UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 33-98364
SIMON PROPERTY GROUP, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 35-1903854
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
115 WEST WASHINGTON STREET
INDIANAPOLIS, INDIANA 46204
(Address of principal executive (Zip Code)
offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (317) 636-1600
Securities registered pursuant to Section 12 (b) of the Act: None
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
Documents Incorporated By Reference
Portions of Simon DeBartolo Group, Inc.'s Proxy Statement in connection with
its annual meeting of shareholders, are incorporated by reference in Part III.
PART I
ITEM 1. BUSINESS
BACKGROUND
Simon Property Group, L.P. (the "Simon Operating Partnership") is a
Delaware limited partnership that is engaged primarily in the ownership,
development, management, leasing, acquisition and expansion of income-producing
properties, primarily regional malls and community shopping centers. The Simon
Operating Partnership is a subsidiary of Simon DeBartolo Group, Inc. (the
"Company"), a self-administered real estate investment trust ("REIT"). The
Simon Operating Partnership was formed to acquire the shopping center and real
estate business of Melvin and Herbert Simon, and certain of the affiliates
(collectively, the "Simons"). On August 9, 1996, the Company merged with
DeBartolo Realty Corporation (the "Merger"). As a result of the Merger, the
Simon Operating Partnership became a subsidiary of Simon DeBartolo Group, L.P.
("SDG, LP"), and SDG, LP became a subsidiary and the primary operating
partnership of the Company. The Simon Operating Partnership is managed by SDG,
LP and the Company.
In addition, the Simon Operating Partnership owns a preferred stock and
non-controlling common stock interest in M.S. Management Associates, Inc. (the
"Management Company") which manages regional malls and community shopping
centers not wholly owned by the Simon Operating Partnership and certain other
properties and also engages in certain property development activities. The
Management Company also holds substantially all of the voting stock of
DeBartolo Properties Management, Inc. ("DPMI"), which provides architectural
design, construction and other services to the properties which SDG, LP owns or
holds an interest in as well as certain other regional malls and community
shopping centers owned by third parties. SDG, LP, however, holds substantially
all the economic interest in DPMI.
GENERAL
As of December 31, 1996, the Simon Operating Partnership owned or held
interests in a diversified portfolio of 124 income-producing properties,
including 63 enclosed regional malls, 54 community shopping centers, three
specialty retail centers, three mixed-use properties and one value-oriented
super-regional mall, located in 30 states (the "Properties"). Regional malls,
community centers and the remaining portfolio comprised 79.5%, 8.7%, and 11.8%,
respectively, of total rent revenues and tenant reimbursements in 1996. The
Properties contain an aggregate of approximately 64.7 million square feet of
GLA, of which 38.9 million square feet is owned by the Simon Operating
Partnership ("Owned GLA"). Approximately 2,200 different retailers occupy
approximately 7,000 stores in the Properties.
As of December 31, 1996, mall and freestanding Owned GLA was 87.2% leased
in the regional malls and 92.4% for Owned GLA in the community shopping
centers. In addition, the Simon Operating Partnership has interests in four
properties under construction in the United States, and five parcels of land
held for development containing an aggregate of approximately 274 acres
(collectively, the "Development Properties", and together with the Properties,
the "Simon Portfolio Properties").
OPERATING STRATEGIES
The Simon Operating Partnership's primary business objectives are to
increase cash generated from operations per unit of partnership interest in the
Simon Operating Partnership ("Unit") and the value of the Simon Operating
Partnership's Properties and operations. As used in this report, the term
Units does not include units of partnership interest entitled to preferential
distributions of cash ("Preferred Units.") The Simon Operating Partnership
plans to achieve these objectives through a variety of methods discussed below,
although no assurance can be made that such objectives will be achieved.
Leasing. The Simon Operating Partnership pursues an active leasing
strategy, which includes aggressively marketing available space; renewing
existing leases at higher base rents per square foot; and continuing to
sign leases that provide for percentage rents and/or regular or periodic
fixed contractual increases in base rents.
Management. Drawing upon the expertise gained through management of
approximately 77.8 million square feet of retail and mixed-use Properties,
the Simon Operating Partnership seeks to maximize cash flow through a
combination of an active merchandising program to maintain its shopping
centers as inviting shopping destinations, continuation of its successful
efforts to minimize overhead and operating costs, coordinated marketing
and promotional activities, and systematic planning and monitoring of
results.
Strategic Expansions and Renovations. A key objective of the Simon
Operating Partnership is to increase the profitability and market share of
the Simon Portfolio Properties through the completion of strategic
renovations and expansions. In 1996, the Simon Operating Partnership
completed construction and opened three expansion and/or renovation
projects at Greenwood Plus in Greenwood, Indiana; Muncie Mall in Muncie,
Indiana; and College Mall in Bloomington, Indiana.
The Simon Operating Partnership has a number of renovation and/or
expansion projects currently under construction. In addition,
preconstruction development continues on a number of project expansions,
renovations and anchor additions. The Simon Operating Partnership expects
to commence construction on many of these projects in the next 12 to 24
months.
Development. Development activities are an ongoing part of the Simon
Operating Partnership's business. The Simon Operating Partnership opened
a regional mall, a specialty retail center, and a value-oriented super-
regional mall during 1996. The new regional mall is the 1.0 million
square foot Cottonwood Mall in Albuquerque, New Mexico. The new specialty
retail center is the 60,000 square foot Tower Shops in Las Vegas, Nevada
and the value-oriented super-regional mall is the 1.3 million square foot
Ontario Mills in Ontario, California. Cottonwood Mall is anchored by
Dillard's, Foley's, JCPenney, Mervyn's and Montgomery Ward. Ontario
Mills' anchors include: AMC Theatres, Burlington Coat Factory, JCPenney,
Sports Authority and Marshall's, with a Dave & Busters under construction.
Development activities are ongoing at several other locations including:
*A 235,000 square foot phase II expansion of the Forum Shops at Caesars
in Las Vegas, in which the Simon Operating Partnership has a 55%
ownership interest, is scheduled to open in August 1997. The costs of
the phase II project are being funded with a portion of the $184
million two-tranche financing facility which closed on February 23,
1996. The loan bears interest on a weighted average basis at LIBOR
plus 137 basis points and matures in February 2000.
*The Source, a 730,000 square foot value-oriented retail and
entertainment development project in Westbury (Long Island), New York,
is expected to open in August 1997. This new $150 million development
will adjoin an existing Fortunoff store. The Simon Operating
Partnership has a total equity investment of $25.3 million in this 50%-
owned joint venture project. Construction financing of $120 million
closed on this property in July 1996. The loan initially bears
interest at LIBOR plus 170 basis points and matures on July 16, 1999.
*Arizona Mills, a 1,230,000 square foot retail development project in
Tempe, Arizona, broke ground on August 1, 1996. This $184 million
value-oriented super-regional mall is expected to open in November
1997. In January 1997, the joint venture closed on a five-year $145
million construction loan with interest at LIBOR plus 150 basis points.
The Simon Operating Partnership had an $13.5 million equity investment
through December 31, 1996 and a 25% ownership interest in this joint
venture development.
*Grapevine Mills, a 1,480,000 square foot retail development project in
Grapevine (Dallas/Fort Worth), Texas, broke ground on July 10, 1996.
This $202 million value-oriented super-regional mall development
project is expected to open in October 1997. A commitment has been
obtained for a four-year $157 million construction loan (plus a one-
year extension) with an initial interest rate of LIBOR plus 165 basis
points. The Simon Operating Partnership has a $14 million equity
commitment on this 37.5%-owned joint venture project, and made its
initial contribution of $7.9 million in January 1997.
*The Shops at Sunset Place, a destination-oriented retail and
entertainment project containing approximately 500,000 square feet of
GLA is scheduled to open in 1998 in South Miami, Florida. The Simon
Operating Partnership owns 75% of this $143 million project. The Simon
Operating Partnership expects to have construction financing for the
majority of the development costs of this project in place during the
second quarter of 1997.
In addition, the Simon Operating Partnership is in the preconstruction
development phase on two new community center projects, each of which is
immediately adjacent to an existing regional mall in the Company's
portfolio. Lakeline Plaza, a 50%-owned joint venture development project
in Austin, Texas, is scheduled to open in 1998. This approximately $39
million development is projected to open with 391,000-square-feet of GLA.
Muncie Plaza, a wholly-owned project, is scheduled to open in Muncie,
Indiana, in 1998. This approximately $15 million development is projected
to open with 200,000-square-feet of GLA.
The Simon Operating Partnership also has direct or indirect interests in
five other parcels of land held for development in four states totaling
approximately 274 acres. Management believes the Simon Operating
Partnership is well positioned to pursue future development opportunities
as conditions warrant.
Acquisitions. During 1996, the Simon Operating Partnership also acquired
additional ownership in two existing regional malls, Ross Park Mall and
North East Mall. The Simon Operating Partnership now holds 100% of the
ownership in Ross Park Mall, and together with SDG, LP, the partnerships
hold 100% of North East Mall. It is expected that any future acquisitions
will be executed by SDG, LP, the primary operating partnership of the
Company.
COMPETITION
The Simon Operating Partnership believes that it has a competitive
advantage in the retail real estate business as a result of (i) its use of
innovative retailing concepts, (ii) its management and operational expertise,
(iii) its extensive experience and relationship with retailers and lenders and
(iv) the size and diversity of its Properties. Management believes that the
Company's Portfolio Properties, in which the Simon Portfolio Properties are a
part, are the largest, as measured by GLA, of any publicly traded REIT, with
more regional malls than any other publicly traded REIT. For these reasons,
management believes the Simon Operating Partnership to be the leader in the
industry.
All of the Simon Portfolio Properties are located in developed areas.
With respect to certain of such Properties, there are other properties of the
same type within the market area. The existence of competitive properties
could have a material effect on the Simon Operating Partnership's ability to
lease space and on the level of rents the Simon Operating Partnership can
obtain.
There are numerous commercial developers, real estate companies and other
owners of real estate that compete with the Simon Operating Partnership in its
trade areas. This results in competition for both acquisition of prime sites
(including land for development and operating properties) and for tenants to
occupy the space that the Simon Operating Partnership and its competitors
develop and manage.
ENVIRONMENTAL MATTERS
Substantially all of the Simon Portfolio Properties have been subjected to
Phase I or similar environmental audits (which involve only a review of records
and visual inspection of the property without soil sampling or ground water
analysis) by independent environmental consultants since April 1988. Most of
these audits have been conducted since January 1, 1990. The Phase I
environmental audits are intended to discover information regarding, and to
evaluate the environmental condition of, the surveyed properties and
surrounding properties. The environmental audits have not revealed, nor is
management aware of, any environmental liability that management believes will
have a material adverse effect on the financial condition or results of
operations of Simon Operating Partnership. No assurance can be given that
existing environmental studies reveal all potential environmental liabilities,
that any previous owner, occupant or tenant did not create any material
environmental condition not known to management, that the current environmental
condition of the Simon Portfolio Properties will not be affected by tenants and
occupants, by the condition of nearby properties, or by unrelated third
parties, or that future uses or condition (including, without limitation,
changes in applicable environmental laws and regulations or the interpretation
thereof) will not result in imposition of environmental liability.
Management believes that the Simon Portfolio Properties are in compliance,
in all material respects, with all Federal, state and local environmental laws,
ordinances and regulations (see Item 3. Legal Proceedings). Management is
unaware of any instances in which it would incur significant environmental
costs if any or all properties were sold, disposed of or abandoned.
EMPLOYEES
The Company, SDG, LP, the Simon Operating Partnership and its affiliates
employ approximately, 7,400 persons at various centers and offices throughout
the United States. Approximately 675 of such employees are located at the
their headquarters in Indianapolis, Indiana, and approximately 3,950 of all
employees are part-time.
INSURANCE
The Company, SDG, LP and the Simon Operating Partnership have
comprehensive liability, fire, flood, extended coverage and rental loss
insurance with respect to its properties. Management believes that such
insurance provides adequate coverage.
HEADQUARTERS
The executive offices of the Company, SDG, LP, the Simon Operating
Partnership and its affiliates are located at National City Center, 115 West
Washington Street, Indianapolis, Indiana 46204, and its telephone number is
(317) 636-1600.
EXECUTIVE OFFICERS OF THE COMPANY
The Company is the sole general partner of the Simon Operating
Partnership. The following table sets forth certain information with respect
to the executive officers of the Company as of December 31, 1996.
Name Age Position
Melvin Simon (1) 70 Co-Chairman
Herbert Simon (1) 62 Co-Chairman
David Simon (1) 35 Chief Executive Officer
Richard S. Sokolov 47 President and Chief Operating Officer
Randolph L. Foxworthy 52 Executive Vice President - Corporate
Development
William J. Garvey 58 Executive Vice President - Property
Development
James A. Napoli 50 Executive Vice President - Leasing
John R. Neutzling 44 Executive Vice President - Property
Management
James M. Barkley 45 General Counsel; Secretary
Stephen E. Sterrett 41 Treasurer
(1) Melvin Simon is the brother of Herbert Simon and the father of David Simon.
Set forth below is a summary of the business experience of the executive
officers of the Company. The executive officers of the Company serve at the
pleasure of the Board of Directors and have served in such capacities since the
completion of the Company's initial public offering ("IPO"), with the exception
of Mr. Richard Sokolov who has been President, Chief Operating Officer and a
director since the Merger. For biographical information of Melvin Simon,
Herbert Simon, David Simon, and Richard Sokolov, see Item 10 of this report.
Mr. Foxworthy is the Executive Vice President - Corporate Development of
the Company. He served as a Director of the Company from the IPO until the
Merger. Mr. Foxworthy joined Melvin Simon & Associates, Inc. ("MSA") in 1980
and has been an Executive Vice President in charge of Corporate Development of
MSA since 1986 and has held the same position with the Company since the IPO.
Mr. Garvey is the Executive Vice President - Property Development of the
Company. Mr. Garvey, who was Executive Vice President and Director of
Development at MSA, joined MSA in 1979 and held various positions with MSA.
Mr. Napoli is the Executive Vice President - Leasing of the Company. Mr.
Napoli also served as Executive Vice President and Director of Leasing since he
joined MSA in 1989.
Mr. Neutzling holds the position of Executive Vice President - Property
Management of the Company. Mr. Neutzling has also been an Executive Vice
President of MSA since 1992 overseeing all property and asset management
functions. He joined MSA in 1974 and has held various positions with MSA.
Mr. Barkley serves as the Company's General Counsel and Secretary. Mr.
Barkley holds the same position for MSA. He joined MSA in 1978 as Assistant
General Counsel for Development Activity.
Mr. Sterrett serves as the Company's Treasurer. He joined MSA in 1989 and
has held various positions with MSA.
ITEM 2. PROPERTIES
SIMON PORTFOLIO PROPERTIES
The 124 Properties are located in 30 states throughout the United States,
with concentrations in Indiana, Illinois, and Texas (See Note 2 to the
consolidated financial statements contained in Item 14 for a complete listing
of the Properties). The Properties generally consist of two types: regional
malls and community shopping centers. Regional malls contain two or more
anchors and a wide variety of smaller stores ("Mall" stores) located in
enclosed malls connecting the anchors. Additional stores ("Freestanding"
stores) are usually located along the perimeter of the parking area. The 63
regional malls in the Properties range in size from approximately 210,000 to
1.4 million square feet of GLA, with 58 regional malls over 400,000 square
feet. These regional malls contain in the aggregate over 6,000 occupied
stores, including over 240 anchors which are mostly national retailers. As of
December 31, 1996, regional malls (including specialty retail centers, and
retail space in the mixed-use Properties) represented 75.3% of the GLA, 69.4%
of Owned GLA and 79.0% of total annualized base rent of the Properties.
Community shopping centers are typically not enclosed and are generally
smaller than regional malls. Most of the 54 community shopping centers in the
Properties range in size from approximately 100,000 to 400,000 square feet of
GLA. Community shopping centers generally are of two types: (i) traditional
community centers, which focus primarily on value-oriented and convenience
goods and services, are usually anchored by a supermarket, drugstore or
discount retailer and are designed to service a neighborhood area; and (ii)
power centers, which are designed to serve a larger trade area and contain at
least two anchors that are usually national retailers among the leaders in
their markets and occupy more than 70% of the GLA in the center. As of
December 31, 1996, community shopping centers represented 18.4% of the GLA,
21.4% of Owned GLA and 14.2% of the total annualized base rent of the
Properties.
The Simon Operating Partnership also has an interest in three specialty
retail centers, three mixed-use Properties and one value-oriented super
regional mall. The specialty retail centers contain approximately 530,000
square feet of GLA and do not have anchors; instead, they feature retailers and
entertainment facilities in a distinctive shopping environment and location.
The three mixed-use Properties range in size from approximately 500,000 to
982,000 square feet of GLA. One of these Properties is a regional mall with a
connected office building, and two are located in mixed-use developments and
contain primarily office space. Ontario Mills is the value-oriented super
regional mall. Ontario Mills contains over 1.3 million square feet of GLA,
including six anchors, one of which is under construction.
As of December 31, 1996, approximately 87.2% of the Mall and Freestanding
Owned GLA in regional malls, specialty retail centers and the retail space in
the mixed use Properties was leased and approximately 92.4% of Owned GLA in the
community shopping centers was leased.
Of the 124 Properties, 99 are owned 100% by the Simon Operating
Partnership and the remainder are held as joint venture interests (the "Joint
Venture Properties"). The Simon Operating Partnership is the managing or co-
managing general partner of all but three Joint Venture Property partnerships.
In addition, the Simon Operating Partnership owns the land at 95 of the 124
Properties, while the remaining 29 are leased in whole or in part. See Note 12
to the consolidated financial statements contained in Item 14 for additional
information on ground leases.
LAND HELD FOR DEVELOPMENT
The Simon Operating Partnership has direct or indirect ownership interests
in five parcels of land held for development, containing an aggregate of 273.5
acres located in four states, and, through the Management Company, interest in
a mortgage on a parcel of land held for development containing approximately
134 acres. Management believes that the Simon Operating Partnership's
significant base of commercially zoned land, together with the Simon Operating
Partnership's status as a fully integrated real estate firm, gives it a
competitive advantage in future development activities over other commercial
real estate development companies in its principal markets.
The Management Company has granted options to the Simon Operating
Partnership (for no additional consideration) to acquire for a period of ten
years (expiring December 2003) the Management Company's interest in three
parcels of land held for development, as indicated in footnote (1) to the above
table, at a price equal to the actual cost incurred to acquire and carry such
properties from their acquisition by the Management Company to the exercise
date of the option. The Management Company may not sell its interest in any
parcel subject to option through December 1998 without the consent of the Simon
Operating Partnership. After such period, if the Management Company notifies
the Simon Operating Partnership that it desires to sell its interest in a
parcel, the Simon Operating Partnership has 30 days to exercise its option,
after which time the option expires as to such parcel. If the Simon Operating
Partnership does not exercise its option and the Management Company has not
sold the parcel within one year from such notice, the Management Company must
again give the Simon Operating Partnership the right to purchase the Management
Company's interest in such parcel before it sells its interest by giving the
Simon Operating Partnership notice of such intent to sell, following which
notice the Simon Operating Partnership again has 30 days to elect to purchase
the Management Company's interest at a price calculated as described above.
The Management Company also holds indebtedness secured by 134 acres of
land held for development, Lakeview at Gwinnett ("Lakeview") in Gwinnett
County, Georgia, in which the Simons hold a 64% partnership interest. In
addition, the Management Company holds unsecured debt owed by the Simons as
partners of this partnership. The Management Company has an option to acquire
the Simons' partnership interests in Lakeview for one dollar in the event the
requisite partner consents to such transfers are obtained. The Management
Company is required to fund certain operating expenses and carrying costs of
the partnership that are owed by the Simons as partners thereof (the
"Advances"). The Management Company has granted to the Simon Operating
Partnership the option to acquire (i) the Simons' partnership interest(s) and
the secured debt or (ii) the property, if the Management Company forecloses the
secured indebtedness, for one dollar plus the amount of all Advances plus the
amount of the outstanding secured and unsecured debt.
JOINT VENTURES
The Simon Operating Partnership is a joint venture partner with a major
pension fund in twelve existing community shopping centers and one regional
mall. With certain exceptions, such pension fund has a right of first refusal
subject to certain conditions to enter into joint ventures with the Simon
Operating Partnership for the development of future power centers.
The Simon Operating Partnership has also entered into an agreement which
gives the outside partner the right to sell its ownership interest in Rolling
Oaks Mall to the Simon Operating Partnership in exchange for Units based on the
fair market value of the ownership interest at the time of the exchange. This
right expires on January 1, 2002.
MORTGAGE FINANCING ON PROPERTIES
The following table sets forth certain information regarding the mortgages
and other debt encumbering the Properties. All mortgage and property related
debt is nonrecourse, although certain of the Unitholders have guaranteed a
portion of the property related debt in the aggregate amount of $398.9 million.
MORTGAGE AND OTHER DEBT ON SIMON PORTFOLIO PROPERTIES
(DOLLARS IN THOUSANDS)
ANNUAL
INTEREST FACE AMOUNT DEBT MATURITY
PROPERTY NAME RATE @ 12/31/96 SERVICE DATE
- ------------------------ --------- --------- ------- --------
CONSOLIDATED PROPERTIES:
Anderson Mall (1) 6.74% $ 19,000 $1,281 (2) 12/15/03
Barton Creek Square 8.10% 63,549 5,867 12/30/99
Battlefield Mall 7.50% 50,724 4,765 06/01/03
Bloomingdale Court (3) 8.75% 29,009 2,538 (2) 12/01/00
Cielo Vista Mall (4) 9.25% (5) 56,329 5,665 05/01/07
Cielo Vista Mall 8.13% 2,323 376 07/01/04
College Mall (6) 7.00% 43,429 3,563 07/01/04
Crossroads Mall 7.75% 41,440 3,212 (2) 07/31/02
Eastgate Consumer Mall - (7) 25,429 - (2) 12/31/98
East Towne Mall - (8) 55,000 - (2) 09/29/98
Eastland Mall - (7) 30,000 - (2) 11/01/97
Forest Mall (9) 6.74% 12,800 863 (2) 12/15/03
Forest Plaza (3) 8.75% 16,904 1,518 (2) 12/01/00
Forest Village Park (1) 6.16% 20,600 1,269 (2) 12/15/03
Fox River Plaza (3) 8.75% 12,654 1,107 (2) 12/01/00
Golden Ring Mall (9) 6.74% 29,750 2,005 (2) 12/15/03
Greenwood Park Mall (6) 7.00% 36,374 2,984 07/01/04
Hutchinson Mall (9) 8.44% 11,523 973 (2) 10/01/02
Ingram Park Mall 8.10% 49,107 4,533 12/01/99
Ingram Park Mall 9.63% 7,000 674 (2) 11/01/99
Irving Mall (4) 9.25% (5) 43,375 4,363 05/01/07
Jefferson Valley Mall - (10) 50,000 - (2) 01/12/00
La Plaza Mall 8.25% 50,526 4,677 12/30/99
Lake View Plaza (3) 8.75% 22,169 1,940 (2) 12/01/00
Lincoln Crossing (3) 8.75% 997 87 (2) 12/01/00
Lincolnwood Town Center - (11) 63,000 - (2) 01/31/98
Longview Mall (1) 6.16% 22,100 1,361 (2) 12/15/03
Markland Mall (9) 6.74% 10,000 675 (2) 12/15/03
Matteson Plaza (3) 8.75% 11,159 976 (2) 12/01/00
McCain Mall (4) 9.25% (5) 26,304 2,646 05/01/07
Midland Park Mall (9) 6.31% 22,500 1,420 (2) 12/15/03
Miller Hill Mall (9) 6.74% 34,500 2,325 (2) 12/15/03
Muncie Mall (9) 6.74% 24,000 1,618 (2) 12/15/03
Muncie Mall (9) 6.99% 20,000 1,398 12/15/03
North East Mall 10.00% 22,442 2,475 09/01/00
North Riverside Park Plaza 9.38% 4,117 452 09/01/02
North Riverside Park Plaza 10.00% 3,668 420 09/01/02
North Towne Square (9) 6.31% 23,500 1,483 (2) 12/15/03
O'Hare International Center 7.50% (12) 27,500 2,063 12/31/13
Regency Plaza (3) 8.75% 1,878 164 (2) 12/01/00
Riverway - (13) 85,571 - (2) 12/31/98
Riverway - (13) 45,879 - (2) 12/31/98
Ross Park Mall 6.14% 60,000 3,684 08/15/98
South Park Mall (1) 7.25% 24,748 1,791 (2) 06/15/03
St. Charles Towne Plaza (3) 8.75% 30,887 2,703 (2) 12/01/00
Sunland Park Mall 8.63% (5) 40,149 3,773 01/01/26
The Forum Shops at Caesars - (14) 100,000 - (2) 02/23/00
The Forum Shops at Caesars - (15) 22,716 - (2) 02/23/00
Tippecanoe Mall(6) 8.45% 47,556 4,647 07/01/04
Towne East Square (6) 7.00% 57,419 4,711 07/01/04
Towne West Square (1) 6.16% 40,250 2,479 (2) 12/15/03
Trolley Square 5.81% 19,000 1,104 (2) 07/23/00(16)
Trolley Square - (7) 3,500 - (2) 07/23/00
Trolley Square - (7) 4,641 - (2) 07/23/00
Valle Vista Mall (4) 9.25% (5) 34,837 3,504 05/01/07
West Ridge Mall 8.00% 50,005 4,529 06/01/99
West Ridge Plaza (3) 8.75% 4,612 404 (2) 12/01/00
White Oaks Mall 7.70% 16,500 1,271 (2) 03/01/98
White Oaks Plaza (3) 8.75% 12,345 1,080 (2) 12/01/00
Windsor Park Mall 8.00% 8,951 811 05/01/12
Windsor Park Mall 8.00% 6,009 544 06/01/00
TOTAL PLEDGED PROPERTY ---------
INDEBTEDNESS 1,812,254
---------
Unsecured Revolving Credit
Facility - (17) 230,000 - (2) 09/27/99
TOTAL INDEBTEDNESS- ---------
CONSOLIDATED (18) 2,042,254
=========
JOINT VENTURE PROPERTIES:
Circle Centre - (19) 60,000 - (2) 12/05/03
Cobblestone Court (20) 7.22% 6,180 446 (2) 11/30/05
Crystal Court (20) 7.22% 3,570 258 (2) 11/30/05
Fairfax Court (20) 7.22% 10,320 745 (2) 11/30/05
Gaitway Plaza (20) 7.22% 7,350 531 (2) 11/30/05
Lakeline Mall - (21) 68,515 - (2) 05/16/99
Ontario Mills - (22) 77,637 - (2) 05/07/99
Ridgewood Court (20) 7.22% 7,980 576 (2) 11/30/05
Royal Eagle Plaza (20) 7.22% 7,920 572 (2) 11/30/05
Seminole Towne Center 6.88% 70,500 4,850 (2) 12/27/05
Smith Haven Mall 7.86% 115,000 9,039 06/01/06
The Tower Shops - (23) 15,749 - (2) 03/13/99
The Plaza At Buckland Hills 7.22% 17,680 1,276 (2) 11/30/05
(20)
The Source - (24) 62,032 - 07/16/01
The Yards Plaza (20) 7.22% 8,270 597 (2) 11/30/05
Village Park Plaza (20) 7.22% 8,960 647 (2) 11/30/05
West Town Corners (20) 7.22% 10,330 746 (2) 11/30/05
Westland Park Plaza (20) 7.22% 4,950 357 (2) 11/30/05
Willow Knolls Court (20) 7.22% 6,490 469 (2) 11/30/05
TOTAL INDEBTEDNESS-EQUITY ---------
(25) $ 569,433
=========
(1) Loans secured by these five properties are cross-collateralized and
cross-defaulted. The aggregate principal amount of the loans is $126,698,
with an annual debt service of $8,181 and weighted average interest rate of
6.46%. Four of the loans have interest rate reset provisions available on
12/15/98 and mature 12/15/2003. The remaining loan matures on 6/15/2003.
During the term of these loans, there is amortization of a portion of the
principal amount.
(2) Requires monthly payments of interest only. Fixed-rate debt will
reflect an amount for annual debt service.
(3) These 10 properties are cross-defaulted.
(4) On December 31, 1996, these four properties were cross-collateralized
and cross-defaulted. On January 31, 1997, the Simon Operating Partnership
closed on a restructure of these loans, which included; repaying the Irving
Mall loan, paying $21,000 to remove the contingent interest feature on the
three remaining loans and paying down a total of $3,900 on two other
Property loans with the same lender.
(5) Lender also participates in a percentage of gross revenues above a
specified base.
(6) Loans secured by these four properties are cross-collateralized and
cross-defaulted. The aggregate principal amount of the loans is $184,778,
with an annual debt service of $15,905 and interest rate of 7.0%, except
for Tippecanoe Mall, which bears interest at 8.45%. During the term of
these loans, there is amortization of a portion of the principal amount.
(7) LIBOR + 1.50%.
(8) LIBOR + 1.125%.
(9) Loans secured by these eight properties are cross-collateralized
and/or cross-defaulted. The aggregate principal amount of the loans is
$188,573, with an annual debt service of $12,760, and a weighted average
interest rate of 6.77%. Eight of these loans have interest reset provisions
available on 12/15/98 and mature 12/15/2003. The remaining loan will mature
10/1/2002. During the term of these loans, there is amortization of a
portion of the principal amount.
(10) LIBOR + 0.55% with LIBOR capped at 8.7% through maturity.
(11) LIBOR + 1.25%.
(12) In 1998, the lender will begin participating in a percentage of gross
revenues after deduction of debt service, tenant improvement costs and
leasing commissions.
(13) LIBOR + 1.375%, LIBOR capped at 5.0% through maturity.
(14) LIBOR + 1.00%.
(15) LIBOR + 1.8125%.
(16) The earliest date on which the lender may call the bonds is 7/23/2000.
(17) SDG, LP and the Simon Operating Partnership are co-borrowers on this
$750,000 unsecured revolving credit facility, which currently bears
interest at LIBOR + 0.90% and provides for different pricing based upon
SDG, LP's investment grade rating. LIBOR is initially capped at 7.5%;
however, if LIBOR should equal or exceed 8.75% between monthly reset dates,
then LIBOR will be capped at 8.5% for that period only. As of 12/31/96,
$510,000 was available, with an additional $10,000 reserved under a letter
of credit.
(18) Includes minority interest partners' share ($60,850) of total
consolidated indebtedness.
(19) On February 18, 1997 the loan was refinanced at LIBOR +.44% with a
maturity of 1/31/2004 and an initial reset date of 1/31/2001. The rate at
12/31/96 was LIBOR + 0.7%.
(20) Rate is fixed at 7.22% through December 1998 and thereafter the rate
is the greater of 7.22% or 2.0% over the then current yield of a six month
treasury bill selected by the lender.
(21) LIBOR + 0.375%.
(22) LIBOR + 2.75%.
(23) LIBOR + 2.00%.
(24) LIBOR + 1.70%.
(25) Includes joint venture partners' share ($376,123) of total equity
indebtedness.
ITEM 3. LEGAL PROCEEDINGS
Roel Vento et al v. Tom Taylor et al. An affiliate of the Company is a
defendant in litigation entitled Roel Vento et al v. Tom Taylor et al, in the
District Court of Cameron County, Texas, in which a judgment in the amount of
$7,800 has been entered against all defendants. This judgment includes
approximately $6,500 of punitive damages and is based upon a jury's findings on
four separate theories of liability including fraud, intentional infliction of
emotional distress, tortuous interference with contract and civil conspiracy
arising out of the sale of a business operating under a temporary license
agreement at Valle Vista Mall, in Harlingen, Texas. The Company is seeking to
overturn the award and has appealed the verdict. Although the Company is
optimistic that it may be able to reverse or reduce the verdict, there can be
no assurance thereof. Management, based upon the advice of counsel, believes
that the ultimate outcome of this action will not have a material adverse
effect on the Company and affiliates.
Browning- Ferris Industries of Illinois, et al. v. Richard Ter Maat, et
al. v. Craig J. Cain, et al., Case No. 92 C 20259. On April 4, 1994, a third-
party action was filed by Richard Ter Maat and five other parties (collectively
referred to as "Third Party Plaintiffs") named as defendants in the above
referenced litigation, which had begun in 1992, against Machesney Park
Associates (a "Subsidiary") and approximately 74 other parties (collectively
referred to as "Third-Party Defendants"). That third-party action alleged
generally that the Third-Party Defendants are liable under the Comprehensive
Environmental response, Compensation and Liability Act of 1980 ("CERCLA"), 42
U.S.C. section 9601 et seq., and under Illinois statutory and common law for
certain response costs expended and to be expended by Third-Party Plaintiffs in
connection with the claims asserted by Browning-Ferris Industries of Illinois
and approximately 20 other parties (collectively referred to as "Plaintiffs")
against the Third-Party Plaintiffs. In the original lawsuit, Plaintiffs sought
reimbursement of response costs they allegedly incurred and will incur in
response to the release or threat of release of hazardous substances from the
M.I.G./Dewane Landfill located one mile east of the City of Belvidere, in Boone
County, Illinois (the "Site"), and declaratory judgment on liability against
Defendants for such response costs. To date, the Plaintiffs have alleged
response costs in excess of $5.0 million in connection with the Site.
In February 1996, the Subsidiary settled this pending litigation by the
payment of $40,000 to the original Plaintiffs. Pursuant to that settlement,
the Simon Operating Partnership agreed that it would take part in a nonbinding
arbitration or mediation at sometime in the future to allocate expenses
incurred in remediating the Site. No such arbitration or mediation has yet
been instituted. Management, based upon the advice of counsel, believes that
the ultimate outcome of this action will not have a material adverse effect on
the Simon Operating Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS
MARKET INFORMATION
There is no established public trading market for the
Simon Operating Partnership's Units or Preferred Units. The
following table sets forth for the periods indicated, the
distributions declared on the Units:
Declared
Distribution
1995 ------------
-----------
1st Quarter $0.4925
2nd Quarter $0.4925
3rd Quarter $0.4925
4th Quarter $0.4925
1996
-----------
1st Quarter $0.4925
2nd Quarter $0.4925
3rd Quarter $0.1515 (1)
4th Quarter $0.4925
(1) Represents a distribution declared in the third
quarter of 1996 related to the Merger, designated
to align the time periods of distribution payments
of the merged entities.
On January 23, 1997, the Simon Operating Partnership
declared a distribution of $0.4925 per Unit payable on
February 21, 1997 to Unitholders of record on February 7,
1997. The current annual distribution rate is $1.97 per
Unit. As the holder of the Preferred Units, the Company is
entitled to preferential distributions of cash equal to the
dividends payable on its outstanding shares of preferred
stock. The Company and SDG, LP held all of the Units of the
Simon Operating Partnership as of March 27, 1997.
UNREGISTERED SALES OF EQUITY SECURITIES
On October 4, 1996, the Simon Operating Partnership
exercised its option to acquire the remaining 30% limited
partnership interest in North East Mall owned by the Simons
in exchange for 472,410 Units, as well as the Simons' 50%
general partnership interest which the Simon Operating
Partnership acquired for nominal consideration. The Simons
had previously contributed to Simon Operating Partnership in
exchange for Units, the right to receive distributions
relating to its 50% general partnership interest. The Units
are convertible on a one-for-one basis into common stock of
the Company. The Units issued to the Simons were not
registered under the Securities Act of 1933, as amended (the
"Act") in reliance on the exemptions provided by Section
4(2) of the Act and the rules and regulations promulgated
thereunder.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data for
the Simon Operating Partnership and combined historical financial data of Simon
Property Group (the "Predecessor"). The financial data should be read in
conjunction with the financial statements and notes thereto and with
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Other data management believes is important in understanding trends in the
Simon Operating Partnership's business is also included in the table.
<TABLE>
<CAPTION>
SIMON PROPERTY GROUP, L.P. SIMON PROPERTY GROUP
--------------------------------------------- ---------------------
For the For the
Period Period
from from
December January For the
20 to 1 to Year Ended
December December December
For the Year Ended December 3l, 31, l9, 3l,
---------------------------------- ---------- --------- ----------
1996 1995 1994 1993 1993 1992
---------- ---------- ---------- ---------- --------- ----------
(in thousands, except per Unit data)
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C>
Total revenue $ 591,904 $ 553,657 $ 473,676 $ 18,424 $ 405,869 $ 400,852
Income (loss) before
extraordinary items 100,899 101,505 60,308 8,707 6,912 (11,692)
Net income (loss) $ 97,176 $ 98,220 $ 42,328 $ (21,774) $ 33,101 $ (11,692)
Preferred Unit requirement
8,125 1,490 N/A N/A N/A N/A
Net income (loss)
available to Unitholders $ 89,051 $ 96,730 $ 42,328 $ (21,774) $ 33,101 $ (11,692)
EARNINGS PER UNIT (1):
Income before
extraordinary items $ 0.97 $ 1.08 $ 0.71 $ 0.11 N/A N/A
Extraordinary items (0.04) (0.04) (0.21) (0.39) N/A N/A
---------- ---------- ---------- -----------
Net income (loss) $ 0.93 $ 1.04 $ 0.50 $ (0.28) N/A N/A
========== ========== ========== ===========
Distributions per
Unit (2) $ 1.63 $ 1.97 $ 1.90 _ N/A N/A
Weighted average Units
outstanding 95,913 92,666 84,509 78,447 N/A N/A
BALANCE SHEET DATA:
Investment in real
estate, net $2,229,612 $2,009,344 $1,829,111 $ 1,350,360 N/A $1,156,009
Cash and cash equivalents 50,009 62,721 105,139 110,625 N/A 42,682
Total assets 2,759,183 2,556,436 2,316,860 1,793,654 N/A 1,494,289
Mortgages and other notes
payable 2,042,254 1,980,759 1,938,091 1,455,884 N/A 1,711,778
Limited partners' interest
(3) _ 908,764 909,306 843,373 N/A N/A
Owners' equity (deficit) 254,628 (589,126) (807,613) (791,820) N/A $(565,566)
OTHER DATA:
Cash flow provided by
(used in):
Operating activities $ 204,941 $ 194,336 $ 128,023 N/A N/A N/A
Investing activities (176,334) (222,679) (266,772) N/A N/A N/A
Financing activities (41,319) (14,075) 133,263 N/A N/A N/A
NOTES
(1)Per Unit data is reflected only for the Simon Operating Partnership,
because the historical combined financial statements of the Predecessor are
a combined presentation of partnerships and corporations.
(2)Represents distributions declared in 1996, which includes a distribution of
$0.1515 per Unit declared on August 9, 1996, in connection with the Merger,
designated to align the time periods of distributions of the merged
companies. On January 23, 1997, the Simon Operating Partnership declared a
distribution of $0.4925 per Unit payable on February 21, 1997 to
Unitholders of record on February 7, 1997. The current annual distribution
rate is $1.97 per Unit.
(3)See Note 10 of the Notes to the Financial Statements.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Selected
Financial Data, and all of the financial statements and notes thereto included
elsewhere herein. Certain statements made in this report may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. 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
During 1994, 1995 and 1996, the Simon Operating Partnership acquired
several other properties through purchase, acquisition and merger, and, as
result of changes in controlling interest, changed the way it accounted for
several properties (using either the consolidated method of accounting or the
equity method of accounting for noncontrolled joint venture entities) (the
"Property Transactions"). Following is a listing of such transactions.
Effective April 1, 1994, the Simon Operating Partnership began including The
Forum Shops at Caesars ("Forum") as a consolidated property due to the Simon
Operating Partnership's ability to demonstrate control. On September 1, 1994,
the Simon Operating Partnership consolidated 15 properties as a result of the
merger of MSA Realty Corporation into the Company. During December 1994, the
Simon Operating Partnership acquired a 100% interest in Independence Center,
Orange Park Mall, Broadway Square and University Mall (Florida). On February
23, 1995, the Simon Operating Partnership acquired an additional 50% interest
in White Oaks Mall and began accounting for the property using the consolidated
method of accounting. On August 1, 1995, the Simon Operating Partnership
purchased the remaining 50% ownership in Crossroads Mall and subsequently began
accounting for the property using the consolidated method of accounting. On
September 25, 1995, the Simon Operating Partnership acquired the remaining 55%
ownership in East Towne Mall and subsequently began accounting for the property
using the consolidated method of accounting. On April 11, 1996, the Simon
Operating Partnership acquired the remaining 50% economic ownership interest in
Ross Park Mall and subsequently began accounting for the property using the
consolidated method of accounting. (See the "Liquidity and Capital Resources"
discussion for additional information regarding these transactions.)
RESULTS OF OPERATIONS
Year Ended December 31, 1996 vs. Year Ended December 31, 1995
Total revenue increased $38.2 million, or 6.9%, in 1996 as compared to
1995. Of this increase, $37.7 million is attributable to the Property
Transactions. The remaining increase includes net increases in minimum rent,
lease settlements and miscellaneous income of $9.3 million, $1.8 million and
$2.4 million, respectively, partially offset by a net decrease in tenant
reimbursements of $11.8 million. The minimum rent increase results from
increases of $1.42 and $0.40 in average base minimum rents per square foot for
regional mall stores and community shopping centers, respectively. Regional
mall store leases executed during 1996 were $6.30 per square foot greater than
leases expiring; community shopping center leases were $2.08 greater.
Total operating expenses increased $28.6 million, or 9.4%, in 1996 as
compared to 1995. Of this increase, $18.6 million is the result the Property
Transactions. The remaining $10.0 million increase is primarily the result of
a net increase in depreciation and amortization ($8.9 million).
Interest expense increased $12.3 million, or 8.2%, to $162.5 million for
1996 as compared to $150.2 million for 1995. Of this increase, $15.4 million is
attributable to the Property Transactions. In addition, the Simon Operating
Partnership realized incremental interest expenses in 1996 related to
borrowings used to acquire additional ownership interests in and/or make equity
investments in unconsolidated joint venture properties of $4.9 million.
Offsetting these increases were interest savings realized as a result of
restructuring the Simon Operating Partnership's credit facilities, from the
proceeds of the Company's 6,000,000 common share offering on April 19, 1995,
and from the proceeds of the Series A preferred stock offering, which were used
to paydown debt (described under "Financing and Debt").
Income (loss) from unconsolidated entities increased from $1.4 million in
1995 to $5.2 million in 1996, primarily resulting from an increase in the Simon
Operating Partnership's share of the Management Company income ($4.8 million),
partially offset by a decrease in its share of income from partnerships and
joint ventures ($1.0 million). The increase in Management Company income is
primarily the result of the Management Company's losses in 1995 related to the
settlement of a mortgage receivable ($3.9 million) and the liquidation of a
partnership investment ($1.0 million).
Extraordinary losses of $3.7 million in 1996 and $3.3 million in 1995
result from costs associated with the refinancing or early extinguishment of
debt.
Preferred Unit requirements increased by $6.6 million in 1996 as a result
a full year's distributions on the 8.125% Series A convertible preferred stock
issued on October 27, 1995, as compared to approximately two months of
distributions in 1995.
Net income available to Unitholders decreased from $96.7 million in 1995
to $89.1 million in 1996, for the reasons discussed above.
Year Ended December 31, 1995 vs. Year Ended December 31, 1994
Total revenue increased $80.0 million, or 16.9%, in 1995. Of this
increase, $72.8 million is attributable to the 1995 Property Transactions, and
the full-year impact in 1995 of the 1994 Property Transactions. The remaining
increase is primarily the result of an increase in minimum rent revenue
resulting from increases of $1.25 and $0.18 in average base minimum rents per
square foot for regional mall stores and community shopping centers as
evidenced by leasing spreads for regional mall store and community shopping
center leases executed during 1995 over those leases expiring in 1995 of $5.38
and $1.22 per square foot, respectively. These increases are partially offset
by a decrease in overage rent resulting primarily from static sales in the
portfolio and a decline of $1.8 million in overage rent at Texas border
properties due to the devaluation of the Mexican peso. Management expects
these properties to return to their prior performance level, as they have done
historically after previous peso devaluations.
Total operating expenses increased $43.1 million, or 16.6%, in 1995. Of
this increase, $37.9 million, or 87.9%, is the result of the Property
Transactions. Other than increases from the Property Transactions, total
operating expenses experienced an increase of only 2.0%, attributable to
increased depreciation and amortization derived from an increase in investment
properties.
Interest expense, excluding prior year nonrecurring interest expense,
increased a net of $27.2 million, or 22.2%, to $150.2 million for 1995 as
compared to $123.0 million for 1994. Of this increase, $26.5 million, or 97.4%
is the result of the Property Transactions. Interest savings were realized as
a result of restructuring the Simon Operating Partnership's credit facilities
and from the proceeds of the Company's 6,000,000 common share offering on April
19, 1995.
The net gain on the sale of assets in 1995 resulted from a gain of $2.4
million on the sale of a minority partnership interest in land previously held
for development in Denver, Colorado, partially offset by a loss of $0.5 million
on the sale of an equity investment in Arborland Mall.
Income (loss) from unconsolidated entities increased from a loss of $0.1
million in 1994 to income of $1.4 million in 1995, resulting from an increase
in the Simon Operating Partnership's share of income from partnerships and
joint ventures, partially offset by an increase in its share of losses of the
Management Company. The Simon Operating Partnership's share of income from
partnerships and joint ventures improved $4.1 million from $1.0 million in 1994
to $5.1 million in 1995. This increase is primarily attributable to gains from
sales of peripheral property ($3.4 million) and the change to accounting for
North East Mall using the equity method of accounting ($1.7 million). The
Simon Operating Partnership's share of the Management Company's results
declined $2.6 million from an allocated net loss of $1.1 million for 1994 to an
allocated net loss of $3.7 million for 1995. This decrease is the result of
the Management Company's losses related to the settlement of a mortgage
receivable and the liquidation of a partnership investment in 1995, partially
offset by a $1.6 million increase in the Management Company's operating income.
Extraordinary items of $3.3 million in 1995 and $18.0 million in 1994
result from costs associated with the refinancing of debt.
The Preferred Unit requirement in 1995 was $1.5 million as a result of
the Company's issuance of $100 million of 8 1/8% Series A convertible
preferred stock on October 27, 1995. The proceeds were contributed to the
Simon Operating Partnership in exchange for Preferred Units with terms
identical to the preferred stock issued by the Company.
Net income available to Unitholders increased from $42.3 million in 1994
to $96.7 million in 1995, for the reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Simon Operating Partnership's balance of cash
and cash equivalents was $50.0 million, not including its proportionate share
of cash held by the joint venture properties and the Management Company. In
addition to its cash balance, the Simon Operating Partnership as a co-borrower
with SDG, LP has a $750 million unsecured revolving credit facility which had
$510 million available after outstanding borrowings and letters of credit at
December 31, 1996. In December 1995, a shelf registration statement for $500
million of nonconvertible investment grade debt securities of the Simon
Operating Partnership became effective. As of December 31, 1996, no securities
have been issued from this registration statement.
Financing and Debt. The Simon Operating Partnership's ratio of debt-to-
market capitalization was 39.8% and 44.9% at December 31, 1996 and 1995,
respectively.
On February 23, 1996, the Simon Operating Partnership borrowed the
initial $100.0 million tranche of a $184.0 million two-tranche loan facility
for Forum and retired the existing $89.7 million mortgage debt for Forum. The
initial funding bears interest a LIBOR plus 100 basis points and matures in
February 2000. The remaining proceeds are being used to provide funds for the
approximately 250,000-square-foot phase II expansion of this property.
On April 11, 1996, the Simon Operating Partnership drew $115 million on
its revolving credit facility. The funds were used primarily to finance the
acquisition of the remaining economic ownership interest in Ross Park Mall ($44
million) and to retire a portion of the property's debt ($54 million).
On June 28, 1996, the Simon Operating Partnership obtained an additional
$200 million unsecured revolving credit facility. The facility bore interest
at LIBOR plus 132.5 basis points and had a maturity date of August 1998. Terms
for the facility were identical to the existing revolving credit facility.
On September 10, 1996, the Simon Operating Partnership loaned $112 million
to SDG, LP to retire the secured line of credit which DRC and its operating
partnership had in effect prior to the Merger, which bore interest at LIBOR
plus 175 basis points.
On September 27, 1996, the Company completed a $200 million public
offering of 8,000,000 shares of 8 3/4% Series B cumulative redeemable preferred
stock, generating net proceeds of approximately $193 million. The Company
contributed the proceeds of such offering to SDG, LP, in exchange for Preferred
Units in SDG, LP, which used the net proceeds to repay $142.8 million of
outstanding mortgage indebtedness, loaned $34.4 million to the Simon Operating
Partnership which used such amount to reduce amounts outstanding under its
credit facilities, $12.1 million for the acquisition of the remaining ownership
of North East Mall in Hurst, Texas, and the remainder for working capital.
On September 27, 1996, SDG, LP, as co-borrower with the Simon Operating
Partnership, obtained a $750 million unsecured three-year credit facility (the
"Credit Facility"), with an option to extend, which initially bears interest at
LIBOR plus 90 basis points. The Simon Operating Partnership borrowed $323
million under this Credit Facility to retire the outstanding borrowings under
its two unsecured credit facilities, which bore interest at LIBOR plus 132.5
basis points. In addition, the Credit Facility contains a $150.0 million
competitive bid feature, which can further reduce interest costs. The Credit
Facility increased available capital by $150 million.
On November 21, 1996, the Securities and Exchange Commission declared
effective a shelf registration statement filed by the SDG, LP to provide for
the offering, from time to time, of up to $750 million in aggregate principal
amount of nonconvertible investment-grade unsecured debt securities (the
"Notes"). Securities issued under this shelf registration are guaranteed by
the Simon Operating Partnership. On November 26, 1996, SDG, LP completed the
sale of $250 million of Notes. The Notes bear interest semiannually at 6.875%
and mature on November 15, 2006. The net proceeds of $247.5 million were used
primarily to reduce SDG, LP's overall interest rates by retiring a $62 million
mortgage loan on Boynton Beach Mall and loaning $165 million to the Simon
Operating Partnership, which used $57 million to retire the construction loan
relating to Cottonwood Mall and $108 million to reduce the outstanding balance
on the Credit Facility, with the remainder going into working capital. The
Simon Operating Partnership is currently finalizing the allocation of $300
million of this shelf registration to a Medium-Term Note Program, although
management has no immediate plans to issue securities under the program.
On December 6, 1996, SDG, LP completed a $100 million private placement of
putable asset trust securities ("PATS"). The PATS bear interest at 6.75% and
mature on November 15, 2003. The PATS are guaranteed by the Simon Operating
Partnership. Proceeds from the placement were advanced to the Simon Operating
Partnership and used to reduce outstanding borrowings on the Credit Facility.
At December 31, 1996, the Simon Operating Partnership had consolidated
debt of $2,042.3 million, of which $1,326.5 million is fixed-rate debt and
$715.8 million is variable-rate debt. As of December 31, 1996, the Simon
Operating Partnership had interest rate protection agreements related to $394.1
million of variable-rate 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 $43.4 million, the
buyout of the contingent interest feature on the remaining three loans for $21
million, a principal reduction of $3.9 million to be applied to two of the
properties, and a restatement of the interest amount on the three remaining
loans. This transaction was funded using the Credit Facility.
Scheduled principal payments of mortgage indebtedness over the next five
years is $1,254.0 million, with $788.3 million thereafter.
Acquisition Activity. Prior to April 11, 1996, the Simon Operating
Partnership held a 50% joint venture interest in Ross Park Mall in Pittsburgh,
Pennsylvania. On April 11, 1996, the Simon Operating Partnership acquired the
remaining economic ownership interest. The purchase price included
approximately $44.0 million in cash and the assumption of the joint venture
partner's share of existing debt ($57.0 million). The purchase price in excess
of the net assets acquired of $49.1 million was allocated to investment
properties. Effective April 11, 1996, the property is being accounted for
using the consolidated method of accounting. It was previously accounted for
using the equity method of accounting. In addition, the remaining 11%
ownership in Ross Park Mall was acquired by the Simon Operating Partnership on
January 21, 1997.
On August 9, 1996, the Company acquired the national shopping center
business of DRC. Pursuant to the Merger, the Company acquired all the
outstanding common stock of DRC (55,712,529 shares), at an exchange ratio of
0.68 share of the Company's common stock for each share of DRC common stock
(the "Exchange Ratio"). A total of 37,873,965 shares of the Company's common
stock was issued by the Company to the DRC shareholders. DRC and the
acquisition subsidiary merged. DRC became a 99.9% subsidiary of the Company.
This portion of the transaction was valued at approximately $923.2 million,
based upon the number of DRC shares of common stock acquired (55,712,529), the
Exchange Ratio and the last reported sales price of the Company's common stock
on August 9, 1996 ($24.375). In connection therewith, SPG changed its name to
Simon DeBartolo Group, Inc. and DRC changed its name to SD Property Group, Inc.
In connection with the Merger, the general and limited partners of the
Simon Operating Partnership contributed 49.5% (47,442,212 Units) of the total
outstanding Units in the Simon Operating Partnership to the operating
partnership of DRC, DeBartolo Realty Partnership, L.P. ("DRP, LP"), in exchange
for 47,442,212 Units of partnership interest in DRP, LP, whose name was changed
to Simon DeBartolo Group, L.P. The Company retained a 50.5% partnership
interest (48,400,641 Units) in the Simon Operating Partnership but assigned its
rights to receive distributions of profits on 49.5% (47,442,212 Units) of the
outstanding Units of partnership interest in the Simon Operating Partnership to
SDG, LP. The limited partners of DRP, LP approved the contribution made by the
partners of the Simon Operating Partnership and simultaneously exchanged their
38.0% (34,203,623 Units) partnership interest in DRP, LP, adjusted for the
Exchange Ratio, for a smaller partnership interest in SDG, LP. The exchange of
the limited partners' 38.0% partnership interest in DRP, LP for Units of SDG,
LP has been accounted for as an acquisition of minority interest by the Company
and is valued based on the estimated fair value of the consideration issued
(approximately $566.9 million). The Units of SDG, LP may under certain
circumstances be exchangeable for common stock of the Company on a one-for-one
basis. Therefore, the value of the acquisition of the DRP, LP limited
partners' interest acquired was based upon the number of DRP, LP Units
exchanged (34,203,623), the Exchange Ratio and the last reported sales price
per share of the Company's common stock on August 9, 1996 ($24.375). The
limited partners of the Simon Operating Partnership received a 23.7%
partnership interest in SDG, LP (37,282,628 Units) for the contribution of
their 38.9% partnership interest in the Simon Operating Partnership (37,282,628
Units) to SDG, LP. The interests transferred by the partners of the Simon
Operating Partnership to DRP, LP have been appropriately reflected at
historical costs.
It is currently expected that subsequent to the first anniversary of the
date of the Merger, reorganizational transactions will be effected so that SDG,
LP will directly own all of the assets and partnership interests now owned by
the Simon Operating Partnership. However, there can be no assurance that such
reorganizational transactions will be so effected.
The Merger resulted in the addition of 49 regional malls, 11 community
centers and one mixed-use property. These properties included 47,052,267
square feet of retail space GLA and 558,636 of office GLA. Of these
properties, 40 regional malls, 10 community centers and the mixed-use property
are being accounted for using the consolidated method of accounting. The
remaining properties are being accounted for using the equity method of
accounting, with the exception of West Town Mall, which is accounted for using
the cost method of accounting.
Prior to October 4, 1996, the Simon Operating Partnership held the right
to receive 50% of the partnership results of North East Mall in Hurst, Texas.
On October 4, 1996, in connection with the settlement of certain outstanding
litigation, SDG, LP acquired for $12.1 million an additional 20% limited
partnership interest in North East Mall. At the same time, the Simon Operating
Partnership exercised its option to acquire the remaining 30% limited
partnership interest in North East Mall owned by the Simons in exchange for
472,410 Units in the Simon Operating Partnership, as well as the Simons' 50%
general partnership interest. The Simons had previously contributed the right
to receive distributions relating to its 50% general partnership interest to
the Simon Operating Partnership, in exchange for Units. As a result of these
transactions, the Simon Operating Partnership owns 80% of North East Mall and
accounts for it using the consolidated method of accounting. SDG, LP owns the
remaining 20%.
See Note 3 to the consolidated financial statements for details of 1995
and 1994 acquisition activity.
Development Activity. Development activities are an ongoing part of the
Simon Operating Partnership's business. The Simon Operating Partnership opened
a regional mall, one specialty retail center and one value-oriented super-
regional mall during 1996. The new regional mall is the 1.0 million square
foot Cottonwood Mall in Albuquerque, New Mexico, which opened on July 31. The
new specialty retail center is the 60,000 square foot Tower Shops in Las Vegas,
Nevada, which opened in November. The value-oriented super-regional mall is
the 1.3 million square foot Ontario Mills, which opened in Ontario, California,
on November 14. Other than Cottonwood Mall, which is wholly-owned and accounted
for using the consolidated method of accounting, the Simon Operating
Partnership has joint venture partners on each of the projects recently opened
and accounts for them using the equity method of accounting.
Construction also continues on the following projects:
* The Source, a 730,000 square foot value-oriented retail and entertainment
development project in Westbury (Long Island), New York, is expected to
open in August 1997. This new $150 million development will adjoin an
existing Fortunoff store. The Simon Operating Partnership has a total
equity investment of $25.3 million in this 50%-owned joint venture project.
Construction financing of $120 million closed on this property in July
1996. The loan initially bears interest at LIBOR plus 170 basis points and
matures on July 16, 1999.
* Arizona Mills, a 1,230,000 square foot retail development project in Tempe,
Arizona, broke ground on August 1, 1996. This $184 million value-oriented
super-regional mall is expected to open in November 1997. In January 1997,
the joint venture closed on a five-year $145 million construction loan with
interest at LIBOR plus 150 basis points. The Simon Operating Partnership
had an $13.5 million equity investment through December 31, 1996 and a 25%
ownership interest in this joint venture development.
* Grapevine Mills, a 1,480,000 square foot retail development project in
Grapevine (Dallas/Fort Worth), Texas, broke ground on July 10, 1996. This
$202 million value-oriented super-regional mall development project is
expected to open in October 1997. A commitment has been obtained for a
four-year $157 million construction loan (plus a one-year extension) with
an initial interest rate of LIBOR plus 165 basis points. The Simon
Operating Partnership has a $14 million equity commitment on this 37.5%-
owned joint venture project, and advanced its initial contribution of $7.9
million in January 1997.
* The Shops at Sunset Place, a destination-oriented retail and entertainment
project containing approximately 500,000 square feet of GLA is scheduled to
open in 1998 in South Miami, Florida. The Simon Operating Partnership owns
75% of this $143 million project. The Simon Operating Partnership expects
to have construction financing for the majority of the development costs of
this project in place during the second quarter of 1997.
In addition, the Simon Operating Partnership is in the preconstruction
development phase on two new community center projects, each of which is
immediately adjacent to an existing regional mall in the Company's portfolio.
Lakeline Plaza, an approximately $39 million development, is scheduled to open
in Austin, Texas, in 1998. The Simon Operating Partnership has a 50% ownership
interest in this 391,000 square foot joint venture development project. Muncie
Plaza, a $15 million development project, is scheduled to open in Muncie,
Indiana, in 1998. This 200,000 square foot development project is wholly-
owned.
Strategic Expansions and Renovations. A key objective of the Simon
Operating Partnership is to increase the profitability and market share of its
portfolio properties through the completion of strategic renovations and
expansions. In 1996, the Simon Operating Partnership completed construction
and opened three expansion and/or renovation projects; Greenwood Plus in
Greenwood, Indiana; Muncie Mall in Muncie, Indiana; and College Mall in
Bloomington, Indiana.
The Simon Operating Partnership currently has one major expansion project
under construction, and is in the preconstruction development stage with an
additional major expansion project. The aggregate cost of the projects is
approximately $240 million.
*A 235,000 square foot phase II expansion of Forum in Las Vegas, in which the
Simon Operating Partnership has a 55% ownership interest, is scheduled to
open in August 1997. The costs of the phase II project are being funded
with a portion of the $184 million two-tranche financing facility which
closed on February 23, 1996. The loan bears interest on a weighted average
basis at LIBOR plus 137 basis points and matures in February 2000.
*A 200,000 square foot small shop expansion of North East Mall, in Hurst,
Texas, which includes a renovation, is scheduled for completion in 1999.
This project includes the addition of Nordstrom and a second level of small
shops.
The Simon Operating Partnership has a number of smaller renovation and/or
expansion projects currently under construction including the following,
aggregating approximately $30 million:
Expected Date
of Completion Property Name Property Location
-------------- ------------------------ ------------------------------
March 1997 Smith Haven Mall Lake Grove (Long Island), NY
April 1997 St. Charles Towne Center Waldorf (Washington, D.C.), MD
August 1997 Orange Park Mall Jacksonville, FL
October 1997 Alton Square Alton, IL
November 1997 East Towne Mall Knoxville, TN
In addition, preconstruction development continues on a number of project
expansions, renovations and anchor additions at additional properties. The
Simon Operating Partnership expects to commence construction on many of these
projects in the next 12 to 24 months.
It is anticipated that these projects will be financed principally with
access to debt and equity markets, existing corporate credit facilities and
cash flow from operations.
Capital Expenditures. Capital expenditures were $211.3 million, $135.4
million and $252.5 million for the periods ended December 31, 1996, 1995 and
1994, respectively.
1996 1995 1994
------- ------- -------
New Developments $ 63.7 $ 29.7 $ 2.9
Renovations and Expansions 66.2 38.9 22.7
Tenant Allowances--Retail 21.5 17.2 10.1
Tenant Allowances--Offices 6.1 4.3 2.5
Capital Expenditures Recoverable
from Tenants 6.7 8.0 3.2
Acquisitions 43.9 32.5 205.2
Other 3.2 4.8 5.9
------- ------- -------
Total $ 211.3 $ 135.4 $ 252.5
======= ======= =======
Distributions. The Simon Operating Partnership declared distributions in
1996 aggregating $1.63 per Unit and $1.97 per Unit in 1995. This included a
distribution of $0.1515 per Unit on August 9, 1996, in connection with the
Merger, designated to align the time periods of distribution payments of the
merged companies. On January 23, 1997, the Simon Operating Partnership
declared a distribution of $0.4925 per Unit. The current annual distribution
rate is $1.97 per Unit. For federal income tax purposes, 64% of the 1996
distributions and 25% of the 1995 distributions represented a return of
capital. Future distributions will be determined based on actual results of
operations and cash available for distribution.
Capital Resources. Management anticipates that cash generated from
operating performance will provide the necessary funds on a short- and long-
term basis for its operating expenses, interest expense on outstanding
indebtedness, recurring capital expenditures, and distributions to 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 raised in the public markets by the Company.
Management continues to actively review and evaluate a number of
individual property and portfolio acquisition opportunities. Management
believes that funds on hand, amounts available under the Credit Facility,
together with the ability to issue 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
acquisition will be executed by SDG, LP.
Investing and Financing Activities. Cash used in investing activities for
the year ended December 31, 1996, was $176.3 million, including approximately
$44 million for the acquisition of the remaining economic ownership interest in
Ross Park Mall, capital expenditures and development related costs of $151.8
million including $40.4 million, $34.9 million, $11.1 million and $6.9 million
at Cottonwood Mall, Forum, Muncie Mall, and The Shops at Sunset Place,
respectively. In addition, investments in unconsolidated joint ventures
totaling approximately $57.3 million includes $21.4 million, $15.0 million,
$13.5 million and $3.2 million in equity contributions made to The Source,
Ontario Mills, Arizona Mills and The Tower Shops, respectively, to fund
development activity. These expenditures are partially offset by cash received
from unconsolidated entities of $35.8 million, which includes a $28.3 million
return of equity from Smith Haven Mall, and $38.6 million of note repayments
received from M.S. Management Associates.
Cash used in financing activities for the year ended December 31, 1996 was
$41.3 million as compared to $14.1 million in 1995. This increase is primarily
the result of an increase in partnership distributions ($35.4 million), and net
proceeds from sales of common and preferred stock in 1995 ($242.4 million),
partially offset by advances from SDG, LP ($259.4 million). The increase in
distributions is primarily the result of special distributions paid in
connection with the Merger ($14.5 million), the addition of the Preferred Units
($9.6 million), and additional Units issued in the comparative periods. The
annual distribution rate has remained at $1.97 per Unit in both periods.
INFLATION
Inflation has remained relatively low during the past four years and has
had a minimal impact on the operating performance of the Properties.
Nonetheless, substantially all of the tenants' leases contain provisions
designed to lessen the impact of inflation. Such provisions include clauses
enabling the 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Index to Financial Statements contained in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company is the sole general partner of the Simon Operating
Partnership. The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement for its annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A and is
included under the caption "EXECUTIVE OFFICERS OF THE REGISTRANT" in Part I
hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference
to the Company's definitive Proxy Statement for its annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference
to the Company's definitive Proxy Statement for its annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference
to the Company's definitive Proxy Statement for its annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
Report of Independent Public Accountants
Simon Property Group, L.P. Consolidated Balance Sheets as
of December 31, 1996 and 1995
Simon Property Group, L.P. Consolidated Statements of
Operations for the years ended December 31, 1996, 1995 and
1994
Simon Property Group, L.P. Consolidated Statements of
Changes in Partners' Equity (Deficit) for the years ended
December 31, 1996, 1995 and 1994
Simon Property Group, L.P. Consolidated Statements of
Cash Flows for the years ended December 31, 1996, 1995 and
1994
Notes to Financial Statements
(2) Financial Statement Schedule
Report of Independent Public Accountants
Schedule III _ Schedule of Real Estate and Accumulated
Depreciation
Notes to Schedule III
(3) Exhibits
The Exhibit Index attached hereto is hereby incorporated
by reference to this Item.
(b) Reports on Form 8-K
None.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Simon DeBartolo Group, Inc.:
We have audited the accompanying consolidated balance sheets of SIMON PROPERTY
GROUP, L.P. (a Delaware limited partnership) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, partners' equity (deficit) and cash flows for the years ended
December 31, 1996, 1995 and 1994. These financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Simon Property
Group, L.P. and subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1996, 1995 and 1994, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana
February 18, 1997
BALANCE SHEETS
Simon Property Group, L.P. Consolidated
(Dollars in thousands, except per unit amounts)
December 31,
----------------------
1996 1995
ASSETS: ---------- ----------
Investment properties, at cost $2,467,779 $2,162,161
Less - accumulated depreciation 238,167 152,817
---------- ----------
2,229,612 2,009,344
Cash and cash equivalents 50,009 62,721
Tenant receivables and accrued revenue, net 136,496 144,400
Notes receivable from Management Company 63,978 102,522
Investment in partnerships and joint 139,711 117,332
ventures, at equity
Deferred costs, net 84,295 81,398
Other assets 45,370 30,985
Minority interest 9,712 7,734
---------- ----------
Total assets $2,759,183 $2,556,436
---------- ----------
LIABILITIES:
Mortgages and other notes payable $2,042,254 $1,980,759
Advances from Simon DeBartolo Group, L.P. 259,382 --
Accounts payable and accrued expenses 113,027 113,131
Accrued distributions -- 48,594
Cash distributions and losses in partnerships 17,106 54,120
and joint ventures, at equity
Investment in Management Company and 18,519 20,612
affiliates
Minority interest 12,128 --
Other liabilities 42,139 19,582
---------- ----------
Total liabilities 2,504,555 2,236,798
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 13)
LIMITED PARTNERS' EQUITY INTEREST, 0 and
37,282,628 units outstanding,
respectively, at redemption value (Note 10) -- 908,764
PARTNERS' EQUITY (DEFICIT) (Notes 3 and 10):
Preferred units, 4,000,000 units authorized,
issued and outstanding 99,923 99,923
General Partner, 958,429 and 58,360,195 units
outstanding, respectively 1,601 135,710
Special Limited Partner, 95,356,834 and 0
units outstanding, respectively 158,458 --
Adjustment to reflect Limited Partners'
equity interest at redemption value -- (822,072)
Unamortized restricted stock award (5,354) (2,687)
---------- ----------
Total partners' equity (deficit) 254,628 (589,126)
---------- ----------
Total liabilities and partners'
equity (deficit) $2,759,183 $2,556,436
========== ==========
The accompanying notes are an integral part of these statements.
STATEMENTS OF OPERATIONS
Simon Property Group, L.P. Consolidated
(Dollars in thousands, except per unit amounts)
For the Year Ended December 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
REVENUE:
Minimum rent $ 339,120 $ 307,857 $ 255,716
Overage rent 23,300 23,278 25,463
Tenant reimbursements 194,507 192,994 163,588
Other income 34,977 29,528 28,909
--------- --------- ---------
Total revenue 591,904 553,657 473,676
--------- --------- ---------
EXPENSES:
Property operating 104,643 96,851 85,672
Depreciation and amortization 108,435 92,739 75,945
Real estate taxes 55,597 53,941 44,502
Repairs and maintenance 25,361 24,614 22,940
Advertising and promotion 21,119 18,888 17,000
Provision for credit losses 2,991 2,858 3,417
Other 12,937 12,630 9,902
Total operating expenses 331,083 302,521 259,378
OPERATING INCOME 260,821 251,136 214,298
--------- --------- ---------
INTEREST EXPENSE 162,485 150,224 122,980
NON-RECURRING INTEREST EXPENSE -- -- 27,184
--------- --------- ---------
INCOME BEFORE MINORITY INTEREST 98,336 100,912 64,134
MINORITY INTEREST (2,748) (2,681) (3,759)
GAIN ON SALE OF ASSETS, NET 88 1,871 --
--------- --------- ---------
INCOME BEFORE UNCONSOLIDATED ENTITIES 95,676 100,102 60,375
INCOME (LOSS) FROM UNCONSOLIDATED ENTITIES
5,223 1,403 (67)
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEMS 100,899 101,505 60,308
EXTRAORDINARY ITEMS (3,723) (3,285) (17,980)
--------- --------- ---------
NET INCOME 97,176 98,220 42,328
PREFERRED UNIT REQUIREMENT 8,125 1,490 --
--------- --------- ---------
NET INCOME AVAILABLE TO UNITHOLDERS $ 89,051 $ 96,730 $ 42,328
========= ========= =========
NET INCOME AVAILABLE TO UNITHOLDERS
ATTRIBUTABLE TO:
General Partner $ 31,125 $ 57,781 $ 23,377
Limited Partners 57,926 38,949 18,951
--------- --------- ---------
$ 89,051 $ 96,730 $ 42,328
EARNINGS PER UNIT: ========= ========= =========
Income before extraordinary items $ 0.97 $ 1.08 $ 0.71
Extraordinary items (0.04) (0.04) (0.21)
--------- --------- ---------
Net income $ 0.93 $ 1.04 $ 0.50
========= ========= =========
The accompanying notes are an integral part of these statements.
<TABLE>
Statements of Shareholders' Equity
Simon DeBartolo Group, Inc. Consolidated
(Dollars in thousands)
<CAPTION>
Common
Stock and
Class B
Series A Series B and Class Capital in Unamortized Total
Preferred Preferred C Common Excess of Accumulated Restricted Shareholders'
Stock Stock Stock Par Value Deficit Stock Award Equity
--------- --------- --------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1993 $ -- $ -- $ 5 $ 40,882 $ (11,366) $ -- $ 29,521
Common stock issued,
net of
issuance costs
(7,462,445 shares) 1 164,333 164,334
Transfer out of
limited partners'
interest
in the Operating
Partnership (69,650) (69,650)
Net income 23,377 23,377
Distributions (90,275) (90,275)
--------- --------- --------- ---------- ----------- ---------- ----------
Balance at
December 31, 1994 -- -- 6 135,565 (78,264) -- 57,307
Stock options
exercised (6,876
shares) 164 164
Common stock issued,
net of
issuance costs
(9,797,563 shares) 1 221,416 221,417
Preferred stock
issued, net of
issuance costs
(4,000,000 shares) 99,923 99,923
Stock incentive
program (143,311
shares) 3,608 (3,605) 3
Amortization of stock
incentive 918 918
Transfer out of
limited partners'
interest
in the Operating
Partnership (94,035) (94,035)
Net income 59,271 59,271
Distributions (112,022) (112,022)
--------- --------- --------- ---------- ----------- ---------- ----------
Balance at
December 31, 1995 99,923 -- 7 266,718 (131,015) (2,687) 232,946
Stock options
exercised (372,151
shares) 8,677 8,677
Common stock issued in
connection
with Merger
(37,873,965 shares) 3 922,276 922,279
Class C Common stock
issued in connection
with Merger (4,000
shares) 100 100
Common stock issued in
connection with
severance program
(70,074 shares) 1,841 1,841
Preferred stock
issued, net of
issuance costs
(8,000,000 shares) 192,989 192,989
Stock incentive
program (200,030
shares) 4,751 (4,751) -
Amortization of stock
incentive 2,084 2,084
Transfer out of
limited partners'
interest in the
Operating Partnership
(14,382) (14,382)
Net income 85,255 85,255
Distributions (126,836) (126,836)
Other (62) (62)
-------- --------- --------- ---------- ----------- -------- ----------
Balance at
December 31, 1996 $ 99,923 $ 192,989 $ 10 $1,189,919 $ (172,596) $(5,354) $1,304,891
========= ========= ========= ========== =========== ========== ==========
</TABLE>
STATEMENTS OF CASH FLOWS
Simon DeBartolo Group, Inc. Consolidated
(Dollars in thousands)
For the Year Ended December 31,
---------------------------------
1996 1995 1994
---------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 85,255 $ 59,271 $ 23,377
Adjustments to reconcile net income to net
cash provided by operating activities_
Depreciation and amortization 143,582 101,262 83,196
Loss on extinguishments of debt 3,521 3,285 17,980
Gain on sale of assets, net (88) (1,871) --
Limited partners' interest in Operating
Partnership 45,887 38,949 18,951
Straight-line rent (3,502) (1,126) (4,326)
Minority interest 4,300 2,681 3,759
Equity in income of unconsolidated
entities (9,545) (1,403) 67
Changes in assets and liabilities_
Tenant receivables and accrued revenue (6,422) 5,502 (3,908)
Deferred costs and other assets (12,756) (14,290) 1,099
Accounts payable, accrued expenses and
other liabilities (13,768) 2,076 (12,172)
---------- --------- ---------
Net cash provided by operating
activities 236,464 194,336 128,023
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (56,069) (32,547) (227,312)
Capital expenditures (195,833) (98,220) (42,765)
Cash from Merger and consolidation of
joint ventures, net of Merger costs 37,053 4,346 8,924
Decrease in restricted cash 1,474 -- --
Proceeds from sale of assets 399 2,550 --
Investments in unconsolidated entities (62,096) (77,905) (1,056)
Distributions from unconsolidated entities
36,786 6,214 5,842
Investments in and advances to/(from)
Management Company 38,544 (27,117) (10,405)
---------- --------- ---------
Net cash used in investing activities (199,742) (222,679) (266,772)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common and
preferred stock, net 201,704 242,377 106,773
Minority interest distributions (5,115) (3,680) (2,148)
Distributions to shareholders (166,640) (104,785) (67,279)
Distributions to limited partners (90,763) (72,941) (53,432)
Mortgage and other note proceeds, net of
transaction costs 1,293,582 456,520 405,430
Mortgage and other note principal payments
(1,267,902) (531,566) (256,081)
---------- --------- ---------
Net cash provided by (used in) financing
activities (35,134) (14,075) 133,263
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,588 (42,418) (5,486)
CASH AND CASH EQUIVALENTS, beginning of
period 62,721 105,139 110,625
---------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 64,309 $ 62,721 $ 105,139
========== ========= =========
The accompanying notes are an integral part of these statements.
SIMON PROPERTY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
1. ORGANIZATION
Simon DeBartolo Group, Inc. (the "Company"), formerly known as Simon
Property Group, Inc., is a self-administered and self-managed real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended.
On August 9, 1996, the Company acquired the national shopping center business
of DeBartolo Realty Corporation ("DRC"), The Edward J. DeBartolo Corporation
and their affiliates as the result of the Merger described in Note 3.
As of December 31, 1996, Simon Property Group, L.P. ("SPG, LP" or the
"Simon Operating Partnership") was a subsidiary partnership of Simon DeBartolo
Group, L.P. ("SDG, LP"). The Simon Operating Partnership, is engaged primarily
in the ownership, operation, management, leasing, acquisition, expansion and
development of real estate properties, primarily regional malls and community
shopping centers. As of December 31, 1996, the Simon Operating Partnership
owns or holds an interest in 124 income-producing properties, which consist of
63 regional malls, 54 community shopping centers, three specialty retail
centers, three mixed-use properties and one value-oriented super-regional mall
in 30 states (the "Properties"). The Simon Operating Partnership also owns
interests in two specialty retail centers and two value-oriented super-regional
malls five parcels of land held for future development. The Simon Operating
Partnership also holds substantially all of the economic interest in M.S.
Management Associates, Inc. (the "Management Company"). See Note 7 for a
description of the activities of the Management Company.
The Simon Operating Partnership is subject to risks incidental to the
ownership and operation of commercial real estate. These include, among
others, the risks normally associated with changes in the general economic
climate, trends in the retail industry, creditworthiness of tenants,
competition for tenants, changes in tax laws, interest rate levels, the
availability of financing, and potential liability under environmental and
other laws. Like most retail properties, the Simon Operating Partnership's
regional malls and community shopping centers rely heavily upon anchor tenants.
As of December 31, 1996, 131 of the approximately 438 anchor stores in the
Properties were occupied by JCPenney Company, Inc., Sears Roebuck & Co. and
Dillard Department Stores, Inc. An affiliate of JCPenney Company, Inc. is a
limited partner in the Simon Operating Partnership. In addition, the Chief
Operating Officer of Dillard Department Stores, Inc. is a director of the
Company.
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements of the Simon Operating
Partnership include the accounts of all entities owned or controlled by the
Simon Operating Partnership. All significant intercompany amounts have been
eliminated. The accompanying consolidated financial statements have been
prepared in accordance with generally accepted accounting principles, which
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses during the reported
periods. Actual results could differ from these estimates.
Properties which are wholly-owned ("Wholly-Owned Properties") or owned
less than 100% and are controlled by the Simon Operating Partnership ("Minority
Interest Properties") have been consolidated. Control is demonstrated by the
ability of the general partner to manage day-to-day operations, refinance debt
and sell the assets of the partnership without the consent of the limited
partner and the inability of the limited partner to replace the general
partner. Investments in partnerships and joint ventures which represent
noncontrolling 14.7% to 50.0% ownership interests ("Joint Venture Properties")
and the investment in the Management Company (see Note 7) are accounted for
using the equity method of accounting. These investments are recorded
initially at cost and subsequently adjusted for net equity in income (loss) and
cash contributions and distributions.
Effective April 1, 1994, the Simon Operating Partnership demonstrated its
ability to control the operating activities of The Forum Shops at Caesars
("Forum"). Subsequent to April 1, 1994, Forum is included in the accompanying
financial statements using the consolidated method of accounting. Prior to the
demonstration of control, Forum was reflected in the accompanying financial
statements using the equity method of accounting.
Effective July 1, 1995, the Simon Operating Partnership relinquished its
ability to solely direct certain activities related to the control of North
East Mall. As a result, the Property was no longer consolidated.
Net operating results of the Simon Operating Partnership are allocated
after preferred distributions (see Note 10), based on its partners' ownership
interests. The Company's direct and indirect weighted average ownership
interest in the Simon Operating Partnership during 1996, 1995 and 1994 was
61.0%, 60.3% and 55.6%, respectively. At December 31, 1996 and 1995, the
Company's ownership interest was 60.8% and 61.0%, respectively.
The following schedule identifies each Property included in the
accompanying consolidated financial statements and the method of accounting
utilized for each Property as of December 31, 1996:
CONSOLIDATED METHOD:
Regional Malls
- ------------------
Alton Square North Towne Square Northwoods Mall
Amigoland Mall Heritage Park Mall Orange Park Mall
Anderson Mall Hutchinson Mall Prien Lake Mall
Barton Creek Square Independence Center Ross Park Mall
Battlefield Mall Ingram Park Mall St. Charles Towne
Broadway Square Irving Mall Center
Century Mall Jefferson Valley Mall South Park Mall
Charles Towne Square La Plaza Mall Southgate Mall
Cielo Vista Mall Lincolnwood Town Southtown Mall
College Mall Center Sunland Park Mall
Cottonwood Mall Longview Mall Tippecanoe Mall
Crossroads Mall Machesney Park Mall Towne East Square
East Towne Mall Markland Mall Towne West Square
Eastgate Consumer Mall McCain Mall University Mall
Eastland Mall Memorial Mall (Arkansas)
Forest Mall Midland Park Mall University Mall
Forest Village Park Miller Hill Mall (Florida)
Mall Mounds Mall Valle Vista Mall
Fremont Mall Muncie Mall West Ridge Mall
Golden Ring Mall North East Mall White Oaks Mall
Greenwood Park Mall Wichita Mall
Windsor Park Mall
Specialty Retail Mixed-Use
Centers Properties
- ------------------ --------------
The Forum Shops at O'Hare
Caesars International
Center
Trolley Square Riverway
Community Centers
- ------------------
Arvada Plaza Greenwood Plus New Castle Plaza
Aurora Plaza Griffith Park Plaza North Ridge Plaza
Bloomingdale Court Hammond Square North Riverside Park
Bridgeview Court Ingram Plaza Plaza
Brightwood Plaza Lake Plaza Northland Plaza
Bristol Plaza Lake View Plaza Northwood Plaza
Buffalo Grove Towne Lincoln Crossing Park Plaza
Center Maplewood Square Regency Plaza
Celina Plaza Markland Plaza St. Charles Towne
Cohoes Commons Martinsville Plaza Plaza
Countryside Plaza Marwood Plaza Teal Plaza
East Towne Commons Matteson Plaza Tippecanoe Plaza
Eastland Plaza Memorial Plaza Wabash Village
Forest Plaza Mounds Mall Cinema West Ridge Plaza
Fox River Plaza White Oaks Plaza
Wood Plaza
EQUITY METHOD:
Regional Malls Community Centers Value-Oriented
Super-Regional Mall
- ------------------ ------------------ ------------------
Circle Centre Cobblestone Court Ontario Mills
Lakeline Mall Crystal Court
Rolling Oaks Mall Fairfax Court Mixed-Use Property
Seminole Towne Center Gaitway Plaza ------------------
Smith Haven Mall Plaza at Buckland The Fashion Centre at
Hills, The Pentagon City
Ridgewood Court
Royal Eagle Plaza Specialty Retail
Village Park Plaza Center
West Town Corners ------------------
Westland Park Plaza The Tower Shops
Willow Knolls Court
Yards Plaza, The
The deficit minority interest balance in the accompanying Consolidated
Balance Sheets represents outside partners' interests in the net equity of
certain Properties. Deficit minority interests were recorded when a
partnership agreement provided for the settlement of deficit capital accounts
before distributing the proceeds from the sale of partnership assets and/or
from the intent (legal or otherwise) and ability of the partner to fund
additional capital contributions.
3. MERGERS AND REAL ESTATE ACQUISITIONS AND DEVELOPMENTS
Mergers
DRC. On August 9, 1996, the Company acquired the national shopping center
business of DRC (the "Merger") for an aggregate value of $3.0 billion. The
acquired portfolio consisted of 49 regional malls, 11 community centers and one
mixed-use Property. These Properties included 47,052,267 square feet of retail
space gross leasable area ("GLA") and 558,636 of office GLA. Pursuant to the
Merger, the Company acquired all the outstanding common stock of DRC
(55,712,529 shares), at an exchange ratio of 0.68 share of the Company's common
stock for each share of DRC common stock (the "Exchange Ratio"). A total of
37,873,965 shares of the Company's common stock was issued by the Company, to
the DRC shareholders. DRC and the acquisition subsidiary merged. DRC became a
99.9% subsidiary of the Company and changed its name to SD Property Group, Inc.
This portion of the transaction was valued at approximately $923,179, based
upon the number of DRC shares of common stock acquired (55,712,529 shares), the
Exchange Ratio and the last reported sales price of the Company's common stock
on August 9, 1996 ($24.375). In connection therewith, the Company changed its
name to Simon DeBartolo Group, Inc.
In connection with the Merger, the general and limited partners of SPG, LP
contributed 49.5% (47,442,212 units of partnership interest) of the total
outstanding units of partnership interest ("Units") in SPG, LP to the operating
partnership of DRC, DeBartolo Realty Partnership, L.P. ("DRP, LP") in exchange
for 47,442,212 Units of partnership interest in DRP, LP, whose name was changed
to Simon DeBartolo Group, L.P. ("SDG, LP"). The Company retained a 50.5%
partnership interest (48,400,641 Units) in SPG, LP but assigned its rights to
receive distributions of profits on 49.5% (47,442,212 Units) of the outstanding
Units of partnership interest in SPG, LP to SDG, LP. The limited partners of
DRP, LP approved the contribution made by the partners of SPG, LP and
simultaneously exchanged their 38.0% (34,203,623 Units) partnership interest in
DRP, LP, adjusted for the Exchange Ratio, for a smaller partnership interest in
SDG, LP. The exchange of the limited partners' 38.0% partnership interest in
DRP, LP for Units of SDG, LP has been accounted for as an acquisition of
minority interest by the Company and is valued based on the estimated fair
value of the consideration issued (approximately $566,900). The Units of SDG,
LP may under certain circumstances be exchangeable for common stock of the
Company on a one-for-one basis. Therefore, the value of the acquisition of the
DRP, LP limited partners' interest acquired was based upon the number of DRP,
LP Units exchanged (34,203,623), the Exchange Ratio and the last reported sales
price per share of the Company's common stock on August 9, 1996 ($24.375). The
limited partners of SPG, LP received a 23.7% partnership interest in SDG, LP
(37,282,628 Units) for the contribution of their 38.9% partnership interest in
SPG, LP (37,282,628 Units) to SDG, LP. The interests transferred by the
partners of SPG, LP to DRP, LP have been appropriately reflected at historical
costs.
Upon completion of the Merger, the Company became a general partner of
SDG, LP with 36.9% (57,605,796 Units) of the outstanding partnership Units in
SDG, LP and became through SD Property Group, Inc. the managing general partner
of SDG, LP with 24.3% (37,873,965 Units in SPG, LP) of the outstanding
partnership Units in SDG, LP. The Company remained the sole general partner of
SPG, LP with 1% of the outstanding partnership Units (958,429 Units) and 49.5%
interest in the capital of SPG, LP, and SDG, LP became the special limited
partner in SPG, LP with 49.5% (47,442,212 Units) of the outstanding partnership
Units in SPG, LP and an additional 49.5% interest in the profits of SPG, LP.
SPG, LP did not acquire any interest in SDG, LP. Upon completion of the
Merger, the Company directly and indirectly owned a controlling 61.2%
(95,479,761 Units) partnership interest in SDG, LP.
For financial reporting purposes, the completion of the Merger resulted in
a reverse acquisition by the Company, using the purchase method of accounting,
directly or indirectly, of 100% of the net assets of DRP, LP for consideration
valued at $1.5 billion, including related transaction costs. The purchase
price has been allocated to the fair value of the assets and liabilities of
DRP, LP at December 31, 1996. Certain assumptions were made which management
of the General Partners believes are reasonable. Final adjustments to the
purchase price allocation were not completed at December 31, 1996. While no
material changes to the allocation are anticipated, changes will be recorded in
1997.
Although the Company was the accounting acquirer, SDG, LP (formerly DRP,
LP) became the primary operating partnership through which the future business
of the Company will be conducted. As a result of the Merger, the Company's
initial operating partnership, SPG, LP, became a subsidiary of SDG, LP with 99%
of the profits allocable to SDG, LP and 1% of the profits allocable to the
Company. Cash flow allocable to the Company's 1% profit interest in SDG, LP is
absorbed by public company costs and related expenses incurred by the Company.
However, because the Company was the accounting acquirer and, upon completion
of the Merger, acquired majority control of SDG, LP; SPG, LP is the predecessor
to SDG, LP for financial reporting purposes. Accordingly, the financial
statements of SDG, LP for the post-Merger periods reflect the reverse
acquisition of DRP, LP by the Company using the purchase method of accounting
and for all pre-Merger comparative periods, and the financial statements of
SDG, LP reflect the financial statements of SPG, LP as the predecessor to SDG,
LP for financial reporting purposes.
It is currently expected that subsequent to the first anniversary of the
date of the Merger, reorganizational transactions will be effected so that SDG,
LP will directly own all of the assets and partnership interests now owned by
SPG, LP. However, there can be no assurance that such reorganizational
transactions will be so effected.
MSA Realty Corporation ("MSAR"). On September 1, 1994, the Company issued
an additional 1,799,945 shares of common stock in conjunction with the merger
of MSAR. Each outstanding share of MSAR common stock as of August 31, 1994,
was converted into 0.31 shares of the Company's common stock. The acquisition
price, including related transaction costs, was $48,031. The Company's
investment in MSAR was contributed to the Simon Operating Partnership for
1,799,945 Units, which increased the Company's ownership of the Simon Operating
Partnership by 1.0% to 56.4%. As a result of the acquisition, the Simon
Operating Partnership now owns 100% of fourteen centers in which it previously
held a 50% interest and substantially all of the ownership interest in one
community shopping center in which it held a minority interest. In addition,
the Simon Operating Partnership obtained a noncontrolling 50% interest in a
regional mall. This transaction was accounted for using the purchase method of
accounting. The purchase price in excess of the net assets acquired of $26,507
was allocated to investment properties. The Simon Operating Partnership's
interest in the assets and liabilities of these centers prior to this
transaction is reflected at predecessor cost. Subsequent to September 1, 1994,
each of the Properties involved in this merger was accounted for using the
consolidated method of accounting.
Acquisitions and Developments
Independence Center. On December 1, 1994, the Simon Operating Partnership
acquired Independence Center in Independence, Missouri. Included in the
purchase are approximately 47 acres of undeveloped land adjacent to the mall.
Under the terms of the sale, the Simon Operating Partnership paid $51,413,
including transaction costs, funded through the use of the Simon Operating
Partnership's credit facilities.
Broadway Square, Orange Park Mall and University Mall. On December 29,
1994, the Simon Operating Partnership acquired Broadway Square in Tyler, Texas;
Orange Park Mall in Jacksonville, Florida; and University Mall in Pensacola,
Florida. Under the terms of the sale, the Simon Operating Partnership paid
$153,874, including transaction costs, funded through the use of the Simon
Operating Partnership's credit facilities. Included in the purchase price were
approximately 14 acres and 10 acres of undeveloped land adjacent to Orange Park
Mall and University Mall, respectively.
White Oaks Mall. At the time of the Company's initial public offering in
December 1993, the Teacher's Retirement System of the State of Illinois ("TRS")
held an option to put its 50% general and limited partnership interests in
White Oaks Mall in Springfield, Illinois, to the Simon Operating Partnership.
TRS exercised this option on January 23, 1995, and the purchase closed February
23, 1995. The Units which TRS received upon exercise of the options were
exchanged for 2,022,247 shares of common stock of the Company. The Simon
Operating Partnership now owns 77% of White Oaks Mall. The issuance of the
additional shares increased the Company's ownership interest in the Simon
Operating Partnership by 1.0% to 57.6%. The White Oaks Mall transaction,
valued at $45,000, was accounted for using the purchase method of accounting.
The purchase price in excess of the net assets acquired of $10,905 was
allocated to investment properties. The Simon Operating Partnership's interest
in the assets and liabilities of this Property prior to this transaction is
reflected at predecessor cost. Effective February 23, 1995, White Oaks Mall
was being accounted for in the accompanying consolidated financial statements
using the consolidated method of accounting. It was previously accounted for
using the equity method of accounting.
Crossroads Mall. Prior to July 31, 1995, the Simon Operating Partnership
held a 50% joint venture interest in Crossroads Mall in Omaha, Nebraska. On
July 31, 1995, the Simon Operating Partnership acquired the remaining 50%
ownership in the Property from Melvin Simon, Herbert Simon, and certain of
their affiliates (collectively, the "Simons") in exchange for 120,000 Units.
The acquisition was reflected at predecessor cost. Concurrent with the
acquisition, a debt restructuring was completed which included the issuance of
1,200,000 shares of common stock of the Company to the lender (New York State
Teachers' Retirement System) in exchange for a $30,000 reduction of the
outstanding loan balance which included accrued interest. In addition, the
effective interest rate on the remaining balance of $41,400 was reduced from
10.5% to 7.75%. The loan matures on July 31, 2002. Effective July 31, 1995,
Crossroads Mall was included in the accompanying consolidated financial
statements using the consolidated method of accounting. It was previously
accounted for using the equity method of accounting.
The Shops at Sunset Place. On August 15, 1995, the Simon Operating
Partnership acquired for $11,406 a controlling 75% joint venture interest in a
redevelopment project to be named "The Shops at Sunset Place" in South Miami,
Florida, using borrowings from its unsecured revolving credit facility. The
Simon Operating Partnership began construction on this 500,000 square foot
development property in November 1996, and it is scheduled for completion in
1998. The Simon Operating Partnership expects to have construction financing
for the majority of the development costs of this project in place before the
end of the second quarter of 1997. This project is included in the
accompanying consolidated financial statements using the consolidated method of
accounting.
East Towne Mall. Prior to September 25, 1995, the Simon Operating
Partnership held a 45.0% joint venture interest in East Towne Mall in
Knoxville, Tennessee. On September 25, 1995, the Simon Operating Partnership
acquired the remaining interest for $18,500 and the assumption of 55% of the
$75,000 of existing mortgage debt. In connection with the transaction, the
Simon Operating Partnership refinanced the $75,000 mortgage. These
transactions were funded through a new loan of $55,000 and $38,500 in
borrowings from the Simon Operating Partnership's unsecured revolving credit
facility. The transaction was accounted for using the purchase method of
accounting. The purchase price in excess of the net assets acquired of $21,982
was allocated to investment properties. Effective September 25, 1995, East
Towne Mall was included in the accompanying consolidated financial statements
using the consolidated method of accounting. It was previously accounted for
using the equity method of accounting.
The Source. On December 22, 1995, a joint venture, in which the Simon
Operating Partnership has a noncontrolling 50% joint venture interest acquired
a development project located in Westbury (Long Island), New York, for $30,253.
This transaction was initially financed using borrowings from the Simon
Operating Partnership's unsecured revolving credit facility. When construction
financing of $120,000 closed on this property in July 1996, the Simon Operating
Partnership was repaid its $27,500 loan. The construction loan carries
interest at LIBOR plus 170 basis points and matures on July 16, 2001.
Construction commenced in February 1996 and this 730,000 square foot value-
oriented retail center development is expected to open in August 1997. This
joint venture is being accounted for using the equity method of accounting.
Smith Haven Mall. On December 28, 1995, a joint venture in which the
Simon Operating Partnership owns a noncontrolling 25% interest, purchased Smith
Haven Mall, a 1.3 million square foot regional mall located in Lake Grove (Long
Island), New York, for $221,000. The Simon Operating Partnership's
contribution of $55,725 to the purchase price of $221,000 was financed using
borrowings from the Simon Operating Partnership's unsecured revolving credit
facility. On June 17, 1996, the joint venture closed on a $115,000 interest-
only mortgage maturing June 1, 2006. Subsequently, the Simon Operating
Partnership received a reimbursement of $28,256 of its contribution. This
joint venture is being accounted for using the equity method of accounting.
Ross Park Mall. Prior to April 11, 1996, the Simon Operating Partnership
held a 50% joint venture interest in Ross Park Mall in Pittsburgh,
Pennsylvania. On April 11, 1996, the Simon Operating Partnership acquired the
remaining economic ownership interest. The purchase price included
approximately $44,000 cash and the assumption of the joint venture partner's
share of existing debt ($57,000). The purchase price in excess of the net
assets acquired of $49,074 was allocated to investment properties. Effective
April 11, 1996, the property is being accounted for using the consolidated
method of accounting. It was previously accounted for using the equity method
of accounting.
Cottonwood Mall. Cottonwood Mall opened on July 31, 1996, in Albuquerque,
New Mexico. This 1.0 million square foot regional mall is wholly-owned by the
Simon Operating Partnership. The development costs were financed through a
$60,000 construction loan, which bore interest at the lower of the prime rate
plus 25 basis points or LIBOR plus 200 basis points and had a scheduled
maturity of February 1, 1999. On November 26, 1996, using proceeds from the
sale of the Notes (See Note 8) the Simon Operating Partnership retired the
entire $57,000 outstanding balance.
North East Mall. Prior to October 4, 1996, the Simon Operating
Partnership held the right to receive 50% of the Partnership results of North
East Mall in Hurst, Texas. On October 4, 1996, in connection with the
settlement of certain outstanding litigation, the SDG, LP acquired for $12,100
an additional 20% limited partnership interest in North East Mall. At the same
time, the Simon Operating Partnership exercised its option to acquire the
remaining 30% limited partnership interest in North East Mall owned by the
Simons in exchange for 472,410 Units in the Simon Operating Partnership, as
well as the Simons' 50% general partnership interest. The Simons had
previously contributed the right to receive distributions relating to its 50%
general partnership interest to the Simon Operating Partnership, in exchange
for Units. As a result of these transactions, the Simon Operating Partnership
owns 80% of North East Mall and accounts for it using the consolidated method
of accounting. SDG, LP owns the remaining 20%.
Mills Developments. On December 29, 1995, the Simon Operating Partnership
entered into arrangements with The Mills Corporation to develop value-oriented
super-regional malls in Ontario (Los Angeles), California; Grapevine
(Dallas/Fort Worth), Texas; and Tempe (Phoenix), Arizona. Ontario Mills, a 25%-
owned, 1.3 million square foot super-regional mall, opened on November 14,
1996, in Ontario, California. The Simon Operating Partnership financed its
$15,000 equity commitment for this project in 1996. Grapevine Mills, a 37.5%-
owned, 1.5 million square foot development project, broke ground on July 10,
1996, and is expected to open in October 1997. The Simon Operating Partnership
has a $14,000 equity commitment on this $211,000 development project. Arizona
Mills, a 25%-owned, 1.2 million square foot development project, broke ground
on August 1, 1996, and is expected to open in November 1997. The Simon
Operating Partnership has a $13,500 equity investment in this $183,000
development project. These projects are being accounted for using the equity
method of accounting.
Joint Venture Property Openings. The Simon Operating Partnership opened
two new Joint Venture Properties during 1996. Ontario Mills, described above,
opened on November 14, 1996, and the Tower Shops in Las Vegas, Nevada opened in
November 1996. The Simon Operating Partnership has a noncontrolling 50.0%
ownership interest in this approximately 60,000 square foot specialty retail
center. These properties are being accounted for using the equity method of
accounting.
The Simon Operating Partnership also opened three new regional malls
during 1995. Circle Centre opened on September 8, 1995, in Indianapolis,
Indiana. The Simon Operating Partnership has a 14.7% ownership interest in
this approximately 800,000 square foot regional mall. Seminole Towne Center
opened on September 22, 1995, in Sanford, Florida. The Simon Operating
Partnership has a 45.0% ownership interest in this approximately 1.1 million
square foot regional mall. Lakeline Mall opened on October 18, 1995, in
Austin, Texas. The Simon Operating Partnership has a noncontrolling 50.0%
ownership interest in this approximately 1.1 million square foot regional mall.
Each of these regional malls is being accounted for using the equity method of
accounting.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment Properties
Investment properties are recorded at the lower of cost (predecessor cost
for Properties acquired from the Simons) or net realizable value. Net
realizable value of investment properties for financial reporting purposes is
reviewed for impairment on a Property-by-Property basis whenever events or
changes in circumstances indicate that the carrying amount of investment
properties may not be recoverable. Impairment of investment properties is
recognized when estimated undiscounted operating income is less than the
carrying value of the Property. To the extent an impairment has occurred, the
excess of carrying value of the Property over its estimated net realizable
value will be charged to income. The Simon Operating Partnership adopted
Statement of Financial Accounting Standards ("SFAS") No. 121 (Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of) on
January 1, 1996. The adoption of this pronouncement had no impact on the
accompanying consolidated financial statements. Investment properties include
costs of acquisition, development, construction, tenant allowances and
improvements, interest and real estate taxes incurred during construction,
certain capitalized improvements and replacements, and certain allocated
overhead.
Depreciation on buildings and improvements is provided utilizing the
straight-line method over an estimated original useful life of 10 to 45 years,
resulting in an average composite life of approximately 30 years. Depreciation
on tenant allowances and improvements is provided utilizing the straight-line
method over the term of the related lease.
Certain improvements and replacements are capitalized when they extend the
useful life, increase capacity, or improve the efficiency of the asset. All
other repair and maintenance items are expensed as incurred.
Capitalized Interest
Interest is capitalized on projects during periods of construction.
Interest capitalized by the Simon Operating Partnership during 1996, 1995 and
1994 was $5,156, $1,515 and $1,586, respectively.
Deferred Costs
Deferred costs consist primarily of financing fees incurred to obtain long-
term financing, costs of interest rate protection agreements, and internal and
external leasing commissions and related costs. Deferred financing costs,
including interest rate protection agreements, are amortized on a straight-line
basis over the terms of the respective loans or agreements. Deferred leasing
costs are amortized on a straight-line basis over the terms of the related
leases. Deferred costs consist of the following:
DECEMBER 31,
--------------------
1996 1995
-------- --------
Deferred financing costs $ 59,968 $ 68,042
Leasing costs and other 94,103 88,094
-------- --------
154,071 156,136
Lessaccumulated amortization 69,776 74,738
-------- --------
Deferred costs, net $ 84,295 $ 81,398
======== ========
Included in interest expense in the accompanying Consolidated Statements
of Operations is amortization of deferred financing costs of $8,418, $8,523 and
$7,251 for 1996, 1995 and 1994, respectively.
Revenue Recognition
The Simon Operating Partnership, as a lessor, has retained substantially
all of the risks and benefits of ownership of the investment Properties and
accounts for its leases as operating leases. Minimum rents are accrued on a
straight-line basis over the terms of their respective leases. Overage rents
are recognized when earned.
Reimbursements from tenants for real estate taxes and other recoverable
operating expenses are recognized as revenue in the period the applicable
expenditures are incurred.
Allowance for Credit Losses
A provision for credit losses is recorded based on management's judgment
of tenant creditworthiness. The activity in the allowance for credit losses
during 1996, 1995 and 1994 was as follows:
Provision
Balance at for Accounts Balance
Beginning Credit Written at End of
Year Ended of Year Losses Off Year
---------- --------- -------- ---------
December 31, l996 $ 4,259 $ 2,991 $(1,027) $ 6,223
======= ======= ======== =======
December 31, l995 $ 2,943 $ 2,858 $(1,542) $ 4,259
======= ======= ======== =======
December 31, l994 $ - $ 3,417 $ (474) $ 2,943
======= ======= ======== =======
Income Taxes
As a partnership, the allocated share of income or loss for each year is
included in the income tax returns of the partners, accordingly, no accounting
for income taxes is required in the accompanying consolidated financial
statements. State and local taxes are not material.
Taxable income of the Simon Operating Partnership for the year ended
December 31, 1996, is estimated to be $100,228 and was $100,915 and $44,683 for
the years ended 1995 and 1994, respectively. Reconciling differences between
book income and tax income primarily result from timing differences consisting
of (i) depreciation expense, (ii) prepaid rental income and (iii) straight-line
rent. Furthermore, the Simon Operating Partnership's share of income or loss
from the affiliated Management Company is excluded from the tax return of the
Simon Operating Partnership.
Per Unit Data
The net income per Unit is based on the weighted average number of Units
outstanding during the period. The weighted average number of Units used in
the computation for 1996, 1995 and 1994 was 95,913,460; 92,666,469; and
84,509,597, respectively. The stock options outstanding under the Stock Option
Plan (see note 10) and the Units entitled to preferential distributions of cash
("Preferred Units") have not been considered in the computations of per Unit
data, as they did not have a dilutive effect.
It is the Simon Operating Partnership's policy, to accrue distributions
when they are declared. The Simon Operating Partnership declared distributions
in 1996 aggregating $1.63 per Unit. The 1996 distributions include a $0.1515
distribution on August 9, 1996, in connection with the Merger, designated to
align the time periods of distribution payments of the merged entities. The
current annual distribution rate is $1.97 per Unit. The following is a summary
of distributions per Unit declared in 1996 and 1995, which represented a return
of capital measured using generally accepted accounting principles:
FOR THE YEAR
ENDED DECEMBER 31,
Distributions per Unit 1996 1995
------- -------
From book net income $ 0.93 $ 1.04
Representing return of capital 0.70 0.93
Total distributions $ 1.63 $ 1.97
On a federal income tax basis, 64% of the 1996 distributions and 25% of
the 1995 distributions represented return of capital.
Statements of Cash Flows
For purposes of the Statements of Cash Flows, all highly liquid
investments purchased with an original maturity of 90 days or less are
considered as cash and cash equivalents. Cash equivalents are carried at cost,
which approximates market value. Cash equivalents generally consist of
commercial paper, bankers acceptances, Eurodollars, repurchase agreements and
Dutch auction securities.
Cash paid for interest, net of any amounts capitalized, during 1996, 1995
and 1994 were $161,133, $142,345 and $140,106 respectively. The 1994 amount
includes a $27,184 nonrecurring interest charge.
Noncash Transactions
The following is a summary of significant non-cash transactions.
As described in Note 2, effective April 1, 1994, the Simon Operating
Partnership reflected Forum using the consolidated method of accounting.
As described in Note 3, on September 1, 1994, the Simon Operating
Partnership issued 1,799,945 Units in conjunction with the merger of MSAR. On
February 23, 1995, the Simon Operating Partnership issued 2,022,247 Units in
connection with the acquisition of an additional joint venture interest in
White Oaks Mall. On July 31, 1995, the Simon Operating Partnership issued
120,000 Units in exchange for the Simons' 50% interest in Crossroads Mall. The
Company issued 1,200,000 shares of common stock in connection with the
reduction of the outstanding loan and accrued interest at Crossroads Mall.
Effective October 4, 1996, the Simon Operating Partnership reflected North East
Mall using the consolidated method of accounting.
Accrued and unpaid distributions as of December 31, 1996 and 1995 were $0
and $47,104, respectively. Accrued and unpaid distributions at December 31,
1995, included $1,490 on the Preferred Units.
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation. These
reclassifications have no impact on net operating results previously reported.
5. INVESTMENT PROPERTIES
Investment properties consist of the following:
DECEMBER 31,
1996 1995
----------- -----------
Land $ 312,683 $ 283,722
Buildings and improvements 2,131,475 1,860,203
----------- -----------
Total land, buildings and
improvements 2,444,158 2,143,925
Furniture, fixtures and equipment 23,621 18,236
----------- -----------
Investment properties at cost 2,467,779 2,162,161
Less-accumulated depreciation 238,167 152,817
----------- -----------
Investment properties at cost, net $ 2,229,612 $ 2,009,344
=========== ===========
Building and improvements include $74,500 and $40,676 of construction in
progress at December 31, 1996 and 1995, respectively.
6. INVESTMENT IN PARTNERSHIPS AND JOINT VENTURES
Summary financial information of partnerships and joint ventures accounted
for using the equity method and a summary of the Simon Operating Partnership's
investment in and share of income from such partnerships and joint ventures
follows.
DECEMBER 31,
BALANCE SHEETS 1996 1995
ASSETS: ---------- ----------
Investment properties at cost, net $1,328,600 $1,156,066
Cash and cash equivalents 41,270 52,624
Tenant receivables 37,067 35,306
Other assets 54,981 32,626
---------- ----------
Total assets $1,461,918 $1,276,622
========== ==========
LIABILITIES AND PARTNERS' EQUITY:
Mortgages and other notes payable $ 569,433 $ 410,652
Accounts payable, accrued expenses and other
liabilities 161,552 127,322
---------- ----------
Total liabilities 730,985 537,974
Partners' equity 730,933 738,648
---------- ----------
Total liabilities and partners' equity $1,461,918 $1,276,622
========== ==========
THE SIMON OPERATING PARTNERSHIP'S SHARE OF:
Total assets $ 340,449 $ 290,802
========== ==========
Investment in partnerships and joint ventures, at $ 139,711 $117,332
equity
Cash distribution and losses in partnerships and
joint ventures, at equity (17,106) (54,120)
---------- ----------
Partners' equity $ 122,605 $ 63,212
========== ==========
FOR THE YEAR ENDED DECEMBER 31,
STATEMENTS OF OPERATIONS 1996 1995 1994
REVENUE: --------- --------- ---------
Minimum rent $ 110,221 $ 83,905 $ 92,380
Overage rent 3,890 2,754 3,655
Tenant reimbursements 53,909 39,500 45,440
Other income 10,206 13,980 10,131
--------- --------- ---------
Total revenue 178,226 140,139 151,606
OPERATING EXPENSES:
Operating expenses and other 68,421 46,466 55,949
Depreciation and amortization 41,839 26,409 26,409
--------- --------- ---------
Total operating expenses 110,260 72,875 82,358
--------- --------- ---------
OPERATING INCOME 67,966 67,264 69,248
INTEREST EXPENSE 30,823 28,685 38,124
EXTRAORDINARY ITEMS (1,314) (2,687) --
--------- --------- ---------
NET INCOME 35,829 35,892 31,124
THIRD-PARTY INVESTORS' SHARE OF NET INCOME
31,717 30,752 30,090
--------- --------- ---------
THE SIMON OPERATING PARTNERSHIP'S
SHARE OF NET INCOME $ 4,112 $5,140 $1,034
========= ========= =========
The net income or net loss for each partnership and joint venture is
allocated in accordance with the provisions of the applicable partnership or
joint venture agreement. The allocation provisions in these agreements are not
always consistent with the ownership interests held by each general or limited
partner or joint venturer, primarily due to partner preferences.
7. INVESTMENT IN MANAGEMENT COMPANY
The Simon Operating Partnership holds 80% of the outstanding common stock,
5% of the outstanding voting common stock, and all of the preferred stock of
the Management Company. The remaining 20% of the outstanding common stock of
the Management Company (representing 95% of the voting common stock) is owned
directly by Melvin, Herbert and David Simon. The Management Company, including
its consolidated subsidiaries, provides management, leasing, development,
accounting, legal, marketing and management information systems services to 33
Minority Interest and Joint Venture Properties, Melvin Simon & Associates, Inc.
("MSA"), and certain other nonowned properties. Because the Simon Operating
Partnership exercises significant influence over the financial and operating
policies of the Management Company, it is reflected in the accompanying
statements using the equity method of accounting.
In connection with the Merger, the Management Company purchased 95% of the
voting stock (665 shares of common stock) of DeBartolo Property Management,
Inc. ("DPMI"), a DRC management company, for $2,500 in cash. DPMI provides
architectural, design, construction and other services primarily to the
Properties. During 1996, DPMI formed a captive insurance company, which
provided property damage and general liability insurance to certain DeBartolo
Properties in 1996. SDG, LP paid a total of $2,383 to this wholly-owned
subsidiary of the Management Company for insurance coverage during 1996. The
Management Company accounts for both DPMI and the captive insurance company
using the consolidated method of accounting.
During 1995, the Simon Operating Partnership advanced a net of $27,500 to
the Management Company, which bears interest at 11%. The proceeds were used to
acquire a $27,500 mortgage note due from The Source, in which the Simon
Operating Partnership has a noncontrolling 50% interest. In July 1996, the
joint venture which owns The Source closed on a $120,000 construction loan and
retired the mortgage note. The Management Company in turn repaid the Simon
Operating Partnership the $27,500 advanced in 1995. The Management Company
also liquidated in 1995 its interest in a partnership investment which held a
9.8-acre parcel of land in Rosemont, Illinois. The sale of that parcel
resulted in a loss of $958 to the Management Company. Further, an undeveloped
two-acre parcel of land in Washington, D.C., for which the Management Company
held a mortgage, was sold in December 1995. The Management Company forwarded
$11,000 of the net proceeds from this sale to the Simon Operating Partnership
in January 1996 to reduce its outstanding loan balance. The Management Company
recorded a loss in 1995 in connection with this transaction of $3,949.
Management, development and leasing fees charged to the Simon Operating
Partnership and SDG, LP relating to Minority Interest Properties were $6,916,
$5,353 and $2,352 for the years ended December 31, 1996, 1995 and 1994,
respectively. Architectural, contracting and engineering fees charged to the
Simon Operating Partnership and SDG, LP for 1996 were $21,650. Fees for
services provided by the Management Company to MSA were $4,000, $4,572 and
$7,239 for the years ended December 31, 1996, 1995 and 1994, respectively, and
are included in cost-sharing income and other in the Management Company's
Statements of Operations.
At December 31, 1996 and 1995, total notes receivable and advances due
from the Management Company and consolidated affiliates were $63,978 and
$102,522, respectively. Unpaid interest income receivable from the Management
Company at December 31, 1996 and 1995, was $0 and $84, respectively. All
preferred dividends due from the Management Company were paid by December 31,
1996 and 1995. Interest and preferred dividend receivables, if any, are
reflected in tenant receivables and accrued revenue in the accompanying
Consolidated Balance Sheets.
Summarized consolidated financial information of the Management Company,
accounted for using the equity method, and a summary of the Simon Operating
Partnership's investment in and share of income (loss) from the Management
Company follows.
DECEMBER 31,
BALANCE SHEETS 1996 1995
ASSETS: --------- ---------
Current assets $ 69,708 $ 40,964
Undeveloped land and mortgage notes 16,177 45,769
Other assets 24,378 13,813
--------- ---------
Total assets $ 110,263 $ 100,546
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT:
Current liabilities $ 46,690 $ 18,435
Notes payable and advances due to Simon 63,978 102,522
Operating Partnership at 11%, due 2008
SDG, LP Advances and minority interest in DPMI 17,601 --
--------- ---------
Total liabilities 128,269 120,957
Shareholders' deficit (18,006) (20,411)
--------- ---------
Total liabilities and shareholders' deficit $ 110,263 $ 100,546
========= =========
THE SIMON OPERATING PARTNERSHIP'S SHARE OF:
Total assets $ 96,316 $ 80,437
========= =========
Shareholders' deficit $ (18,519) $(20,612)
========= =========
FOR THE YEAR ENDED DECEMBER 31,
STATEMENTS OF OPERATIONS 1996 1995 1994
REVENUE: --------- --------- ---------
Management fees $ 20,529 $ 20,106 $ 18,587
Architectural, contracting and
engineering fees 35,546 -- --
Development and leasing fees 10,611 15,451 9,683
Cost-sharing income and other 11,979 7,561 10,077
--------- --------- ---------
Total revenue 78,665 43,118 38,347
EXPENSES:
Operating expenses and costs of
construction 60,508 31,163 27,944
Depreciation 2,852 2,275 1,406
Interest 6,232 7,694 8,623
--------- --------- ---------
Total expenses 69,592 41,132 37,973
--------- --------- ---------
OPERATING INCOME 9,073 1,986 374
LOSS ON DISPOSITION OF ASSETS -- (4,907) --
--------- --------- ---------
NET INCOME (LOSS) 9,073 (2,921) 374
PREFERRED DIVIDENDS 1,400 1,400 1,400
--------- --------- ---------
NET INCOME (LOSS) AVAILABLE FOR
COMMON SHAREHOLDERS $ 7,673 $ (4,321) $ (1,026)
========= ========= =========
THE SIMON OPERATING PARTNERSHIP'S SHARE
OF NET INCOME (LOSS) $ 2,093 $ (3,737) $ (1,101)
INTERCOMPANY PROFIT ELIMINATION 982 -- --
--------- --------- ---------
THE SIMON OPERATING PARTNERSHIP'S SHARE
OF NET INCOME (LOSS) $ 1,111 $ (3,737) $ (1,101)
========= ========= =========
The Simon Operating Partnership manages all of its wholly owned
properties. SDG, LP manages all Wholly-Owned Properties and substantially all
of the Minority Interest and Joint Venture Properties that were owned by DRC
prior to the Merger. Accordingly, they reimburse the Administrative Services
Partnership ("ASP"), a subsidiary of the Management Company, for costs
incurred, including management, leasing, development, accounting, legal,
marketing, and management information systems. Substantially all employees
(other than direct field personnel) are employed by ASP which is owned 1% by
the Simon Operating Partnership and 99% by the Management Company. The
Management Company's Statements of Operations report costs net of amounts
reimbursed by the Simon Operating Partnership. Common costs are allocated
based on payroll and related costs. In management's opinion, allocations under
the cost-sharing arrangement are reasonable. The Simon Operating Partnership
and SDG, LP's share of allocated common costs was $29,262, $21,874 and $15,619
for 1996, 1995 and 1994, respectively.
Amounts receivable from the Simon Operating Partnership and SDG, LP under
the cost-sharing arrangement and management contracts were $3,288 and $1,175 at
December 31, 1996 and 1995, respectively.
8. INDEBTEDNESS
Mortgages and other notes payable consist of the following:
DECEMBER 31,
1996 1995
---------- ----------
FIXED-RATE DEBT
Mortgages and other notes payable, net $1,326,518 $1,232,360
---------- ----------
Total fixed-rate debt 1,326,518 1,232,360
VARIABLE-RATE DEBT
Mortgages and other notes payable, net $ 485,736 $ 530,000
Credit facility 230,000 196,000
Construction loan -- 22,399
---------- ----------
Total variable-rate debt 715,736 748,399
---------- ----------
Total mortgages and other notes payable
$2,042,254 $1,980,759
========== ==========
Fixed-Rate Debt
Mortgage Loans & Other Notes. The fixed-rate mortgage loans and other
notes bear interest ranging from 5.81% to 10.00% (weighted average of 7.75%),
require monthly payments of principal and/or interest and have various due
dates through 2026 (average maturity of 6.8 years). Certain of the Properties
are pledged as collateral to secure the related mortgage note. The fixed and
variable mortgage notes are nonrecourse but have partial guarantees by
affiliates of approximately $398,906. Certain of the Properties are cross-
defaulted and cross-collateralized as part of a group of properties. Under
certain of the cross-default provisions, a default under any mortgage included
in the cross-defaulted package may constitute a default under all such
mortgages and may lead to acceleration of the indebtedness due on each
property within the collateral package. Certain of the Properties are subject
to a provision in which the lender participates in a percentage of gross
revenues above a specified base or after deduction of debt service and various
expenses. Contingent interest incurred under these arrangements was $1,645,
$1,929 and $1,527 for the years ended December 31, 1996, 1995 and 1994,
respectively. Certain of the Properties are subject to financial performance
covenants relating to debt-to-market capitalization, minimum earnings before
interest, taxes, depreciation and amortization ("EBITDA") ratios and minimum
equity values.
$500,000 Shelf Registration. SPG, LP has a $500,000 debt shelf
registration which became effective December 1995. At December 31, 1996, no
securities have been issued under this registration statement.
Variable-Rate Debt
Mortgages and Other Notes. The variable-rate mortgage loans and other
notes bear interest ranging from 6.05% to 7.59% (weighted average of 6.66% at
December 31, 1996) and are due at various dates through 2000 (average maturity
of 2.2 years). Certain of the Properties are subject to the collateral, cross-
default and cross-collateral agreements, participation agreements or other
covenants relating to debt-to-market capitalization, minimum EBITDA ratios and
minimum equity values.
Credit Facility. On September 27, 1996, the SPG, LP and SDG, LP obtained
a $750,000 three-year unsecured facility (the "Credit Facility") which has a
one-year extension available at the option of SPG, LP and SDG, LP. The Credit
Facility bears interest at LIBOR plus 90 basis points and is guaranteed by SPG,
LP and SDG, LP. The maximum and average amounts outstanding during 1996 under
the Credit Facility were $438,000 and $292,350, respectively. The Credit
Facility is primarily used for funding acquisition, renovation and expansion
and predevelopment opportunities. At December 31, 1996, the Credit Facility
had an interest rate of 6.43%, with $510,000 available after outstanding
borrowings and letters of credit. The Credit Facility contains financial
covenants relating to a market capitalization value, minimum EBITDA and
unencumbered EBITDA ratios and minimum equity values.
Debt Maturity and Other
As of December 31, 1996, scheduled principal repayments on indebtedness
were as follows:
1997 $ 40,777
1998 357,873
1999 457,261
2000 383,457
2001 14,585
Thereafter 788,301
----------
Total mortgages and other notes payable $2,042,254
==========
Certain mortgages and notes payable may be prepaid but are generally
subject to a prepayment of a yield-maintenance premium.
The unconsolidated partnerships and joint ventures have $569,433 and
$410,652 of mortgages and other notes payable at December 31, 1996 and 1995,
respectively. The Simon Operating Partnership's share of this debt was
$193,310 and $167,644 at December 31, 1996 and 1995, respectively. This debt
becomes due in installments over various terms extending into 2006, with
interest rates ranging from 6.03% to 8.20% (weighted average rate of 7.14% at
December 31, 1996). The debt matures $0 in 1997, $0 in 1998, $221,900 in 1999,
$119 in 2000, $64,252 in 2001 and $283,162 thereafter.
Net extraordinary losses of $3,723, $3,285 and $17,980 for the years ended
December 31, 1996, 1995 and 1994, respectively, were incurred, resulting from
the early extinguishment or refinancing of debt.
6 7/8% Unsecured Notes. Nonconvertible investment-grade unsecured debt
securities (the "Notes") were issued by SDG, LP on November 21, 1996. The
Notes pay interest semiannually, mature in 2006, and contain leverage ratios
and minimum EBITDA and unencumbered EBITDA ratios. The Notes were issued under
SDG, LP's $750,000 shelf registration which became effective in November 1996,
of which $500,000 remains available. Notes issued under this shelf
registration are guaranteed by Simon Operating Partnership.
6 3/4% Putable Asset Trust Securities (PATS). The $100,000 of PATS,
issued by SDG, LP in December 1996, pay interest semiannually and mature in
2003. These securities contain leverage ratios and minimum EBITDA and
unencumbered EBITDA ratios and are guaranteed by Simon Operating Partnership.
On January 31, 1997, the Simon Operating Partnership completed a
refinancing transaction involving debt on four Properties. The transaction
consisted of the payoff of one loan totaling $43,375, the buyout of the
contingent interest feature on all four loans for $21,000 and a restatement of
the interest amount on the three remaining loans. This transaction was funded
using the Credit Facility.
Interest rate Protection Agreements
The Simon Operating Partnership has entered into certain interest rate
protection agreements, in the form of "cap" or "swap" arrangements, with
respect to the majority of its variable-rate mortgages and other notes payable.
Cap arrangements, which effectively limit the amount by which variable interest
rates may rise, have been entered into for $394,079 principal amount of debt
and cap LIBOR at rates ranging from 5.0% to 8.7% through the related debt's
maturity. Costs of the caps ($7,792) are amortized over the life of the
agreements. The unamortized balance of the cap arrangements was $3,343 as of
December 31, 1996. The Simon Operating Partnership's hedging activity as a
result of interest swaps and caps resulted in interest savings of $1,553 and
$3,528 for the years ended December 31, 1996 and 1995, respectively. This did
not materially impact the Simon Operating Partnership's weighted average
borrowing rate.
Fair Value of Financial Instruments
SFAS No. 107 requires disclosure about fair value for all financial
instruments. The carrying value of variable-rate mortgages and other loans and
interest rate protection agreements represents their fair values. The fair
value of fixed-rate mortgages and other notes payable was approximately
$1,752,000 and $1,375,000 at December 31, 1996 and 1995, respectively. The
fair value of the interest rate protection agreements at December 31, 1996 and
1995, was $3,158 and $3,900, respectively. At December 31, 1996 and 1995, the
estimated discount rates were 7.25% and 7.00%, respectively.
Advances from SDG, LP
Net advances due SDG, LP of $259,382 result from debt and equity
instruments issued by SDG, LP for which a portion of the proceeds were advanced
to the Simon Operating Partnership to retire mortgages and other notes payable
and amounts outstanding under the Credit Facility. The Simon Operating
Partnership has recognized interest costs based on the terms of the instruments
issued by SDG, LP.
9. RENTALS UNDER OPERATING LEASES
The Simon Operating Partnership receives rental income from the leasing of
retail and mixed-use space under operating leases. Future minimum rentals to
be received under noncancelable operating leases for each of the next five
years and thereafter, excluding tenant reimbursements of operating expenses and
percentage rent based on tenant sales volume, as of December 31, 1996, are as
follows:
1997 $ 292,871
1998 275,085
1999 249,075
2000 219,372
2001 186,613
Thereafter 696,959
----------
$1,919,975
==========
Approximately 2.64% of future minimum rents to be received are
attributable to leases with JCPenney Company, Inc., an affiliate of a limited
partner in the Simon Operating Partnership.
10. PARTNERS' EQUITY
In January 1995, the Company filed a shelf registration with the
Securities and Exchange Commission covering 15,000,000 shares of common stock.
In April 1995, 6,000,000 of these shares were sold in an underwritten offering.
In May 1995, the underwriters closed on a portion (241,854 shares) of the over-
allotment option granted them in connection with the above offering. Proceeds
from these transactions were contributed to the Simon Operating Partnership in
exchange for 6,241,854 Units and subsequently were used to repay debt.
On February 10, 1995, one of the Simon Operating Partnership's limited
partners exchanged its 212,114 Units for 212,114 shares of common stock.
On October 27, 1995, the Company completed a $100,000 private placement of
4,000,000 shares of Series A preferred stock. Dividends on the preferred stock
are paid quarterly at the greater of 8.125% per annum or the dividend rate
payable under the underlying common stock. The holders of the preferred stock
have the right to convert the preferred stock into common stock after two years
at an initial conversion ratio equal to 0.9524. The Company may redeem the
preferred stock after five years upon payment of premiums that decline to
$25.00 per share over the following seven years. The holders of the preferred
stock are entitled to vote on all matters submitted to a vote of holders of
common stock, based on the number of shares of common stock into which the
preferred stock can be converted. The Company contributed the proceeds to the
Simon Operating Partnership in exchange for Preferred Units. The Simon
Operating Partnership pays a preferred distribution to the Company equal to the
dividends paid on the preferred stock.
On December 21, 1995, a limited partner in the Simon Operating Partnership
exchanged 121,348 Units for 121,348 shares of common stock.
On September 27, 1996, the Company completed a $200,000 public offering
(the "Preferred Offering") of 8,000,000 shares of Series B cumulative
redeemable preferred stock, generating net proceeds of approximately $193,000.
Dividends on the preferred stock are paid quarterly in arrears at 8.75% per
annum. The Company may redeem the preferred stock any time on or after
September 29, 2006, at a redemption price of $25.00 per share, plus accrued and
unpaid dividends. The redemption price (other than the portion thereof
consisting of accrued and unpaid dividends) is payable solely out of the sale
proceeds of other capital shares of the Company, which may include other series
of preferred shares. The Company contributed the proceeds to SDG, LP in
exchange for Preferred Units. SDG, LP pays a preferred distribution to the
Company equal to the dividends paid on the preferred stock. SDG, LP advanced a
portion of the proceeds ($34,400) to the Simon Operating Partnership which used
the advanced proceeds to reduce outstanding debt.
Exchange Rights
The former limited partners in the Simon Operating Partnership had the
right at any time after December 1994 to exchange all or any portion of their
Units for shares of common stock of the Company on a one-for-one basis or cash,
as selected by the Company's Board of Directors. If the Company had selected
to use cash, the Company could cause the Simon Operating Partnership to redeem
the Units. The amount of cash to be paid if the exchange right was exercised
and the cash option was selected would have been based on the trading price of
the Company's common stock at that time. In the periods when the Simon
Operating Partnership did not control whether cash would be used to settle the
limited partners' exchange rights, the limited partners' equity interest was
excluded from partners' equity and was reflected in the consolidated balance
sheet at redemption value.
In connection with the merger, the Simon Operating Partnership agreement
was amended eliminating the exchange right provision. Accordingly, the limited
partners' equity interest in the Simon Operating Partnership has been included
as partners' equity at historical carrying value. Previous transfers of
limited partners' equity interest from partners' equity have been reversed.
This reversal occurred in the financial statements of the Simon Operating
Partnership, effective August 9, 1996.
11. STOCK OPTION PLANS
The Company and the Simon Operating Partnership adopted an Employee Stock
Plan (the "Employee Plan"). The Company also adopted a Director Stock Option
Plan (the "Director Plan" and, together with the Employee Plan, the "Stock
Option Plans") for the purpose of attracting and retaining eligible officers,
directors and employees. The Company has reserved for issuance 4,595,000
shares of common stock under the Employee Plan and 100,000 shares of common
stock under the Director Plan. If stock options granted in connection with the
Stock Option Plans are exercised at any time or from time to time, the
partnership agreement requires the Company to sell to the Simon Operating
Partnership, at fair market value, shares of the Company's common stock
sufficient to satisfy the exercised stock options. The Company also is
obligated to purchase Units for cash in an amount equal to the fair market
value of such shares.
Employee Plan
The Employee Plan is currently administered by the Company's Compensation
Committee (the "Committee"). During the ten-year period following the adoption
of the Employee Plan, the Committee may, subject to the terms of the Employee
Plan and in certain instances subject to board approval, grant to key employees
(including officers and directors who are employees) of the Simon Operating
Partnership or its "affiliates" (as defined in the Employee Plan) the following
types of awards: stock options (including options with a reload feature), stock
appreciation rights, performance units and shares of restricted or unrestricted
common stock. Awards granted under the Employee Plan become exercisable over
the period determined by the Committee. The exercise price of an option may
not be less than the fair market value of the shares of the common stock on the
date of grant. The options vest 40% on the first anniversary of the date of
grant, an additional 30% on the second anniversary of the grant date and become
fully vested three years after the grant date. The options expire ten years
from the date of grant.
Director Plan
Directors of the Company who are not also employees of the Company or its
"affiliates" (as defined in the Director Plan) participate in the Director
Plan. Under the Director Plan, each eligible director is automatically granted
options ("Director Options") to purchase 5,000 shares of common stock upon the
director's initial election to the Board of Directors and 3,000 shares of
common stock upon each reelection of the director to the Board of Directors.
The exercise price of the options is equal to 100% of the fair market value of
the Company's common stock on the date of grant. Director Options become
exercisable on the first anniversary of the date of grant or at such earlier
time as a "change in control" of the Company occurs and will remain exercisable
through the tenth anniversary of the date of grant (the "Expiration Date").
Prior to their Expiration Dates, Director Options will terminate 30 days after
the optionee ceases to be a member of the Board of Directors.
SFAS No. 123, "Accounting for Stock-Based Compensation," requires entities
to measure compensation costs related to awards of stock-based compensation
using either the fair value method or the intrinsic value method. Under the
fair value method, compensation expense is measured at the grant date based on
the fair value of the award. Under the intrinsic value method, compensation
expense is equal to the excess, if any, of the quoted market price of the stock
at the grant date over the amount the employee must pay to acquire the stock.
Entities electing to measure compensation costs using the intrinsic value
method must make pro forma disclosures of net income and earnings per Unit as
if the fair value method had been applied. The Simon Operating Partnership has
elected to account for stock-based compensation programs using the intrinsic
value method consistent with existing accounting policies and, therefore, the
standard will not have an effect on the consolidated financial statements. The
impact on pro forma net income and earnings per Unit as a result of applying
the intrinsic value method was not material.
Information relating to the Stock Option Plans from January 1, 1994
through December 31, 1996 is as follows:
DIRECTOR PLAN EMPLOYEE PLAN
OPTION OPTION
OPTIONS PRICE PER OPTIONS PRICE PER
SHARE SHARE
------- -------- --------- --------
SHARES UNDER OPTION AT
JANUARY 1, 1994 25,000 $ 22.25 735,000 $ 22.25
Granted 15,000 27.00 1,363,272 23.44 -
25.25
Exercised - - - -
Forfeited - - (28,125) 23.44
------- -------- --------- --------
SHARES UNDER OPTION AT 40,000 22.25 - 2,070,147 22.25 -
DECEMBER 31, 1994 27.00 25.25
Granted (1) 15,000 24.94 - -
Exercised - - (6,876) 23.44
Forfeited - - (49,137) 23.44 -
25.25
------- -------- --------- --------
SHARES UNDER OPTION AT $22.25 - $22.25 -
DECEMBER 31, 1995 55,000 27.00 2,014,134 25.25
Granted (1) 40,000 24.37 - -
Exercised (5,000) 24.75 (367,151) 24.88 -
30.75
Forfeited - - (24,000) 23.44 -
25.25
------- -------- --------- --------
SHARES UNDER OPTION AT $22.25 - $22.25 -
DECEMBER 31, 1996 90,000 27.38 1,622,983 25.25
======= ======== ========= ========
OPTIONS EXERCISABLE AT
DECEMBER 31, 1996 (1) 50,000 $ 24.59 1,496,117 $ 22.97
======= ======== ========= ========
SHARES AVAILABLE FOR GRANT AT
DECEMBER 31, 1996 5,000 1,597,990
======= =========
(1) Option price represents average price.
Stock Incentive Program
In October 1994, under the Employee Plan of the Company and the Simon
Operating Partnership, the Company's Compensation Committee approved a five-
year stock incentive program (the "Stock Incentive Program"), under which
restricted stock award shares have been granted to certain employees at no
cost. The outstanding restricted stock award shares vest in four installments
of 25% each on January 1 of each year following the year in which the
restricted shares are awarded. The cost of restricted stock awards, based on
the stock's fair market value at the determination dates, is charged to
partners' equity and subsequently amortized against earnings of the Simon
Operating Partnership over the vesting period.
In March 1995, an aggregate of 1,000,000 shares of restricted stock was
allocated to 50 executives, subject to the performance standards and other
terms of the Stock Incentive Program. During 1996 and 1995, 200,030 and
144,196 shares of common stock, respectively, were granted under the Stock
Incentive Program. Approximately $2,084 and $918 relating to this program were
amortized in 1996 and 1995, respectively.
12. EMPLOYEE BENEFIT PLANS
The Simon Operating Partnership and affiliated entities currently
maintains a tax-qualified retirement 401(k) savings plan. Under the plan,
eligible employees can participate in a cash or deferred arrangement permitting
them to defer up to a maximum of 12% of their compensation, subject to certain
limitations. Participants' salary deferrals are matched at specified
percentages, and one plan provides annual contributions of 3% of eligible
employees' compensation. The Simon Operating Partnership contributed $2,123,
$1,716 and $1,628 to the plans in 1996, 1995 and 1994, respectively.
Except for the 401(k) plan, the Company offers no other postretirement or
postemployment benefits to its employees.
13. COMMITMENTS AND CONTINGENCIES
Litigation
Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. On October 16,
1996, a complaint was filed in the Court of Common Pleas of Mahoning County,
Ohio, captioned Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. The
named defendants are SD Property Group, Inc., a 99%-owned subsidiary of the
Company, and DeBartolo Properties Management, Inc., and the plaintiffs are 27
former employees of the defendants. In the complaint, the plaintiffs allege
that they were recipients of deferred stock grants under the DRC Plan and that
these grants immediately vested under the DRC Plan's "change in control"
provision as a result of the Merger. Plaintiffs assert that the defendants'
refusal to issue them approximately 661,000 shares of DRC common stock, which
is equivalent to approximately 450,000 shares of common stock of the Company
computed at the 0.68 Exchange Ratio used in the Merger, constitutes a breach of
contract and a breach of the implied covenant of good faith and fair dealing
under Ohio law. Plaintiffs seek damages equal to such number of shares of DRC
common stock, or cash in lieu thereof, equal to all deferred stock ever granted
to them under the DRC Plan, dividends on such stock from the time of the
grants, compensatory damages for breach of the implied covenant of good faith
and fair dealing, and punitive damages.
The complaint was served on the defendants on October 28, 1996, and
pretrial proceedings have just commenced. The Company is of the opinion that
it has meritorious defenses and accordingly intends to defend this action
vigorously. While it is difficult for the Company to predict the outcome of
this litigation at this stage based on the information known to the Company to
date, the Company does not expect this action will have a material adverse
effect on the Company.
Roel Vento et al. v. Tom Taylor et al. An affiliate of the Simon Operating
Partnership is a defendant in litigation entitled Roel Vento et al. v. Tom
Taylor et al., in the District Court of Cameron County, Texas, in which a
judgment in the amount of $7,800 has been entered against all defendants. This
judgment includes approximately $6,500 of punitive damages and is based upon a
jury's findings on four separate theories of liability including fraud,
intentional infliction of emotional distress, tortuous interference with
contract and civil conspiracy arising out of the sale of a business operating
under a temporary license agreement at Valle Vista Mall in Harlingen, Texas.
The Simon Operating Partnership is seeking to overturn the award and has
appealed the verdict. Although the Simon Operating Partnership is optimistic
that it may be able to reverse or reduce the verdict, there can be no assurance
thereof. Management, based upon the advice of counsel, believes that the
ultimate outcome of this action will not have a material adverse effect on the
Company or the Simon Operating Partnership.
The Company or the Simon Operating Partnership currently are not subject
to any other material litigation other than routine litigation and
administrative proceedings arising in the ordinary course of business. On the
basis of consultation with counsel, management believes that these items will
not have a material adverse impact on the Company's or the Simon Operating
Partnership's financial position or results of operations.
Financing Commitments
The Simon Operating Partnership has agreed to equity funding commitments
of $14,000 and $31,103 relating to the construction of Grapevine Mills and The
Source, respectively. The Simon Operating Partnership had satisfied $24,241 of
its commitment on The Source at December 31, 1996.
Lease Commitments
As of December 31, 1996, a total of 25 of the Properties are subject to
ground leases. The termination dates of these ground leases range from 1998 to
2087. These ground leases generally require payments by the Simon Operating
Partnership of a fixed annual rent, or a fixed annual rent plus a participating
percentage over a base rate. Ground lease expense including contingent rent
incurred by the Simon Operating Partnership for the years ended December 31,
1996, 1995 and 1994, was $7,497, $6,700 and $5,808, respectively.
Future minimum lease payments due under such ground leases for each of the
next five years ending December 31 and thereafter are as follows:
1997 $ 3,806
1998 3,799
1999 3,805
2000 3,815
2001 3,710
Thereafter 141,495
---------
$ 160,430
=========
Environmental Matters
Substantially all of the Properties have been subjected to Phase I
environmental audits. Such audits have not revealed nor is management aware of
any environmental liability that management believes would have a material
adverse impact on the Simon Operating Partnership's financial position or
results of operations. Management is unaware of any instances in which it
would incur significant environmental costs if any or all Properties were sold,
disposed of or abandoned.
Other
The Simon Operating Partnership's partner in Rolling Oaks Mall has the
right to transfer its ownership interest to the Simon Operating Partnership in
exchange for Units based on the fair market value of the ownership interest at
the time of the exchange. This right expires on January 1, 2002. Rolling Oaks
Mall is a Joint Venture Property accounted for using the equity method of
accounting.
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly 1996 and 1995 data is as follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
-------- -------- -------- -------- --------
1996
Total revenue $139,444 $143,761 $146,396 $162,303 $591,904
Operating income 61,073 63,051 63,001 73,696 260,821
Income before
extraordinary items
21,801 21,937 20,396 28,640 92,774
Net income available
to Unitholders
21,536 21,937 17,866 27,712 89,051
Net income before
extraordinary items
per Unit 0.23 0.23 0.21 0.30 0.97
Net income per Unit $ 0.23 $ 0.23 $ 0.19 $ 0.29 $ 0.93
1995
Total revenue $129,490 $130,765 $138,042 $155,360 $553,657
Operating income 58,865 58,115 64,191 69,965 251,136
Income before
extraordinary items
22,207 23,528 26,946 27,334 100,015
Net income available
to Unitholders
22,207 23,280 24,310 26,933 96,730
Net income before
extraordinary items
per Unit 0.26 0.25 0.28 0.29 1.08
Net income per Unit $ 0.26 $ 0.25 $ 0.25 $ 0.28 $ 1.04
Primarily due to the cyclical nature of earnings to Unitholders, the sum
of the quarterly earnings per Unit in 1996 varies from the annual earnings per
Unit.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SIMON PROPERTY GROUP, L.P.
BY: SIMON DEBARTOLO GROUP, INC.,
GENERAL PARTNER
By /s/ David Simon
-----------------
David Simon
Chief Executive Officer
March 30, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
/s/ David Simon Chief Executive Officer and March 30, 1997
- ----------------- Director (Principal
David Simon Executive Officer)
/s/ Herbert Simon Co-Chairman of the Board of March 30, 1997
- ----------------- Directors
Herbert Simon
/s/ Melvin Simon Co-Chairman of the Board of
- ----------------- Directors March 30, 1997
Melvin Simon
/s/ Richard Sokolov President, Chief Operating
- ------------------- Officer and Director March 30, 1997
Richard Sokolov
/s/ Edward J. DeBartolo, Jr. Director March 30, 1997
- ----------------------------
Edward J. DeBartolo, Jr.
/s/ M. Denise DeBartolo York Director March 30, 1997
- ----------------------------
M. Denise DeBartolo York
/s/ Birch Bayh Director March 30, 1997
- --------------
Birch Bayh
/s/ William T. Dillard, II Director March 30, 1997
- --------------------------
William T. Dillard, II
/s/ G. William Miller Director March 30, 1997
- ---------------------
G. William Miller
/s/ Fredrick W. Petri Director March 30, 1997
- ---------------------
Fredrick W. Petri
/s/ Terry S. Prindiville Director March 30, 1997
- ------------------------
Terry S. Prindiville
/s/ J. Albert Smith Director March 30, 1997
- -------------------
J. Albert Smith
/s/ Philip J. Ward Director March 30, 1997
- ------------------
Philip J. Ward
/s/ Stephen E. Sterrett Treasurer (Principal March 30, 1997
- ----------------------- Financial Officer)
Stephen E. Sterrett
/s/ Dennis L. Cavanagh Senior Vice President, March 30, 1997
- ---------------------- Financial Services
Dennis L. Cavanagh (Principal Accounting
Officer)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULE
To Simon DeBartolo Group, Inc.:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of SIMON PROPERTY GROUP, L.P. included in
this Form 10-K, and have issued our report thereon dated February 18, 1997.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule is the responsibility of Simon
Property Group, L.P.'s management and is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of the
basic financial statements. The schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana
February 18, 1997
SIMON PROPERTY GROUP, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
SCHEDULE III
<TABLE>
<CAPTION>
Cost Capitalized Gross Amounts At
Subsequent to Which Carried
Initial Cost Acquisition At Close of Period
------------------- ---------------- --------------------
Buildings Buildings Buildings Accumu- Date
and and and lated of
Encum- Improve- Improve- Improve- Depreci- Constr-
Name, Location brances Land ments Land ments Land ments Total ation uction
---------- -------- ---------- ------- -------- -------- ---------- ---------- -------- --------
Regional Malls
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <S>
Alton Square, Alton, IL $ 0 $ 154 $ 7,641 $ 0 $ 1,174 $ 154 $ 8,815 $ 8,969 $ 917 1993 (Note 3)
Amigoland Mall, 0 1,045 4,518 0 875 1,045 5,393 6,438 1,085 1974
Brownsville, TX
Anderson Mall, 1,838 18,122 1,363 1,785 3,201 19,907 23,108 2,752 1972
Anderson, SC 19,000
Barton Creek Square, 63,549 4,413 20,699 771 15,849 5,184 36,548 41,732 4,058 1981
Austin, TX
Battlefield Mall, 50,724 4,040 29,783 3,225 29,388 7,265 59,171 66,436 6,980 1976
Springfield, MO
Broadway Square, 0 11,470 32,450 0 1,327 11,470 33,777 45,247 2,042 1994 (Note 3)
Tyler, TX
Century Consumer Mall, 0
Merrillville, IN 0 2,190 9,589 0 1,314 2,190 10,903 13,093 2,054 1992 (Note 3)
Charles Town Square,
Charleston, SC 0 539 2,825 500 530 1,039 3,355 4,394 575 1976
Cielo Vista Mall,
El Paso, TX 58,652 1,307 18,512 608 12,621 1,915 31,133 33,048 5,267 1974
College Mall,
Bloomington, IN 43,429 1,012 16,245 722 16,298 1,734 32,543 34,277 4,790 1965
Cottonwood Mall, 0 0 0 12,554 69,172 12,554 69,172 81,726 1,337 1993
Albuquerque, NM
Crossroads Mall, 41,440 884 37,293 409 21,636 1,293 58,929 60,222 2,619 1994 (Note 3)
Omaha, NE
East Towne Mall, 55,000 5,269 22,965 3,699 20,083 8,968 43,048 52,016 2,216 1984
Knoxville, TN
Eastgate Consumer Mall,
Indianapolis, IN 25,429 425 4,722 187 2,826 612 7,548 8,160 2,683 1991 (Note 3)
Eastland Mall, Tulsa, OK 30,000 3,124 24,035 518 5,692 3,642 29,727 33,369 3,341 1986
Forest Mall, 12,800 754 4,498 0 903 754 5,401 6,155 1,035 1973
Fond Du Lac, WI
Forest Village Park,
Forestville, MD 20,600 1,212 4,625 757 3,401 1,969 8,026 9,995 1,171 1980
Fremont Mall, Fremont, NE 0 26 1,280 265 1,718 291 2,998 3,289 237 1983
Golden Ring Mall, 29,750 1,130 8,955 572 8,436 1,702 17,391 19,093 2,486 1974 (Note 3)
Baltimore, MD
Greenwood Park Mall, 36,374 2,606 23,500 5,275 50,895 7,881 74,395 82,276 8,648 1977
Greenwood, IN
Heritage Park, Midwest 0 598 6,213 0 705 598 6,918 7,516 1,118 1978
City, OK
Hutchinson Mall, 11,523 1,777 18,427 0 2,174 1,777 20,601 22,378 2,753 1985
Hutchison, KS
Independence Center,
Independence, MO 0 5,539 45,822 0 2,080 5,539 47,902 53,441 2,838 1994 (Note 3)
Ingram Park Mall, San 56,107 820 17,182 169 11,562 989 28,744 29,733 4,167 1979
Antonio, TX
Irving Mall, Irving, TX 43,375 6,736 17,479 2,533 10,673 9,269 28,152 37,421 4,966 1971
Jefferson Valley Mall, 50,000 4,869 30,304 0 2,649 4,869 32,953 37,822 4,240 1983
Yorktown, NY
La Plaza, McAllen, TX 50,526 2,194 9,828 0 2,042 2,194 11,870 14,064 1,571 1976
Lincolnwood Town Center,
Lincolnwood, IL 63,000 11,197 63,490 28 0 11,225 63,490 74,715 5,926 1990
Longview Mall, 22,100 278 3,602 124 2,437 402 6,039 6,441 1,208 1978
Longview, TX
Machesney Park Mall, 0 613 7,460 120 3,025 733 10,485 11,218 1,683 1979
Rockford, IL
Markland Mall, Kokomo, IN 10,000 0 7,568 0 901 0 8,469 8,469 913 1983
Mc Cain Mall, N. Little 26,304 0 9,515 0 5,303 0 14,818 14,818 2,856 1973
Rock, AR
Memorial Mall, 0 175 4,881 0 624 175 5,505 5,680 740 1980
Sheboygan, WI
Midland Park Mall, 22,500 704 9,613 0 2,510 704 12,123 12,827 1,996 1980
Midland, TX
Miller Hill Mall, 34,500 2,537 18,114 0 1,522 2,537 19,636 22,173 2,556 1973
Duluth, MN
Mounds Mall, Anderson, IN 0 0 2,689 0 1,536 0 4,225 4,225 681 1964
Muncie Mall, Muncie, IN 44,000 210 5,964 0 12,906 210 18,870 19,080 1,434 1975
North East Mall, 22,442 1,440 13,473 784 15,447 2,224 28,920 31,144 369 1996 (Note 4)
Hurst, TX
North Towne Square, 23,500 579 8,382 0 1,411 579 9,793 10,372 2,205 1980
Toledo, OH
Northwoods Mall, 0 1,202 12,779 1,449 17,574 2,651 30,353 33,004 4,484 1983 (Note 3)
Peoria, IL
Orange Park Mall, Orange 0 13,345 65,173 0 2,241 13,345 67,414 80,759 3,881 1994 (Note 3)
Park, FL
Prien Lake Mall, Lake 0 1,926 2,829 725 3,338 2,651 6,167 8,818 821 1972
Charles, LA
Ross Park Mall, 60,000 15,269 50,995 9,617 40,162 24,886 91,157 116,043 2,554 1996 (Note 4)
Pittsburgh, PA
St Charles Towne Center
Waldorf, MD 0 9,328 52,974 1,180 8,786 10,508 61,760 72,268 7,909 1990
South Park Mall, 24,748 855 13,691 74 2,193 929 15,884 16,813 2,682 1975
Shreveport, LA
Southgate Mall, Yuma, AZ 0 1,817 7,974 0 2,826 1,817 10,800 12,617 1,282 1988 (Note 3)
Southtown Mall,
Ft. Wayne, IN 0 2,059 13,288 0 959 2,059 14,247 16,306 3,395 1969
Sunland Park Mall, El 40,149 2,896 28,900 0 1,664 2,896 30,564 33,460 4,771 1988
Paso, TX
Tippecanoe Mall, 47,556 4,320 8,474 5,355 30,307 9,675 38,781 48,456 4,500 1973
Lafayette, IN
Towne East Square, 57,419 9,495 18,479 2,042 7,134 11,537 25,613 37,150 4,540 1975
Wichita, KS
Towne West Square, 40,250 988 21,203 76 3,493 1,064 24,696 25,760 4,050 1980
Wichita, KS
University Mall, Little 0 123 17,411 0 320 123 17,731 17,854 2,824 1967
Rock, AR
University Mall, 0 4,741 26,657 0 1,113 4,741 27,770 32,511 1,636 1994 (Note 3)
Pensacola, FL
Valle Vista Mall, 34,837 1,398 17,266 372 6,692 1,770 23,958 25,728 3,161 1983
Harlingen, TX
West Ridge Mall,
Topeka, KS 50,005 5,775 34,132 197 2,317 5,972 36,449 42,421 4,573 1988
White Oaks Mall, 16,500 3,024 35,692 1,153 12,835 4,177 48,527 52,704 3,269 1977
Springfield, IL
Wichita Mall, Wichita, KS 0 0 4,535 0 384 0 4,919 4,919 865 1981
Windsor Park Mall, San 14,960 1,194 16,940 130 3,197 1,324 20,137 21,461 3,087 1976
Antonio, TX
Community Shopping Centers
- --------------------------
Arvada Plaza, Arvada, CO 0 70 342 0 581 70 923 993 119 1966
Aurora Plaza, Aurora, CO 0 35 5,754 0 908 35 6,662 6,697 1,009 1966
Bloomingdale Court, 29,009 9,735 26,184 0 648 9,735 26,832 36,567 2,209 1987
Bloomingdale, IL
Bridgeview Court, 0 308 3,638 0 0 308 3,638 3,946 383 1988
Bridgeview, IL
Brightwood Plaza, 0 65 128 0 208 65 336 401 61 1965
Indianapolis, IN
Bristol Plaza, 0 61 325 0 21 61 346 407 94 1966
Bristol, VA
Buffalo Grove Towne 0 2,044 6,602 0 209 2,044 6,811 8,855 225 1988
Center,
Buffalo Grove, IL
Celina Plaza, El Paso, TX 0 138 815 0 13 138 828 966 108 1977
Cohoes Commons,
Rochester, NY 0 1,698 8,426 0 51 1,698 8,477 10,175 1,282 1984
Countryside Plaza, 0 1,243 8,507 0 481 1,243 8,988 10,231 1,410 1977
Countryside, IL
East Towne Commons, 0 3,921 5,345 0 1,604 3,921 6,949 10,870 632 1990
Knoxville, TN
Eastland Plaza, Tulsa, OK 0 908 3,709 0 29 908 3,738 4,646 374 1987
Forest Plaza, 16,904 4,270 16,818 453 364 4,723 17,182 21,905 1,231 1985
Rockford, IL
Fox River Plaza, 12,654 2,907 9,453 0 60 2,907 9,513 12,420 716 1985
Elgin, IL
Greenwood Plus,
Greenwood, IN 0 1,350 1,792 0 3,914 1,350 5,706 7,056 507 1979 (Note 3)
Griffith Park Plaza, 0 0 2,412 0 93 0 2,505 2,505 398 1979
Griffith, IN
Hammond Square, Sandy 0 0 27 0 1 0 28 28 4 1974
Springs, GA
Ingram Plaza,
San Antonio, TX 0 421 1,802 4 22 425 1,824 2,249 338 1980
Lake Plaza, Waukegan, IL 0 2,868 6,420 0 203 2,868 6,623 9,491 445 1986
Lake View Plaza, Orland 22,169 4,775 17,586 0 256 4,775 17,842 22,617 1,239 1986
Park, IL
Lincoln Crossing, 997 1,079 2,692 0 36 1,079 2,728 3,807 329 1990
O'Fallon, IL
Maplewood Square, 0 466 1,249 0 42 466 1,291 1,757 220 1987
Omaha, NE
Markland Plaza, 0 210 1,258 0 356 210 1,614 1,824 282 1975
Kokomo, IN
Martinsville Plaza, 0 0 584 0 45 0 629 629 199 1980
Martinsville, VA
Marwood Plaza, 0 52 3,597 0 82 52 3,679 3,731 402 1962
Indianapolis, IN
Matteson Plaza, 11,159 1,830 9,737 0 1,496 1,830 11,233 13,063 813 1988
Matteson, IL
Memorial Plaza,
Sheboygan, WI 0 250 436 0 129 250 565 815 156 1966
Mounds Mall Cinema, 0 88 158 0 1 88 159 247 30 1975
Anderson, IN
New Castle Plaza, New 0 128 1,621 0 426 128 2,047 2,175 337 1966
Castle, IN
North Ridge Plaza,
Joliet, IL 0 2,831 7,699 0 30 2,831 7,729 10,560 653 1985
North Riverside Park
Plaza,
N. Riverside, IL 7,785 1,062 2,490 0 195 1,062 2,685 3,747 454 1977
Northland Plaza,
Columbus, OH 0 4,490 8,893 0 271 4,490 9,164 13,654 602 1988
Northwood Plaza, Fort 0 304 2,922 0 330 304 3,252 3,556 494 1977
Wayne, IN
Park Plaza, 0 300 1,572 0 24 300 1,596 1,896 224 1968
Hopkinsville, KY
Regency Plaza, St. 1,878 616 4,963 0 126 616 5,089 5,705 319 1988
Charles, MO
St. Charles Towne Plaza, 30,887 8,835 18,993 0 0 8,835 18,993 27,828 1,412 1987
Waldorf, MD
Teal Plaza, Lafayette, IN 0 99 878 0 93 99 971 1,070 96 1986
Tippecanoe Plaza, 0 265 440 305 3,315 570 3,755 4,325 355 1962
Lafayette, IN
Wabash Village, West 0 0 976 0 58 0 1,034 1,034 175 1976
Lafayette, IN
West Ridge Plaza, 4,612 1,491 4,620 0 508 1,491 5,128 6,619 310 1988
Topeka, KS
White Oaks Plaza, 12,345 3,265 14,267 0 154 3,265 14,421 17,686 1,022 1986
Springfield, IL
Wood Plaza, 0 45 380 0 701 45 1,081 1,126 158 1967
Fort Dodge, IA
Specialty Retail Centers
The Forum Shops at
Caesars,
Las Vegas, NV 122,716 0 72,866 0 39,931 0 112,797 112,797 8,220 1992
Trolley Square, Salt Lake 27,141 4,899 27,539 263 639 5,162 28,178 33,340 2,968 1986 (Note 3)
City, UT
Mixed-Use Properties
- --------------------
O'Hare International
Center,
Rosemont, IL 27,500 172 60,287 1 8,210 173 68,497 68,670 11,270 1986
Riverway, Rosemont, IL 131,450 8,738 129,175 16 5,886 8,754 135,061 143,815 21,580 1988
Development Projects
- --------------------
The Shops at Sunset Place,
South Miami, FL 0 11,898 3,210 399 12,960 12,297 16,170 28,467 0 1995
Other 0 0 674 0 884 0 1,558 1,558 0 1995
---------- -------- ---------- ------- -------- -------- ---------- ---------- --------
$1,812,254 $253,689 $1,551,916 $58,994 $579,559 $312,683 $2,131,475 $2,444,158 $230,661
========== ======== ========== ======= ======== ======== ========== ========== ========
</TABLE>
SIMON PROPERTY GROUP, L.P.
NOTES TO SCHEDULE III AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(1) Reconciliation of Real Estate Properties:
The changes in real estate assets for the years ended December 31, 1996
and 1995 are as follows:
1996 1995
Balance, beginning of year $2,143,925 $1,887,122
Acquisitions 56,069 32,547
Improvements 182,516 73,097
Disposals (19,579) (12,722)
Consolidation 81,227 163,881
Balance, close of year 2,444,158 $2,143,925
The aggregate net book value for federal income tax purposes as of
December 31, 1996 was $2,026,759.
(2) Reconciliation of Accumulated Depreciation:
The changes in accumulated depreciation and amortization for the years
ended December 31, 1996 and 1995 are as follows:
1996 1995
Balance, beginning of year $ 147,341 $68,222
Depreciation expense 94,094 79,126
Disposals (10,774) (7)
Balance, close of year $ 230,661 $ 147,341
Depreciation of Simon Property Group, L.P.'s investment in buildings and
improvements reflected in the statements of operations is calculated over the
estimated original lives of the assets as follows:
Buildings - typically 35 years
Improvements - shorter of lease term or useful life
(3) Initial cost represents net book value at December 20, 1993.
(4) Not developed/constructed by the Simons. The date of construction
represents acquisition date.
INDEX TO EXHIBITS
Exhibits
2.1 Agreement and Plan of Merger among the Company, Sub and
DRC, dated as of March 26, 1996, as amended (included as
Annex I to the Prospectus/Joint Proxy Statement filed as
part of Form S-4 of Simon Property Group, Inc.
(Registration No. 333-06933)
3.1 Third Amended and Restated Agreement of Limited
Partnership of Simon Property Group, L.P. (Incorporated by
Reference to Exhibit 10.1.2 of the Company's Form S-4
(Registration No. 333-06933))
*4.1 Secured Promissory Note and Open-End Mortgage and Security
Agreement from Simon Property Group, L.P. in favor of
Principal Mutual Life Insurance Company (Pool 1).
*4.2 Secured Promissory Note and Open-End Mortgage and Security
Agreement from Simon Property Group, L.P. in favor of
Principal Mutual Life Insurance Company (Pool 2).
****4.3 Credit Agreement dated as of September 27, 1996 among the
Operating Partnership and Morgan Guaranty Trust Company of
New York, Union Bank of Switzerland and Chase Manhattan
Bank as Lead Agents.
****10.1 Restated Indemnity Agreement dated as of August 9, 1996
between the Company and its directors and officers.
(Previously filed as Exhibit 10.8)
*10.2 Noncompetition Agreement dated as of December 1, 1993
between the Company and each of Melvin Simon and Herbert
Simon.
*10.3 Noncompetition Agreement dated as of December 1, 1993
between the Company and David Simon.
*10.4 Restriction and Noncompetition Agreement dated as of
December 1, 1993 among the Company and the Management
Companies.
*10.5 Simon Property Group, L.P. Employee Stock Plan.
*10.6 Simon DeBartolo Group, Inc. Director Stock Option Plan.
*10.7 Option Agreement to acquire the Excluded Retail
Properties. (Previously filed as Exhibit 10.10.)
*10.8 Option Agreement to acquire the Excluded PropertiesLand.
(Previously filed as Exhibit 10.11.)
*10.9 Registration Rights Agreement dated as of December 1, 1993
between the Company, certain Limited Partners and certain
other parties. (Previously filed as Exhibit 10.12.)
*10.10 Option Agreements dated as of December 1, 1993 between the
Management Company and Simon Property Group, L.P.
(Previously filed as Exhibit 10.20.)
*10.11 Option Agreement dated as of December 1, 1993 to acquire
Development Land. (Previously filed as Exhibit 10.22.)
*10.12 Option Agreement dated December 1, 1993 between the
Management Company and Simon Property Group, L.P.
(Previously filed as Exhibit 10.25.)
*10.13 Option Agreement dated December 1, 1993 between Simon
Enterprises, Inc. and Simon Property Group, L.P.
(Previously filed as Exhibit 10.26.)
*10.14 Lock-Up Agreement dated December 20, 1993 between MSA and
Simon Property Group, L.P. (Previously filed as Exhibit
10.27.)
***10.15 Operating Agreement of Summit Mall Company, L.L.C. dated
February 23, 1995.
****10.16 Indemnity Agreement by and between the Company and its new
Directors, dated as of August 9, 1996
****10.17 Subscription Agreement by and between Day Acquisition
Corp., and the Purchaser (as defined in this Exhibit)
****10.18 Registration Rights Agreement (the "Agreement"), dated as
of August 9, 1996, by and among the "Simon Family Members"
(As defined in the Agreement), SPG, Inc., JCP Realty,
Inc., Brandywine Realty, Inc., and the Estate of Edward J.
DeBartolo Sr., Edward J. DeBartolo, Jr., Marie Denise
DeBartolo York, and the Trusts and other entities listed
on Schedule 2 of the Agreement, and any of their
respective successors-in-interest and permitted assigns.
21.1 List of Subsidiaries of the Simon Operating Partnership. Attached
23.1 Consent of Arthur Andersen LLP. Attached
****99.1 Agreement dated November 13, 1996 between Simon DeBartolo
Group, Inc. and Simon DeBartolo Group, L.P. (Incorporated
by reference to Amendment No. 3 of Form S-3 filed by Simon
DeBartolo Group, L.P. and Simon Property Group, L.P. on
November 20, 1996 under Registration No. 333-11491)
* Incorporated by reference to the exhibit numbered as indicated that
was filed with the Company's Form 10-K for the fiscal year ended
December 31, 1993.
** Incorporated by reference to the exhibit numbered as indicated that
was filed with the Company's Form 10-K for the fiscal year ended
December 31, 1994.
*** Incorporated by reference to the exhibit numbered as indicated that
was filed with the Company's Form 10-K for the fiscal year ended
December 31, 1995.
**** Incorporated by reference to the exhibit numbered as
indicated that was filed with the Company's Form 10-K for the
fiscal year ended December 31, 1996.
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF SIMON PROPERTY GROUP, L.P.
Name of Subsidiary Jurisdiction
- ------------------ ------------
Charles Mall Company Limited Partnership Maryland
East Towne Mall Company Limited Partnership Tennessee
Forestville Associates Maryland
Golden Ring Mall Company Limited Partnership Indiana
Jefferson Valley Mall Limited Partnership Delaware
Knoxville Developers Limited Partnership Indiana
M.S. Management Associates (Indiana), Inc. Indiana
M.S. Management Associates, Inc. Delaware
Northwoods Development Company Illinois
Pentagon City Developers Limited Partnership Indiana
Simon MOA Management Company, Inc. Indiana
Simon Property Group Administrative Services Partnership Delaware
Simon Property Group (Illinois), L.P. Illinois
Simon Property Group (Texas), L.P. Texas
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports, included in this Form 10-K, into Simon Property Group, L.P.'s
previously filed Registration Statement File No. 33-98364.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
April 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-K and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 50,009
<SECURITIES> 0
<RECEIVABLES> 142,719
<ALLOWANCES> 6,223
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 2,467,779
<DEPRECIATION> 238,167
<TOTAL-ASSETS> 2,759,183
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 2,042,254
0
0
<COMMON> 0
<OTHER-SE> 254,628<F2>
<TOTAL-LIABILITY-AND-EQUITY> 2,759,183
<SALES> 0
<TOTAL-REVENUES> 591,904
<CGS> 0
<TOTAL-COSTS> 331,083
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,991
<INTEREST-EXPENSE> 162,485
<INCOME-PRETAX> 100,899
<INCOME-TAX> 100,899
<INCOME-CONTINUING> 100,899
<DISCONTINUED> 0
<EXTRAORDINARY> (3,723)
<CHANGES> 0
<NET-INCOME> 97,176
<EPS-PRIMARY> 0.93<F3>
<EPS-DILUTED> 0.93<F3>
<FN>
<F1>The Registrant does not use a classified Balance Sheet.
<F2>The Registrant is a partnership. The amount reported is Partner's equity.
<F3>Amounts are actually earnings per unit.
</FN>
</TABLE>
