
OP. The OP, and consequently the FP, were formed to continue and expand the
shopping mall ownership, management and development business of The Edward J.
DeBartolo Corporation ("EJDC") in a portfolio which, as of December 31, 1995,
consists of 51 super-regional and regional malls (the "DeBartolo Malls"), 11
community centers and land held for future development (collectively, the
"DeBartolo Properties"). As the sole general partner of the OP, the Company has
full, exclusive and complete responsibility and discretion in the management and
control of the OP. The OP was formed prior to the consummation of the Company's
IPO and is the successor entity to the DeBartolo Retail Group. During 1995,
certain property management and development activities are carried out for the
OP and FP through an affiliate, DeBartolo Properties Management, Inc. (the
"Property Manager").
Concurrently with the completion of the IPO, the FP completed a $455 million
principal amount securitized debt financing (the "Securitized Debt Financing").
Simultaneously with the IPO, EJDC and certain affiliates (collectively, the
"DeBartolo Group") and certain current and former employees of EJDC, along with
JCP Realty, Inc. ("JCP"), contributed to the OP interests in the DeBartolo
Properties (and certain other assets) for limited partnership interests in the
OP. Pursuant to an Exchange Rights Agreement, in April 1995 the Company filed a
registration statement for the issuance of 34,168,347 shares of common stock.
The Exchange Rights Agreement provides for the conversion of the limited partner
interests to shares of common stock. The Exchange Rights Agreement is subject
to certain restrictions relating to the initial exercise period, minimum value
of interest exchanged, and ownership limitations.
In connection with the IPO, the OP received options to acquire the interests of
the estate of Edward J. DeBartolo and other members of his family and affiliates
in four DeBartolo Malls and one community center. On July 1, 1995, the Company
exercised these options and acquired a 12.8% interest in Miami International
Mall, 10.1% interests in University Park Mall and University Center and 0.1%
interests in Coral Square and Lakeland Square. The exercise price of
approximately $9.4 million was payable in limited partnership interests in the
OP. As a result of these acquisitions, the Company's percentage ownership in
the OP decreased from 58.8% to 58.3%.
On August 1, 1995, the Company completed a public offering of 6,000,000 shares
of common stock at an offering price of $14 1/4 per share raising net proceeds
of approximately $80.4 million. The Company contributed the net proceeds to the
OP, which has used the net proceeds to retire mortgage debt (including any
related prepayment penalties). As a result of the contribution by the Company
to the OP of the net proceeds of the offering, the Company's percentage
ownership in the OP increased from 58.3% to 61.1%.
During August 1995, EJDC exchanged limited partnership interests in the OP to
retire certain EJDC corporate debt. The lender immediately exchanged the
limited partnership interests in the OP for common stock of the Company. As a
result of this transaction, the Company's percentage ownership in the OP
increased from 61.1% to 61.8%.
At December 31, 1995, ownership in the OP is as follows:
Percent
Total Units Owned
---------- -----
GENERAL PARTNER
DeBartolo Realty Corporation 55,329,162 61.8%
LIMITED PARTNERS
DeBartolo Group 32,714,135 36.5
JCP Realty, Inc. 1,016,156 1.1
DeBartolo Employees (current and former) 542,241 0.6
----------- -------
TOTAL 34,272,532 38.2
----------- -------
TOTAL UNITS 89,601,694 100%
=========== =======
Note 2 - Basis of Presentation
The financial statements of the OP are presented on a consolidated basis.
Properties which are controlled through majority ownership have been
consolidated and all significant intercompany transactions and accounts have
been eliminated. Properties where the OP owns less than a majority interest
have been accounted for under the equity method. One property, 2% of which is
owned by the OP, is accounted for under the cost method.
The OP owns 5% of the voting common stock and all of the nonvoting preferred
stock of the Property Manager. The OP's pro rata share is 95% of the Property
Manager's operating results. The OP accounted for its investment in the Property
Manager under the cost method through September 30, 1995. During 1995, in
accordance with Emerging Issues Task Force Issue No. 95-6, Accounting by a Real
Estate Investment Trust for an Investment in a Service Corporation, the OP
changed its method of accounting for its investment in the Property Manager to
the equity method. The OP has applied the new accounting method retroactively
to April 21, 1994, in accordance with Accounting Principles Board Opinion 20,
Accounting Changes. The change had no significant impact to previously issued
financial results for 1994 and 1995.
The accompanying combined financial statements of DeBartolo Retail Group
represent DeBartolo Properties previously owned by EJDC and certain of its
affiliates. The historical financial statements of DeBartolo Retail Group are
presented on a combined basis because EJDC and certain of its affiliates were
the subject of the business combination discussed above. The business
combination has been accounted for as a reorganization of entities under common
control, which is similar to the accounting used for a pooling of interests.
Note 3 - Summary of Significant Accounting Policies
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
Investment Properties:
Investment properties are stated at cost less accumulated depreciation,
which in the opinion of management is not in excess of net realizable value.
Costs incurred for the acquisition, development, construction and improvement of
properties, including significant renovations, are capitalized. Interest costs
and real estate taxes incurred with respect to qualified expenditures relating
to the construction of assets are capitalized during the development period.
Depreciation and Amortization:
The cost of buildings, improvements and equipment are depreciated on the
straight-line method over estimated useful lives, as follows:
Buildings - 30 to 40 years
Improvements - shorter of lease term or useful life
Equipment - 3 to 10 years
Tenant allowances paid to tenants for construction are capitalized and
amortized over the terms of each specific lease. Maintenance and repairs are
charged to expense when incurred.
Deferred Charges:
Deferred charges consist principally of financing costs and leasing
commissions which are amortized over the terms of the respective agreements.
Capitalized Interest:
Interest is capitalized on projects during the construction period.
Interest capitalized was $1,614 in 1995; $686 from inception to December 31,
1994; $13 for the period January 1, 1994 to April 20, 1994, and $219 in 1993.
Cash and Cash Equivalents:
Highly liquid investments with maturities of three months or less are
considered cash equivalents.
Restricted Cash:
Cash is restricted primarily for renovations and redevelopment of certain
DeBartolo Properties in connection with the Securitized Debt Financing.
Fair Value of Financial Instruments:
The following methods and assumptions were used to estimate the fair value
of financial instruments:
* The fair value of cash and cash equivalents, restricted cash and
short-term investments approximate carrying value due to the short-
term nature of these instruments.
* The fair value of the OP's fixed rate mortgages and notes payable
is based on current rates available to the OP for debt of similar
terms. Fair value of variable rate debt is considered to be the
carrying amount.
* The fair value of the interest rate caps and interest rate swaps
are based on available market data.
Minority Interests:
Minority interests in consolidated joint ventures represent the amounts of
net assets of consolidated ventures attributable to the interests of outside
parties. Minority interests in capital deficits of joint ventures are carried
as assets to the extent considered recoverable.
Revenue Recognition:
Shopping center space is generally leased to specialty retail tenants under
short and intermediate term leases which are accounted for as operating leases.
Minimum rents are recognized on the straight-line method over the terms of
leases. Percentage rents are recognized on an accrual basis as earned. Real
estate tax and operating expense recoveries are recognized in the period the
applicable costs are incurred.
Ground Leases:
Certain properties, as lessees, lease land under operating leases. Rent
expense is recorded on the straight-line method over the term of these leases.
Income Taxes:
The allocable share of the taxable income or loss of the OP is includable
in the income tax returns of the partners; accordingly, income taxes are not
reflected in the consolidated financial statements.
Earnings Per Unit:
Earnings per unit is based on the weighted average number of units
outstanding for the year ending December 31, 1995 and for the period of April
21, 1994 through December 31, 1994. Units of common stock awarded during 1994
under a deferred stock plan (70,696 units) and units of common stock awarded
under a long-term incentive plan (245,200 units) have been considered
outstanding units. In April 1995, the OP issued 96,006 units of common stock
under both plans. Both plans are a part of the 1994 DeBartolo Realty
Corporation Stock Incentive Plan. For purposes of determining fully dilutive
earnings per unit, the remaining 2,427,100 units of common stock under the long-
term incentive deferred stock plan are anti-dilutive after adjusting earnings to
give effect to the increase in earnings necessary for the units of common stock
to be awarded under the plan.
Impact of Recently Issued Accounting Standards:
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The OP will adopt Statement 121 in
the first quarter of 1996 and, based on current circumstances, does not believe
the effect of adoption will be material. The OP continually analyzes its mall
properties based on investment related criteria and, as a result, the OP may
determine to dispose of certain properties. Current circumstances based on the
OP's intention to hold the properties for long-term appreciation, do not
indicate that any of the OP's properties are impaired. However, if a decision
is made to dispose of certain properties, it is reasonably possible that
significant write-downs may be required.
Reclassifications:
Certain prior year amounts have been reclassified to conform to the current
year presentation.
Note 4 - Investment Properties
Investment properties consist of shopping center properties, including
peripheral land and properties under development and an office tower adjacent to
one of the shopping centers. Investment properties are summarized as follows:
December 31,
---------------------------
1995 1994
---------- ----------
Land $ 193,365 $ 192,781
Shopping center buildings, improvements and
equipment 1,537,725 1,486,819
Office tower building, improvements and
equipment 40,522 40,225
Properties under construction/expansion/renovation 13,351 7,962
Peripheral land parcels 8,700 9,805
---------- ----------
1,793,663 1,737,592
Accumulated depreciation 574,338 519,754
---------- ----------
Total investment properties $1,219,325 $1,217,838
========== ==========
Peripheral land parcels primarily consist of undeveloped land parcels
adjacent to certain shopping centers.
Depreciation expense totaled $55,315 in 1995; $37,298 from April 21, 1994
to December 31, 1994; $15,792 for the period January 1, 1994 to April 20, 1994;
and $51,431 for 1993.
The DeBartolo Group has granted the OP options to purchase their interests
in two shopping center development sites at an agreed upon purchase price.
These options are subject to the rights and approvals of existing lenders, third
parties and governmental authorities. The OP has options and rights of first
refusal to purchase the DeBartolo Group's interest in two regional malls. The
option prices are fair market value at any time until December 31, 1998.
As of December 31, 1995, the OP had options to acquire the interests of
three outside partners in five DeBartolo Properties. These options are subject
to the rights of partners and lenders and to the satisfaction of certain
conditions. In January 1996, the Property Manager acquired the interests of one
outside partner in two properties, see Note 16.
Note 5 - Investments in Nonconsolidated Joint Ventures
The OP's investments in the joint ventures, which have been accounted for
under the equity method, are as follows:
OP'S PERCENTAGE
OWNERSHIP AS OF
VENTURE PROPERTY DECEMBER 31, 1995
- ------------------------------------ --------- -----------------
Aventura Mall Aventura Mall 33.3%
Jacksonville Avenues Limited Partnership The Avenues 25.0%
Biltmore Square Associates Biltmore Square 33.3%
Century III Associates Century III Mall 50.0%
Chesapeake-JCP Associates, Ltd. Chesapeake Square 50.0%
Coral-CS/LTD Associates Coral Square 50.0%
Florida Mall Associates The Florida Mall 50.0%
HD Lakeland Mall Joint Venture Lakeland Square 50.0%
West Dade County Associates Miami International 50.0%
Mall
Northfield Center Limited Partnership Northfield Square 31.6%
Palm Beach Mall (a tenancy in common) Palm Beach Mall 50.0%
Philadelphia Center Associates Great Northeast 50.0%
Plaza
These investments are recorded initially at cost and subsequently adjusted
for net equity in income (loss) and cash contributions and distributions. The
OP receives substantially all of the economic benefit of Biltmore Square,
Chesapeake Square and Northfield Square as the result of advances made to those
joint ventures. For one joint venture, the outside partner receives
substantially all of the economic benefit.
Summary financial information and summary of OP's investment in and share
of income (loss) from the above joint ventures follows:
December 31,
1995 1994
--------- ---------
Balance Sheets
Investment properties (net) $ 599,234 $ 604,506
Other assets 43,094 47,007
--------- ---------
Total assets 642,328 651,513
--------- ---------
Mortgages and notes payable 584,495 592,990
Other liabilities 90,549 85,182
--------- ---------
Total liabilities 675,044 678,172
--------- ---------
Accumulated deficit (32,716) (26,659)
Less: Outside partners' equity 180 3,753
Advances to nonconsolidated joint ventures 78,474 71,415
--------- ---------
Net surplus in nonconsolidated joint ventures $ 45,578 $ 41,003
========= =========
Net surplus (deficits) in nonconsolidated
joint ventures is presented in the accompanying
consolidated balance sheets as follows:
Investments in nonconsolidated joint ventures $ 38,251 $ 39,430
Advances to nonconsolidated joint ventures 78,474 71,415
--------- ---------
Total investments in and advances to
nonconsolidated joint ventures 116,725 110,845
Deficits in nonconsolidated joint ventures (71,147) (69,842)
--------- ---------
$ 45,578 $ 41,003
========= =========
Period From Period From
April 21, January 1,
1994 to 1994 to
December 31, December 31, April 20, December 31,
1995 1994 1994 1993
Statements of Operations -------- -------- -------- --------
Revenues:
Minimum rents $ 89,727 $ 60,978 $ 26,101 $ 80,971
Tenant recoveries 44,293 30,967 12,709 40,589
Percentage rents 6,058 4,833 1,406 7,932
Other 12,853 9,252 2,420 8,233
-------- -------- -------- --------
Total revenues 152,931 106,030 42,636 137,725
-------- -------- -------- --------
Expenses:
Shopping Center expenses 57,368 39,778 16,092 52,400
Interest expense 57,561 37,038 15,942 58,615
Depreciation and amortization 24,078 16,351 6,885 22,307
-------- -------- -------- --------
139,007 93,167 38,919 133,322
-------- -------- -------- --------
Gain (loss) on sale of assets 166 1,196 (1) 1,380
-------- -------- -------- --------
Income before extraordinary
item 14,090 14,059 3,716 5,783
Extraordinary item - loss on
early extinguishment of debt (425) (388) - -
-------- -------- -------- --------
Net income $ 13,665 $ 13,671 $ 3,716 $ 5,783
======== ======== ======== ========
DeBartolo Realty Partnership,
L.P.'s share of:
Revenues less shopping center
expenses $ 41,987 $ 28,706 $ 12,541 $ 40,302
Interest expense 20,035 12,902 8,206 29,801
Depreciation, amortization
and other 12,826 8,318 3,493 11,319
Gain on land sales 164 445 - 514
-------- -------- -------- --------
Income (loss) before
extraordinary item 9,290 7,931 842 (304)
Extraordinary item - loss on
early extinguishment of debt (425) (377) - -
-------- -------- -------- --------
Net income (loss) $ 8,865 $ 7,554 $ 842 $ (304)
======== ======== ======== ========
Note 6 - Property Manager
Summary financial information for the Property Manager is as follows:
December 31,
Balance Sheets 1995 1994
-------- --------
Cash and cash equivalents $ 2,018 $ 2,816
Accounts receivable, substantially
all due from related parties 13,516 10,531
Other assets 8,003 2,692
-------- --------
$ 23,537 $ 16,039
======== ========
Accounts payable and accrued liabilities $ 14,691 $ 11,421
Note payable to OP 4,018 --
Other long-term liabilities 4,082 3,977
-------- --------
Total Liabilities 22,791 15,398
Shareholders' equity 746 641
-------- --------
$ 23,537 $ 16,039
======== ========
OP's share of Shareholders' equity $ 709 $ 609
======== ========
Outside Shareholders' equity $ 37 $ 32
======== ========
Period From
Year Ended April 21, 1994
December 31, to December 31,
Statements of Operations 1995 1994
-------- --------
Revenues:
Construction and development $ 6,087 $ 4,541
Management and leasing 16,768 12,194
Other 3,223 1,507
-------- --------
Total revenues 26,078 18,242
-------- --------
Expenses:
Salaries and employee benefits 20,018 12,361
Other operating expenses 5,784 2,485
Other expenses 171 2,162
-------- --------
Total expenses 25,973 17,008
-------- --------
Net income 105 1,234
======== ========
OP's share of net income $ 100 $ 1,172
======== ========
Note 7 - Deferred Charges and Prepaid Expenses
Deferred charges and prepaid expenses are summarized as follows:
December 31,
1995 1994
-------- --------
Lease costs, net of accumulated amortization of
$15,566 and $14,541 in 1995 and 1994, respectively $ 17,402 $ 17,077
Securitized Debt Financing costs, net of accumulated
amortization of $2,992 and $1,226 in 1995
and 1994, respectively 9,374 11,135
Loan costs, net of accumulated amortization
of $11,382 and $11,910 in 1995 and 1994, respectively 8,743 11,189
Interest rate protection agreements, net of
accumulated amortization of $2,249
and $2,103 in 1995 and 1994, respectively 704 8,011
Interest rate buydowns,net of accumulated
amortization of $11,222 and $7,426 in 1995
and 1994, respectively 30,993 44,256
Investment in West Town Mall Joint Venture 2,699 2,405
Prepaid expenses and other 4,181 3,537
-------- --------
$ 74,096 $ 97,610
======== ========
Lease cost amortization totaled $3,288 in 1995; $2,280 from April 21, 1994 to
December 31, 1994; $824 for the period January 1, 1994 to April 20, 1994; and
$2,796 in 1993.
Amortization of loan costs, interest rate protection agreements and interest
rate buydowns totaled $14,729 in 1995; $12,640 from April 21, 1994 to
December 31, 1994; $1,354 for the period January 1, 1994 to April 20, 1994; and
$4,390 in 1993.
On December 27, 1995, the OP assigned certain interest protection agreements
to an unrelated third party and replaced such agreements with interest rate swap
agreements. Accordingly, interest rate protection agreements have been
written-off with a charge to interest expense. Fair value of the remaining
interest rate protection agreement and the interest rate swap was $704 and
$1,130, respectively, at December 31, 1995. Fair value of the interest rate
protection agreements at December 31, 1994 were $13,659.
Note 8 - Mortgages and Notes Payable
Mortgage debt, which is collateralized by substantially all investment
properties, is summarized as follows:
December 31,
1995 1994
---------- ----------
Commercial Mortgage pass-through certificates -
fixed interest rates ranging from 7.59% to 9.24%
(average of 8.13% at December 31, 1995), due
April, 2001 $ 367,244 $ 367,800
Commercial Mortgage pass-through certificates -
interest at LIBOR, subject to an interest rate
swap agreement, plus 56 basis points (5.31% at
December 31, 1995), due April, 2001 87,200 87,200
Revolving line of credit with interest at LIBOR
plus 175 basis points (7.5% at December 31, 1995)
due December 1998 55,000 --
Primarily first mortgages with fixed interest
rates ranging from 6.79% to 9.92% (average
of 7.9% at December 31, 1995), due at various
dates through 2012 692,162 804,362
First mortgages with variable interest rates
at LIBOR, subject to an interest rate swap
agreement, plus 100 basis points (5.75% at
December 31, 1995) due at various dates through 2002 74,864 78,362
Bond payable collateralized by a mortgage to
an affiliate of EJDC on one property at an
effective rate of 8.0% due September 1996 72,103 72,103
---------- ----------
Total Mortgages and Notes Payable $1,348,573 $1,409,827
========== ===========
During December 1995, the OP entered into an interest rate swap agreement to
pay LIBOR at (i) 4.75% on approximately $218 million of debt through April 1997
and (ii) 5.71% on $87.2 million of debt from May 1997 through April 2001. As
part of this arrangement, the OP assigned the following interest rate protection
agreements (i) 4.75% through April 1996 and 5.25% from May 1996 through April
1997 on approximately $131 million of debt and (ii) 4.75% through April 1996 on
$87.2 million of debt. The OP has an interest rate protection agreement which
limits interest on $87.2 million of debt to no more than LIBOR of 8.44% for the
period May 1996 through March 2001.
The OP's proportionate share of the mortgages and notes payable are as
follows as of December 31:
1995 1994
----------- -----------
DeBartolo Realty Partnership, L.P. $ 1,305,564 $ 1,363,042
Outside partners 43,009 46,785
----------- -----------
$ 1,348,573 $ 1,409,827
=========== ===========
Annual principal payments and maturities as of December 31, 1995 are as
follows:
Total OP's Share
----------- -----------
1996 $ 157,221 $ 157,139
1997 7,588 7,491
1998 63,253 63,149
1999 69,103 68,991
2000 8,661 8,540
Thereafter 1,042,747 1,000,254
----------- -----------
$ 1,348,573 $ 1,305,564
=========== ===========
During 1995, the OP paid off mortgages of $117,227 at three properties and
obtained the release of mortgage liens at two properties. Additionally, the OP
refinanced three loans at one property totaling $44,098 with a $59,500 mortgage
note payable (of which $46,528 is currently outstanding), providing additional
borrowing capacity of up to $13,000 to be drawn upon over the subsequent twelve
months for expansion and renovation of that property. The OP refinanced $9,518
of construction loans at three community centers with permanent financing
totaling $15,000.
In December 1995, the OP amended and expanded its revolving line of credit
from $50,000 to $120,000, subject to certain conditions being met. As of
December 31, 1995, total current availability under this working line is
$94,500, of which $55,000 is outstanding. The facility is secured by the
mortgages of two properties and a negative pledge of a third property and is
recourse to the OP. The OP anticipates the facility to be increased to $150,000
and the availability will be increased to $144,500 during the first quarter of
1996 once certain conditions are met including additional collateral of a
mortgage on the negative pledged property. Interest is provided at the lesser
of LIBOR plus 175 basis points or the Base Rate, as defined. The facility
matures in December 1998, however, the OP has a one-year extension option. The
facility requires the OP to maintain a minimum net worth as defined, limits the
OP's indebtedness and provides for other restrictive covenants.
The OP restructured a $54,906 mortgage note payable having an interest rate
of 8 7/8% maturing January, 1998. The new mortgage matures January, 2005 and
bears interest at 7.42% . In connection with this transaction, the OP made a
partial paydown of $5,491 on a mortgage note of a nonconsolidated joint venture.
Commercial mortgage pass-through certificate covenants require the OP to
fund into escrow reserves for renovations, repairs and maintenance and tenant
improvements and requires the FP to maintain Minimum Debt Service coverage
ratios (as defined) and provides for other restrictive covenants.
Annual reserve funding requirements are as follows:
1996 $ 7,600
1997 10,400
1998 6,933
1999 5,200
2000 5,200
Thereafter 1,734
---------
$ 37,067
=========
DeBartolo Realty Partnership, L.P. has guaranteed $29,946 of the mortgages
and notes payable relating to three consolidated properties and three
nonconsolidated joint ventures. An affiliate of EJDC continues to provide a
guarantee of 33 1/3% of the debt service obligation on a $100,000 floating rate
mortgage at one nonconsolidated joint venture. The OP has agreed to indemnify
the EJDC affiliate for any loss or costs incurred or associated with this
guaranty.
DeBartolo, Inc., parent of EJDC, and certain of its affiliates have
guaranteed $100,000 of the OP's mortgages and notes payable.
Fair Value of Debt Related Financial Instruments:
The estimated fair value of debt related financial instruments are as
follows:
December, 1995 December, 1994
----------------------- ----------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------- ---------- ---------- ----------
Securitized Debt Financing $ 454,444 $ 477,083 $ 455,000 $ 446,936
Fixed rate mortgages and
notes payable 764,265 796,231 876,465 805,553
Variable rate mortgages and
notes payable 74,864 74,864 78,362 78,362
Revolving loan 55,000 55,000 -- --
---------- ---------- ---------- ----------
$1,348,573 $1,403,178 $1,409,827 $1,330,851
========== ========== ========== ==========
The debt on the nonconsolidated joint ventures (see Note 5) was $584,495 at
December 31, 1995. The OP's pro rata share of that debt was $249,535 at
December 31, 1995. The OP's proportionate share of mortgage notes and other
notes payable on both its consolidated and nonconsolidated properties was
$1,555,099 at December 31, 1995.
Note 9 - Rentals Under Operating Leases
The properties receive rental income from the leasing of retail shopping
center space and an office tower under operating leases that expire at various
dates through 2026. Substantially all investment property is leased out under
operating leases. The minimum future rentals based on operating leases held are
as follows as of December 31, 1995
Leases
with Related
All Leases Parties (1)
----------- --------
1996 $ 181,438 $ 7,315
1997 165,984 6,975
1998 150,090 5,771
1999 130,068 5,419
2000 111,839 4,695
Thereafter 486,197 23,905
----------- --------
$ 1,225,616 $ 54,080
=========== ========
(1) Represents stores whose parent company also owns units of
the OP or stores whose chief executive officers are on the
Board of Directors of the Company.
Minimum future rentals do not include amounts which may be received under
the terms of certain leases based upon a percentage of the tenants' sales or as
reimbursement of shopping center expenses.
No single tenant or group of affiliated tenants collectively accounts for
more than 10% of the consolidated properties total revenues which include
minimum rents, tenant recoveries, percentage rents and other revenue. The
tenant base includes national and regional retail chains and local retailers and
consequently the consolidated properties credit risk is concentrated in the
retail industry. The DeBartolo Malls are located in 16 states, with 17 malls
located in Florida and 8 malls located in Ohio.
The revenues of the OP may be adversely affected by the inability to
collect rent due to bankruptcy or insolvency of tenants or otherwise. Two
department store companies operating six department stores or other large retail
stores in excess of 60,000 square feet ("Anchor") at the consolidated DeBartolo
Properties are operating under the protection of the United States Bankruptcy
Code. At December 31, 1995, leases (excluding rejected leases) of Anchor
tenants open and operating in bankruptcy comprise approximately 1% of total
gross leasable area ("GLA"). Annual rentals paid by these Anchor tenants
comprised 2.5% of minimum rents paid by Anchor tenants. At December 31, 1995,
leases (excluding rejected leases) of mall store tenants at consolidated
DeBartolo Properties open and operating in bankruptcy comprise approximately
6.4% of mall GLA. Annual rentals paid by these mall store tenants comprised
6.1% of minimum rents paid by mall store tenants. Substantially all of these
tenants are currently meeting their contractual obligations. At the time a
tenant files for bankruptcy protection it is difficult to determine to what
extent these tenants will reject their leases or seek other concessions as a
condition to continued occupancy. The OP expects certain of these tenants to
reject their leases. Based on past experience, the OP has been able to offset,
over a reasonable period of time, the impact on minimum rents caused by a tenant
in bankruptcy.
Note 10 - Ground Leases
Certain properties, as lessees, have ground leases expiring at various
dates through 2087. Following is a schedule of future minimum rental payments
required under these ground leases as of:
December 31,
1995
----------
1996 $ 2,267
1997 2,347
1998 2,347
1999 2,347
2000 2,347
Thereafter 225,607
----------
$ 237,262
==========
Note 11 - Transactions with Affiliates
Management and Other Fees: The Property Manager has contracted to provide
management, leasing, development and construction management services to the OP.
Amounts included in the consolidated financial statements related to agreements
with the Property Manager are as follows:
Period Period
From From
April 21, January 1,
1994 to 1994 to
December 31, April 20,
1995 1994 1994 1993
------- ------- ------- -------
Management fees $ 5,369 $ 3,044 $ 2,179 $ 7,167
Leasing fees 3,261 1,872 552 3,319
Development and construction 4,872 1,844 717 3,013
Other reimbursements 835 254 180 664
During 1995, the Property Manager earned development and construction
revenues of $893 from affiliates of a partner in the OP.
Insurance: The OP has first dollar commercial general liability coverage
and special cause of loss property insurance with a $5 deductible. Prior to
1995 the OP's insurance carrier reinsured certain coverages with an affiliate of
EJDC. Charges to the OP for the reinsured amounts totaled $3,462 from April 21,
1994 to December 31, 1994. Prior to April 21, 1994, the DeBartolo Retail Group
had first dollar commercial general liability insurance of which an affiliated
insurance company reinsured the first $250 per occurrence. Additionally, the
DeBartolo Retail Group had "All Risk" Property insurance. The insurance company
reinsured the first $95 per occurrence with an affiliate of EJDC. Charges for
the reinsured amounts totaled $1,374 for the period January 1, 1994 to April 20,
1994 and $4,355 for 1993.
Affiliate Leases: On November 6, 1995, Fun-N-Games, an affiliate of EJDC
which operated amusement centers in DeBartolo Properties, was sold to an
independent third party operator which continues to operate these stores. These
properties have recorded total revenues and operating expense reimbursements of
$1,771 from January 1, 1995 through November 6, 1995, $1,571 from April 21, 1994
to December 31, 1994, $776 for the period from January 1, 1994 to April 20, 1994
and $2,287 for 1993.
Affiliates of certain Anchor tenants and small shops in various properties
are partners in various properties or are partners in the OP. As of
December 31, 1995, these tenants own or lease space in 29 consolidated
properties. These properties recorded rental income and operating expense
reimbursements of $10,933 in 1995; $8,926 from April 21, 1994 to December 31,
1994; $3,314 for the period January 1,1994 to April 20, 1994; and $12,674 for
1993.
Affiliated Receivables (Payables): At December 31, 1995, the affiliated
receivable represents a $4,018 revolving loan receivable from the Property
Manager bearing interest at prime plus 200 basis points offset by amounts due to
the Property Manager for normal operating costs. Interest earned by the OP on
this revolver totaled $258 in 1995. At December 31, 1994, affiliated
receivables represent amounts due to the Property Manager for normal monthly
operating costs offset by dividends receivable from the Property Manager of
$809. At December 31, 1993, net affiliated receivables (which are primarily
non-interest bearing) are due from EJDC. Concurrent with the offering, these
affiliated receivables were distributed to EJDC. Interest expense includes
interest charged to properties by EJDC on net amounts due to EJDC totaling $760
for the period January 1, 1994 to April 20, 1994 and $2,754 in 1993.
The Property Manager leases office space from EJDC under an operating
lease. Rent charged under the lease totaled $1,092 in 1995 and $755 in 1994.
The Property Manager performs legal, tax and other services for EJDC under
a corporate service agreement. Fees for these services totaled $570 in 1995 and
$425 in 1994.
Note 12 - Stock Incentive Plan
The Company and the OP adopted the DeBartolo Realty Corporation 1994 Stock
Incentive Plan (the "Stock Incentive Plan") to provide incentives to attract and
retain officers, directors and key employees.
The Stock Incentive Plan provides for the grants of nonqualified and
incentive stock options to purchase a specified number of shares of Common Stock
("Options") or rights to future grants of Common Stock ("Deferred Stock").
Under the Stock Incentive Plan, 3,100,000 shares of Common Stock are available
for grant.
The Compensation Committee of the Company's Board of Directors has approved
the grant of approximately 2,743,000 shares in the form of Deferred Stock in
connection with a two-part, long-term incentive compensation program.
Deferred Stock Awards upon Completion of the Offering
Upon completion of the IPO, approximately 71,000 shares of Deferred Stock
were granted to certain employees of the Company and the Property Manager, and
will vest ratably over a five-year period. The vesting of this initial Deferred
Stock award is based only on service and will not depend on the Company's
financial performance.
Long-Term Incentive Deferred Stock Awards. The second and more significant
component of the Company and the OP's long-term compensation proposal is a
Deferred Stock grant for which vesting is tied to the attainment of annual and
cumulative targets for growth in the Company's funds from operations ("FFO") per
share (which is substantially equivalent to cash generated before debt
repayments and capital expenditures, including peripheral land sales) after
adjusting for a reserve (not to exceed a specified amount) set annually to cover
tenant allowances and the use of floating rate debt through 1998. This long-
term incentive Deferred Stock grant includes senior management and approximately
130 key employees of the Property Manager. Any Deferred Stock award earned upon
attainment of an annual and cumulative growth target will be distributed over
the three-year period subsequent to the period that the award was earned,
provided the employee remains in the employ of the Company or the Property
Manager. Deferred Stock awarded to employees over the three-year period will be
unrestricted.
The awards eligible to be earned in any given year will be earned only if
the annual and cumulative adjusted FFO per share growth target for such year is
reached. As defined, the adjusted FFO per share growth target from the current
adjusted FFO base was $1.54 in 1995 and increases 7% for each year ending
December 31, 1996 through 1998. The percentage of the total Deferred Stock
award eligible to be earned upon attainment of these targets is 10% for 1994,
15% for 1995, 20% for 1996, 25% for 1997 and 30% for 1998. The following table
provides the adjusted FFO target for award of the Common Stock reserved for
issuance under the Stock Incentive Plan.
Long-Term Incentive Deferred Stock Award Targets
Annual Cumulative
Year Ended Growth Growth Target FFO Per Share
December 31, Target From Plan Inception Growth Target
------------ ------- ------------------- -------------
1996 7.0% 16.8% $1.65
1997 7.0% 25.0% $1.77
1998 7.0% 33.7% $1.89
If the annual target is not met, the percentage of the award attributable
to that annual target may be earned in a subsequent year if the cumulative
growth target is met including the shortfall in the prior year(s). The
Compensation Committee of the Company's Board of Directors has the right to make
partial awards if targets are not met.
At December 31, 1995, approximately 2,672,300 shares of the total 3,100,000
shares of Common Stock reserved for issuance under the Stock Incentive Plan were
allocated among senior management and approximately 130 key employees in
connection with the long-term incentive award. The remaining shares have been
held for future allocations under the stock incentive plan to both current and
future employees. The Compensation Committee has discretion to waive the
additional three-year employment requirement upon certain terminations of
employment (e.g., retirement, death, disability or termination without cause).
The awards vest over a period of eight years, with the majority vesting in the
fourth through eighth years after the IPO.
The OP did not meet the FFO growth target in 1995; accordingly, the
financial statement reflects expense of $210 relating to the vested portion of
the 70,696 shares under the Deferred Stock plan. The OP achieved its 1994 FFO
target and accordingly expensed $3,848 relating to 245,200 shares awarded under
the long-term incentive deferred stock plan and $210 relating to the 1994 vested
portion of the Deferred Stock award.
Stock Option Plan:
The Company and the OP has a stock option plan in place covering each
Director of the Company who is not otherwise an employee of the Company or any
of its subsidiaries or affiliates. Each such Director, upon joining the
Company's Board of Directors, received an initial grant of Options to purchase
1,000 shares of Common Stock having an exercise price equal to 100% of the fair
market value of the Common Stock as of such date. Commencing on December 31,
1994, and on each December 31st thereafter, each Director also will
automatically receive an annual grant of options to purchase 500 shares of
Common Stock having an exercise price equal to 100% of the fair market value of
the Common Stock at the date of grant of such Option. The options can be
exercised any time during the ten years after grant.
Note 13 - Gain on Sale of Assets
During 1995, the OP has recognized a $3,750 gain from the sale of a
partnership interest in an undeveloped mall site located in Strongsville, Ohio,
which was acquired in 1994 from the DeBartolo Group through the exercise of an
option for $6,250 and immediately sold. The remaining gains primarily represent
the sale of land adjacent to three properties.
Note 14 - Extraordinary Item
The extraordinary charge in 1995 resulted from prepayment penalties of
$3,390 and the write-off of unamortized deferred financing costs of
$7,877 related to the early retirement of mortgage notes payable. The
extraordinary item in 1994 resulted from prepayment penalties and the write-off
of unamortized deferred financing costs related to the satisfaction of mortgage
notes payable in connection with the OP's reorganization.
Note 15 - Contingent Liabilities
Certain of the properties are subject to various legal proceedings and
claims arising in the ordinary course of business, some of which are covered by
insurance. Management of the properties believes the ultimate resolution of
these matters is not likely to have a material adverse effect on the
consolidated financial statements.
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 OP'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.
Note 16 - Subsequent Events
The OP transferred ownership of one property to its lender, as of March 1,
1996, fully satisfying the property's mortgage note payable. This property no
longer met the OP's criteria for its ongoing strategic plan. The OP will
recognize an extraordinary gain on this transaction of approximately $8.0
million in the first quarter of 1996.
On January 31, 1996, the Property Manager was assigned a 33 % partnership
interest in one of the nonconsolidated joint ventures and a 25% partnership
interest in another nonconsolidated joint venture from an unrelated joint
venture partner. As a result, the OP effectively owns 65% and 74% of these
joint ventures.
Note 16.1-Event (Unaudited) Subsequent to Date of Independent Auditor's Report
The Company entered into an Agreement and Plan of Merger, dated as of March
26, 1996 (the "Agreement"), among Simon Property Group, Inc., a Maryland
corporation ("SPG"), its merger subsidiary and the Company, pursuant to which
the Company agreed to merge with the merger subsidiary. The Agreement provides
for the exchange of all outstanding Company common stock for SPG common stock,
$0.0001 par value (the "SPG Common Stock"), at an exchange ratio of 0.68 shares
of SPG Common Stock for each share of Company common stock. The merger is
subject to the approval of shareholders of both SPG and the Company and other
conditions. The new entity will be renamed Simon DeBartolo Group, Inc.
Note 17 - Selected Quarterly Financial Data (Unaudited)
1995
DeBartolo Realty Partnership, L.P.
----------------------------------------------
January 1 April 1 July 1 October 1
To To To To
March 31 June 30 September 30 December 31
-------- -------- -------- --------
Operating Data:
Total revenues $ 79,229 $ 81,223 $ 84,099 $ 88,106
Income before
extraordinary items 11,739 9,826 13,343 11,435
Extraordinary items - - (5,629) (5,638)
-------- -------- -------- --------
Net income $ 11,739 $ 9,826 $ 7,714 $ 5,797
======== ======== ======== ========
Earning Per Unit Data:
Income before
extraordinary items $ 0.14 $ 0.12 $ 0.15 $ 0.12
Extraordinary items - - (0.07) (0.06)
-------- -------- -------- --------
Net income $ 0.14 $ 0.12 $ 0.08 $ 0.06
======== ======== ======= ========
Cash Dividends Per Unit $ 0.315 $ 0.315 $ 0.315 $ 0.315
======== ======== ======== ========
Weighted Average
Units Outstanding 83,150 83,150 84,567 89,150
======== ======== ======== ========
1994
DeBartolo Realty Partnership, L.P.
------------------------------------
April 21 July 1 October 1
To To To
June 30 September 30 December 31
Operating Data: -------- -------- --------
Total revenues $ 61,227 $ 80,412 $ 87,304
Income before extraordinary items 5,123 10,519 12,026
Extraordinary items (8,932) -- --
-------- -------- --------
Net income $ (3,809) $ 6,180 $ 12,026
======== ======== ========
Earning Per Unit Data:
Income before extraordinary items $ 0.06 $ 0.13 $ 0.15
Extraordinary items (0.11) -- --
-------- -------- --------
Net income (loss) $ (0.05) $ 0.13 $ 0.15
======== ======== ========
Cash Dividends Per Unit $ 0.245 $ 0.315 $ 0.315
Weighted Average Units Outstanding 81,590 82,906 82,908
Note 18 - Unaudited Pro Forma Financial Information
As a result of the IPO and the related transactions entered into in
connection with the formation of the Company and the OP, 1994 historical results
of operations and earnings per unit may not be indicative of future results of
operations and earnings per share. This unaudited Pro Forma Condensed
Consolidated Statement of Operations assumed that the Company qualifies as a
real estate investment trust for federal income tax purposes and also assumed
(i) completion of the asset contributions in the formation of the Company; (ii)
the completion of the IPO, including the exercise of the underwriters over-
allotment option and the Securitized Debt Financing; (iii) the completion of
debt exchange transactions with BJS Capital Partners, L.P. and MS Youngstown
General Partnership; (iv) the contribution by JCP Realty, Inc. and the EJDC
employees of their interests in certain DeBartolo Properties; and (v) the
completion of certain refinancings of mortgage indebtedness of the DeBartolo
Properties (collectively defined as the "REIT Formation") as of the beginning of
1994. In management's opinion, all necessary adjustments to reflect the effects
of these transactions have been made as of January 1, 1994.
The unaudited Pro Forma Condensed Statement of Operations is not
necessarily indicative of what actual results of operations of the OP would have
been assuming such transactions had been completed at January 1, 1994, nor does
it purport to represent the results of operations of future periods.
The following is the DeBartolo Realty Partnership, L.P. Pro Forma Condensed
Consolidated Statement of Operations for the twelve months ended December 31,
1994:
<TABLE>
DeBARTOLO DeBARTOLO
REALTY REALTY
DeBARTOLO PARTNERSHIP, L.P. PARTNERSHIP, L.P.
RETAIL GROUP DeBARTOLO APRIL 21, 1994 FOR THE TWELVE
JANUARY 1, 1994 RETAIL GROUP TO MONTHS ENDED
TO PRO FORMA DECEMBER 31, DECEMBER 31,
APRIL 20, 1994 (A) ADJUSTMENTS 1994 1994
----------------- ------------ --------------- --------------
(Dollars in Thousands, Unaudited)
<S> <C> <C> <C> <C>
Revenues B $ 95,272 $ 1,125 $ 228,943 $ 325,340
Shopping center expenses C 35,648 500 80,635 116,783
Deferred stock compensation expense -- -- 4,058 4,058
Interest expense D 44,119 (7,316) 87,040 123,843
Depreciation and amortization 16,616 -- 39,578 56,194
--------- -------- --------- ---------
96,383 (6,816) 211,311 300,878
--------- --------- --------- ---------
Gain on sale of assets (primarily land) 3,286 -- 1,952 5,238
Income from nonconsolidated
joint ventures E 842 2,033 7,554 10,429
Minority partners' interest in
consolidated joint ventures F 888 (977) 530 441
--------- -------- --------- ---------
Income before extraordinary items 3,905 8,997 27,668 40,570
Extraordinary item - loss on early
extinguishment of debt -- -- (8,932) (8,932)
--------- ------- --------- ---------
Net income $ 3,905 $ 8,997 $ 18,736 $ 31,638
========= ======== ========= =========
Pro forma earnings per unit (based upon
pro forma weighted average units
outstanding)
Income before extraordinary items $ 0.49
Extraordinary loss on early extinguishment (0.11)
of debt ---------
Net Income $ 0.38
=========
</TABLE>
(A)The pro forma adjustments reflect the historical combined operations of the
Predecessor to the OP (the "DeBartolo Retail Group") for the period from
January 1, 1994 through April 20, 1994.
(B)Represents pro forma impact of the Property Manager. The OP accounts for
its investment in the Property Manager on the equity basis of accounting.
Pro forma adjustments also include interest income on $60,000 of cash from
the REIT Formation from January 1, 1994 through April 20, 1994.
(C)The proforma adjustment reflects the elimination of certain taxes associated
with the change of ownership structure from a corporation to a partnership.
The pro forma adjustments also reflect the Company's prorated share of
estimated annual cost of $2,000 associated with operating as a public
company.
(D)Reflects the reduction of interest expense associated with the reduction of
debt and restructuring resulting from the IPO and related transactions.
(E)The pro forma adjustment reflects the changes in ownership interest,
structure, and refinancing of debt in the nonconsolidated joint ventures
which are recorded on the equity method.
(F)Increase reflects the minority partners' share of the net effect of the REIT
Formation.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of
DeBartolo Realty Partnership, L.P.
We have audited the accompanying combined balance sheets of the Nonconsolidated
Joint Ventures of DeBartolo Realty Partnership, L.P. as of December 31, 1995 and
1994 and the related combined statements of operations, accumulated deficit and
cash flows for the year ended December 31, 1995 and for the period from
April 21, 1994 to December 31, 1994 and the combined statements of operations,
accumulated deficit and cash flows of the Uncombined Joint Ventures of
DeBartolo Retail Group as described in Note 1 for the period January 1, 1994 to
April 20, 1994 and for the year ended December 31, 1993. These financial
statements are the responsibility of DeBartolo Realty Partnership,
L.P.'s 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 best 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Nonconsolidated Joint Ventures of DeBartolo Realty Partnership, L.P. at
December 31,1995 and 1994 and the combined results of their operations and
their cash flows for the year ended December 31, 1995 and for the period
April 21, 1994 to December 31, 1994, and the combined results of operations
and cash flows of the Uncombined Joint Ventures of DeBartolo Retail Group for
the period January 1, 1994 to April 20, 1994 and for the year ended
December 31, 1993, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 14, 1996
<PAGE>
NONCONSOLIDATED JOINT VENTURES OF DEBARTOLO REALTY PARTNERSHIP, L.P.
AND
UNCOMBINED JOINT VENTURES OF DEBARTOLO RETAIL GROUP
COMBINED BALANCE SHEETS
(Dollars in Thousands)
December 31,
1995 1994
--------- ---------
Assets:
Investment properties (Notes 3 and 5) $ $ 784,211 $ 767,345
Less accumulated depreciation 184,977 162,839
--------- ---------
599,234 604,506
Cash and cash equivalents. 5,507 6,043
Restricted cash. 2,089 2,016
Accounts receivable, net of allowance
for doubtful accounts of $2,883 and
$2,718, in 1995 and 1994 17,506 18,321
Deferred charges and prepaid expenses (Note 4) 17,992 20,627
--------- ---------
$ 642,328 $ 651,513
========= =========
Liabilities and Accumulated Equity (Deficit):
Liabilities:
Mortgages and notes payable (Note 5) $ 584,495 $ 592,990
Accounts payable and accrued expenses 14,113 12,217
Affiliate payables (Note 8). 76,436 72,965
--------- ---------
675,044 678,172
--------- ---------
Commitments and contingencies
(Notes 5, 6, 7, and 9) - -
Accumulated deficit (32,716) (26,659)
--------- ---------
$ 642,328 $ 651,513
========= =========
Accumulated equity (deficit):
DeBartolo Realty Partnership, L.P. $ (32,896) $ (30,412)
Outside partners 180 3,753
--------- ---------
$ (32,716) $ (26,659)
========= =========
See accompanying notes
<PAGE>
<TABLE>
NONCONSOLIDATED JOINT VENTURES OF DEBARTOLO REALTY PARTNERSHIP, L.P.
AND
UNCOMBINED JOINT VENTURES OF DEBARTOLO RETAIL GROUP
COMBINED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
DeBartolo Realty Partnership, L.P. DeBartolo Retail Group
----------------------------------- -----------------------
April 21, January 1,
to to
December 31, April 20,
1995 1994 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues (Note 8):
Minimum rents $ 89,727 $ 60,978 $ 26,101 $ 80,971
Tenant recoveries 44,293 30,967 12,709 40,589
Percentage rents 6,058 4,833 1,406 7,932
Other 12,853 9,252 2,420 8,233
-------- -------- -------- --------
Total revenues 152,931 106,030 42,636 137,725
-------- -------- -------- --------
Expenses:
Shopping Center Expenses:
Property operating 14,381 10,178 4,247 13,289
Repairs and maintenance 12,065 7,888 3,437 11,563
Real estate taxes 18,630 13,052 5,185 16,898
Advertising and promotion 4,972 3,307 684 3,904
Management fees to
affiliate (Note 8) 4,984 3,377 1,545 4,731
Provision for doubtful accounts 997 276 496 1,078
Ground leases (Note 7) 130 88 37 125
Other 1,209 1,612 461 812
-------- -------- -------- --------
Total shopping center expenses 57,368 39,778 16,092 52,400
Interest expense 57,561 37,038 15,942 58,615
Depreciation and amortization 24,078 16,351 6,885 22,307
-------- -------- -------- --------
139,007 93,167 38,919 133,322
-------- -------- -------- --------
Gain( loss) on sale of assets 166 1,196 (1) 1,380
Income before extraordinary item 14,090 14,059 3,716 5,783
Extraordinary item (Note 10) (425) (388) -- --
-------- -------- -------- --------
Net income $ 13,665 $ 13,671 $ 13,716 $ 5,783
======== ======== ======== ========
See accompanying notes
<PAGE>
</TABLE>
NONCONSOLIDATED JOINT VENTURES OF DEBARTOLO REALTY PARTNERSHIP, L.P.
AND
UNCOMBINED JOINT VENTURES OF DEBARTOLO RETAIL GROUP
COMBINED STATEMENTS OF ACCUMULATED DEFICIT
(Dollars in Thousands)
Balance at December 31, 1992 $ 1,843
Contributions 6,258
Distributions (31,040)
Net income 5,783
----------
Balance at December 31, 1993 (17,156)
Contributions 4,398
Distributions (11,532)
Net income 3,716
----------
Balance at April 20, 1994 (20,574)
Contributions 1,279
Distributions (21,035)
Net income 13,671
----------
Balance at December 31, 1994 (26,659)
Contributions 9,097
Distributions (28,819)
Net income 13,665
----------
Balance at December 31, 1995 $ (32,716)
==========
See accompanying notes
<PAGE>
<TABLE>
NONCONSOLIDATED JOINT VENTURES OF DEBARTOLO REALTY PARTNERSHIP, L.P.
AND
UNCOMBINED JOINT VENTURES OF DEBARTOLO RETAIL GROUP
COMBINED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
DeBartolo Realty Partnership, L.P. DeBartolo Retail Group
-------------------------------- ----------------------
April 21, January 1,
to to
December 31, April 20,
1995 1994 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 13,665 $ 13,671 $ 3,716 $ 5,783
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of financing costs included
in interest expense 1,941 1,184 367 877
(Gain) loss on sale of assets (166) (1,196) 1 (1,380)
Depreciation and amortization 24,078 16,351 6,885 22,307
Extraordinary items 425 388 - -
(Increase) decrease in restricted cash (73) 699 (1,548) (1,168)
(Increase) decrease in accounts receivable 815 (3,899) 767 (3,568)
Decrease (increase) in prepaid expenses
and other 39 2,007 (2,001) (175)
Increase (decrease) in accounts payable
and accrued expenses 1,012 (5,881) 6,322 3,405
Other -- 139 459 --
Net Cash Provided By Operating Activities 41,736 23,463 14,968 26,081
Cash Flows From Investing Activities:
Additions to investment properties (9,750) (24,524) (1,961) (9,270)
Additions to lease costs (1,268) (701) (156) (1,170)
Proceeds from sale of land 193 1,407 1 1,560
Net Cash Used In Investing Activities (10,825) (23,818) (2,116) (8,880)
Cash Flows From Financing Activities:
Proceeds from issuance of debt - 19,667 4,445 88,300
Scheduled principal payments on mortgages (3,004) (1,888) (871) (2,443)
Other payments on debt (5,491) (48,167) - (84,327)
Loan costs paid (126) (8,889) (320) (2,573)
Capital contributions 2,522 1,279 4,398 6,258
Partner distributions (28,819) (21,036) (11,532) (31,040)
(Increase) decrease in affiliate
receivables (net of affiliated payables) 3,471 56,962 (2,508) 9,987
Net Cash Used In Financing Activities (31,447) (2,072) (6,388) (15,838)
Net Increase (Decrease) In Cash and
Cash Equivalents (536) (2,427) 6,464 1,363
Cash and Cash Equivalents:
Beginning of year 6,043 8,470 2,006 643
End of year $ 5,507 $ 6,043 $ 8,470 $ 2,006
Supplemental Information:
Interest paid $ 56,125 $ 36,032 $ 15,319 $ 55,894
Supplemental Schedule of Non-Cash and
Financing Activities:
Step-up in basis associated with the
acquisition of partnership interests
in three properties $ 6,734 $ -- $ -- $ --
See accompanying notes
</TABLE>
<PAGE>
NONCONSOLIDATED JOINT VENTURES OF
DeBARTOLO REALTY PARTNERSHIP, L.P.
AND UNCOMBINED JOINT VENTURES OF DeBARTOLO RETAIL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in Thousands)
Note 1 - Basis of Presentation
DeBartolo Realty Partnership, L.P. (the "Operating Partnership" or "OP")
was formed as a Delaware limited partnership in 1993 in connection with
DeBartolo Realty Corporation's (the "Company") initial public offering (the
"IPO"). The OP owns 50% or less of twelve joint ventures and accounts for its
investment in these joint ventures under the equity method. Prior to April 21,
1994, each of these joint ventures were owned 50% or less by The Edward J.
DeBartolo Corporation ("EJDC") and certain affiliates.
The accompanying combined financial statements of the nonconsolidated
joint ventures of DeBartolo Realty Partnership, L.P. and uncombined joint
ventures of DeBartolo Retail Group consist of the assets, liabilities and
results of operations identified with the joint ventures which are owned 50% or
less by the OP.
The transaction relating to the acquisition of the investments in joint
ventures is accounted for as a reorganization of entities under common control
and accordingly the assets and liabilities of all combined joint ventures will
be carried forward at historical cost.
In conjunction with the IPO, the OP received options to acquire the
interests of the estate of Edward J. DeBartolo and other members of his family
and affiliates in three nonconsolidated joint ventures. On July 1, 1995, the
OP exercised these options and acquired a 12.8% interest in Miami International
Mall, and 0.1% interests in Coral Square and Lakeland Square. The purchase
price of approximately $6.7 million was payable in limited partnership
interests in the OP.
The joint ventures included in these combined financial statements and the
OP's and DeBartolo Retail Group's ownership interest in each are as follows:
OP'S
PERCENTAGE
OWNERSHIP
AT
DECEMBER 31,
VENTURE PROPERTY 1995
Aventura Mall Venture Aventura Mall 33.3%
Biltmore Square Associates Biltmore Square 33.3%
Century III Associates Century III Mall 50.0%
Chesapeake-JCP Associates, Ltd. Chesapeake Square 50.0%
Coral-CS/LTD Associates Coral Square 50.0%
Florida Mall Associates The Florida Mall 50.0%
HD Lakeland Mall Joint Venture Lakeland Square 50.0%
Jacksonville Avenues Limited Partnership The Avenues 25.0%
Northfield Center Limited Partnership Northfield Square 31.6%
Palm Beach Mall (A Tenancy in Common) Palm Beach Mall 50.0%
Philadelphia Center Associates Great Northeast Plaza 50.0%
West Dade County Associates Miami International Mall 50.0%
Note 2 - Summary of Significant Accounting Policies
Investment Properties:
Investment properties are stated at cost less accumulated depreciation,
which in the opinion of management is not in excess of net realizable value.
Costs incurred for the acquisition, development, construction and improvement
of properties, including significant renovations, are capitalized. Interest
costs and real estate taxes incurred with respect to qualified expenditures
relating to the construction of assets are capitalized during the development
period.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Depreciation and Amortization:
The cost of buildings, improvements and equipment are depreciated on the
straight-line method over estimated useful lives, as follows:
Buildings _ 30 to 40 years
Improvements _ shorter of lease term or useful life
Equipment _ 3 to 10 years
Tenant allowances paid to tenants for construction are capitalized and
amortized over the terms of each specific lease. Maintenance and repairs are
charged to expense when incurred.
Deferred Charges:
Deferred charges consist principally of financing costs and leasing
commissions which are amortized over the terms of the respective agreements.
Capitalized Interest:
Interest is capitalized on projects during the construction period.
Interest capitalized was $708 in 1995, $798 from April 21, 1994 to December 31,
1994, and $24 for the period January 1, 1994 to April 20, 1994. No interest
was capitalized during 1993.
Cash and Cash Equivalents:
Highly liquid investments with maturities of three months or less are
considered cash equivalents.
Restricted Cash:
Restricted cash is being restricted primarily for payment of expenditures
for improvements relating to a shopping center.
Fair Value of Financial Instruments:
The following methods and assumptions were used to estimate the fair value
of financial instruments:
The fair value of cash and cash equivalents and restricted
cash approximate the carrying value due to the short term nature of
these instruments.
The fair value of the fixed rate mortgages and notes
payable is based on current rates available to the OP for debt of
similar terms. Fair value of variable rate debt is considered to be
the carrying amount.
Revenue Recognition:
Shopping center space is generally leased to specialty retail tenants
under short and intermediate term leases which are accounted for as operating
leases. Minimum rents are recognized on the straight-line method over the
terms of leases. Percentage rents are recognized on an accrual basis as
earned. Real estate tax and operating expense recoveries are recognized in the
period the applicable costs are incurred.
Income Taxes:
The allocable share of the taxable income or loss of the joint ventures is
includable in the income tax returns of the partners; accordingly, income taxes
are not reflected in the combined financial statements.
Impact of Recently Issued Accounting Standards:
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The OP will adopt Statement 121 in
the first quarter of 1996 and, based on current circumstances, does not believe
the effect of adoption will be material.
Note 3 - Investment Properties
Investment properties consist of shopping center properties, including
peripheral land and properties under development. Investment properties are
summarized as follows:
DECEMBER 31,
1995 1994
--------- ---------
Land $ 80,670 $ 79,651
Shopping center buildings, improvements
and equipment 697,058 684,412
Properties under expansion/renovation 6,336 3,107
Peripheral land parcels 147 175
--------- ---------
784,211 767,345
Accumulated depreciation 184,977 162,839
--------- ---------
Total investment properties $ 599,234 $ 604,506
========= =========
Peripheral land parcels primarily consist of undeveloped land parcels
adjacent to certain shopping centers.
Depreciation expense totaled $22,283 in 1995; $14,982 from April 21, 1994 to
December 31, 1994; $6,395 for the period January 1, 1994 to April 20, 1994 and
$20,706 for 1993.
Note 4 - Deferred Charges and Prepaid Expenses
Deferred charges and prepaid expenses are summarized as follows:
DECEMBER 31,
1995 1994
-------- --------
Lease costs net of accumulated amortization
of $10,836 and $10,242 in 1995 and
1994, respectively $ 7,996 $ 8,343
Loan costs net of accumulated amortization of
$3,285 and $3,834 in 1995 and 1994,
respectively 3,319 3,887
Interest rate buydowns, net of accumulated
amortization of $2,068 and $904 in 1995
and 1994, respectively 6,101 7,811
Prepaid expenses and other 576 586
-------- --------
$ 17,992 $ 20,627
======== ========
Lease cost amortization totaled $1,795 in 1995; $1,369 from April 21, 1994
to December 31, 1994; $490 for the period January 1, 1994 to April 20, 1994;
and $1,601 in 1993.
Amortization of loan costs and interest rate buydowns totaled $1,941 in
1995; $1,184 from April 21, 1994 to December 31, 1994; $367 for the period
January 1, 1994 to April 20, 1994; and $877 in 1993.
Note 5 - Mortgages and Notes Payable
Mortgage debt, which is collateralized by substantially all investment
properties, is summarized as follows:
DECEMBER 31,
----------------------
1995 1994
--------- ---------
Primarily first mortgages with fixed interest rates
ranging from 6.0% to 9.52% (average of
7.6%) at December 31, 1995, due at various
dates through 2003 $ 401,595 $ 408,890
First mortgages with variable interest rates
(average of 7.03% at December 31, 1995)
due at various dates through 1998 107,900 109,100
Commercial paper secured by a first mortgage
due to an affiliate of EJDC on a property
under a 10 year credit facility through 1998
(effective rate including original issue discount
at December 31, 1995 of 7.11%) 75,000 75,000
--------- ---------
Total Mortgages and Notes Payable $ 584,495 $ 592,990
========= =========
The OP's proportionate share of the mortgages and notes payable are as
follows as of December 31:
DECEMBER 31,
----------------------
1995 1994
--------- ---------
DeBartolo Realty Partnership, L.P. $ 249,535 $ 246,365
Outside partners 334,960 346,625
--------- ---------
$ 584,495 $ 592,990
========= =========
Annual principal payments and maturities are as follows as of
December 31, 1995:
Total OP's Share
--------- ---------
1996 $ 28,873 $ 12,880
1997 6,214 2,445
1998 178,510 72,319
1999 3,795 1,608
2000 80,854 35,799
Thereafter 286,249 124,484
--------- ---------
$ 584,495 $ 249,535
========= =========
A lender on two properties is entitled to receive in addition to any
amounts due pursuant to the terms of the loan, 33 1/3% of net sales or
refinancing proceeds as defined upon sale or refinancing of the properties.
DeBartolo Realty Partnership, L.P. has guaranteed $21,726 of the mortgages
and notes payable relating to three nonconsolidated joint ventures. An
affiliate of EJDC continues to provide a guarantee of 33 1/3% of the debt
service obligation on a $100 million floating rate mortgage at one of the joint
ventures. The OP has agreed to indemnify the EJDC affiliate for any loss or
costs incurred or associated with this guaranty.
Fair Value of Debt Related Financial Instruments:
The estimated fair value of financial instruments are as follows:
December, 1995 December, 1994
-------------------- ---------------------
Carrying Fair Carrying Fair
Value Value Value Value
--------- --------- --------- ---------
Fixed rate mortgages and
notes payable $ 401,595 $ 415,563 $ 408,890 $ 366,041
Variable rate mortgages and
notes payable 182,900 182,900 184,100 184,100
--------- --------- --------- ---------
$ 584,495 $ 598,463 $ 592,990 $ 550,141
========= ========= ========= =========
Note 6 - Rentals Under Operating Leases
The properties receive rental income from the leasing of retail shopping
center space under operating leases that expire at various dates through 2020.
Substantially all investment property is leased out under operating leases.
The minimum future rentals based on operating leases held are as follows as of
December 31, 1995:
Leases
With Related
All Leases Parties (1)
-------- --------
1996 $ 83,243 $ 3,009
1997 77,076 2,989
1998 71,221 2,762
1999 64,362 2,762
2000 56,124 2,762
Thereafter 201,102 15,060
-------- --------
$ 553,128 $ 29,344
========= ========
(1) Represents stores whose parent company also owns units of the OP or
stores whose chief executive officer's are on the Board of Directors of the
Company.
Minimum future rentals do not include amounts which may be received under
the terms of certain leases based upon a percentage of the tenants' sales or as
reimbursement of shopping center expenses.
No single tenant or group of affiliated tenants collectively accounts for
more than 10% of the combined properties total revenues which include minimum
rents, tenant recoveries, percentage rents and other revenue. The tenant base
includes national and regional retail chains and local retailers and
consequently the combined properties credit risk is concentrated in the retail
industry.
The revenues of the joint ventures may be adversely affected by the inability
to collect rent due to bankruptcy or insolvency of tenants or otherwise. At
December 31, 1995, leases (excluding rejected leases) of mall store tenants of
the joint ventures open and operating in bankruptcy comprise approximately 5.1%
of mall gross leasable area ("GLA"). Annual rentals paid by these Mall Store
tenants comprised 5.0% of minimum rents paid by mall store tenants.
Substantially all of these tenants are currently meeting their contractual
obligations. At the time a tenant files for bankruptcy protection it is
difficult to determine to what extent these tenants will reject their leases or
seek other concessions as a condition to continued occupancy. The OP expects
certain of these tenants to reject their leases. Based on past experience, the
OP has been able to offset, over a reasonable period of time, the impact on
minimum rents caused by a tenant in bankruptcy.
Note 7 - Ground Leases
One joint venture, as lessee, has a ground lease expiring in 2012.
Following is a schedule of future minimum rental payments required under this
ground lease as of December 31, 1995:
1996 $ 120
1997 120
1998 120
1999 120
2000 120
Thereafter 1,380
-------
$ 1,980
=======
Note 8 - Transactions with Affiliates
Management and Other Fees: The Property Manager, an affiliate of the OP,
has contracted to provide management, leasing, development and construction
management services to the joint ventures. One joint venture is managed by a
partner in that joint venture who is unrelated to the OP. Amounts included in
the nonconsolidated financial statements related to agreements with the
Property Manager are as follows:
Period Period
From From
April 21, January 1,
1994 to 1994 to
December 31, December 31, April 20, December 31,
1995 1994 1994 1993
-------- ------- ------- -------
Management fees $ 4,075 $ 2,871 $ 1,353 $ 4,271
Leasing fees 986 550 156 1,117
Development and Construction 969 802 312 589
Other Reimbursements 119 163 55 302
Insurance: The joint ventures have first dollar commercial general
liability coverage and special cause of loss property insurance with a $5
deductible. Prior to 1995 the joint ventures' insurance carrier reinsured
certain coverages with an affiliate of EJDC. Charges to the joint ventures for
the reinsured amounts totaled $936 from April 21, 1994 to December 31, 1994.
Prior to April 21, 1994, the joint ventures had first dollar commercial general
liability insurance of which an affiliated insurance company reinsured the
first $250 per occurrence. Additionally, the joint ventures had "All Risk"
Property insurance. The insurance company reinsured the first $95 per
occurrence with an affiliate of EJDC. Charges for the reinsured amounts
totaled $371 for the period January 1, 1994 to April 20, 1994 and $1,074 for
1993.
Affiliate Leases: On November 6, 1995, Fun-N-Games, an affiliate of EJDC
which operated amusement centers in the joint venture properties, was sold to
an independent third party operator who continues to operate these stores. The
joint ventures recorded total revenues and operating expense reimbursements of
$559 through November 6, 1995; $504 from April 21, 1994 to December 31, 1994;
$254 for the period from January 1, 1994 to April 20, 1994 and $725 for 1993.
Affiliates of certain anchor tenants and small shops in various properties
are partners in those properties or are partners in the Operating Partnership.
As of December 31, 1995, these tenants own or lease space in 10 properties.
These properties recorded rental income and operating expense reimbursements of
$3,451 in 1995; $3,223 from April 21, 1994 to December 31, 1994; $1,443 for the
period January 1, 1994 to April 20, 1994 and $4,320 in 1993.
Affiliate Payables: At December 31, 1995, affiliate payables represent
amounts due to the Property Manager for normal monthly operating costs and
advances from DeBartolo Realty Partnership, L.P. Concurrent with the offering,
net affiliate payables, which were primarily non-interest bearing, were
distributed to EJDC. Interest expense including interest charged to properties
by affiliates of venturers totaled $6,689 in 1995; $7,681 from April 21, 1994
to December 31, 1994; $1,976 for the period from January 1, 1994 to April 20,
1994 and $6,098 in 1993.
Note 9 - Contingent Liabilities
Certain of the properties are subject to various legal proceedings and
claims arising in the ordinary course of business, some of which are covered by
insurance. Management of the properties believes the ultimate resolution of
these matters is not likely to have a material adverse effect on the combined
financial statements.
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 OP'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.
Note 10 - Extraordinary Item
The extraordinary charge in 1995 represents the write-off of unamortized
deferred financing costs of $425 relating to the partial paydown of mortgage
debt of one property. The extraordinary charge in 1994 resulted from
prepayment penalties and the write-off of unamortized deferred financing costs
related to the satisfaction of mortgage notes payable.
Note 11 - Subsequent Event
On January 31, 1996, the Property Manager was assigned a 33 % partnership
interest in one of the nonconsolidated joint ventures and a 25% partnership
interest in another nonconsolidated joint venture from an unrelated joint
venture partner.
<PAGE>
SIGNATURES
- ----------
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.
DeBARTOLO REALTY PARTNERSHIP, L.P.
By: DeBARTOLO REALTY CORPORATION
General Partner
/s/ Edward J. DeBartolo, Jr.
Name: Edward J. DeBartolo, Jr.
Title: Chairman of the Board of Directors
Date: March 28, 1996
/s/ William T. Dillard, Sr.
Name: William T. Dillard, Sr.
Title: Director
Date: March 25, 1996
/s/ James R. Giuliano, III
Name: James R. Giuliano, III
Title: Senior Vice President, Chief Financial Officer and Director
Date: March 28, 1996
/s/ Rev. Theodore M. Hesburgh
Name: Rev. Theodore M. Hesburgh
Title: Director
Date: March 28, 1996
/s/ Anthony W. Liberati
Name: Anthony W. Liberati
Title: Director
Date: March 22, 1996
/s/ G. William Miller
Name: G. William Miller
Title: Director
Date: March 28, 1996
Name: Fredrick W. Petri
Title: Director
Date:
/s/ Richard S. Sokolov
Name: Richard S. Sokolov
Title: President, Chief Executive Officer and Director
Date: March 28, 1996
Name: Mark T. Gallogly
Title: Director
Date:
/s/ Philip J. Ward
Name: Philip J. Ward
Title: Director
Date: March 25, 1996
/s/ Marie Denise DeBartolo York
Name: Marie Denise DeBartolo York
Title: Director
Date: March 28, 1996
<PAGE>
==============================================================================
EXHIBIT INDEX
-------------
Sequentially
Exhibit No. Description Numbered Pages
2.1 Agreement and Plan of Merger (the "Merger
Agreement") (dated as of March 26, 1996, among
SDG, Sub and DRC (included as Annex I to the
Prospectus/Joint Proxy Statement referred to
in Exhibit 20.1).
2.2 Amendment No. 1 to the Merger Agreement, dated
as of June 26, 1996 (included as Annex I to the
Prospectus/Joint Proxy Statement referred to in
Exhibit 20.1).
2.3 Amendment No. 2 to the Merger Agreement, dated
as of August 8, 1996 (incorporated by reference
as Exhibit 2.3 of the Current Report on Form 8-K
filed by SDG on August 26, 1996 (the "SDG
Form 8-K")).
10.1 Amended and Restated Partnership Agreement of the
Registrant (incorporated by reference as Exhibit
10.1.2 of the Registration Statement referred to
in Exhibit 20.1).
10.2 Contribution Agreement (incorporated by reference
as Exhibit 10.5 of the Registration Statement
referred to in Exhibit 20.1).
20.1 Prospectus/Joint Proxy Statement dated June 28,
1996 (incorporated by reference to the
Prospectus/Joint Proxy Statement dated June 28,
1996, forming a part of the SDG's Registration
Statement (the "Registration Statement") on
Form S-4 (333-06933), as amended and declared
effective by the Securities and Exchange
Commission on June 28, 1996).
99.1 Press Release dated August 7, 1996 (incorporated
by reference as Exhibit 99.1 of the SDG Form 8-K).
99.2 Press Release dated August 9, 1996 (incorporated
by reference as Exhibit 99.2 of the SDG Form 8-K).
<PAGE>
