UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission file number 33-98364
SIMON PROPERTY GROUP, L.P.
(Exact name of registrant as specified in its charter)
Delaware 35-1903854
(State or other (I.R.S. Employer
jurisdiction
of incorporation or Identification No.)
organization)
115 West Washington Street
Indianapolis, Indiana 46204
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (317) 636-1600
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO
<PAGE>
SIMON PROPERTY GROUP, L.P.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited and dollars in thousands, except per unit amounts)
March 31, December 31,
1997 1996
ASSETS:
Investment properties, at cost $2,498,799 $2,467,779
Less _ accumulated depreciation 258,509 238,167
2,240,290 2,229,612
Cash and cash equivalents 35,367 50,009
Tenant receivables and accrued revenue, net 136,054 136,496
Notes and advances receivable from Management
Company 78,683 63,978
Investment in partnerships and joint ventures,
at equity 149,349 139,711
Deferred costs, net 79,665 84,295
Other assets 41,103 45,370
Minority interest 9,462 9,712
Total assets $2,769,973 $2,759,183
LIABILITIES:
Mortgages and other indebtedness $2,111,875 $2,042,254
Advances from Simon DeBartolo Group, L.P. 267,966 259,382
Accounts payable and accrued expenses 101,759 113,027
Cash distributions and losses in partnerships
and joint ventures, at equity 18,056 17,106
Investment in Management Company and affiliates
17,932 18,519
Minority interest held by affiliates 74,881 12,128
Other liabilities 34,594 42,139
Total liabilities 2,627,063 2,504,555
COMMITMENTS AND CONTINGENCIES (Note 10)
PARTNERS' EQUITY:
Preferred units, 4,000,000 units authorized,
issued and outstanding 99,923 99,923
General Partner, 958,429 units outstanding 478 1,601
Special Limited Partner, 95,356,834 units
outstanding 47,342 158,458
Unamortized restricted stock award (4,833) (5,354)
Total partners' equity 142,910 254,628
Total liabilities and partners' equity $2,769,973 $2,759,183
The accompanying notes are an integral part of these statements.
<PAGE>
SIMON PROPERTY GROUP, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited and dollars in thousands, except per unit amounts)
For the Three Months
Ended March 31,
1997 1996
REVENUE:
Minimum rent $ 86,489 $ 78,454
Overage rent 4,900 4,967
Tenant reimbursements 51,639 46,985
Other income 4,994 9,038
Total revenue 148,022 139,444
EXPENSES:
Property operating 27,376 24,847
Depreciation and amortization 26,473 24,672
Real estate taxes 15,241 13,829
Repairs and maintenance 6,553 7,073
Advertising and promotion 3,491 4,194
Provision for credit losses 1,288 1,497
Other 1,488 2,259
Total operating expenses 81,910 78,371
OPERATING INCOME 66,112 61,073
INTEREST EXPENSE 43,016 38,566
INCOME BEFORE MINORITY INTEREST 23,096 22,507
MINORITY INTEREST (Including affiliates'
share of $1,902 in 1997) 1,170 (503)
GAIN ON SALE OF ASSETS, NET 37 --
INCOME BEFORE UNCONSOLIDATED ENTITIES 24,303 22,004
INCOME FROM UNCONSOLIDATED ENTITIES 1,774 1,828
INCOME BEFORE EXTRAORDINARY ITEMS 26,077 23,832
EXTRAORDINARY ITEMS (23,247) (265)
NET INCOME 2,830 23,567
PREFERRED UNIT REQUIREMENT 2,031 2,031
NET INCOME AVAILABLE TO UNITHOLDERS $ 799 $ 21,536
NET INCOME AVAILABLE TO UNITHOLDERS
ATTRIBUTABLE TO:
General Partner $ 8 $ 13,154
Limited Partners 791 8,382
$ 799 $ 21,536
EARNINGS PER UNIT:
Income before extraordinary items $ 0.25 $ 0.23
Extraordinary items (0.24) --
Net income $ 0.01 $ 0.23
The accompanying notes are an integral part of these statements.
<PAGE>
SIMON PROPERTY GROUP, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited and dollars in thousands)
For the Three Months
Ended March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,830 $23,567
Adjustments to reconcile net income to net
cash provided by operating activities_
Depreciation and amortization 28,494 26,728
Loss on extinguishments of debt 23,247 265
Gain on sale of assets, net (37) --
Straight-line rent (58) 137
Minority interest (1,170) 503
Equity in income of unconsolidated entities (1,774) (1,828)
Changes in assets and liabilities_
Tenant receivables and accrued revenue 1,021 5,883
Deferred costs and other assets 802 115
Accounts payable, accrued expenses and other
liabilities (18,813) (16,122)
Net cash provided by operating activities 34,542 39,248
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (31,626) (25,249)
Proceeds from sale of assets 599 --
Investments in and advances to
unconsolidated entities (27,303) (5,093)
Distributions from unconsolidated entities 4,467 11,772
Net cash used in investing activities (53,863) (18,570)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from affiliate 8,584 --
Minority interest distributions (1,664) (1,649)
Partnership distributions (49,466) (50,625)
Mortgage and other indebtedness proceeds,
net of transaction costs 117,958 105,568
Mortgage and other indebtedness principal
payments (49,733) (91,548)
Other refinancing transaction (21,000) --
Net cash provided by (used in) financing
activities 4,679 (38,254)
DECREASE IN CASH AND CASH EQUIVALENTS (14,642) (17,576)
CASH AND CASH EQUIVALENTS, beginning
of period 50,009 62,721
CASH AND CASH EQUIVALENTS, end of period $35,367 $45,145
<PAGE>
SIMON PROPERTY GROUP, L.P.
Notes to Unaudited Consolidated Condensed Financial Statements
(Dollars in thousands)
Note 1 - Organization
Simon DeBartolo Group, Inc. (the "Company"), formerly known as Simon
Property Group, Inc., is a self-administered and self-managed real estate
investment trust ("REIT"). On August 9, 1996 (the "Merger date"), the Company
acquired, through a merger (the "Merger"), the national shopping center
business of DeBartolo Realty Corporation ("DRC"). (See Note 4.)
Simon DeBartolo Group, L.P. ("SDG, LP") is a subsidiary partnership of the
Company. Simon Property Group, L.P. ("SPG, LP" or the "Simon Operating
Partnership") is a subsidiary partnership of SDG, LP and of the Company. The
Simon Operating Partnership, is engaged primarily in the ownership, operation,
management, leasing, acquisition, expansion and development of real estate
properties, primarily regional malls and community shopping centers. As of
March 31, 1997, the Simon Operating Partnership owned or held an interest in
123 income-producing properties, consisting of 63 regional malls, 53 community
shopping centers, three specialty retail centers, three mixed-use properties
and one value-oriented super-regional mall in 30 states (the "Properties").
The Simon Operating Partnership also owns interests in two specialty retail
centers and two value oriented super-regional malls under construction and five
parcels of land held for future development. The Simon Operating Partnership
also holds substantially all of the economic interest in M.S. Management
Associates, Inc. (the "Management Company"). - (See Note 7.) The Company
indirectly owned 60.8% of the Simon Operating Partnership as of March 31, 1997
and December 31, 1996.
Note 2 - Basis of Presentation
The accompanying consolidated condensed financial statements are
unaudited; however, they have been prepared in accordance with generally
accepted accounting principles for interim financial information and in
conjunction with the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the disclosures required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting solely of normal
recurring matters) necessary for a fair presentation of the consolidated
condensed financial statements for these interim periods have been included.
The results for the interim period ended March 31, 1997, are not necessarily
indicative of the results to be obtained for the full fiscal year. These
unaudited consolidated condensed financial statements should be read in
conjunction with the December 31, 1996, audited financial statements and notes
thereto included in the Simon Property Group, L.P. Annual Report on Form 10-K.
The accompanying consolidated condensed financial statements of the Simon
Operating Partnership include all accounts of the entities owned or controlled
by the Simon Operating Partnership. All significant intercompany amounts have
been eliminated. The accompanying consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting principles,
which requires management to make estimates and assumptions that affect the
reported amounts of the Simon Operating Partnership's assets, liabilities,
revenues and expenses during the reported periods. Actual results could differ
from these estimates.
Properties which are wholly-owned or owned less than 100% and are
controlled by the Simon Operating Partnership have been consolidated. The
Simon Operating Partnership's equity interests in certain partnerships and
joint ventures which represent noncontrolling 14.7% to 50.0% ownership
interests and the investment in the Management Company are accounted for under
the equity method of accounting. These investments are recorded initially at
cost and subsequently adjusted for net equity in income (loss) and cash
contributions and distributions.
Net operating results of the Simon Operating Partnership are allocated
after distributions based on its partners' ownership interests. The Company's
weighted average indirect ownership interest in the Simon Operating Partnership
for the three months ended March 31, 1997 and 1996 was 60.8% and 61.1%,
respectively.
Note 3 - Reclassifications
Certain reclassifications of prior period amounts have been made in the
financial statements to conform to the 1997 presentation.
<PAGE>
Note 4 -The Merger
On August 9, 1996, the Company acquired the national shopping center
business of DRC for an aggregate value of $3.0 billion. The acquired portfolio
consisted of 49 regional malls, 11 community centers and 1 mixed-use Property.
These Properties included 47,052,267 square feet of retail gross leasable area
("GLA") and 558,636 of office GLA. The Merger was accounted for using the
purchase method of accounting. Of these Properties, 40 regional malls, 10
community centers and the mixed-use Property are being accounted for using the
consolidated method of accounting. The remaining Properties are being
accounted for using the equity method of accounting, with the exception of one
regional mall, which is accounted for using the cost method of accounting. As a
result of the merger, the Simon Operating Partnership became a subsidiary of
SDG, LP with 99% of the profits allocable to SDG, LP and 1% of the profits
allocable to the Company. Cash flow allocable to the Company's 1% profit
interest in SPG, LP is absorbed by public company costs and related expenses
incurred by the Company.
It is currently expected that subsequent to the first anniversary of the
date of the Merger, reorganizational transactions will be effected so that SDG,
LP will directly own all of the assets and partnership interests now owned by
the Simon Operating Partnership. In connection therewith, the Simon Operating
Partnership transferred partnership interests in certain properties ranging
from 1.0% to 49.5% in the form of a distribution to the partners of the Simon
Operating Partnership, SDG, LP and the Company. The distribution of the
partnership interests in the certain properties has been reflected for
financial reporting purposes as of January 1, 1997. The distribution was
determined based on the historical cost value of the partnership interests
transferred, which aggregated $65,603. The interest in the properties now held
directly by SDG, LP and the Company is reflected as minority interest held by
affiliates in the accompanying financial statements.
Note 5 - Cash Flow Information
Cash paid for interest, net of amounts capitalized, during the three
months ended March 31, 1997, was $37,247, as compared to $37,612 for the same
period in 1996. All accrued distributions had been paid as of March 31, 1997
and December 31, 1996.
Note 6 - Per Unit Data
Per unit data is based on the weighted average number of units of
partnership interest in the Simon Operating Partnership ("Units") outstanding
during the period. As used herein, the term Units does not include units of
partnership interest entitled to preferential distribution of cash ("Preferred
Units"). The weighted average number of units used in the computation for the
three months ended March 31, 1997 and 1996 was 96,315,263 and 86,757,624,
respectively. Additionally, Preferred Units may be converted into common stock
of the Company. The outstanding stock options and Preferred Units have not
been included in the computations of per Unit data as they did not have a
dilutive effect.
<PAGE>
Note 7 - Investment in Unconsolidated Entities
Partnerships and Joint Ventures
Summary financial information of partnerships and joint ventures accounted
for using the equity method of accounting and a summary of the Simon Operating
Partnership's investment in and share of income from such partnerships and
joint ventures follow:
March 31, December 31,
BALANCE SHEETS 1997 1996
Assets: ---------- ----------
Investment properties at cost, net $1,389,597 $1,328,600
Cash and cash equivalents 56,213 41,270
Tenant receivables 36,285 37,067
Other assets 56,390 54,981
---------- ----------
Total assets $1,538,485 $1,461,918
========== ==========
Liabilities and Partners' Equity:
Mortgages and other notes payable $ 663,530 $ 569,433
Accounts payable, accrued expenses and other
liabilities 126,721 161,552
---------- ----------
Total liabilities 790,251 730,985
Partners' equity 748,234 730,933
---------- ----------
Total liabilities and partners' equity $1,538,485 $1,461,918
========== ==========
The Simon Operating Partnership's Share of:
Total assets $ 350,839 $ 340,449
========== ==========
Investment in partnerships and joint
ventures, at equity $ 149,349 $ 139,711
Cash distributions and losses in partnerships
and joint ventures, at equity (18,056) (17,106)
---------- ----------
Partners' equity $ 131,293 $ 122,605
========== ==========
For the Three Months
Ended March 31,
-----------------------
STATEMENTS OF OPERATIONS 1997 1996
Revenue: --------- ---------
Minimum rent $ 30,303 $ 27,964
Overage rent 869 762
Tenant reimbursements 14,000 14,069
Other income 1,335 4,769
--------- ---------
Total revenue 46,507 47,564
Operating Expenses:
Operating expenses and other 17,678 17,568
Depreciation and amortization 11,910 10,670
--------- ---------
Total operating expenses 29,588 28,238
--------- ---------
Operating Income 16,919 19,326
Interest Expense 9,426 7,847
Extraordinary Loss 858 0
Net Income $ 6,635 $ 11,479
========= =========
Third-Party Investors' Share of Net Income 5,448 10,022
--------- ---------
The Simon Operating Partnership's Share of Net
Income $ 1,187 $ 1,457
========= =========
The net income or net loss for each partnership and joint venture is
allocated in accordance with the provisions of the applicable partnership or
joint venture agreement. The allocation provisions in these agreements are not
always consistent with the ownership interest held by each general or limited
partner or joint venturer, primarily due to partner preferences.
<PAGE>
The Management Company
The Management Company, including its consolidated subsidiaries, provides
management, leasing, development, accounting, legal, marketing and management
information systems services to 33 non-wholly owned Properties, Melvin Simon &
Associates, Inc. ("MSA"), and certain other nonowned properties. Certain
subsidiaries of the Management Company provide architectural, design,
construction, insurance and other services primarily to certain of the
Properties. The Simon Operating Partnership's share of consolidated net income
of the Management Company, after intercompany profit eliminations, was $587 and
$371 for the three-month periods ended March 31, 1997 and 1996, respectively.
Note 8 - Debt
On January 31, 1997, the Simon Operating Partnership completed a
refinancing transaction involving debt on four consolidated Properties. The
transaction consisted of the payoff of one loan totaling $43,375, a restatement
of the interest rate on the three remaining loans, the financing transaction
which included the acquisition of the contingent interest feature on all four
loans for $21,000, and $3,904 of principal reductions on two additional loans.
This transaction, which was funded using the Credit Line (as refined below),
resulted in an extraordinary loss of $23,247, including the write-off of
deferred mortgage costs of $2,247.
At March 31, 1997, the Simon Operating Partnership had consolidated debt
of $2,111,875, of which $1,280,015 was fixed-rate debt and $831,860 was
variable-rate debt. As of March 31, 1997 and December 31, 1996, the Simon
Operating Partnership had interest-rate protection agreements related to
$435,254 and $306,879 principal amount of debt, respectively. The agreements
are generally in effect until the related variable-rate debt matures. As a
result of the various interest-rate protection agreements, interest savings
were $230 and $453 for the three months ended March 31, 1997 and 1996,
respectively. The Simon Operating Partnership's pro rata share of indebtedness
of the unconsolidated joint venture Properties as of March 31, 1997 and
December 31, 1996 was $207,261 and $193,310, respectively.
On April 14, 1997, the Simon Operating Partnership, as co-borrower with
SDG, LP, obtained improvements to its unsecured revolving credit facility (the
"Credit Line"). The Credit Line agreement was amended to reduce the interest
rate from LIBOR plus 90 basis points to LIBOR plus 75 basis points. In
addition, the Credit Line's competitive bid feature, which can further reduce
interest costs, was increased from $150,000 to $300,000.
SDG, LP is currently finalizing the allocation of $300,000 of its debt
shelf registration with the Securities and Exchange Commission to a Medium-Term
Note Program, although management has no immediate plans to issue securities
under the program. Debt issued under this shelf registration is guaranteed by
the Simon Operating Partnership.
Net advances due SDG, LP of $268,574 result primarily from debt and equity
instruments issued by SDG, LP for which a portion of the proceeds were advanced
to the Simon Operating Partnership to retire mortgages and other indebtedness
and amounts under the Credit Line. The Simon Operating Partnership has
recognized interest costs based on the terms of the instruments issued by SDG,
LP.
<PAGE>
Note 9 - Partners' Equity
The following table summarizes the change in the Simon Operating
Partnership's partners' equity since December 31, 1996.
<TABLE>
<CAPTION>
Unamor-
tized
Special Restricted Total
Preferred General Limited Stock Partners'
Units Partner Partner Award Equity
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 99,923 $ 1,601 $ 158,458 $ (5,354) $ 254,628
Amortization of stock incentive 521 521
Adjustment to allocate net equity
of the Simon Operating
Partnership (3) 3 -
Net income 2,031 8 791 2830
Distributions (2,031) (1,128) (111,910) (115,069)
--------- --------- --------- ---------- ---------
Balance at March 31, 1997 $ 99,923 $ 478 $ 47,342 $ (4833) $ 142,910
========= ========= ========= ========== =========
</TABLE>
<PAGE>
Note 10 - Commitments and Contingencies
Litigation
Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. On October 16,
1996, a complaint was filed in the Court of Common Pleas of Mahoning County,
Ohio, captioned Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. The
named defendants are SD Property Group, Inc., a 99%-owned subsidiary of the
Company, and DeBartolo Properties Management, Inc., and the plaintiffs are 27
former employees of the defendants. In the complaint, the plaintiffs allege
that they were recipients of deferred stock grants under the DRC stock
incentive plan (the "DRC Plan") and that these grants immediately vested under
the DRC Plan's "change in control" provision as a result of the Merger.
Plaintiffs assert that the defendants' refusal to issue them approximately
661,000 shares of DRC common stock, which is equivalent to approximately
450,000 shares of common stock of the Company computed at the 0.68 Exchange
Ratio used in the Merger, constitutes a breach of contract and a breach of the
implied covenant of good faith and fair dealing under Ohio law. Plaintiffs
seek damages equal to such number of shares of DRC common stock, or cash in
lieu thereof, equal to all deferred stock ever granted to them under the DRC
Plan, dividends on such stock from the time of the grants, compensatory damages
for breach of the implied covenant of good faith and fair dealing, and punitive
damages.
The complaint was served on the defendants on October 28, 1996, and
pretrial proceedings have just commenced. The Company is of the opinion that
it has meritorious defenses and accordingly intends to defend this action
vigorously. While it is difficult for the Company to predict the outcome of
this litigation at this stage based on the information known to the Company to
date, the Company does not expect this action will have a material adverse
effect on the Company.
Roel Vento et al v. Tom Taylor et al. An affiliate of the Simon Operating
Partnership is a defendant in litigation entitled Roel Vento et al v. Tom
Taylor et al, in the District Court of Cameron County, Texas, in which a
judgment in the amount of $7,800 has been entered against all defendants. This
judgment includes approximately $6,500 of punitive damages and is based upon a
jury's findings on four separate theories of liability including fraud,
intentional infliction of emotional distress, tortuous interference with
contract and civil conspiracy arising out of the sale of a business operating
under a temporary license agreement at Valle Vista Mall in Harlingen, Texas.
The Simon Operating Partnership is seeking to overturn the award and has
appealed the verdict. Although the Simon Operating Partnership is optimistic
that it may be able to reverse or reduce the verdict, there can be no assurance
thereof. Management, based upon the advice of counsel, believes that the
ultimate outcome of this action will not have a material adverse effect on the
Company or the Simon Operating Partnership.
The Company or the Simon Operating Partnership currently are not subject
to any other material litigation other than routine litigation and
administrative proceedings arising in the ordinary course of business. On the
basis of consultation with counsel, management believes that these items will
not have a material adverse impact on the Company's or the Simon Operating
Partnership's financial position or results of operations.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Simon Operating Partnership to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions, which
will, among other things, affect demand for retail space or retail goods,
availability and creditworthiness of prospective tenants, lease rents and the
terms and availability of financing; adverse changes in the real estate markets
including, among other things, competition with other companies and technology;
risks of real estate development and acquisition; governmental actions and
initiatives; and environmental/safety requirements.
Overview
The Simon Operating Partnership acquired additional interest in two
regional malls and opened one consolidated regional mall during the comparative
periods (the "Property Transactions"). The following is a description of such
transactions. On April 11, 1996, the Simon Operating Partnership acquired the
remaining 50% economic ownership interest in Ross Park Mall in Pittsburgh,
Pennsylvania, and subsequently began accounting for the Property using the
consolidated method of accounting. On July 31, 1996, the Simon Operating
Partnership opened Cottonwood Mall in Albuquerque, New Mexico. The Simon
Operating Partnership owns 100% of this regional mall and accounts for it using
the consolidated method of accounting. On October 4, 1996, the Simon Operating
Partnership acquired an additional 30% interest in North East Mall and
subsequently began accounting for the Property using the consolidated method of
accounting. The Simon Operating Partnership owned 80% of North East Mall after
this acquisition. On October 4, 1996, SDG, LP acquired the remaining 20%
interest in this Property.
Results of Operations
For the Three Months Ended March 31, 1997 vs. the Three Months Ended March 31,
1996
Total revenue increased $8.6 million or 6.2% for the three months ended
March 31, 1997, as compared to the same period in 1996. This increase is
primarily the result of the Property Transactions ($11.2 million).
Total operating expenses increased $3.5 million, or 4.5%, for the three
months ended March 31, 1997, as compared to the same period in 1996. This
increase is primarily the result of the Property Transactions ($6.1 million).
Interest expense increased $4.5 million, or 11.5% for the three months
ended March 31, 1997, as compared to the same period in 1996. This increase is
primarily as a result of the Property Transactions ($4.1 million).
The loss from extraordinary items in 1997 is the result of the refinancing
transaction which included the acquisition of the contingent interest feature
on four loans for $21.0 million and the write-off of mortgage costs associated
with those loans.
<PAGE>
Net income available to Unitholders of the Simon Operating Partnership was
$.8 million for the three months ended March 31, 1997, as compared to $23.6
million for the same period in 1996, reflecting a decrease of $22.8 million,
for the reasons discussed above.
Liquidity and Capital Resources
As of March 31, 1997, the Simon Operating Partnership's balance of cash
and cash equivalents was $35.4 million. In addition to its cash balance, the
Simon Operating Partnership, as co-borrower with SDG, LP, has a $750 Credit
Line with $414 million available after outstanding borrowings and letters of
credit. The Company and the Simon Operating Partnership also have access to
public equity and debt markets through various shelf registrations.
At March 31, 1997, the Simon Operating Partnership had consolidated debt
of $2,112 million, of which $1,280 million was fixed-rate debt and $832 million
was variable-rate debt. As of March 31, 1997 and December 31, 1996, the Simon
Operating Partnership had interest-rate protection agreements relating to
$435.3 million and $306.9 million of the variable-rate debt, respectively. The
agreements are generally in effect until the related variable-rate debt
matures.
On April 14, 1997, certain improvements were obtained related to Credit
Line. The Credit Line agreement was amended to reduce the interest rate from
LIBOR plus 90 basis points to LIBOR plus 75 basis points. In addition, the
Credit Line's competitive bid feature, which can further reduce interest costs,
was increased from $150 million to $300 million.
SDG, LP is currently finalizing the allocation of $300 million of its debt
shelf registration with the Securities and Exchange Commission to a Medium-Term
Note Program, although management has no immediate plans to issue securities
under the program. Debt issued under the shelf registration are guaranteed by
the Simon Operating Partnership.
Development, Expansions and Renovations. The Simon Operating Partnership
is involved in several development, expansion and renovation efforts.
Construction continues on the following development projects: The Source,
a $150 million value-oriented retail and entertainment development project
containing 730,000 square feet of GLA, is expected to open in August 1997 in
Westbury (Long Island), New York. Arizona Mills, a $184 million retail
development project containing 1,230,000 square feet of GLA, is expected to
open in November 1997 in Tempe, Arizona. Grapevine Mills, a $202 million
retail development project containing 1,480,000 square feet of GLA, is expected
to open in October 1997 in Grapevine (Dallas/Fort Worth), Texas. The Shops at
Sunset Place, a $143 million destination-oriented retail and entertainment
project containing approximately 500,000 square feet of GLA, is scheduled to
open in 1998 in South Miami, Florida.
In addition, the Simon Operating Partnership is in the preconstruction
development phase on a new community center project at an aggregate cost of $39
million. This project is immediately adjacent to an existing regional mall
Property.
<PAGE>
A key objective of the Simon Operating Partnership is to increase the
profitability and market share of its Properties through the completion of
strategic renovations and expansions. The Simon Operating Partnership
currently has a number of expansion projects under construction and in the
preconstruction development stage. The Simon Operating Partnership's share of
the projected costs to fund these projects in 1997 is approximately $150
million. Approximately $45 million of these costs is anticipated to be
financed using project-specific indebtedness, with the remainder financed
principally with the Credit Line, access to debt and equity markets, and cash
flow from operations.
Distributions. During the first quarter of 1997, the Simon Operating
Partnership paid a distribution of $0.4925 per Unit. On May 6, 1997, the Simon
Operating Partnership declared a distribution of $0.505 per Unit, an increase
of $.0125 per share over the previous distribution. Future distributions will
be determined based on actual results of operations and cash available for
distribution. In addition, preferred distributions of $0.5078 per Series A
preferred unit were paid during the first quarter of 1997.
Capital Resources. Management anticipates that cash generated from
operating performance will provide the necessary funds on a short- and long-
term basis for its operating expenses, interest expense on outstanding
indebtedness, recurring capital expenditures, and distributions to Unitholders.
Sources of capital for nonrecurring capital expenditures, such as major
building renovations and expansions, as well as for scheduled principal
payments, including balloon payments, on outstanding indebtedness are expected
to be obtained from: (i) excess cash generated from operating performance; (ii)
working capital reserves; (iii) additional debt financing; and (iv) additional
equity sold in the public markets by the Company.
Management continues to actively review and evaluate a number of
individual property and portfolio acquisition opportunities. Management
believes that funds on hand, amounts available under the Credit Line, together
with the ability to issued Units and the Company's ability to issue shares of
common stock, provide the means to finance certain acquisitions. No assurance
can be given that the Simon Operating Partnership will not be required to, or
will not elect to, even if not required to, obtain funds from outside sources,
including through the sale of debt or equity securities, to finance significant
acquisitions, if any. It is expected that any future acquisitions will be
executed by SDG, LP.
<PAGE>
Investing and Financing Activities
Cash flows from investing activities for the three months ended March 31,
1997 included, $31.6 million of capital expenditures, which included
construction costs of $8.9 million and $4.8 million at Forum phase II and The
Shops at Sunset Place, respectively, and renovation and expansion costs of
other Properties as well as tenant allowances. In addition, investments in
unconsolidated entities of $12.6 million included $7.9 million to Grapevine
Mills and $2.6 million to The Source.
Cash flows from financing activities for the three months ended March 31,
1997 included distributions of $49.5 million, net borrowings of $68.2 million
primarily used to fund development activity, and $21.0 million for the
financial transaction which included the acquisition of a contingent interest
feature on four mortgage loans.
Inflation
Inflation has remained relatively low during the past three years and has
had a minimal impact on the operating performance of the Properties.
Nonetheless, substantially all of the tenants' leases contain provisions
designed to lessen the impact of inflation. Such provisions include clauses
enabling the Simon Operating Partnership to receive percentage rentals based on
tenants' gross sales, which generally increase as prices rise, and/or
escalation clauses, which generally increase rental rates during the terms of
the leases. In addition, many of the leases are for terms of less than ten
years, which may enable the Simon Operating Partnership to replace existing
leases with new leases at higher base and/or percentage rentals if rents of the
existing leases are below the then-existing market rate. Substantially all of
the leases, other than those for anchors, require the tenants to pay a
proportionate share of operating expenses, including common area maintenance,
real estate taxes and insurance, thereby reducing the Simon Operating
Partnership's exposure to increases in costs and operating expenses resulting
from inflation.
However, inflation may have a negative impact on some of the Simon
Operating Partnership's other operating items. Interest and general and
administrative expenses may be adversely affected by inflation as these
specified costs could increase at a rate higher than rents. Also, for tenant
leases with stated rent increases, inflation may have a negative effect as the
stated rent increases in these leases could be lower than the increase in
inflation at any given time.
Other
The shopping center industry is seasonal in nature, particularly in the
fourth quarter during the holiday season, when tenant occupancy and retail
sales are typically at their highest levels. In addition, shopping malls
achieve most of their temporary tenant rents during the holiday season. As a
result of the above, earnings are generally highest in the fourth quarter of
each year.
<PAGE>
Part II - Other Information
Item 1: Legal Proceedings
None.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
4.4 * First Amendment to Credit Agreement dated as of April 14, 1997
* Incorporated by reference to the corresponding exhibit included in the
Company's Form 10-Q for the period ended March 31, 1997.
(b) Reports on Form 8-K - None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIMON PROPERTY GROUP, L.P.
BY: SIMON DeBARTOLO GROUP, INC.
General Partner
Date: May 15, 1997 /s/ Stephen E. Sterrett
Stephen E. Sterrett,
Treasurer
(Principal Financial Officer)
Date: May 15, 1997 /s/ Dennis Cavanagh
Dennis Cavanagh,
Senior Vice President of Financial Services
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statments.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 35,367
<SECURITIES> 0
<RECEIVABLES> 136,054
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 2,498,799
<DEPRECIATION> (258,509)
<TOTAL-ASSETS> 2,769,973
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 2,111,875
0
0
<COMMON> 0
<OTHER-SE> 142,910<F2>
<TOTAL-LIABILITY-AND-EQUITY> 2,769,973
<SALES> 0
<TOTAL-REVENUES> 148,022
<CGS> 0
<TOTAL-COSTS> 81,910
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,288
<INTEREST-EXPENSE> 43,016
<INCOME-PRETAX> 26,077
<INCOME-TAX> 26,077
<INCOME-CONTINUING> 26,077
<DISCONTINUED> 0
<EXTRAORDINARY> (23,247)
<CHANGES> 0
<NET-INCOME> 2,830
<EPS-PRIMARY> 0.01<F3>
<EPS-DILUTED> 0.01<F3>
<FN>
<F1>The Registrant does not report using a classified Balance Sheet.
<F2>Amount represents Partners' equity.
<F3>Amounts represent earnings per unit of partnership interest.
</FN>
</TABLE>
