<PAGE> 1
Filed pursuant to Rule 424(b)(5)
Registration No. 333-11491
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 21, 1996)
LOGO
SIMON DEBARTOLO GROUP, L.P.
$100,000,000 6 3/4% NOTES DUE 2004
$150,000,000 7% NOTES DUE 2009
------------------------
Simon DeBartolo Group, L.P., a Delaware limited partnership (the "Operating
Partnership"), will issue the 6 3/4% Notes due 2004 (the "2004 Notes") and the
7% Notes due 2009 (the "2009 Notes" and together with the 2004 Notes, the
"Notes") offered hereby (the "Offering"), in an aggregate principal amount of
$250 million. The 2004 Notes will mature on July 15, 2004 and the 2009 Notes
will mature on July 15, 2009. The Notes are redeemable at any time at the option
of the Operating Partnership, in whole or in part, at a redemption price equal
to the sum of (i) the principal amount of the Notes being redeemed plus accrued
interest to the redemption date and (ii) the Make-Whole Amount (as defined in
"Description of the Notes -- Optional Redemption"), if any. Interest on the
Notes is payable semi-annually in arrears on each July 15 and January 15,
commencing on January 15, 1998. The Notes are unsecured obligations of the
Operating Partnership and will rank pari passu with each other and all unsecured
unsubordinated indebtedness of the Operating Partnership. Simon Property Group,
L.P., a Delaware limited partnership and a subsidiary partnership of the
Operating Partnership, will guarantee (the "Guarantee") the due and punctual
payment of the principal of, premium, if any, interest on, and any other amounts
payable with respect to, the Notes, when and as the same shall become due and
payable, whether at a maturity date, on redemption, by declaration of
acceleration or otherwise. On March 31, 1997, the Operating Partnership had
unsecured unsubordinated indebtedness aggregating approximately $685 million.
See "Description of the Notes."
Each series of Notes will be represented by fully-registered global notes in
book-entry form, without coupons (a "Global Note"), registered in the name of
the nominee of The Depository Trust Company ("DTC"). Beneficial interests in a
Global Note will be shown on, and transfers thereof will be effected only
through, records maintained by DTC (with respect to beneficial interests of
participants) or by participants or persons that hold interests through
participants (with respect to beneficial interests of beneficial owners). Owners
of beneficial interests in a Global Note will be entitled to physical delivery
of Notes in definitive form equal in principal amount to their respective
beneficial interest only under the limited circumstances described under
"Description of the Notes -- Book Entry System." Settlement for the Notes will
be made in immediately available funds. The Notes will trade in DTC's Same-Day
Funds Settlement System until maturity or until the Notes are issued in
definitive form, and secondary market trading activity in the Notes will
therefore settle in immediately available funds. All payments of principal and
interest in respect of the Notes will be made by the Operating Partnership in
immediately available funds. See "Description of the Notes -- Same Day
Settlement and Payment." The Operating Partnership does not intend to apply for
listing of the Notes on a national securities exchange.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===========================================================================================================
PROCEEDS TO THE
PRICE TO UNDERWRITING OPERATING
PUBLIC(1) DISCOUNT(2) PARTNERSHIP(3)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Per 2004 Note....................... 99.575% .625% 98.950%
- -----------------------------------------------------------------------------------------------------------
Total(3)............................ $99,575,000 $625,000 $98,950,000
- -----------------------------------------------------------------------------------------------------------
Per 2009 Note....................... 99.284% .675% 98.609%
- -----------------------------------------------------------------------------------------------------------
Total(3)............................ $148,926,000 $1,012,500 $147,913,500
===========================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from July 22, 1997.
(2) The Operating Partnership has agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Operating Partnership estimated at
$500,000.
------------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if delivered to and accepted by them, subject to approval of
certain legal matters by counsel for the Underwriters. The Underwriters reserve
the right to withdraw, cancel or modify such offer and to reject orders in whole
or in part. It is expected that delivery of the Notes will be made in New York,
New York on or about July 22, 1997.
------------------------
MERRILL LYNCH & CO.
CHASE SECURITIES INC.
LEHMAN BROTHERS
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
SALOMON BROTHERS INC
UBS SECURITIES
------------------------
The date of this Prospectus Supplement is July 17, 1997.
<PAGE> 2
[MAP OF REGIONAL MALLS]
[MAP OF COMMUNITY MALLS]
SIMON DeBARTOLO GROUP
- --------------------------------------------------------------------------------
Regional Mall & Community Center Portfolios
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Certain persons participating in this Offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the Notes, including
entering stabilizing bids and effecting syndicate covering transactions. For a
description of these activities, see "Underwriting."
2
<PAGE> 3
The following information in this Prospectus Supplement is qualified in its
entirety by, and should be read in conjunction with, the more detailed
information appearing in the accompanying Prospectus or incorporated herein and
therein by reference. Unless indicated otherwise, the information contained in
this Prospectus Supplement is presented as of March 31, 1997. All references to
the "Operating Partnership" or the "Company" (as defined below) in this
Prospectus Supplement and the accompanying Prospectus include the Operating
Partnership or the Company, as the case may be, those entities owned or
controlled by it (including, in the case of the Operating Partnership, SPG, LP,
as defined below) and its predecessors, unless the context indicates otherwise.
THE OPERATING PARTNERSHIP
Simon DeBartolo Group, L.P. (the "Operating Partnership") is a subsidiary
partnership of Simon DeBartolo Group, Inc. (the "Company"). The Company is a
self-administered and self-managed real estate investment trust ("REIT"). Simon
Property Group, L.P. ("SPG, LP") is a subsidiary partnership of the Operating
Partnership and is also a subsidiary partnership of the Company. The Operating
Partnership is engaged primarily in the ownership, development, management,
leasing, acquisition and expansion of income producing properties, primarily
regional malls and community shopping centers. On August 9, 1996, the Company
acquired the national shopping center business of DeBartolo Realty Corporation
("DRC"), The Edward J. DeBartolo Corporation ("EJDC") and their affiliates as
the result of the merger (the "Merger") of DRC with a subsidiary of the Company.
As a result of the Merger, the Portfolio Properties (as defined below) were
expanded by 61 properties and the management resources of the merged entities
were combined to create one of the most experienced management teams in the
shopping center business. Management believes that the Portfolio Properties, as
measured in gross leasable area ("GLA"), constitute the largest and most
geographically diverse portfolio of any publicly traded REIT in North America
and that the Company's market capitalization is the largest of any publicly
traded real estate company in North America.
In addition, SPG, LP holds substantially all of the economic interest in
M.S. Management Associates, Inc. (the "SPG Management Company"), which manages
certain regional malls and community shopping centers not wholly owned by the
Operating Partnership and certain other properties and also engages in certain
property development activities. The Operating Partnership holds substantially
all of the economic interest in, and the SPG Management Company holds
substantially all of the voting stock of, DeBartolo Properties Management, Inc.
(the "DRC Management Company"), which provides architectural, design,
construction and other services to substantially all of the Portfolio Properties
owned by the Operating Partnership, as well as certain other regional malls and
community shopping centers owned by third parties.
The Operating Partnership owns or holds interests in a diversified
portfolio of 186 income producing properties (the "Portfolio Properties"),
including 114 super-regional and regional malls, 65 community shopping centers,
three specialty retail centers and four mixed-use properties located in 33
states. The Portfolio Properties contain an aggregate of approximately 114
million square feet of GLA, of which approximately 68 million square feet is GLA
owned by the Operating Partnership ("Owned GLA"). Approximately 3,100 different
retailers occupy approximately 12,000 stores in the Portfolio Properties. Total
estimated retail sales at the Portfolio Properties exceeded $16 billion in 1996.
In addition, the Operating Partnership has interests in five properties under
construction in the United States aggregating an additional four million square
feet of GLA, and owns land held for future development. The Operating
Partnership, together with the SPG Management Company and its affiliated
management companies, manage approximately 130 million square feet of GLA of
retail and mixed-use properties.
S-3
<PAGE> 4
THE OFFERING
All capitalized terms used herein and not defined herein have meanings
provided in "Description of the Notes." For a more complete description of the
terms of the Notes specified in the following summary, see "Description of the
Notes."
Securities Offered......... $100 million aggregate principal amount 6 3/4%
Notes due 2004 (the "2004 Notes") and $150 million
aggregate principal amount of 7% Notes due 2009
(the "2009 Notes" and together with the 2004 Notes,
the "Notes").
Maturity................... The 2004 Notes will mature on July 15, 2004 and the
2009 Notes will mature on July 15, 2009.
Interest Payment Dates..... Semi-annually on each July 15 and January 15,
commencing January 15, 1998.
Ranking.................... The Notes will rank pari passu with each other and
with all other unsecured and unsubordinated
indebtedness of the Operating Partnership except
that the Notes will be effectively subordinated to
(i) the prior claims of each secured mortgage
lender to any specific Portfolio Property which
secures such lender's mortgage and (ii) any claims
of creditors of entities wholly or partly owned,
directly or indirectly, by the Operating
Partnership. As of March 31, 1997, total
consolidated mortgage indebtedness on the Portfolio
Properties aggregated approximately $3,062 million.
Guarantee.................. SPG, LP will guarantee the due and punctual payment
of the principal of, premium, if any, interest on,
and any other amounts payable with respect to, the
Notes, when and as the same shall become due and
payable, whether at a maturity date, on redemption,
by declaration of acceleration or otherwise.
Use of Proceeds............ The net proceeds to the Operating Partnership from
the Offering (approximately $246 million) will be
used primarily to reduce the amount outstanding
under the Operating Partnership's Credit Facility
(as defined herein) and for general working capital
needs.
Limitations on Incurrence
of Debt.................... The Notes contain various covenants, including the
following:
(1) The Operating Partnership will not incur any
Debt if, after giving effect thereto, the
aggregate principal amount of all outstanding
Debt is greater than 60% of the sum of (i) the
Operating Partnership's Adjusted Total Assets
as of the end of the most recent fiscal quarter
and (ii) any increase in Adjusted Total Assets
from the end of such quarter, including any pro
forma increase resulting from the application
of proceeds of such additional Debt.
(2) The Operating Partnership will not incur any
Secured Debt if, after giving effect thereto,
the aggregate principal amount of all
outstanding Secured Debt is greater than 55% of
the sum of (i) the Operating Partnership's
Adjusted Total Assets as of the end of the
fiscal quarter prior to the incurrence of such
additional Secured Debt and (ii) any increase
in Adjusted Total Assets from the end of such
quarter, including any pro forma increase
resulting from the application of proceeds of
such additional Secured Debt.
S-4
<PAGE> 5
(3) The Operating Partnership will not incur any
Debt if the ratio of EBITDA After Minority
Interest to Interest Expense for the four
consecutive fiscal quarters most recently ended
prior to the incurrence of such Debt, on a pro
forma basis, is less than 1.75 to 1.
(4) The Operating Partnership is required to
maintain Unencumbered Assets of not less than
150% of the aggregate outstanding principal
amount of Unsecured Debt.
For definitions of the capitalized terms used in
the foregoing covenants, see "Descriptions of the
Notes -- Certain Covenants."
Optional Redemption........ The Notes are redeemable at any time at the option
of the Operating Partnership, in whole or in part,
at a redemption price equal to the sum of (i) the
principal amount of the Notes being redeemed plus
accrued interest to the redemption date and (ii)
the Make-Whole Amount, if any. See "Description of
the Notes -- Optional Redemption."
S-5
<PAGE> 6
RECENT DEVELOPMENTS
ACQUISITIONS, DEVELOPMENT AND EXPANSION
On June 16, 1997, the Operating Partnership purchased 1,408,450 shares of
common stock of Chelsea GCA Realty, Inc. ("Chelsea"), a publicly traded REIT,
for approximately $50 million. The shares purchased represent approximately 9.2%
of Chelsea's outstanding common stock. In addition, the Operating Partnership
and Chelsea announced that they have formed a strategic alliance to develop and
acquire manufacturers' outlet shopping centers with 500,000 square feet or more
of GLA in the United States. The Boards of Directors of both the Operating
Partnership's managing general partner and Chelsea have approved the terms and
conditions of the joint venture agreement.
On July 10, 1997, the Operating Partnership acquired a 48% interest in West
Town Mall, a 1.3 million square foot super regional mall in Knoxville,
Tennessee. The transaction increased the Operating Partnership's ownership of
West Town Mall to 50%. The remaining 50% is owned by an institutional investor.
The Management Company will continue to perform management, leasing and
development for the project.
FINANCINGS AND INDEBTEDNESS
On April 9, 1997, the Operating Partnership refinanced approximately $68
million in existing indebtedness on Lakeline Mall. The new loan is in the
principal amount of $74 million, bears interest at a fixed rate of 7.65% and
matures on May 1, 2007. The previous loan bore interest at LIBOR plus 0.375%,
with a May, 1999 maturity.
On April 14, 1997, the Operating Partnership obtained improved pricing
terms on its $750 million unsecured revolving line of credit (the "Credit
Facility"). The agreement for the Credit Facility was amended to reduce the
interest rate from LIBOR plus 90 basis points to LIBOR plus 75 basis points. In
addition, the Credit Facility's competitive bid feature, which has further
reduced interest costs, was increased from $150 million to $300 million.
On May 15, 1997, the Operating Partnership refinanced approximately $140
million in existing debt on The Forum Shops at Caesar's. The new debt consists
of three classes of notes totaling $180 million, with $90 million bearing
interest at 7.125% and the other $90 million bearing interest at LIBOR plus 30
basis points, all of which will mature on May 15, 2004. Approximately $40
million of the borrowings were placed in escrow to pay for construction costs
required in connection with the development of the expansion of this project
which is scheduled to open on August 28, 1997.
Additionally, on May 15, 1997, the Operating Partnership established a $300
million Medium-Term Note program. Subsequently, on June 24, 1997, the Operating
Partnership completed the sale of $100 million of such notes (the "MTN
Offering"). The notes sold bear interest at 7.125% and have a stated maturity of
June 24, 2005. The net proceeds of this sale were used primarily to pay down the
Credit Facility.
On June 5, 1997, the Operating Partnership closed a $115 million
construction loan for The Shops at Sunset Place. The loan initially bears
interest at LIBOR plus 1.25% and matures on June 30, 2000, with two one-year
extensions available.
On June 30, 1997, the Operating Partnership closed a $55 million unsecured
loan which bears interest at LIBOR plus 0.75% and matures on September 29, 1998.
The proceeds were used to retire an existing $55 million mortgage on East Towne
Mall, which bore interest at LIBOR plus 1.125%.
On July 9, 1997, the Company sold 3,000,000 shares of 7.89% Series C
Cumulative Step-Up Premium Rate(SM) Preferred Stock (the "Series C Preferred
Shares") in a public offering (the "Series C Offering") at $50.00 per share. The
net proceeds of the Series C Offering, approximately $146 million, were used for
property acquisitions, to pay down the Credit Facility and for general working
capital purposes.
As of March 31, 1997, the Operating Partnership's share of total
consolidated and joint venture debt as adjusted to give effect to the Offering
(as defined below), the MTN Offering, the Series C Offering and the
S-6
<PAGE> 7
other transactions described below was approximately $4,172 million. Scheduled
maturities of this debt for periods reflected are as follows:
<TABLE>
<CAPTION>
MORTGAGE
DEBT
UNSECURED --------------
YEAR OF MATURITY DEBT TOTAL DEBT
- ---------------------------------------------------- ------------- (IN THOUSANDS) ----------
<S> <C> <C> <C>
1997(4/1 to 12/31).................................. -- $ 34,442 $ 34,442
1998................................................ $ 55,000 294,174 349,174
1999................................................ -- 245,827 245,827
2000................................................ 54,000(1) 360,273 414,273
2001................................................ -- 692,858 692,858
2002................................................ -- 387,361 387,361
2003................................................ 100,000 457,030 557,030
2004................................................ 100,000(2) 310,170 410,170
2005................................................ 100,000(3) 103,298 203,298
2006................................................ 250,000 161,207 411,207
2007................................................ -- 190,324 190,324
2008................................................ -- -- --
Thereafter.......................................... 150,000(4) 125,684 275,684
-------- -------- --------
Total..................................... $ 809,000 $3,362,648 $4,171,648
======== ======== ========
</TABLE>
- ---------------
(1) Represents amount outstanding on the Credit Facility, as adjusted to reflect
draws of $50 million to fund the Chelsea investment and $80 million to fund
development costs and repayments of $246 million from this Offering, $70
million from the Series C Offering and $95 million from the MTN Offering.
(2) Represents the 2004 Notes.
(3) Represents notes sold in the MTN Offering.
(4) Represents the 2009 Notes.
S-7
<PAGE> 8
USE OF PROCEEDS
The net proceeds to the Operating Partnership from the sale of the Notes
offered hereby (the "Offering"), after deducting total expenses estimated to be
approximately $4 million, are estimated to be approximately $246 million. The
Operating Partnership intends to use the proceeds of the Offering primarily to
reduce the amount outstanding under the Credit Facility and for general working
capital needs. The Credit Facility is an unsecured revolving line of credit
which matures initially in September 1999, has an automatic one-year extension
and bears interest at LIBOR plus 75 points. On July 16, 1997, the interest rate
on the Credit Facility was 6.44%.
S-8
<PAGE> 9
CAPITALIZATION
The following table sets forth the historical capitalization of the
Operating Partnership as of March 31, 1997, and the pro forma capitalization of
the Operating Partnership as of March 31, 1997, as adjusted to give effect to
the Offering, the MTN Offering, the Series C Offering and borrowings under the
Credit Facility related to the Chelsea investment and development activity.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
------------------------
HISTORICAL PRO FORMA
---------- ---------
(IN MILLIONS)
<S> <C> <C>
Debt:
Mortgages and other indebtedness................................... $3,062 $ 3,062
Unsecured Debt:
Credit Facility................................................. 335 52
6 7/8% Unsecured Notes due November 15, 2006.................... 249 249
6 3/4% Putable Asset Trust Securities due November 15, 2003..... 101 101
Medium-Term Notes due June 24, 2005............................. -- 100
6 3/4% Notes due 2004........................................... -- 100
7% Notes due 2009............................................... -- 149
------ ------
Total Debt................................................. 3,747 3,813
------ ------
Partners' Equity
Series A Preferred Units, 4,000,000 units authorized, issued and
outstanding(1).................................................. 100 100
Series B Preferred Units, 9,200,000 units authorized, 8,000,000
units issued and outstanding(1)................................. 193 193
Series C Preferred Units, 3,000,000 units authorized, issued and
outstanding on a pro forma basis(1)............................. -- 146
General Partners(2)................................................ 992 992
Limited Partners(2)................................................ 620 620
Unamortized Restricted Stock Award................................. (20) (20)
------ ------
Total Partners' Equity..................................... 1,885 2,031
------ ------
Total Capitalization....................................... $5,632 5,844
====== ======
</TABLE>
- ---------------
(1) The Operating Partnership is required to pay the Company preferred
distributions equal to the dividends paid by the Company on the Series A
Preferred Shares, the Series B Preferred Shares, and the Series C Preferred
Shares, respectively.
(2) Units issued and outstanding of the Operating Partnership at March 31, 1997
were as follows:
<TABLE>
<CAPTION>
ACTUAL AT
MARCH 31,
1997
------------
<S> <C>
General Partners......................................................... 97,534,311
Limited Partners......................................................... 60,974,050
</TABLE>
S-9
<PAGE> 10
SELECTED FINANCIAL AND OPERATING DATA
The following tables set forth certain selected financial and operating
data on a historical basis for the Operating Partnership for the respective
periods presented. The information presented gives effect to the Merger, which
occurred on August 9, 1996, as described previously. The historical financial
information should be read in conjunction with the financial statements and
notes thereto incorporated by reference herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,(1) YEAR ENDED DECEMBER 31,
-------------------------------------- ---------------------------------------------------
1997 1996
PRO FORMA(2) 1997 1996 PRO FORMA(2) 1996 1995 1994
------------ ---------- ---------- ------------ ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA, PORTFOLIO DATA AND RATIOS.)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenue....... $ 243,301 $ 242,414 $ 139,444 $ 959,956 $ 747,704 $ 553,657 $ 473,676
Income before
extraordinary
items............. 44,650 43,062 23,832 189,036 134,663 101,505 60,308
Net Income available
to Unit holders... $ 35,185 $ 13,409 $ 21,536 $ 151,176 $ 118,448 $ 96,730 $ 42,328
EARNINGS PER UNIT:
Income before
extraordinary
items............. $ 0.22 $ 0.23 $ 0.23 $ 0.96 $ 1.02 $ 1.08 $ 0.71
Extraordinary
items............. -- (0.15) -- -- (0.03) (0.04) (0.21)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income.......... $ 0.22 $ 0.08 $ 0.23 $ 0.96 $ 0.99 $ 1.04 $ 0.50
========== ========== ========== ========== ========== ========== ==========
Distributions per
Unit.............. $ 0.5050 $ 0.5050 $ 0.4925 $ 1.63 $ 1.63 $ 1.97 $ 1.90
Weighted average
Units
outstanding....... 157,951 157,951 95,665 157,074 120,182 92,666 84,510
BALANCE SHEET DATA:
Cash and cash
equivalents....... $ 52,346 $ 41,946 $ 45,145 N/A $ 64,309 $ 62,721 $ 105,139
Total assets........ 6,122,396 5,908,896 2,532,548 N/A 5,895,910 2,556,436 2,316,860
Mortgages and other
indebtedness...... 3,814,492 3,746,992 1,995,620 N/A 3,681,984 1,980,759 1,938,091
Limited partners'
equity interest... -- -- 862,161 N/A -- 908,764 909,306
Partners' equity
(deficit)......... $2,031,733 $1,885,733 $ (660,719) N/A $1,945,174 $ (589,126) $ (807,613)
OTHER DATA:
Cash flow provided
by (used in):
Operating
activities..... N/A $ 89,517 $ 39,248 N/A $ 236,464 $ 194,336 $ 128,023
Investing
activities..... N/A (72,040) (18,570) N/A (199,742) (222,679) (266,772)
Financing
activities..... N/A (39,840) (38,254) N/A (35,134) (14,075) 133,263
Funds from
Operations
(FFO)(3).......... N/A $ 87,939 $ 48,680 N/A $ 281,495 $ 197,909 $ 167,761
========== ========== ========== ========== ==========
Ratio of Earnings to
Fixed
Charges(4)........ 1.68x 1.70x 1.57x 1.65x 1.64x 1.67x 1.43x
PORTFOLIO DATA:
Total EBITDA(5)..... $ 209,274 $ 205,341 $ 115,741 $ 859,433 $ 615,322 $ 437,548 $ 386,835
EBITDA after
minority
interest(5)....... 169,299 166,889 91,216 678,102 497,215 357,158 307,372
Number of Properties
at End of
Period............ 186 186 122 186 186 122 119
Total GLA at End of
Period (thousands
of square feet)... 113,738 113,738 62,219 113,280 113,280 62,232 58,200
</TABLE>
S-10
<PAGE> 11
SELECTED FINANCIAL DATA -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE FOUR QUARTERS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------------- -------------------------------------
1997 1996
PRO PRO
FORMA(2) 1997 1996 FORMA(2) 1996 1995 1994
--------- ----- ----- --------- ----- ----- -----
(IN THOUSANDS EXCEPT PER SHARE DATA, PORTFOLIO DATA AND RATIOS.)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER RATIOS:
Ratio of EBITDA after minority interest to
Fixed Charges and Preferred Unit
Distributions(5)(6)..................... 2.07x 2.04x 2.20x 2.14x 2.09x 2.18x 2.18x
Ratio of EBITDA after minority interest to
interest expense(5)(7).................. 2.57x 2.35x 2.46x 2.65x 2.37x 2.39x 2.36x
Ratio of Debt to Adjusted Total
Assets(8)............................... 45.51% 46.18% 44.29% 45.26% 45.94% 44.90% 50.64%
Ratio of Secured Debt to Adjusted Total
Assets(9)............................... 36.67% 38.45% 40.19% 37.47% 39.30% 40.72% 45.74%
Ratio of Unencumbered Assets to Unsecured
Debt(10)................................ 3.14x 3.41x 5.80x 3.25x 3.61x 5.92x 3.84x
</TABLE>
- ---------------
(1) 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, earnings are generally highest in the fourth quarter of each
year.
(2) Adjusted to give effect to the pro forma adjustments described under "Pro
Forma Combined Consolidated Financial Information" appearing elsewhere in
this Prospectus Supplement.
(3) Funds from Operations ("FFO"), as defined by the National Association of
Real Estate Investment Trusts ("NAREIT"), means combined net income of the
Operating Partnership without giving effect to depreciation and
amortization, gains or losses from extraordinary items, gains or losses on
sales of real estate, gains or losses on investments in marketable
securities and any provision/benefit for income taxes for such period, plus
the allocable portion, based on the Operating Partnership's ownership
interest, of FFO of unconsolidated joint ventures, all determined on a
consistent basis in accordance with generally accepted accounting
principles. Management believes that FFO is an important and widely used
measure of the operating performance of REITs which provides a relevant
basis for comparison among REITs. FFO is presented to assist investors in
analyzing the performance of the Operating Partnership. The Operating
Partnership's method of calculating FFO may be different from the methods
used by other REITs. FFO (i) does not represent cash flows from operations
as defined by generally accepted accounting principles, (ii) should not be
considered as an alternative to net income as a measure of operating
performance or to cash flows from operating, investing and financing
activities and (iii) is not an alternative to cash flows as a measure of
liquidity. In March 1995, NAREIT modified its definition of FFO. The
modified definition provides that amortization of deferred financing costs
and depreciation of nonrental real estate assets are no longer to be added
back to net income in arriving at FFO. The modified definition was adopted
by the Operating Partnership beginning in 1996. Additionally the FFO for
prior periods have been restated to reflect the new definition in order to
make the amounts comparative.
(4) For purposes of computing the Ratio of Earnings to Fixed Charges, earnings
have been calculated by adding Fixed Charges, excluding capitalized
interest, to income (loss) from continuing operations including income from
minority interests which have fixed charges, and including distributed
operating income from unconsolidated joint ventures instead of income from
unconsolidated joint ventures. Fixed Charges consist of interest costs,
whether expensed or capitalized, the interest component of rental expense
and amortization of debt issuance costs.
(5) Total EBITDA represents earnings before interest, taxes, depreciation and
amortization for all properties. EBITDA after minority interest represents
earnings before interest, taxes, depreciation and amortization for all
properties after distribution to the third-party joint venture partners.
EBITDA (i) does not represent cash flow from operations as defined by
generally accepted accounting principles, (ii) should not be considered as
an alternative to net income as a measure of operating performance or to
cash flows from operating, investing and financing activities; and (iii) is
not an alternative to cash flows as a measure of liquidity. Management
believes that in addition to cash flows and net income, EBITDA is a useful
financial performance measurement for assessing the operating performance
of an equity REIT because, together with net income and cash flows, EBITDA
provides investors with an additional basis to evaluate the ability of a
REIT to incur and service debt and to fund acquisitions and other capital
expenditures.
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To evaluate EBITDA and the trends it depicts, the components of EBITDA,
such as revenues and operating expenses, should be considered. The
Operating Partnership's method of calculating EBITDA may be different from
the methods used by other REITs.
(6) For purposes of computing the ratio of EBITDA after minority interest to
Fixed Charges and Preferred Unit Distributions, Fixed Charges and Preferred
Unit Distributions consist of interest costs, whether expensed or
capitalized and including the Operating Partnership's pro rata share of
joint venture interest expense, the interest component of rental expense
and amortization of debt issuance costs plus any distributions on
outstanding preferred units.
(7) For purposes of computing the ratio of EBITDA after minority interest to
interest expense, EBITDA after minority interest represents earnings before
interest, taxes, depreciation and amortization, for all properties after
distributions to third-party joint venture partners. Interest expense
includes the Operating Partnership's pro rata share of consolidated and
joint venture interest expense and is reduced by amortization of debt
issuance costs.
(8) As specified in the Indenture, Debt consists of indebtedness of the
Operating Partnership and its consolidated subsidiaries, less any portion
attributable to minority interests, plus the Operating Partnership's
allocable portion of indebtedness of unconsolidated joint ventures from
borrowed money, secured indebtedness, reimbursement obligations in
connection with letters of credit and capitalized leases. "Adjusted Total
Assets" as of any date means the sum of (i) the amount determined by
multiplying the sum of the shares of common stock of the Company issued in
the initial public offering of the Company ("IPO") and the units of the
Operating Partnership not held by the Company outstanding on the date of
the IPO, by $22.25 (the "IPO Price"), (ii) the principal amount of the
outstanding consolidated debt of the Company on the date of the IPO, less
any portion applicable to minority interests, (iii) the Operating
Partnership's allocable portion, based on its ownership interest, of
outstanding indebtedness of unconsolidated joint ventures on the date of
the IPO, (iv) the purchase price or cost of any real estate assets acquired
(including the value, at the time of such acquisition, of any units of the
Operating Partnership or shares of common stock of the Company issued in
connection therewith) or developed after the IPO by the Operating
Partnership or any Subsidiary, less any portion attributable to minority
interests, plus the Operating Partnership's allocable portion, based on its
ownership interest, of the purchase price or cost of any real estate assets
acquired or developed after the IPO by any unconsolidated joint venture,
(v) the value of the Merger compiled as the sum of (a) the purchase price
including all related closing costs and (b) the value of all outstanding
indebtedness less any portion attributable to minority interests, including
the Operating Partnership's allocable share, based on its ownership
interest, of outstanding indebtedness of unconsolidated joint ventures at
the Merger date, and (vi) working capital of the Operating Partnership;
subject, however, to reduction by the amount of the proceeds of any real
estate assets disposed of after the IPO by the Operating Partnership or any
Subsidiary, less any portion applicable to minority interests, and by the
Operating Partnership's allocable portion, based on its ownership interest,
of the proceeds of any real estate assets disposed of after the IPO by
unconsolidated joint ventures. On a pro forma basis as of March 31, 1997,
the Operating Partnership's Adjusted Total Assets were $9.1 billion. See
"Description of the Notes -- Certain Covenants."
(9) As specified in the Indenture, Secured Debt consists of the Operating
Partnership's share of consolidated and joint venture Debt secured by a
mortgage or other encumbrance on any property of the Operating Partnership
or any Subsidiary. See "Description of the Notes -- Certain Covenants."
(10) As specified in the Indenture, Unencumbered Assets is equal to Adjusted
Total Assets multiplied by a fraction, the numerator of which is
Unencumbered Annualized EBITDA After Minority Interest and the denominator
of which is Annualized EBITDA After Minority Interest. Unencumbered
Annualized EBITDA means Annualized EBITDA less any portion attributable to
assets serving as collateral for Secured Debt. As specified in the
Indenture, Annualized EBITDA means earnings before interest, taxes,
depreciation and amortization for all Portfolio Properties with other
adjustments as are necessary to exclude the effect of items classified as
extraordinary items in accordance with generally accepted accounting
principles, adjusted to reflect the assumption that (i) any income earned
as a result of any assets having been placed in service since the end of
such period had been earned on an annualized basis, during such period, and
(ii) in the case of an acquisition or disposition by the Operating
Partnership, any Subsidiary or any unconsolidated joint venture in which
the Operating Partnership or any Subsidiary owns an interest, of any assets
since the first day of such period, such acquisition or disposition and any
related repayment of Debt had occurred as of the first day of such period
with the appropriate adjustments with respect to such acquisition or
disposition. Annualized EBITDA After Minority Interest means Annualized
EBITDA after distributions to third party joint venture partners. Unsecured
Debt means Debt not secured by a mortgage or other encumbrance on any
property of the Operating Partnership or any subsidiary. See "Description
of the Notes -- Certain Covenants."
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SUMMARY OF PORTFOLIO PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)
The following table summarizes, as of March 31, 1997, certain information
with respect to the Portfolio Properties, in total and by type of property and
retailer:
<TABLE>
<CAPTION>
TOTAL OWNED % OF % OF OWNED
GLA GLA OWNED GLA WHICH IS
TYPE OF PROPERTY(1) (SQ. FT.) (SQ. FT.) GLA(2) LEASED(3)
- -------------------------------------------- ----------- ----------- ------ ------------
<S> <C> <C> <C> <C>
Regional Malls(4)
Mall Store................................ 32,387,193 32,387,193 48.0 % 84.1%
Freestanding.............................. 1,649,775 820,956 1.2 90.7
----------- ---------- ----- ----
Subtotal............................... 34,036,968 33,208,149 49.2 84.3
----------- ---------- ----- ----
Anchor.................................... 59,676,818 19,624,393 29.1 98.6
----------- ---------- ----- ----
Total............................. 93,713,786 52,832,542 78.3 89.6
=========== ========== ===== ====
Community Shopping Centers
Mall Store................................ 3,597,791 3,516,701 5.2 88.4
Freestanding.............................. 787,223 292,584 0.4 98.6
Anchor.................................... 10,914,406 6,692,740 9.9 93.1
----------- ---------- ----- ----
Total............................. 15,299,420 10,502,025 15.5 91.7
=========== ========== ===== ====
Office Portion of Mixed-Use Properties...... 2,002,498 2,002,498 3.0 94.3
Mills-type Properties and Other............. 2,722,322 2,189,537 3.2
----------- ---------- -----
Total............................. 113,738,026 67,526,602 100.0
=========== ========== =====
</TABLE>
- ---------------
(1) All of the GLA and Owned GLA is reported for each Portfolio Property, even
if the Partnerships have less than a 100% ownership interest in the
Portfolio Property.
(2) Indicates the percentage of total Owned GLA represented by each category of
space.
(3) Includes space for which, a lease has been executed, whether or not the
space was then occupied.
(4) Includes three specialty retail centers and retail space at four mixed-use
properties.
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<PAGE> 14
DESCRIPTION OF THE NOTES
The following description of the specific terms of the Notes supplements
the description of the general terms and provisions of Debt Securities set forth
in the accompanying Prospectus under the caption "Description of Debt
Securities."
The 2004 Notes and the 2009 Notes constitute separate series of debt
securities (which are more fully described in the accompanying Prospectus) to be
issued pursuant to an indenture dated as of November 26, 1996, among the
Operating Partnership, SPG, LP, as guarantor, and The Chase Manhattan Bank, as
trustee (the "Trustee"), as supplemented by a Fourth Supplemental Indenture,
dated as of July 22, 1997, between the Operating Partnership and the Trustee
(together, the "Indenture"). The terms of the Notes include those provisions
contained in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
Notes are subject to all such terms, and holders of Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. SPG, LP will
guarantee the due and punctual payment of the principal of, premium, if any,
interest on, and any other amounts payable with respect to, the Notes, when and
as the same shall become due and payable, whether at a maturity date, on
redemption, by declaration of acceleration or otherwise. See "-- The Guarantee."
The following summary of certain provisions of the Indenture does not purport to
be complete and is subject to and qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below.
GENERAL
The 2004 Notes will be limited in aggregate principal amount to $100
million and the 2009 Notes will be limited in aggregate principal amount to $150
million. The Notes will be direct, unsecured obligations of the Operating
Partnership and will rank pari passu with each other and with all other
unsecured and unsubordinated indebtedness of the Operating Partnership from time
to time outstanding. The Notes will be effectively subordinated to (i) the prior
claims of each secured mortgage lender to any specific Portfolio Property which
secures such lender's mortgage and (ii) any claims of creditors of entities
wholly or partly owned, directly or indirectly, by the Operating Partnership.
Subject to certain limitations set forth in the Indenture, and as described
under "-- Certain Covenants -- Limitations on Incurrence of Debt" below, the
Indenture will permit the Operating Partnership to incur additional secured and
unsecured indebtedness. At March 31, 1997, the Operating Partnership had
combined unsecured unsubordinated indebtedness aggregating approximately $685
million.
The 2004 Notes will mature on July 15, 2004 and the 2009 Notes will mature
on July 15, 2009 (each, a "Maturity Date"). The Notes are not subject to any
sinking fund provisions. The Notes will be issued only in fully registered,
book-entry form without Coupons, in denominations of $1,000 and integral
multiples, thereof, except under the limited circumstances described below under
"Book-Entry System."
Except as described under "-- Certain Covenants -- Limitations on
Incurrence of Debt" below and under "Description of Debt Securities -- Merger,
Consolidation or Sale" in the accompanying Prospectus, the Indenture does not
contain any provisions that would limit the ability of the Operating Partnership
to incur indebtedness or that would afford holders of the Notes protection in
the event of (i) a highly leveraged or similar transaction involving the
Operating Partnership, the Company or the General Partners of the Operating
Partnership, or any affiliate of any such party, (ii) a change of control, or
(iii) a reorganization, restructuring, merger or similar transaction involving
the Operating Partnership that may adversely affect the holders of the Notes. In
addition, subject to the limitations set forth under "Description of Debt
Securities -- Merger, Consolidation or Sale" in the accompanying Prospectus, the
Operating Partnership may, in the future, enter into certain transactions such
as the sale of all or substantially all of its assets or the merger or
consolidation of the Operating Partnership that would increase the amount of the
Operating Partnership's indebtedness or substantially reduce or eliminate the
Operating Partnership's assets, which may have an adverse effect on the
Operating Partnership's ability to service its indebtedness, including the
Notes. It is currently expected that subsequent to the first anniversary of the
date of the Merger, reorganizational transactions will be effected so that the
Operating Partnership will directly own all of the assets and
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<PAGE> 15
partnership interests now owned by SPG, LP. However, there can be no assurance
that such reorganizational transactions will be so effected. See "The Operating
Partnership" in the accompanying Prospectus.
PRINCIPAL AND INTEREST
The 2004 and the 2009 Notes will bear interest at the rates set forth on
the cover page of this Prospectus Supplement from the date of issuance or from
the immediately preceding Interest Payment Date (as defined below) to which
interest has been paid, payable semi-annually in arrears on each July 15 and
January 15, commencing January 15, 1998 (each, an "Interest Payment Date"), and
on the applicable Maturity Date, to the persons (the "Holders") in whose names
the applicable Notes are registered in the Security Register applicable to the
Notes at the close of business 15 calendar days prior to such payment date
regardless of whether such day is a Business Day, as defined below (each, a
"Regular Record Date"). Interest on the Notes will be computed on the basis of a
360-day year of twelve 30-day months.
The principal of each Note payable on the applicable Maturity Date will be
paid against presentation and surrender of such Note at the corporate trust
office of the Trustee, located initially at 450 West 33rd Street, 15th Floor,
New York, New York 10001, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.
If any Interest Payment Date or a Maturity Date falls on a day that is not
a Business Day, the required payment shall be made on the next Business Day as
if it were made on the date such payment was due and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date
or such Maturity Date, as the case may be. "Business Day" means any day, other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which
banking institutions in the City of New York are authorized or required by law,
regulation or executive order to close.
CERTAIN COVENANTS
Limitations on Incurrence of Debt. The Operating Partnership will not, and
will not permit any Subsidiary (as defined below) to, incur any Debt (as defined
below), other than intercompany debt (representing Debt to which the only
parties are the Company, the Operating Partnership and any of their Subsidiaries
(but only so long as such Debt is held solely by any of the Company, the
Operating Partnership and any Subsidiary) that is subordinate in right of
payment to the Notes), if, immediately after giving effect to the incurrence of
such additional Debt, the aggregate principal amount of all outstanding Debt
would be greater than 60% of the sum of (i) the Operating Partnership's Adjusted
Total Assets (as defined below) as of the end of the fiscal quarter prior to the
incurrence of such additional Debt and (ii) any increase in Adjusted Total
Assets from the end of such quarter including, without limitation, any pro forma
increase from the application of the proceeds of such additional Debt.
In addition to the foregoing limitation on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Debt secured by any mortgage, lien, pledge, encumbrance or security interest of
any kind upon any of the property of the Operating Partnership or any Subsidiary
("Secured Debt"), whether owned at the date of the Indenture or thereafter
acquired, if, immediately after giving effect to the incurrence of such
additional Secured Debt, the aggregate principal amount of all outstanding
Secured Debt is greater than 55% of the sum of (i) the Operating Partnership's
Adjusted Total Assets as of the end of the fiscal quarter prior to the
incurrence of such additional Secured Debt and (ii) any increase in Adjusted
Total Assets from the end of such quarter including, without limitation, any pro
forma increase from the application of the proceeds of such additional Secured
Debt.
In addition to the foregoing limitations on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Debt if the ratio of Annualized EBITDA After Minority Interest to Interest
Expense (in each case as defined below) for the period consisting of the four
consecutive fiscal quarters most recently ended prior to the date on which such
additional Debt is to be incurred shall have been less than 1.75 to 1 on a pro
forma basis after giving effect to the incurrence of such Debt and to the
application of the proceeds therefrom, and calculated on the assumption that (i)
such Debt and any other Debt incurred since the first day of such four-quarter
period had been incurred, and the proceeds therefrom had been applied
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<PAGE> 16
(to whatever purposes such proceeds had been applied as of the date of
calculation of such ratio), at the beginning of such period, (ii) any other Debt
that has been repaid or retired since the first day of such four-quarter period
had been repaid or retired at the beginning of such period (except that, in
making such computation, the amount of Debt under any revolving credit facility
shall be computed based upon the average daily balance of such Debt during such
period), (iii) any income earned as a result of any assets having been placed in
service since the end of such four-quarter period had been earned, on an
annualized basis, during such period, and (iv) in the case of any acquisition or
disposition by the Operating Partnership, any Subsidiary or any unconsolidated
joint venture in which the Operating Partnership or any Subsidiary owns an
interest, of any assets since the first day of such four-quarter period,
including, without limitation, by merger, stock purchase or sale, or asset
purchase or sale, such acquisition or disposition and any related repayment of
Debt had occurred as of the first day of such period with the appropriate
adjustments with respect to such acquisition or disposition being included in
such pro forma calculation.
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Operating
Partnership, its Subsidiaries and by any unconsolidated joint venture, whenever
the Operating Partnership, any Subsidiary, or any unconsolidated joint venture,
as the case may be, shall create, assume, guarantee or otherwise become liable
in respect thereof.
Maintenance of Unencumbered Assets. The Operating Partnership is required
to maintain Unencumbered Assets (as defined below) of not less than 150% of the
aggregate outstanding principal amount of the Unsecured Debt (as defined below)
of the Operating Partnership.
As used herein:
"Adjusted Total Assets" as of any date means the sum of (i) the amount
determined by multiplying the sum of the shares of common stock of the Company
issued in the initial public offering of the Company ("IPO") and the units of
the Operating Partnership not held by the Company outstanding on the date of the
IPO, by $22.25 (the "IPO Price"), (ii) the principal amount of the outstanding
consolidated debt of the Company on the date of the IPO, less any portion
applicable to minority interests, (iii) the Operating Partnership's allocable
portion, based on its ownership interest, of outstanding indebtedness of
unconsolidated joint ventures on the date of the IPO, (iv) the purchase price or
cost of any real estate assets acquired (including the value, at the time of
such acquisition, of any units of the Operating Partnership or shares of common
stock of the Company issued in connection therewith) or developed after the IPO
by the Operating Partnership or any Subsidiary, less any portion attributable to
minority interests, plus the Operating Partnership's allocable portion, based on
its ownership interest, of the purchase price or cost of any real estate assets
acquired or developed after the IPO by any unconsolidated joint venture, (v) the
value of the Merger compiled as the sum of (a) the purchase price including all
related closing costs and (b) the value of all outstanding indebtedness less any
portion attributable to minority interests, including the Operating
Partnership's allocable share, based on its ownership interest, of outstanding
indebtedness of unconsolidated joint ventures at the Merger date, and (vi)
working capital of the Operating Partnership; subject, however, to reduction by
the amount of the proceeds of any real estate assets disposed of after the IPO
by the Operating Partnership or any Subsidiary, less any portion applicable to
minority interests, and by the Operating Partnership's allocable portion, based
on its ownership interest, of the proceeds of any real estate assets disposed of
after the IPO by unconsolidated joint ventures. On a pro forma basis as of March
31, 1997, the Operating Partnership's Adjusted Total Assets were $9.1 billion.
"Annualized EBITDA" means earnings before interest, taxes, depreciation and
amortization for all properties with other adjustments as are necessary to
exclude the effect of items classified as extraordinary items in accordance with
generally accepted accounting principles, adjusted to reflect the assumption
that (i) any income earned as a result of any assets having been placed in
service since the end of such period had been earned, on an annualized basis,
during such period, and (ii) in the case of any acquisition or disposition by
the Operating Partnership, any Subsidiary or any unconsolidated joint venture in
which the Operating Partnership or any Subsidiary owns an interest, of any
assets since the first day of such period, such acquisition or disposition and
any related repayment of Debt had occurred as of the first day of such period
with the appropriate adjustments with respect to such acquisition or
disposition.
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<PAGE> 17
"Annualized EBITDA After Minority Interest" means Annualized EBITDA after
distributions to third party joint venture partners.
"Debt" means any indebtedness of the Operating Partnership and its
Subsidiaries on a consolidated basis, less any portion attributable to minority
interests, plus the Operating Partnership's allocable portion, based on its
ownership interest, of indebtedness of unconsolidated joint ventures, in respect
of (i) borrowed money evidenced by bonds, notes, debentures or similar
instruments, as determined in accordance with generally accepted accounting
principles, (ii) indebtedness secured by any mortgage, pledge, lien, charge,
encumbrance or any security interest existing on property owned by the Operating
Partnership or any Subsidiary directly, or indirectly through unconsolidated
joint ventures, as determined in accordance with generally accepted accounting
principles, (iii) reimbursement obligations, contingent or otherwise, in
connection with any letters of credit actually issued or amounts representing
the balance deferred and unpaid of the purchase price of any property, except
any such balance that constitutes an accrued expense or trade payable, and (iv)
any lease of property by the Operating Partnership or any Subsidiary as lessee
which is reflected in the Operating Partnership's consolidated balance sheet as
a capitalized lease or any lease of property by an unconsolidated joint venture
as lessee which is reflected in such joint venture's balance sheet as a
capitalized lease, in each case, in accordance with generally accepted
accounting principles; provided, that Debt also includes, to the extent not
otherwise included, any obligation by the Operating Partnership or any
Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise,
items of indebtedness of another person (other than the Operating Partnership or
any Subsidiary) described in clauses (i) through (iv) above (or, in the case of
any such obligation made jointly with another person, the Operating
Partnership's or Subsidiary's allocable portion of such obligation based on its
ownership interest in the related real estate assets).
"Fixed Charges and Preferred Unit Distributions" consist of interest costs,
whether expensed or capitalized, the interest component of rental expense and
amortization of debt issuance costs, including the Operating Partnership's pro
rata share based on its ownership interest of joint venture interest costs,
whether expensed or capitalized and the interest component of rental expense and
amortization of debt issuance costs, plus any distributions on outstanding
preferred units.
"Interest Expense" includes the Operating Partnership's pro rata share of
joint venture interest expense and is reduced by amortization of debt issuance
costs.
"Subsidiary" means a corporation, partnership, joint venture, limited
liability company or other entity, a majority of the outstanding voting stock,
partnership interests or membership interests, as the case may be, of which is
owned or controlled, directly or indirectly, by the Operating Partnership or by
one or more other Subsidiaries of the Operating Partnership and, for purposes of
this definition, shall include SPG, LP. For the purposes of this definition,
"voting stock" means stock having voting power for the election of directors, or
trustees, as the case may be, whether at all times or only so long as no senior
class of stock has such voting power by reason of any contingency.
"Unencumbered Annualized EBITDA After Minority Interest" means Annualized
EBITDA after minority interest less any portion thereof attributable to assets
serving as collateral for Secured Debt.
"Unencumbered Assets" as of any date shall be equal to Adjusted Total
Assets as of such date multiplied by a fraction, the numerator of which is
Unencumbered Annualized EBITDA After Minority Interest and the denominator of
which is Annualized EBITDA After Minority Interest. On a pro forma basis as of
March 31, 1997, the Operating Partnership's Unencumbered Assets were $2.5
billion.
"Unsecured Debt" means Debt which is not secured by any mortgage, lien,
pledge, encumbrance or security interest of any kind.
Reference is made to the section entitled "Description of Debt
Securities -- Certain Covenants" in the accompanying Prospectus for a
description of additional covenants applicable to the Notes. Compliance with the
covenants described herein and such additional covenants with respect to the
Notes generally may not be waived by the Board of Directors of the General
Partners, as general partners of the Operating Partnership, or by the Trustee
unless the Holders of at least a majority in principal amount of all outstanding
Notes consent to such waiver; provided, however, that the defeasance and
covenant defeasance provisions of the Indenture
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<PAGE> 18
described under "Description of Debt Securities -- Discharge" and
" -- Defeasance and Covenant Defeasance" in the accompanying Prospectus will
apply to the Notes and the Guarantee, including with respect to the covenants
described in this Prospectus Supplement.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of the Operating
Partnership, in whole or from time to time in part, at a redemption price equal
to the sum of (i) the principal amount of the Notes being redeemed plus accrued
interest thereon to the redemption date and (ii) the Make-Whole Amount (as
defined below), if any, with respect to such Notes (the "Redemption Price").
If notice of redemption has been given as provided in the Indenture and
funds for the redemption of any Notes called for redemption shall have been made
available on the redemption date referred to in such notice, such Notes will
cease to bear interest on the date fixed for such redemption specified in such
notice and the only right of the Holders of the Notes from and after the
redemption date will be to receive payment of the Redemption Price upon
surrender of such Notes in accordance with such notice.
Notice of any optional redemption of any Notes will be given to Holders at
their addresses, as shown in the security register for the Notes, not more than
60 nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption Price and the
principal amount of the Notes held by such Holder to be redeemed.
If less than all the Notes are to be redeemed at the option of the
Operating Partnership, the Operating Partnership will notify the Trustee at
least 45 days prior to giving notice of redemption (or such shorter period as
may be satisfactory to the Trustee) of the aggregate principal amount of Notes
to be redeemed and their redemption date. The Trustee shall select, in such
manner as it shall deem fair and appropriate, Notes to be redeemed in whole or
in part.
As used herein:
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Notes, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of each such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semi-annual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date notice of such
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, to the date of redemption
or accelerated payment, over (ii) the aggregate principal amount of the Notes
being redeemed or accelerated.
"Reinvestment Rate" means the yield on treasury securities at a constant
maturity corresponding to the remaining life (as of the date of redemption, and
rounded to the nearest month) to Stated Maturity of the principal being redeemed
(the "Treasury Yield"), plus .25%. For purposes hereof, the Treasury Yield shall
be equal to the arithmetic mean of the yields published in the Statistical
Release under the heading "Week Ending" for "U.S. Government
Securities -- Treasury Constant Maturities" with a maturity equal to such
remaining life; provided, that if no published maturity exactly corresponds to
such remaining life, then the Treasury Yield shall be interpolated or
extrapolated on a straight-line basis from the arithmetic means of the yields
for the next shortest and next longest published maturities, rounding each of
such relevant periods to the nearest month. For purposes of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole amount shall be used. If the format or
content of the Statistical Release changes in a manner that precludes
determination of the Treasury Yield in the above manner, then the Treasury Yield
shall be determined in the manner that most closely approximates the above
manner, as reasonably determined by the Operating Partnership.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which reports yields on actively traded United
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<PAGE> 19
States government securities adjusted to constant maturities, or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Operating Partnership.
THE GUARANTEE
SPG, LP will guarantee (the "Guarantee") the due and punctual payment of
principal of, premium, if any, interest on, and any other amounts payable with
respect to, the Notes, when and as the same shall become due and payable,
whether at a maturity date, on redemption, by declaration of acceleration, or
otherwise, in accordance with the terms of the Notes and the Indenture. Pursuant
to the Indenture, (i) the Trustee may exercise its rights thereunder on behalf
of the Holders and (ii) SPG, LP shall covenant that it shall take no action
which would cause the Operating Partnership to violate any covenant under the
Indenture agreement or any other condition. The Guarantee will terminate upon
the consummation of the reorganizational transactions pursuant to which the
Operating Partnership is expected to own directly all of the assets and
partnership interests then owned by SPG, LP. However, there can be no assurance
that such reorganizational transactions will be so effected. See "The Operating
Partnership" in the accompanying Prospectus. No partner (whether limited or
general) of SPG, LP will have any obligation for any obligations of SPG, LP
under the Guarantee.
In the absence of the Guarantee, Holders of the Notes will have no claims,
with respect to any payments in connection with the Notes, against the assets of
SPG, LP or the assets of any other Subsidiary of the Operating Partnership. Any
such claim that such Holders may make will have to be made indirectly through
the equity interest that the Operating Partnership has in SPG, LP (or other
Subsidiaries), and will thus be structurally subordinated to the claims of
creditors of SPG, LP (or other Subsidiaries). As a result of the Guarantee,
Holders of the Notes, upon exercising their rights with respect to the Guarantee
against SPG, LP, will be considered creditors of SPG, LP and their claims will
rank pari passu with those of unsecured and unsubordinated creditors of SPG, LP
and will not be structurally subordinated to such creditors.
BOOK-ENTRY SYSTEM
The following are summaries of certain rules and operating procedures of
DTC that affect the payment of principal and interest and transfers in the
Global Notes. Upon issuance, each series of Notes will only be issued in the
form of a Global Note which will be deposited with, or on behalf of, DTC and
registered in the name of Cede & Co., as nominee of DTC. Unless and until it is
exchanged in whole or in part for Notes in definitive form under the limited
circumstances described below, a Global Note may not be transferred except as a
whole (i) by DTC to a nominee of DTC, (ii) by a nominee of DTC to DTC or another
nominee of DTC or (iii) by DTC or any such nominee to a successor of DTC or a
nominee of such successor.
Ownership of beneficial interests in a Global Note will be limited to
persons that have accounts with DTC for such Global Note ("participants") or
persons that may hold interests through participants. Upon the issuance of a
Global Note, DTC will credit, on its book-entry registration and transfer
system, the participants' accounts with the respective principal amounts of the
Notes represented by such Global Note beneficially owned by such participants.
Ownership of beneficial interests in such Global Notes will be shown on, and the
transfer of such ownership interests will be effected only through, records
maintained by DTC (with respect to interests of participants) and on the records
of participants (with respect to interests of persons holding through
participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may limit or impair the ability to own, transfer or pledge beneficial
interests in the Global Notes.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or its nominee, as the case may be, will be considered the sole owner or Holder
of the Notes represented by such Global Note for all purposes under the
Indenture. Except as set forth below, owners of beneficial interests in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of such Notes in certificated form and will not be considered the
registered owners or Holders thereof under the Indenture. Accordingly, each
person owning a beneficial interest in a
S-19
<PAGE> 20
Global Note must rely on the procedures of DTC and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a Holder under the Indenture. The
Operating Partnership understands that under existing industry practices, if the
Operating Partnership requests any action of Holders or if an owner of a
beneficial interest in a Global Note desires to give or take any action that a
Holder is entitled to give or take under the Indenture, DTC would authorize the
participants holding the relevant beneficial interests to give or take such
action, and such participants would authorize beneficial owners owning through
such participants to give or take such action or would otherwise act upon the
instructions of beneficial owners holding through them.
Principal and interest payments on interests represented by a Global Note
will be made to DTC or its nominee, as the case may be, as the registered owner
of such Global Note. None of the Operating Partnership, the Trustee or any agent
of the Operating Partnership or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or payment
made on account of beneficial ownership interests in the Global Note or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Operating Partnership expects that DTC, upon receipt of any payment of
principal or interest in respect of a Global Note, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in such Global Note as shown on the records of
DTC. The Operating Partnership also expects that payments by participants to
owners of beneficial interests in the Global Notes held through such
participants will be governed by standing customer instructions and customary
practice, as is now the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the responsibility of
such participants.
If DTC is at any time unwilling or unable to continue as depository for the
Notes and the Operating Partnership fails to appoint a successor depository
registered as a clearing agency under the Securities Exchange Act of 1934, as
amended (the "Exchange Act), within 90 days, the Operating Partnership will
issue the Notes in definitive form in exchange for the respective Global Notes.
Any Notes issued in definitive form in exchange for the Global Notes will be
registered in such name or names, and will be issued in denominations of $1,000
and such integral multiples thereof, as DTC shall instruct the Trustee. It is
expected that such instructions will be based upon directions received by DTC
from participants with respect to ownership of beneficial interests in the
Global Notes.
DTC has advised the Operating Partnership of the following information
regarding DTC. DTC is a limited-purpose trust company organized under the
Banking Law of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities of its participants
and to facilitate the clearance and settlement of transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations, some of which (or their representatives) own DTC. Access to the
DTC book-entry system is also available to others, such as banks, brokers and
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters (as defined
herein) in immediately available funds. All payments of principal and interest
in respect of the Notes will be made by the Operating Partnership in immediately
available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, the Notes
will trade in DTC's Same-Day Funds Settlement System until maturity or until the
Notes are issued in certificated form, and secondary market trading activity in
the Notes will therefore be required by DTC to settle in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the Notes.
S-20
<PAGE> 21
UNDERWRITING
Subject to the terms and conditions contained in the terms agreement and
the related underwriting agreement (the "Underwriting Agreement"), the Operating
Partnership has agreed to sell to each of the Underwriters named below (the
"Underwriters"), and each of the Underwriters has severally agreed to purchase,
the respective principal amount of the Notes set forth below opposite their
respective names. The Underwriting Agreement provides that the obligations of
the Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the Notes if any are
purchased.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
OF 2004 OF 2009
UNDERWRITER NOTES NOTES
------------------------------------------------ ------------ ------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................... $ 25,000,000 $ 37,500,000
Chase Securities Inc............................ 25,000,000 --
Lehman Brothers Inc............................. -- 37,500,000
J.P. Morgan Securities Inc...................... -- 37,500,000
Morgan Stanley & Co. Incorporated............... -- 37,500,000
Salomon Brothers Inc............................ 25,000,000 --
UBS Securities LLC.............................. 25,000,000 --
-------------- --------------
- -
Total.............................. $100,000,000 $150,000,000
=============== ===============
</TABLE>
The Underwriters have advised the Operating Partnership that they propose
initially to offer each series of Notes to the public at the public offering
price set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession not in excess of .375% (in the case of
the 2004 Notes) and .4% (in the case of the 2009 Notes) of the principal amount
thereof. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of .25% of the principal amount thereof to certain other dealers.
After the initial public offering, the public offering price, concession and
discount may be changed.
Each series of Notes are a new issue of securities with no established
trading market. The Operating Partnership does not intend to apply for listing
of the Notes on a national securities exchange. The Operating Partnership has
been advised by the Underwriters that the Underwriters intend to make a market
in the Notes as permitted by applicable laws and regulations, but the
Underwriters are not obligated to do so and may discontinue market-making at any
time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes.
Until the distribution of the Notes is completed, rules of the Commission
may limit the ability of the Underwriters and certain selling group members to
bid for and purchase the Notes. As an exemption to these rules, the Underwriters
are permitted to engage in certain transactions that stabilize the price of the
Notes. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection with
the Offering, i.e., they sell more Notes than are set forth on the cover page of
this Prospectus Supplement, the Underwriters may reduce that short position by
purchasing Notes in the open market. The Underwriters may also impose a penalty
bid on selling group members. This means that if the Underwriters purchase Notes
in the open market to reduce the Underwriters' short position or to stabilize
the price of the Notes, they may reclaim the amount of the selling concession
from the selling group members who sold those Notes as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
S-21
<PAGE> 22
Neither the Operating Partnership nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Notes.
In addition, neither the Operating Partnership nor any of the Underwriters
makes any representation that the Underwriters will engage in such transactions
or that such transactions once commenced, will not be discontinued without
notice.
The Operating Partnership and the Company have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the
Underwriters may be required to make in respect thereof.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
certain of the Underwriters have from time to time provided, and may continue to
provide in the future, various investment banking, commercial banking and/or
financial advisory services to the Company, the Operating Partnership and SPG,
LP, for which customary compensation has been, and will be, received. Merrill
Lynch has acted as representative of various underwriters in connection with
public offerings of the Company's Common Stock and Preferred Stock in 1993,
1995, 1996 and 1997 and of the Operating Partnership's Debt Securities in 1996
and 1997. Also, in connection with the Merger, the Company paid Merrill Lynch a
fee of approximately $4 million for financial advisory services provided by
Merrill Lynch and Morgan Stanley & Co. Incorporated ("Morgan Stanley") was paid
a fee of approximately $3.875 million by DRC for financial advisory services
provided to DRC by Morgan Stanley. The Chase Manhattan Bank, which serves as the
Trustee under the Indenture, is an affiliate of Chase Securities Inc., one of
the Underwriters. Morgan Guaranty Trust Company of New York, an affiliate of
J.P. Morgan Securities, Inc., one of the Underwriters, The Chase Manhattan Bank,
an affiliate of Chase Securities Inc., one of the Underwriters, and Union Bank
of Switzerland, New York Branch, an affiliate of UBS Securities LLC, one of the
Underwriters, are lead agents and lenders under the Credit Facility. The Chase
Manhattan Bank or its affiliates are participants in loans secured by mortgages
on certain of the Portfolio Properties in the aggregate principal amount of
approximately $325 million.
LEGAL MATTERS
The legality of the Notes offered hereby and the description of United
States Federal income tax matters contained in this Prospectus Supplement will
be passed upon for the Operating Partnership by Baker & Daniels, Indianapolis,
Indiana. Certain legal matters will be passed upon for the Underwriters by
Rogers & Wells, New York, New York. Baker & Daniels and Rogers & Wells will rely
on (i) the opinions of Piper & Marbury, LLP, Baltimore, Maryland, as to matters
of Maryland law and (ii) the opinions of Vorys, Sater, Seymour and Pease,
Columbus, Ohio, as to matters of Ohio law.
S-22
<PAGE> 23
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The accompanying financial statements present the unaudited pro forma
combined condensed balance sheet of the Operating Partnership as of March 31,
1997 and the unaudited pro forma combined condensed statements of operations of
the Operating Partnership for the three-month period ended March 31, 1997 and
for the year ended December 31, 1996.
The unaudited pro forma combined condensed balance sheet as of March 31,
1997 is presented as if the issuance of $100 million Medium-Term Notes on June
24, 1997 (the "MTN Offering"), the issuance of $150 million of 7.89% Series C
Cumulative Step-Up Premium Rate(SM) Preferred Stock on July 9, 1997 (the "Series
C Offering"), the borrowings of $130 million under the revolving credit facility
subsequent to March 31, 1997 (the "Credit Facility Borrowings"), the issuance of
$250 million of Notes (the "Offering") and the related use of proceeds all had
occurred on March 31, 1997. The unaudited pro forma combined condensed
statements of operations for the three month period ended March 31, 1997 and for
the year ended December 31, 1996 are presented as if the merger with DeBartolo
Realty Corporation on August 9, 1996 (the "Merger"), the issuance of $200
million of Series B Cumulative Redeemable Preferred Stock on September 27, 1996
(the "Series B Offering"), the issuance of $250 million of 6 7/8% Notes on
November 21, 1996 (the "6 7/8% Notes Offering"), the issuance of $100 million of
Putable Asset Trust Securities on November 26, 1996 (the "PATS Offering"), the
MTN Offering, the Series C Offering, the Credit Facility Borrowings, the
Offering and the related use of proceeds all had occurred as of January 1, 1996
and were carried forward through March 31, 1997.
Preparation of the pro forma financial information was based on assumptions
deemed appropriate by the management of the General Partners. The assumptions
give effect to the Merger under the purchase method of accounting, and the
offerings and borrowings described above in accordance with generally accepted
accounting principles. The pro forma financial information is unaudited and is
not necessarily indicative of the results which actually would have occurred if
the transactions had been consummated at the beginning of the periods presented,
nor does it purport to represent the future financial position and results of
operations for future periods. The pro forma information should be read in
conjunction with the historical financial statements of the Operating
Partnership, incorporated by reference into the accompanying Prospectus.
The pro forma adjustments included in the unaudited pro forma combined
condensed financial statements are based upon currently available information
and upon certain assumptions that management of the General Partners believes
are reasonable. There can be no assurance that the actual adjustments will not
differ significantly from the pro forma adjustments reflected in the pro forma
financial information.
SF-1
<PAGE> 24
SIMON DEBARTOLO GROUP, L.P.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SDG, LP PRO FORMA
(HISTORICAL) ADJUSTMENTS TOTAL PRO FORMA
--------------- ----------- ---------------
<S> <C> <C> <C>
ASSETS:
Investment properties, net.................... $ 5,037,663 $ 80,000(C) $ 5,117,663
Cash, cash equivalents and restricted cash.... 46,368 10,400(D) 56,768
Receivables................................... 165,863 -- 165,863
Note receivable from Management Company and
affiliate.................................. 90,157 -- 90,157
Investment in partnerships and joint ventures,
at equity.................................. 404,192 70,000(E) 474,192
Other assets.................................. 164,653 53,100(F) 217,753
--------------- ----------- ---------------
Total assets............................. $ 5,908,896 $ 213,500 $ 6,122,396
=========== ========= ============
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES:
Mortgages and other indebtedness.............. $ 3,746,992 $ 67,500(B) $ 3,814,492
Accounts payable, accrued expenses and other
liabilities................................ 249,902 -- 249,902
Cash distributions and losses in partnerships
and joint ventures, at equity.............. 18,289 -- 18,289
Investment in the Management Company
and affiliates............................. 7,980 -- 7,980
--------------- ----------- ---------------
Total liabilities........................ 4,023,163 67,500 4,090,663
--------------- ----------- ---------------
PARTNERS' EQUITY:
Series A Preferred Units...................... 99,923 -- 99,923
Series B Preferred Units...................... 192,989 -- 192,989
Series C Preferred Units...................... -- 146,000(A) 146,000
General Partners.............................. 992,142 -- 992,142
Limited Partners.............................. 620,267 -- 620,267
Unamortized restricted stock award............ (19,588) -- (19,588)
--------------- ----------- ---------------
Total partners' equity................... 1,885,733 146,000 2,031,733
--------------- ----------- ---------------
Total liabilities and partners' equity... $ 5,908,896 $ 213,500 $ 6,122,396
=========== ========= ============
</TABLE>
The accompanying notes and management's assumptions are an integral part of
these statements.
SF-2
<PAGE> 25
SIMON DEBARTOLO GROUP, L.P.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SDG, LP PRO FORMA TOTAL
(HISTORICAL) ADJUSTMENTS PRO FORMA
------------ ----------- ------------
<S> <C> <C> <C>
REVENUE
Minimum rent....................................................... $ 148,019 $ -- $ 148,019
Overage rent....................................................... 7,515 -- 7,515
Tenant reimbursements.............................................. 75,823 -- 75,823
Other income....................................................... 11,057 887(I) 11,944
------------ ----------- ------------
Total revenue............................................... 242,414 887 243,301
------------ ----------- ------------
EXPENSES
Property and other operating expenses.............................. 87,354 -- 87,354
Depreciation and amortization...................................... 43,354 -- 43,354
------------ ----------- ------------
Total expenses.............................................. 130,708 -- 130,708
------------ ----------- ------------
OPERATING INCOME..................................................... 111,706 887 112,593
INTEREST EXPENSE..................................................... 67,918 215(J) 68,133
------------ ----------- ------------
INCOME BEFORE MINORITY INTEREST...................................... 43,788 672 44,460
MINORITY PARTNERS' INTEREST.......................................... (1,484) -- (1,484)
GAIN ON SALE OF ASSETS............................................... 37 -- 37
------------ ----------- ------------
INCOME BEFORE UNCONSOLIDATED ENTITIES................................ 42,341 672 43,013
INCOME FROM UNCONSOLIDATED ENTITIES.................................. 721 916(K) 1,637
------------ ----------- ------------
NET INCOME FROM CONTINUING OPERATIONS................................ 43,062 1,588 44,650
GENERAL PARTNERS PREFERRED UNIT REQUIREMENT.......................... 6,406 3,059(L) 9,465
------------ ----------- ------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
AVAILABLE TO UNITHOLDERS........................................... $ 36,656 $ (1,471) $ 35,185
============ =========== =============
NET INCOME (LOSS) AVAILABLE TO
UNITHOLDERS ATTRIBUTABLE TO:
GENERAL PARTNERS................................................... $ 22,507 $ (903) $ 21,604
LIMITED PARTNERS................................................... 14,149 (568)(M) 13,581
------------ ----------- ------------
$ 36,656 $ (1,471) $ 35,185
============ =========== =============
NET INCOME PER UNIT.................................................. $ 0.23 $ 0.22
============ =============
WEIGHTED AVERAGE UNITS OUTSTANDING................................... 157,951,481 157,951,481
============ =============
</TABLE>
The accompanying notes and management's assumptions are an integral part of
these statements.
SF-3
<PAGE> 26
SIMON DEBARTOLO GROUP, L.P.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
DRP, LP
(HISTORICAL) PRO
SDG, LP FOR THE PERIOD MERGER FORMA
(HISTORICAL) JANUARY 1, 1996 TO PRO FORMA COMBINED PRO FORMA TOTAL
(NOTE 1) AUGUST 9, 1996 ADJUSTMENTS CONDENSED ADJUSTMENTS PRO FORMA
------------ ------------------- ------------ --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Minimum rent........................ $ 438,089 $ 136,594 $ 2,068(A) $576,751 -- $ 576,751
Overage rent........................ 30,810 6,188 -- 36,998 -- 36,998
Tenant reimbursements............... 233,974 52,398 -- 286,372 -- 286,372
Other income........................ 44,831 11,455 -- 56,286 3,549(I) 59,835
------------ -------- ------------ --------- ----------- -----------
Total revenue................. 747,704 206,635 2,068 956,407 3,549 959,956
------------ -------- ------------ --------- ----------- -----------
EXPENSES
Property and other operating
expenses.......................... 273,176 86,183 (12,164)(B) 347,195 -- 347,195
Depreciation and amortization....... 135,780 38,706 6,823(C) 181,309 -- 181,309
Write off of minority interest...... -- 13,854 (13,854)(D) -- -- --
Merger expenses..................... 7,236 13,512 (20,748)(E) -- -- --
------------ -------- ------------ --------- ----------- -----------
Total expenses................ 416,192 152,255 (39,943) 528,504 -- 528,504
------------ -------- ------------ --------- ----------- -----------
OPERATING INCOME...................... 331,512 54,380 42,011 427,903 3,549 431,452
INTEREST EXPENSE...................... 202,182 74,714 (7,459)(F) 269,437 (10,557)(J) 258,880
------------ -------- ------------ --------- ----------- -----------
INCOME BEFORE MINORITY INTEREST....... 129,330 (20,334) 49,470 158,466 14,106 172,572
MINORITY PARTNERS' INTEREST........... (4,300) (528) -- (4,828) -- (4,828)
GAIN ON SALE OF ASSETS................ 88 -- -- 88 -- 88
------------ -------- ------------ --------- ----------- -----------
INCOME BEFORE UNCONSOLIDATED ENTITIES... 125,118 (20,862) 49,470 153,726 14,106 167,832
INCOME FROM UNCONSOLIDATED ENTITIES... 9,545 8,422 -- 17,967 3,237(K) 21,204
------------ -------- ------------ --------- ----------- -----------
NET INCOME FROM CONTINUING
OPERATIONS.......................... 134,663 (12,440) 49,470 171,693 17,343 189,036
GENERAL PARTNERS PREFERRED UNIT
REQUIREMENT......................... 12,694 -- -- 12,694 25,166(L) 37,860
------------ -------- ------------ --------- ----------- -----------
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS AVAILABLE TO
UNITHOLDERS......................... $ 121,969 $ (12,440) $ 49,470 $158,999 $ (7,823) $ 151,176
=========== ================= ============ ========= =========== ==========
NET INCOME (LOSS) AVAILABLE TO
UNITHOLDERS ATTRIBUTED TO:
GENERAL PARTNERS.................... $ 74,722 $ (7,697) $ 30,553 $ 97,578 $ (4,801) $ 92,777
LIMITED PARTNERS.................... 47,247 (4,743) 18,917(G) 61,421 (3,022)(M) 58,399
------------ -------- ------------ --------- ----------- -----------
$ 121,969 $ (12,440) $ 49,470 $158,999 $ (7,823) $ 151,176
=========== ================= ============ ========= =========== ==========
NET INCOME PER UNIT................... $ 1.02 $ 0.96
=========== ==========
WEIGHTED AVERAGE UNITS OUTSTANDING.... 120,181,895 157,073,785(H)
=========== ==========
</TABLE>
The accompanying notes and management's assumptions are an integral part of
these statements.
SF-4
<PAGE> 27
SIMON DEBARTOLO GROUP, L.P.
NOTES AND MANAGEMENT ASSUMPTIONS TO
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED, IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT AMOUNTS)
1. BASIS OF PRESENTATION
Simon DeBartolo Group, Inc. ("SDG" or the "Company"), formerly known as
Simon Property Group, Inc. ("SPG") 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 below.
Simon DeBartolo Group, L.P. (the "Operating Partnership") is a subsidiary
partnership of the Company. Simon Property Group, L.P. ("SPG, LP") is a
subsidiary partnership of the Operating Partnership and of the Company. The
Operating Partnership is engaged primarily in the ownership, operation,
management, leasing, acquisition, expansion and development of real estate
properties, primarily regional malls and community shopping centers. As of March
31, 1997, the Operating Partnership owns or holds an interest in 186 income-
producing properties, which consist of 114 super-regional and regional malls, 65
community shopping centers, three specialty retail centers and four mixed-use
properties located in 33 states (the "Properties"). The Operating Partnership
also owns interests in four properties currently under construction and seven
parcels of land held for future development.
On August 9, 1996, the merger and other related transactions, pursuant to
the agreement and plan of merger between SPG, an acquisition subsidiary of SPG
and DRC, were consummated (the "Merger"). Pursuant to the Merger, SPG acquired
all the outstanding shares of common stock of DRC (55,712,529 shares), through
the acquisition subsidiary, at an exchange ratio of 0.68 share of SPG common
stock for each share of DRC common stock (the "Exchange Ratio"). DRC and the
acquisition subsidiary merged, with DRC the surviving entity, becoming a 99.9%
subsidiary of SPG. This portion of the transaction was valued at approximately
$923.2 million and resulted in SPG obtaining an indirect 61.9% general
partnership interest in DRC's operating partnership, DeBartolo Realty
Partnership, L.P. ("DRP, LP"). The value of the acquisition of DRC was based
upon the number of shares (55,712,529 shares) of DRC common stock acquired, the
Exchange Ratio and the last reported sales price per share of SPG's common stock
on August 9, 1996 ($24.375).
In connection with the Merger, SPG changed its name to Simon DeBartolo
Group, Inc. In addition, simultaneous with the Merger, the general and limited
partners of SPG, LP contributed 99% of their interests (49.5% partnership
interest and an additional 49.5% interest in the profits of SPG, LP) to DRP, LP
in exchange for units of partnership interest in DRP, LP, whose name had since
changed to Simon DeBartolo Group, L.P. The limited partners of DRP, LP approved
the contribution made by the partners of SPG, LP and simultaneously exchanged
their 38.0% partnership interest in DRP, LP, adjusted for the Exchange Ratio,
for a smaller partnership interest in the Operating Partnership. The exchange of
the limited partners' interest in DRP, LP for units of partnership interest in
the Operating Partnership has been accounted for as an acquisition of minority
interest and is valued based on the estimated fair value of the consideration
issued (approximately $566.9 million). The limited partnership units of the
Operating Partnership may under certain circumstances be exchangeable for common
stock of SDG on a one-for-one basis. Therefore, the value of the acquisition of
the limited partners' interest acquired was based upon the number of units of
partnership interest (34,203,623 units) in DRP, LP exchanged, the Exchange Ratio
and the last reported sales price per share of SPG's common stock on August 9,
1996 ($24.375). The limited partners of SPG, LP received a 23.7% partnership
interest in the Operating Partnership for contributing their 38.9% partnership
interest in SPG, LP to the Operating Partnership. 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 directly and
indirectly owned a controlling 61.2% partnership interest in the Operating
Partnership.
SF-5
<PAGE> 28
SIMON DEBARTOLO GROUP, L.P.
NOTES AND MANAGEMENT ASSUMPTIONS TO
PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
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 $1,518,102, including related transaction costs. The purchase price
has been allocated to the fair value of the assets and liabilities of DRP, LP.
Although the Company was the accounting acquirer, DRP, LP (which is now
known as Simon DeBartolo Group, L.P.) became the primary operating partnership
through which the future business of the Company will be conducted. As a result
of the Merger, SPG's initial operating partnership, SPG, LP, became a subsidiary
of the Operating Partnership, with 99% of the profits allocable to the Operating
Partnership and 1% of the profits allocable to the Company. Cash flow allocable
to the Company's 1% profit interest in SPG, LP will be absorbed by public
company costs and related expenses incurred by the Company. Because the Company
was the accounting acquirer and, upon completion of the Merger, acquired
majority control of DRP, LP, SPG, LP is the predecessor to the Operating
Partnership for financial reporting purposes. Accordingly, the financial
statements and ratios disclosed by the Operating Partnership for post-merger
periods will reflect the reverse acquisition of DRP, LP by the Company using the
purchase method of accounting and for all pre-merger comparative periods, the
financial statements and ratios disclosed by the Operating Partnership will
reflect the financial statements and ratios of SPG, LP as the predecessor to the
Operating Partnership for financial reporting purposes.
The accompanying financial statements present the unaudited pro forma
combined condensed balance sheet of the Operating Partnership as of March 31,
1997 and the unaudited pro forma combined condensed statements of operations of
the Operating Partnership for the three-month period ended March 31, 1997 and
for the year ended December 31, 1996.
The unaudited pro forma combined condensed balance sheet as of March 31,
1997 is presented as if the issuance of $100 million Medium-Term Notes on June
24, 1997 (the "MTN Offering"), the issuance of $150 million of 7.89% Series C
Cumulative Step-Up Premium Rate(SM) Preferred Stock on July 9, 1997 (the "Series
C Offering"), the borrowings of $130 million under the revolving credit facility
subsequent to March 31, 1997 (the "Credit Facility Borrowings"), the issuance of
$250 million of Notes (the "Offering") and the related use of proceeds all had
occurred on March 31, 1997. The unaudited pro forma combined condensed
statements of operations for the three-month period ended March 31, 1997 and for
the year ended December 31, 1996 are presented as if the merger with DeBartolo
Realty Corporation on August 9, 1996 (the "Merger"), the issuance of $200
million of Series B Cumulative Redeemable Preferred Stock on September 27, 1996
(the "Series B Offering"), the issuance of $250 million of 6 7/8% Notes on
November 21, 1996 (the "6 7/8% Notes Offering"), the issuance of $100 million of
Putable Asset Trust Securities on November 26, 1996 (the "PATS Offering"), the
MTN Offering, the Series C Offering, the Credit Facility Borrowings, the
Offering and the related use of proceeds all had occurred as of January 1, 1996
and were carried forward through March 31, 1997.
Preparation of the pro forma financial information was based on assumptions
deemed appropriate by the management of the General Partners. The assumptions
give effect to the Merger under the purchase method of accounting and the
offerings and borrowings described above in accordance with generally accepted
accounting principles. The pro forma financial information is unaudited and is
not necessarily indicative of the results which actually would have occurred if
the transactions had been consummated at the beginning of the periods presented,
nor does it purport to represent the future financial position and results of
operations for future periods. The pro forma information should be read in
conjunction with the historical financial statements of the Operating
Partnership incorporated by reference into the accompanying Prospectus.
The pro forma adjustments included in the unaudited pro forma combined
financial statements are based upon currently available information and upon
certain assumptions that management of the General Partners
SF-6
<PAGE> 29
SIMON DEBARTOLO GROUP, L.P.
NOTES AND MANAGEMENT ASSUMPTIONS TO
PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
believes are reasonable. There can be no assurance that the actual adjustments
will not differ significantly from the pro forma adjustments reflected in the
pro forma financial information.
2. ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED BALANCE SHEET
<TABLE>
<S> <C> <C>
(A) To record the issuance of 3,000,000 7.89% Series C Preferred Shares
for $150,000 with net proceeds of $146,000. The net proceeds of
$146,000 were contributed by the Company to the Operating
Partnership in exchange for preferred units with terms substantially
identical to the Series C Preferred Shares. The Series C Preferred
Shares will pay distributions at a rate of 7.89% through September
30, 2012 and at a rate of 9.89% thereafter. The Series C Preferred
Shares are not redeemable prior to September 30, 2007. On and after
September 30, 2007, the Series C Preferred Shares may be redeemed at
the option of the Company in whole or in part. The redemption price
of the Series C Preferred Shares may only be paid from the sale
proceeds of other capital stock of the Company. Because the
Company's current intent is to redeem the Series C Preferred Shares
prior to the increase in the distribution rate on September 30,
2012, the Company will accrete the Series C Preferred Shares to
their liquidation value of $150,000 over the current estimated
holding period of ten years. The net proceeds were used to acquire
an additional 48% non-controlling joint venture interest in West
Town Mall for $70,000, to reduce the revolving credit facility by
$70,000 and $6,000 retained for general corporate purposes. ........ $ 146,000
==========
(B) To reflect the following adjustments to Mortgages and other
indebtedness:
1. To reflect the issuance of $250,000 in Notes from the Offering
($1,500 discount and $2,500 used to pay debt issuance costs) with an
average interest rate of 6.9% and to reflect the use of $246,000
in net proceeds from the Offering to reduce the amount
outstanding under the revolving credit facility with an average
interest rate of 6.42% for the three months ended March 31,
1997............................................................. $ 2,500
2. To reflect the portion of the net proceeds from the Series C
Offering used to reduce the amount outstanding under the revolving
credit facility with an average interest rate of 6.42% for the
three months ended March 31, 1997. .............................. (70,000)
3. To reflect the $100,000 MTN Offering ($600 used to pay debt
issuance costs) with an interest rate of 7.125% and to reflect the
use of $99,400 in net proceeds from the MTN Offering to reduce
the amount outstanding under the revolving credit facility of
$95,000 with an average interest rate of 6.42% for the three
months ended March 31, 1997 and $4,400 retained for general
corporate purposes. ............................................. 5,000
4. To reflect borrowings on the revolving credit facility (the
"Credit Facility Borrowings") of $80,000 for certain development
activities and $50,000 for the purchase of 1,408,450 shares of
common stock of Chelsea GCA Realty, Inc. (the "Chelsea
Stock") ......................................................... 130,000
-----------
$ 67,500
==========
</TABLE>
SF-7
<PAGE> 30
SIMON DEBARTOLO GROUP, L.P.
NOTES AND MANAGEMENT ASSUMPTIONS TO
PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
<TABLE>
<S> <C> <C>
(C) To record costs related to certain development activities funded by
the Credit Facility Borrowings. .................................... $ 80,000
==========
(D) To reflect the following adjustments to Cash, cash equivalents and
restricted cash:
1. To reflect $6,000 in cash from the Series C Offering............. $ 6,000
2. To reflect $4,400 in cash from the MTN Offering.................. 4,400
-----------
$ 10,400
==========
(E) To record the acquisition of an additional 48% non-controlling
interest in West Town Mall for $70,000. The Operating Partnership
now owns a 50% non-controlling interest in West Town Mall as a
result of the acquisition. The Operating Partnership recorded their
original 2% investment in West Town Mall using the cost method of
accounting. The Operating Partnership will reflect its 50% interest
in West Town Mall using the equity method of accounting. The excess
of the Operating Partnership's investment in West Town Mall over its
shares of the equity in the underlying net assets of West Town Mall
of $17,859 is being amortized over an estimated life of 25 years.... $ 70,000
==========
(F) To reflect the following adjustments to Other assets:
1. To record deferred debt issuance costs related to the
Offering......................................................... $ 2,500
2. To record deferred debt issuance costs related to the MTN
Offering......................................................... 600
3. To record the acquisition of the Chelsea Stock................... 50,000
-----------
$ 53,100
==========
</TABLE>
3. ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
Merger Pro Forma Adjustments
DRP, LP incurred $13,512 of expenses in connection with the Merger and
these expenses have been excluded from the Pro Forma Combined Condensed
Statements of Operations (see (E) below).
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
DECEMBER 31, 1996
-----------------
<S> <C> <C>
(A) To recognize revenue from straightlining rent related to leases
which have been reset in connection with the Merger.............. $ 2,068
==========
(B) To reflect cost savings to eliminate duplicative public company
costs and other identified redundancies which have been estimated
based upon historical costs for those items as a result of the
Merger........................................................... $ (12,164)
==========
(C) To reflect the increase in depreciation as a result of recording
the investment properties of DRP, LP at acquisition value versus
historical cost and utilizing an estimated useful life of 35
years offset by the decrease in amortization expense as a result
of the elimination of deferred leasing costs..................... $ 6,823
==========
</TABLE>
SF-8
<PAGE> 31
SIMON DEBARTOLO GROUP, L.P.
NOTES AND MANAGEMENT ASSUMPTIONS TO
PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
DECEMBER 31, 1996
----------
<S> <C> <C>
(D) To eliminate the adjustment to write-off minority interest
recorded in connection with the Merger........................... $ (13,854)
==========
(E) To reflect the elimination of Merger related costs expensed
during the year ended December 31, 1996.......................... $ (20,748)
==========
(F) To reflect the following adjustments to interest expense as a
result of the Merger:
1. To reflect the elimination of amortization of deferred
mortgage costs, related to DRP, LP, written-off in connection
with the Merger............................................... $ (6,175)
2. To reflect the amortization of the premium required to adjust
mortgages and other notes payable to fair value.................. (1,284)
----------
$ (7,459)
==========
(G) To adjust the allocation of the Limited Partners' interest after
giving effect to the Merger in the net income of the Operating
Partnership, taking into consideration the preferred unit
distribution. The Limited Partners' pro forma weighted average
ownership interest for the year ended December 31, 1996 was
38.6%............................................................ $ 18,917
==========
(H) The pro forma weighted average units outstanding is computed as
follows:
Operating Partnership Historical Weighted Average Units
Outstanding...................................................... 120,181,895
Issuance of units in connection with the Merger (assuming that
there are 89,916,152 units of DRP, LP outstanding immediately
prior to the Merger)............................................. 36,891,890
----------
157,073,785
==========
</TABLE>
Other Pro Forma Adjustments
<TABLE>
<CAPTION>
FOR THE
THREE-MONTHS FOR THE YEAR
ENDED ENDED
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C> <C>
(I) To record other income related to distributions
from the Chelsea Stock............................ $ 887 $ 3,549
========== ==========
(J) To reflect the following adjustments to interest
expense:
1. To record the reduction in interest expense as
a result of the use of $177,200 of the net
proceeds of $193,000 from the Series B Offering
to reduce Mortgages and other indebtedness and
the revolving credit facility.................. $ -- $ (9,548)
2. To record the net increase in interest expense
and deferred debt issuance cost amortization as a
result of the 6 7/8% Notes Offering............ -- 312
3. To record the net increase in interest expense
and deferred debt issuance costs amortization as a
result of the PATS Offering.................... -- 297
</TABLE>
SF-9
<PAGE> 32
SIMON DEBARTOLO GROUP, L.P.
NOTES AND MANAGEMENT ASSUMPTIONS TO
PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE
THREE-MONTHS FOR THE YEAR
ENDED ENDED
MARCH 31, 1997 DECEMBER 31, 1996
---------- ----------
<S> <C> <C> <C>
4. To record the net increase in interest expense
as a result of the MTN Offering................... 275 806
5. To record the net decrease in interest expense
as a result of the Series C Offering.............. (1,124) (4,711)
6. To record the increase in interest expense and
deferred debt issuance costs amortization as a
result of the Offering......................... 4,380 17,518
7. To reflect adjustments to interest expense
including capitalized interest resulting from the
use of proceeds from the Offering.............. (3,316) (15,231)
---------- ----------
$ 212 $ (10,557)
========== ==========
(K) To reflect the Operating Partnership's share of
the net income from West Town Mall less the
amortization of the excess of the Operating
Partnership's investment in West Town Mall over
its share of the equity in the underlying assets
of West Town Mall................................. $ 916 $ 3,237
========== ==========
(L) To reflect the following adjustments to General
Partners preferred unit requirement:
1. To record preferred unit distributions related
to the Series B Offering.......................... $ -- $ 12,931
2. To record preferred unit distributions related
to the Series C Offering including $100 and $400
to accrete the Series C Preferred Stock to
liquidation value, respectively................ 3,059 12,235
---------- ----------
$ 3,059 $ 25,166
========== ==========
(M) To adjust the allocation of the Limited Partners'
interest in the Operating Partnership after giving
effect to the above adjustments. The Limited
Partners' pro forma weighted average ownership
interest for the three-months ended March 31, 1997
and for the year ended December 31, 1996 was
38.6%............................................. $ (568) $ (3,022)
========== ==========
</TABLE>
SF-10
<PAGE> 33
PROSPECTUS
$750,000,000
SIMON DEBARTOLO GROUP, L.P.
DEBT SECURITIES
------------------------
Simon DeBartolo Group, L.P. (the "Operating Partnership") may from time to
time offer in one or more series unsecured non-convertible investment grade debt
securities ("Debt Securities") with an aggregate public offering price of up to
$750,000,000 (or its equivalent in another currency based on the exchange rate
at the time of sale) in amounts, at prices and on terms to be set forth in one
or more supplements to this Prospectus (each a "Prospectus Supplement"). The
Operating Partnership is a subsidiary of Simon DeBartolo Group, Inc. (the
"Company") and is the Company's primary operating partnership following the
consummation on August 9, 1996 of the merger of DeBartolo Realty Corporation
with a subsidiary of the Company. Simon Property Group, L.P., a Delaware limited
partnership and a subsidiary partnership of the Operating Partnership, will
guarantee (the "Guarantee") the due and punctual payment of the principal of,
premium, if any, interest on, and any other amounts payable with respect to, the
Debt Securities, when and as the same shall become due and payable, whether at a
maturity date, on redemption, by declaration of acceleration or otherwise, and
as set forth in the applicable Prospectus Supplement with respect to such Debt
Securities.
The specific terms of the Debt Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include a specific title, aggregate principal amount,
currency, form (which may be registered or bearer, or certificated or global),
authorized denominations, maturity, rate (or manner of calculation thereof) and
time of payment of interest, terms for redemption at the option of the Operating
Partnership or repayment at the option of the holder, terms for sinking fund
payments, covenants and any initial public offering price.
The applicable Prospectus Supplement will also contain information, where
applicable, concerning material United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Debt Securities
covered by such Prospectus Supplement.
The Debt Securities may be offered directly, through agents designated from
time to time by the Operating Partnership, or to and through underwriters or
dealers. If any agents, dealers or underwriters are involved in the sale of any
of the Debt Securities, their names, and any applicable purchase price, fee,
commission or discount arrangement between or among them, will be set forth, or
will be calculable from the information set forth, in an accompanying Prospectus
Supplement. See "Plan of Distribution." No Debt Securities may be sold without
delivery of a Prospectus Supplement describing the method and terms of the
offering of such series of Debt Securities.
The Debt Securities will be direct, unsecured obligations of the Operating
Partnership and will, unless otherwise described in the applicable Prospectus
Supplement, rank equally with all other unsecured and unsubordinated
indebtedness of the Operating Partnership. On September 30, 1996, the total
outstanding debt of the Operating Partnership including its pro rata share of
joint venture debt was approximately $3,986.3 million, 92% of which was secured
debt. Except as otherwise described in the applicable Prospectus Supplement, the
Indenture pursuant to which the Debt Securities are issued does not limit the
amount of other indebtedness of the Operating Partnership that may rank equally
with or senior to the Debt Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
------------------------
The date of this Prospectus is November 21, 1996.
<PAGE> 34
AVAILABLE INFORMATION
Simon DeBartolo Group, Inc. (the "Company") is the holder of approximately
a 99.99% interest in SD Property Group, Inc., which is the managing general
partner of the Operating Partnership. Simon Property Group, L.P. ("SPG, LP") is
a subsidiary partnership of the Operating Partnership. The Company is the
general partner of SPG, LP. The Company and SPG, LP are and, following the
effectiveness of the registration statement of which this Prospectus is a part,
the Operating Partnership will be, subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, the Company and SPG, LP file and the Operating Partnership
may be required to file reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company and SPG, LP can be
inspected and copied, at the prescribed rates, at the public reference
facilities of the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 7 World Trade Center,
Suite 1300, New York, New York 10048, and Northwestern Atrium Center, 500 W.
Madison Street, Chicago, Illinois 60661. The Company's Common Stock is traded on
the New York Stock Exchange ("NYSE"). Reports and other information concerning
the Company may be inspected at the principal office of the NYSE at 20 Broad
Street, New York, New York 10005.
The Company, SPG, LP and the Operating Partnership will provide without
charge to each person to whom a copy of this Prospectus is delivered, upon
written or oral request, a copy of any or all of the documents incorporated
herein by reference (other than exhibits to such documents). Written requests
for such copies should be addressed to National City Center, 115 West Washington
Street, Suite 15 East, Indianapolis, Indiana 46204, Attn: Investor Relations,
telephone number (317) 685-7330.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Operating Partnership and SPG, LP
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Debt Securities offered hereby. This
Prospectus omits certain of the information contained in the Registration
Statement and the exhibits and schedules thereto, in accordance with the rules
and regulations of the Commission. For further information concerning the
Operating Partnership, SPG, LP and the Debt Securities offered hereby, reference
is hereby made to the Registration Statement and the exhibits and schedules
filed therewith, which may be inspected without charge at the office of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and copies of which
may be obtained from the Commission at prescribed rates. The Commission
maintains a World Wide Web Site (http://www.sec.gov) that contains such material
regarding issuers that file electronically with the Commission. This
Registration Statement has been so filed and may be obtained at such site. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
Certain information, including, but not limited to, information relating to
the Operating Partnership's and SPG, LP's properties, principal security
holders, management, executive compensation, certain relationships and related
transactions and legal proceedings that would be required to be disclosed in a
prospectus included in a registration statement on Form S-11, has been omitted
from this Prospectus because such information is not materially different from
the information contained in the Company's and SPG, LP's periodic reports, proxy
statements and other information filed by the Company and SPG, LP with the
Commission.
2
<PAGE> 35
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company and SPG, LP which have been filed
with the Commission are hereby incorporated by reference in this Prospectus.
1. The Company's Registration Statement on Form S-4 (Registration No.
333-06933);
2. The Company's Proxy Statement dated June 28, 1996, relating to the
annual and special meeting of stockholders held on August 7, 1996;
3. The Company's Annual Report on Form 10-K for the year ended December 31,
1995, as amended by Form 10-K/A-1;
4. The Company's Quarterly Reports on Form 10-Q for the calendar quarters
ended March 31, 1996, as amended by Form 10-Q/A, June 30, 1996 and September 30,
1996, as amended by Form 10-Q/A;
5. The Company's Current Reports on Form 8-K filed on March 21, April 1,
May 17, August 12, August 14, August 26, September 18, and September 27, 1996;
6. SPG, LP's Annual Report on Form 10-K for the year ended December 31,
1995, as amended by Forms 10-K/A-1 and 10-K/A-2;
7. SPG, LP's Quarterly Reports on Form 10-Q for the calendar quarters ended
March 31, June 30 and September 30, 1996, as amended by Form 10-Q/A; and
8. SPG, LP's Current Report on Form 8-K filed on August 26, 1996, as
amended on August 28, 1996, and on October 21, 1996.
The Exchange Act filing numbers of the Company and SPG, LP are 1-12618 and
33-98364, respectively.
Each document filed by the Company, SPG, LP or the Operating Partnership
subsequent to the date of this Prospectus pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act and prior to termination of the offering of all
Debt Securities to which this Prospectus relates shall be deemed to be
incorporated by reference in this Prospectus and shall be part hereof from the
date of filing of such document. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus (in the case of a statement in a
previously-filed document incorporated or deemed to be incorporated by reference
herein), in any accompanying Prospectus Supplement relating to a specific
offering of Debt Securities or in any other subsequently filed document that is
also incorporated or deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any accompanying Prospectus Supplement. Subject to the foregoing,
all information appearing in this Prospectus and each accompanying Prospectus
Supplement is qualified in its entirety by the information appearing in the
documents incorporated by reference.
The foregoing documents of the Company and SPG, LP filed under the Exchange
Act have been incorporated by reference herein because they contain information
concerning business, properties, operations and management of the Operating
Partnership through which the Company conducts its operations.
3
<PAGE> 36
THE OPERATING PARTNERSHIP
Simon DeBartolo Group, L.P. (the "Operating Partnership") is a subsidiary
partnership of Simon DeBartolo Group, Inc. (the "Company") (formerly known as
Simon Property Group, Inc. ("SPG")), and is the primary operating partnership of
the Company as a result of the merger of DeBartolo Realty Corporation ("DRC")
with a subsidiary of the Company. Such merger and related transactions thereto
(the "Merger") were consummated on August 9, 1996 (the "Merger Date"), at which
time DRC became an approximately 99.99% owned subsidiary of the Company and was
renamed SD Property Group, Inc. (the "Managing General Partner"). The Managing
General Partner and the Company are both general partners of the Operating
Partnership, but the Managing General Partner is the sole managing general
partner of the Operating Partnership. As part of the Merger, the Company, as
general partner of Simon Property Group, L.P. ("SPG, LP" and, together with the
Operating Partnership, the "Partnerships"), and as owner of 61.1% of the then
outstanding partnership units in SPG, LP, transferred to the Operating
Partnership 10.6% of such partnership units then outstanding and an additional
49.5% interest in the profits (but not the capital) of SPG, LP in exchange for
37.3% of the partnership interests in the Operating Partnership pursuant to a
Contribution Agreement, dated June 25, 1996, and a related Instrument of
Assignment, dated August 9, 1996. All of the limited partners of SPG, LP
contributed another 38.9% of the then outstanding partnership units in SPG, LP
to the Operating Partnership pursuant to similar contribution agreements and
related instruments of assignment. Therefore in total, the Operating Partnership
acquired a 49.5% limited partnership interest in, and an additional 49.5%
interest in the profits of, SPG, LP. See "The Merger." Following certain
redemptions of the Company's interest in SPG, LP completed since the Merger, the
Company owns a 40.8% partnership interest in the capital of SPG, LP and the
Operating Partnership owns a 58.2% special limited partnership in, and an
additional 40.8% interest in the profits of, SPG, LP.
The Company is the parent of the Managing General Partner and owned
effectively as of the Merger Date a controlling 61.4% equity interest in the
Operating Partnership. As of the Merger Date, Melvin Simon, Herbert Simon, David
Simon and certain of their affiliates, including certain other Simon family
members and estates, trusts and other entities established for their benefit
(collectively, the "Simons"), effectively owned a 21.7% equity interest in the
Operating Partnership, and the estate of Edward J. DeBartolo, Edward J.
DeBartolo, Jr., M. Denise DeBartolo York, The Edward J. DeBartolo Corporation,
an Ohio corporation ("EJDC"), and certain of their affiliates, including certain
other DeBartolo family members and estates and trusts established for their
benefit (collectively, the "DeBartolos"), effectively owned a 14.2% equity
interest in the Operating Partnership.
After the Merger, SPG, LP continues to hold interests in certain properties
and is a party to various agreements binding on itself and on subsidiary
partnerships of which it is the general partner. These agreements require the
continued existence of SPG, LP and the consents necessary under these agreements
to permit the combination of SPG, LP and the Operating Partnership were not
obtained at the time of the Merger. To date, all of the required consents have
been obtained. As a result thereof, it is currently expected that subsequent to
the first anniversary of the date of the Merger, reorganizational transactions
will be effected so that the Operating Partnership will directly own all of the
assets and partnership interests now owned by SPG, LP. Prior to such proposed
reorganizational transactions, holders of the Debt Securities to be offered
hereby will not, as a result of the Guarantee be structurally subordinated to
holders of unsecured and unsubordinated indebtedness of SPG, LP but will rank
pari passu with them. After the proposed reorganizational transactions, holders
of the Debt Securities will remain pari passu with holders of such indebtedness.
However, there can be no assurance that such reorganizational transactions will
be so effected.
As of September 30, 1996, on a combined basis: the Operating Partnership
owns or holds interests in a diversified portfolio of 183 income producing
properties (the "Portfolio Properties"), including 112 super-regional and
regional malls, 65 community shopping centers, two specialty retail centers and
four mixed-use properties located in 33 states; the Portfolio Properties contain
an aggregate of more than 111 million square feet of gross leasable area
("GLA"), of which approximately 65 million square feet is GLA owned by the
Partnerships ("Owned GLA"); more than 3,600 different retailers occupy
approximately 12,000 stores in the Portfolio Properties; total estimated retail
sales at the Portfolio Properties approached $16 billion in fiscal 1995; the
Operating Partnership has interests in seven properties under construction in
the United States
4
<PAGE> 37
aggregating approximately six million square feet of GLA, and owns land held for
future development. The Operating Partnership, together with its affiliated
management companies (collectively, the "Management Companies"), manage over 127
million square feet of GLA of retail and mixed-use properties.
As of November 14, 1996, the Operating Partnership and the Management
Companies had approximately 8,000 employees. The Operating Partnership's
executive offices are located at National City Center, 115 West Washington
Street, Suite 15 East, Indianapolis, Indiana 46204, and its telephone number is
(317) 636-1600.
The following chart depicts the organizational and ownership structure of
the Operating Partnership and certain affiliates:
- ---------------
(1) The Simons own less than 1% of the outstanding shares of common stock of the
Company and all of the Class B common stock of the Company.
(2) The DeBartolos own less than 1% of the outstanding common stock of the
Company and all of the Class C common stock of the Company.
(3) The Company owns over 99.9% of the common stock of SD Property Group, Inc.
and, both directly and indirectly through its ownership of the SD Property
Group, Inc., owns at November 14, 1996 61.3% interest in the Operating
Partnership and, as general partner, owns 1% of the partnership units in
SPG, LP and a 40.8% interest in the capital of SPG, LP.
(4) The former limited partners of the Operating Partnership and SPG, LP as a
group (including the Simons and the DeBartolos) own a 38.7% beneficial
interest in the Operating Partnership, of which the Simons own 21.9% and the
DeBartolos own 14.1%.
(5) The Operating Partnership owns at November 14, 1996 58.2% special limited
partnership interest in, and an additional 40.8% interest in the profits of,
SPG, LP.
(6) Properties owned by SPG, LP will be held as they were held in the pre-merger
structure. Later acquired properties will be held by, and future operations
will be conducted through, the Operating Partnership. It is currently
expected that subsequent to the first anniversary of the date of the Merger,
reorganizational
(continued)
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<PAGE> 38
transactions will be effected so that the Operating Partnership 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.
(7) SPG, LP will guarantee the due and punctual payment of the principal of,
premium, if any, interest on, and any other amounts payable with respect to,
the Notes, when and as the same shall become due and payable, whether at a
maturity date, on redemption, by declaration of acceleration or otherwise.
See "Description of the Debt Securities -- The Guarantee."
THE MERGER
On August 9, 1996, the merger and other related transactions, pursuant to
the agreement and plan of merger among Simon Property Group, Inc. ("SPG"), an
acquisition subsidiary of SPG and DeBartolo Realty Corporation ("DRC"), were
consummated (the "Merger"). Pursuant to the Merger, SPG acquired all the
outstanding shares of common stock of DRC (55,712,529 shares) through the
acquisition subsidiary, at an exchange ratio of 0.68 share of SPG common stock
for each share of DRC common stock (the "Exchange Ratio"). A total of 37,884,520
shares of SPG common stock were issued by the Company, through the acquisition
subsidiary, to the DRC shareholders. DRC and the acquisition subsidiary merged,
with DRC as the surviving entity and becoming a 99.9% subsidiary of SPG. 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 shares), the
Exchange Ratio and the last reported sales price per share of SPG's common stock
on August 9, 1996 ($24.375). In connection therewith, SPG changed its name to
Simon DeBartolo Group, Inc. (the "Company") and DRC changed its name to SD
Property Group, Inc. (the "Managing General Partner").
In connection with the Merger, the general and limited partners of the
operating partnership of SPG, Simon Property Group, L.P. ("SPG, LP"),
contributed 49.5% (47,442,212 units) of the total outstanding units of
partnership interest 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 has since been changed to Simon
DeBartolo Group, L.P. ("SDG, LP"). The Company retained a 50.5% partnership
interest (48,400,614 units) in SPG, LP but assigned its rights to receive
distributions of profits on 49.5% (47,442,212 units) of the outstanding units of
partnership interest in SPG, LP to SDG, LP. The limited partners of DRP, LP
approved the contribution made by the partners of SPG, LP and simultaneously
exchanged their 38% (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% partnership interest in DRP, LP for units
of partnership interest in 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
partnership interest in SDG, LP may under certain circumstances be exchangeable
for 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 of partnership interest exchanged (34,203,623
units), the Exchange Ratio and the last reported sales price per share of SPG'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 the Managing General Partner became the managing general partner of SDG, LP
with 24.3% (37,873,965 units in SPG, LP) of the outstanding partnership units in
SDG, LP. The Company remained the sole general partner of SPG, LP with 1% of the
outstanding partnership units (958,429 units) and 49.5% interest in the capital
of SPG, LP, and SDG, LP became a special limited partner in SPG, LP with 49.5%
(47,442,212 units) of the outstanding partnership units in SPG, LP and an
additional 49.5% interest in the profits of SPG, LP. SPG, LP did not acquire any
interest in SDG, LP. Upon completion of the Merger, the Company directly and
indirectly owned a controlling 61.2% (95,479,761 units) partnership interest in
SDG, LP.
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<PAGE> 39
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 $1.523 billion, including related transaction costs. 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. 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 and ratios disclosed by
SDG, LP for the post-merger periods will reflect the reverse acquisition of DRP,
LP by the Company using the purchase method of accounting and for all pre-merger
comparative periods, the financial statements and ratios disclosed by SDG, LP
will reflect the financial statements and ratios 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. See "The Operating Partnership."
In connection with the Merger, M.S. Management Associates, Inc., a SPG
management company, purchased from The Edward J. DeBartolo Corporation all of
the voting stock (665 shares of common stock) of DeBartolo Properties
Management, Inc., a DRC management company, for $2.5 million in cash. SDG, LP
continues to hold substantially all of the economic interest in DeBartolo
Properties Management, Inc. The Company holds substantially all of the economic
interest in M.S. Management Associates, Inc., while the voting stock are held by
the Simons and their affiliates.
For an organizational chart of the Company after the Merger, see page 5.
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<PAGE> 40
USE OF PROCEEDS
Except as otherwise provided in the applicable Prospectus Supplement,
proceeds to the Operating Partnership from the sale of the Debt Securities
offered hereby will be added to the working capital of the Operating Partnership
and will be available for general purposes, which may include the repayment of
indebtedness, the financing of capital commitments and possible future
acquisitions associated with the continued expansion of the Partnerships'
business.
RATIO OF EARNINGS TO FIXED CHARGES
SDG, LP's ratio of earnings to fixed charges for the nine months ended
September 30, 1996 and 1995 was 1.50x and 1.64x, respectively, and for the
fiscal years ended December 31, 1995 and 1994 was 1.67x and 1.43x, respectively.
From the commencement of its operations on December 20, 1993 through December
31, 1993, the ratio of earnings to fixed charges for SPG, LP was 3.36x. SPG, LP
is for financial reporting purposes the predecessor to the Operating
Partnership. See "The Merger."
For purposes of computing the ratio of earnings to fixed charges, earnings
have been calculated by adding fixed charges, excluding capitalized interest, to
income (loss) from continuing operations including income from minority
interests which have fixed charges, and including distributed operating income
from unconsolidated joint ventures instead of income from unconsolidated joint
ventures. Fixed charges consist of interest costs, whether expensed or
capitalized, the interest component of rental expense and amortization of debt
issuance costs.
Prior to the commencement of business by SPG, LP in December 1993, the
predecessor of SPG, LP maintained a different ownership and equity structure.
The predecessor's operating properties have historically generated positive net
cash flow. The financial statements of the predecessor show net income for the
period January 1, 1993 through December 19, 1993, and net losses for the fiscal
years ended December 31, 1992 and 1991. The ratio of earnings to fixed charges
for the period January 1, 1993 through December 19, 1993 was 1.11x. As a
consequence of the net losses for the fiscal years ended December 31, 1992 and
1991, the computation of the ratio of earnings to fixed charges for these fiscal
years indicates that earnings were inadequate to cover fixed charges by
approximately $12.8 million and $18.7 million, respectively.
The new capitalization of the Company effected in December 1993 in
connection with its initial public offering permitted the Company to deleverage
significantly, resulting in an improved ratio of earnings to fixed charges
subsequent to its commencement of operations.
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<PAGE> 41
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture (the "Indenture"),
among the Operating Partnership, SPG, LP, as guarantor, and The Chase Manhattan
Bank, as trustee. The Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part and is available for inspection at
the corporate trust office of the trustee at 450 West 33rd Street, 15th Floor,
New York, New York 10001, or as described above under "Available Information."
The Indenture is subject to, and governed by, the Trust Indenture Act of 1939,
as amended (the "TIA"). The statements made hereunder or in any Prospectus
Supplement relating to the Indenture and the Debt Securities to be issued
thereunder are summaries of certain provisions thereof and do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the Indenture and such Debt Securities. All section
references appearing herein are to sections of the Indenture, and capitalized
terms used but not defined herein shall have the respective meanings set forth
in the Indenture.
The Debt Securities to be offered hereby and in any applicable Prospectus
Supplement will be "investment grade" securities, meaning at the time of the
offering of such Debt Securities, at least one nationally recognized statistical
rating organization (as defined in the Exchange Act) has rated such Debt
Securities in one of its generic rating categories which signifies investment
grade (typically the four highest rating categories, within which there may be
sub-categories or gradations indicating relative standing, signify investment
grades). An investment grade rating is not a recommendation to buy, sell or hold
securities, is subject to revision or withdrawal at any time by the assigning
entity, and should be evaluated independently of any other rating.
In connection with the first takedown proposed to be made by the Operating
Partnership from the shelf registration statement of which this Prospectus forms
a part, the Company has entered into a forward treasury lock agreement, pursuant
to which the Company and the counterparty to the agreement have agreed to
exchange payments with respect to a notional principal amount of $100 million
based on how a specified interest rate on U.S. Treasuries will have varied from
a base rate of 6.307% on November 22, 1996. The Company will either receive or
make a payment, depending on whether such specified interest rate is above or
below 6.307%. In connection with future takedowns under the registration
statement, the Operating Partnership may enter into interest rate protection
agreements which hedge the interest rate exposure associated with such future
debt offerings.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Operating
Partnership and, unless otherwise described in the applicable Prospectus
Supplement, will rank equally with all other unsecured and unsubordinated
indebtedness of the Operating Partnership. No partner (whether limited or
general, including the Company and the Managing General Partner) of the
Operating Partnership has any obligation for payment of principal of (and
premium, if any) and interest, if any, on, or any other amount with respect to,
the Debt Securities (Section 1602). At September 30, 1996, the total outstanding
debt of the Operating Partnership including its pro rata share of joint venture
debt was approximately $3,986.3 million, 92% of which was secured debt. Except
as otherwise described in the applicable Prospectus Supplement, the Indenture
does not limit the amount of other indebtedness of the Operating Partnership
that may rank equally with or senior to the Debt Securities. The Debt Securities
may be issued without limit as to aggregate principal amount, in one or more
series, in each case as established from time to time in or pursuant to
authority granted by a resolution of the Board of Directors of the Managing
General Partner, as the managing general partner of the Operating Partnership or
as established in one or more indentures supplemental to the Indenture. All Debt
Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the holders
of the Debt Securities of such series, for issuances of additional Debt
Securities of such series (Section 301).
The Indenture provides that there may be more than one trustee (the
"Trustee") thereunder, each with respect to one or more series of Debt
Securities. Any Trustee under the Indenture may resign or be removed with
respect to one or more series of Debt Securities, and a successor Trustee may be
appointed to act with respect to such series (Section 608). In the event that
two or more persons are acting as Trustee with respect to different series of
Debt Securities, each such Trustee shall be a trustee of a trust under the
Indenture
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<PAGE> 42
separate and apart from the trust administered by any other Trustee (Section
609), and, except as otherwise indicated herein, any action described herein to
be taken by a Trustee may be taken by each such Trustee with respect to, and
only with respect to, the one or more series of Debt Securities for which it is
Trustee under the Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon acceleration of
the maturity thereof;
(4) the date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be payable;
(5) the rate or rates (which may be fixed or variable), or the method
by which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(6) the date or dates, or the method for determining such date or
dates, from which any interest will accrue, the dates on which any such
interest will be payable, the record dates for such interest payment dates,
or the method by which any such record date shall be determined, the person
to whom such interest shall be payable, and the basis upon which interest
shall be calculated if other than that of a 360-day year of twelve 30-day
months;
(7) the place or places where the principal of (and premium, if any)
and interest, if any, on such Debt Securities will be payable, such Debt
Securities may be surrendered for registration of transfer or exchange and
notices or demands to or upon the Operating Partnership in respect of such
Debt Securities and the Indenture may be served;
(8) the period or periods within which, the price or prices at which
and the terms and conditions upon which such Debt Securities may be
redeemed, in whole or in part, at the option of the Operating Partnership,
if the Operating Partnership is to have such an option;
(9) the obligation, if any, of the Operating Partnership to redeem,
repay or purchase such Debt Securities pursuant to any sinking fund or
analogous provision or at the option of a Holder thereof, and the period or
periods within which, the price or prices at which and the terms and
conditions upon which such Debt Securities will be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation;
(10) if other than U.S. dollars, the currency or currencies in which
such Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(11) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit
or units or composite currency or currencies) and the manner in which such
amounts shall be determined;
(12) the events of default or covenants of such Debt Securities, to
the extent different from or in addition to those described herein;
(13) whether such Debt Securities will be issued in certificated or
book-entry form;
(14) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof if other than $5,000, and any integral multiple thereof and the
terms and conditions relating thereto;
(15) the applicability, if any, of the defeasance and covenant
defeasance provisions described herein, or any modification thereof;
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(16) if such Debt Securities are to be issued upon the exercise of
debt warrants, the time, manner and place of such Debt Securities to be
authenticated and delivered;
(17) whether and under what circumstances the Operating Partnership
will pay additional amounts on such Debt Securities in respect of any tax,
assessment or governmental charge and, if so, whether the Operating
Partnership will have the option to redeem such Debt Securities in lieu of
making such payment;
(18) with respect to any Debt Securities that provide for optional
redemption or prepayment upon the occurrence of certain events (such as a
change of control of the Operating Partnership), (i) the possible effects
of such provisions on the market price of the Operating Partnership's
securities or in deterring certain mergers, tender offers or other takeover
attempts, and the intention of the Operating Partnership to comply with the
requirements of Rule 14e-1 under the Exchange Act and any other applicable
securities laws in connection with such provisions; (ii) whether the
occurrence of the specified events may give rise to cross-defaults on other
indebtedness such that payment on such Debt Securities may be effectively
subordinated; and (iii) the existence of any limitation on the Operating
Partnership's financial or legal ability to repurchase such Debt Securities
upon the occurrence of such an event (including, if true, the lack of
assurance that such a repurchase can be effected) and the impact, if any,
under the Indenture of such a failure, including whether and under what
circumstances such a failure may constitute an Event of Default; and
(19) any other terms of such Debt Securities.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon acceleration of the maturity thereof ("Original Issue
Discount Securities"). If material or applicable, special U.S. federal income
tax, accounting and other considerations applicable to Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
Except as described under "-- Merger, Consolidation or Sale" below or as
may be set forth in any Prospectus Supplement, the Indenture does not contain
any other provisions that would limit the ability of the Operating Partnership
to incur indebtedness or that would afford holders of the Debt Securities
protection in the event of (i) a highly leveraged or similar transaction
involving the Operating Partnership, the Company or the management of the
Company, or any affiliate of any such party, (ii) a change of control, or (iii)
a reorganization, restructuring, merger or similar transaction involving the
Operating Partnership that may adversely affect the holders of the Debt
Securities. In addition, subject to the limitations set forth under "-- Merger,
Consolidation or Sale," the Operating Partnership may, in the future, enter into
certain transactions, such as the sale of all or substantially all of its assets
or the merger or consolidation of the Operating Partnership, that would increase
the amount of the Operating Partnership's indebtedness or substantially reduce
or eliminate the Operating Partnership's assets, which may have an adverse
effect on the Operating Partnership's ability to service its indebtedness,
including the Debt Securities. Reference is made to the applicable Prospectus
Supplement for information with respect to any deletions from, modifications of
or additions to the events of default or covenants that are described below,
including any addition of a covenant or other provision providing event risk or
similar protection.
Reference is made to "-- Certain Covenants" below and to the description of
any additional covenants with respect to a series of Debt Securities in the
applicable Prospectus Supplement. Except as otherwise described in the
applicable Prospectus Supplement, compliance with such covenants generally may
not be waived with respect to a series of Debt Securities unless the Holders of
at least a majority in principal amount of all outstanding Debt Securities of
such series consent to such waiver, except to the extent that the defeasance and
covenant defeasance provisions of the Indenture described under "-- Discharge"
and "-- Defeasance and Covenant Defeasance" below apply to such series of Debt
Securities. See "-- Modification of the Indenture."
Debt Securities may be denominated and payable in a foreign currency or
units of two or more foreign currencies or a composite currency or currencies.
As more fully described in the applicable Prospectus Supplement, awards or
judgments by a court in the United States in connection with a claim with
respect to any Debt Securities denominated other than in United States dollars
(or a judgment denominated other than
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in United States dollars in respect of such claims) may be converted into United
States dollars at a rate of exchange prevailing on a date determined pursuant to
applicable law.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series which are registered securities, other than
registered securities issued in global form (which may be of any denomination),
shall be issuable in denominations of $1,000 and any integral multiple thereof
and the Debt Securities which are bearer securities, other than bearer
securities issued in global form (which may be of any denomination), shall be
issuable in denominations of $5,000 and any integral multiple thereof (Section
302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt Securities
in registered form will be payable at the corporate trust office of the Trustee,
initially located at 450 West 33rd Street, 15th Floor, New York, New York 10001,
provided that, at the option of the Operating Partnership, payment of interest
may be made by check mailed to the address of the Person entitled thereto as it
appears in the applicable Security Register or by wire transfer of funds to such
Person at an account maintained within the United States (Sections 301, 307 and
1002).
Unless otherwise specified in the applicable Prospectus Supplement, any
interest not punctually paid or duly provided for on any Interest Payment Date
with respect to a Debt Security in registered form ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the Person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of such Debt Security not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the Indenture
(Section 307).
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the Trustee referred to above.
In addition, subject to certain limitations imposed upon Debt Securities issued
in book-entry form, the Debt Securities of any series may be surrendered for
registration of transfer thereof at the corporate trust office of the Trustee
referred to above. Every Debt Security surrendered for registration of transfer
or exchange shall be duly endorsed or accompanied by a written instrument of
transfer. No service charge will be made for any registration of transfer or
exchange of any Debt Securities, but the Trustee or the Operating Partnership
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith (Section 305). If the applicable
Prospectus Supplement refers to any transfer agent (in addition to the Trustee)
initially designated by the Operating Partnership with respect to any series of
Debt Securities, the Operating Partnership may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Operating
Partnership will be required to maintain a transfer agent in each place of
payment for such series. The Operating Partnership may at any time designate
additional transfer agents with respect to any series of Debt Securities
(Section 1002).
Neither the Operating Partnership nor the Trustee shall be required (i) to
issue, register the transfer of or exchange any Debt Security if such Debt
Security may be among those selected for redemption during a period beginning at
the opening of business 15 days before selection of the Debt Securities to be
redeemed and ending at the close of business on (A) if such Debt Securities are
issuable only as Registered Securities, the day of the mailing of the relevant
notice of redemption and (B) if such Debt Securities are issuable as Bearer
Securities, the day of the first publication of the relevant notice of
redemption or, if such Debt Securities are also issuable as Registered
Securities and there is no publication, the mailing of the relevant notice of
redemption, or (ii) to register the transfer of or exchange any Registered
Security so selected for redemption in whole or in part, except, in the case of
any Registered Security to be redeemed in part, the portion thereof not to be
redeemed, or (iii) to exchange any Bearer Security so selected for redemption
except that, to the extent provided with respect to such Bearer Security, such
Bearer Security may be exchanged for a Registered Security of that series and of
like tenor, provided that such Registered Security shall be simultaneously
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<PAGE> 45
surrendered for redemption, or (iv) to issue, register the transfer of or
exchange any Debt Security which has been surrendered for repayment at the
option of the Holder, except the portion, if any, of such Debt Security not to
be so repaid (Section 305).
MERGER, CONSOLIDATION OR SALE
The Operating Partnership or the Guarantor may consolidate with, or sell,
lease or convey all or substantially all of its assets to, or merge with or
into, any other entity, provided that (a) the Operating Partnership or the
Guarantor, as the case may be, shall be the continuing entity, or the successor
entity (if other than the Operating Partnership or the Guarantor) formed by or
resulting from any such consolidation or merger or which shall have received the
transfer of such assets shall expressly assume payment of the principal of (and
premium, if any) and interest on all the Debt Securities and the due and
punctual performance and observance of all of the covenants and conditions
contained in the Indenture; (b) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Operating Partnership or the Guarantor, such successor entity or any Subsidiary
as a result thereof as having been incurred by the Operating Partnership or the
Guarantor, such successor entity or such Subsidiary at the time of such
transaction, no Event of Default under the Indenture, and no event which, after
notice or the lapse of time, or both, would become such an Event of Default,
shall have occurred and be continuing; and (c) an officer's certificate and
legal opinion covering such conditions shall be delivered to the Trustee
(Sections 801 and 803).
CERTAIN COVENANTS
Existence. Except as permitted under "-- Merger, Consolidation or Sale"
above, the Operating Partnership is required to do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (statutory and charter) and franchises; provided, however, that the
Operating Partnership shall not be required to preserve any such right or
franchise if it determines that the loss thereof is not disadvantageous in any
material respect to the Holders of the Debt Securities (Section 1006).
Maintenance of Properties. The Operating Partnership is required to cause
all of its material properties used or useful in the conduct of its business or
the business of any Subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and to cause
to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Operating Partnership may be
necessary so that the business carried on in connection therewith may be
properly conducted at all times; provided, however, that the Operating
Partnership and its subsidiaries shall not be prevented from selling or
otherwise disposing for value their respective properties in the ordinary course
of business (Section 1007).
Insurance. The Operating Partnership is required to, and is required to
cause each of its Subsidiaries to, keep all of its insurable properties insured
against loss or damage at least equal to their then full insurable value
(subject to reasonable deductibles determined from time to time by the Operating
Partnership) with financially sound and reputable insurance companies (Section
1008).
Payment of Taxes and Other Claims. The Operating Partnership is required
to pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon its income, profits or property or
that of any Subsidiary, and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Operating Partnership or any Subsidiary; provided, however, that the Operating
Partnership shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings (Section
1009).
Provision of Financial Information. The Holders of Debt Securities will be
provided with copies of the annual reports and quarterly reports of the
Operating Partnership. Whether or not the Operating Partnership is subject to
Section 13 or 15(d) of the Exchange Act and for so long as any Debt Securities
are outstanding, the Operating Partnership will, to the extent permitted under
the Exchange Act, be required to file with the Commission the annual reports,
quarterly reports and other documents which the Operating Partnership would have
been required to file with the Commission pursuant to such Section 13 or 15(d)
(the "Financial Statements") if the Operating Partnership were so subject, such
documents to be filed with the Commission
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on or prior to the respective dates (the "Required Filing Dates") by which the
Operating Partnership would have been required so to file such documents if the
Operating Partnership were so subject. The Operating Partnership will also in
any event (x) within 15 days of each Required Filing Date (i) transmit by mail
to all Holders of Debt Securities, as their names and addresses appear in the
Security Register, without cost to such Holders, copies of the annual reports
and quarterly reports which the Operating Partnership would have been required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
if the Operating Partnership were subject to such Sections and (ii) file with
the Trustee copies of the annual reports, quarterly reports and other documents
which the Operating Partnership would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Operating
Partnership were subject to such Sections and (y) if filing such documents by
the Operating Partnership with the Commission is not permitted under the
Exchange Act, promptly upon written request and payment of the reasonable cost
of duplication and delivery, supply copies of such documents to any prospective
Holder (Section 1010).
Additional Covenants. Any additional or different covenants of the
Operating Partnership with respect to any series of Debt Securities will be set
forth in the Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default for
30 days in the payment of any installment of interest on any Debt Security of
such series; (b) default in the payment of the principal of (or premium, if any,
on) any Debt Security of such series at its Maturity; (c) default in making any
sinking fund payment as required for any Debt Security of such series; (d)
default in the performance of any other covenant of the Operating Partnership
contained in the Indenture (other than a covenant added to the Indenture solely
for the benefit of a series of Debt Securities issued thereunder other than such
series), such default having continued for 60 days after written notice as
provided in the Indenture; (e) default in the payment of an aggregate principal
amount exceeding $30,000,000 of any recourse indebtedness of the Operating
Partnership, however evidenced, such default having occurred after the
expiration of any applicable grace period and having resulted in the
acceleration of the maturity of such indebtedness, but only if such indebtedness
is not discharged or such acceleration is not rescinded or annulled within 10
days after written notice as provided in the Indenture; (f) certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Operating Partnership or any Significant Subsidiary
or any of their respective property; and (g) any other Event of Default provided
with respect to a particular series of Debt Securities (Section 501).
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time Outstanding occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Debt Securities of that series may declare the principal amount
(or, if the Debt Securities of that series of the Original Issue Discount
Securities or Indexed Securities, such portion of the principal amount as may be
specified in the terms thereof) of all of the Debt Securities of that series to
be due and payable immediately by written notice thereof to the Operating
Partnership (and to the Trustee if given by the Holders); provided, that in the
case of an Event of Default described under paragraph (f) of the preceding
paragraph, acceleration is automatic. However, at any time after such
acceleration with respect to Debt Securities of such series has been made, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the Holders of not less than a majority in principal amount of
Outstanding Debt Securities of such series may rescind and annul such
acceleration and its consequences if (a) the Operating Partnership shall have
deposited with the Trustee all amounts due otherwise than on account of such
declaration, plus certain fees, expenses, disbursements and advances of the
Trustee and (b) all Events of Default, other than the non-payment of accelerated
principal of the Debt Securities of such series, have been cured or waived as
provided in the Indenture (Section 502). The Indenture also provides that the
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities of any series may waive any past default with respect to such series
and its consequences, except a default (x) in the payment of the principal of
(or premium, if any) or interest on any Debt Security of such series or (y) in
respect of a covenant or provision contained in the Indenture that cannot be
modified or amended without the consent of the Holder of each Outstanding Debt
Security affected thereby (Section 513).
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<PAGE> 47
The Trustee will be prepared to give notice to the Holders of Debt
Securities within 90 days of a default under the Indenture unless such default
has been cured or waived; provided, however, that the Trustee may withhold
notice to the Holders of any series of Debt Securities of any default with
respect to such series (except a default in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or in the
payment of any sinking fund installment in respect of any Debt Security of such
series) if a trust committee of Responsible Officers of the Trustee consider
such withholding to be in the interest of such Holders (Section 601).
The Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of such series, as well as
an offer of indemnity reasonably satisfactory to it (Section 507). This
provision will not prevent, however, any Holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof (Section 508).
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request of any Holders of any series of Debt
Securities then Outstanding under the Indenture, unless such Holders shall have
offered to the Trustee thereunder reasonable security or indemnity (Section
602). The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or of exercising any trust or power conferred upon the Trustee with
respect to the Debt Securities of such series. However, the Trustee may refuse
to follow any direction which is in conflict with any law or the Indenture,
which may involve the Trustee in personal liability or which may be unduly
prejudicial to the Holders of Debt Securities of such series not joining therein
(Section 512).
Within 120 days after the close of each fiscal year, each of the Operating
Partnership and the Guarantor must deliver to the Trustee a certificate, signed
by one of several specified officers of the Operating Partnership or the
Guarantor, as the case may be, stating whether or not such officer has knowledge
of any default under the Indenture and, if so, specifying each such default and
the nature and status thereof (Section 1011).
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture will be permitted to be made
only with the consent of the Holders of not less than a majority in principal
amount of all Outstanding Debt Securities which are affected by such
modification or amendment (voting as one class); provided, however, that no such
modification or amendment may, without the consent of the Holder of each such
Debt Security affected thereby: (a) change the Stated Maturity of the principal
of, or premium (if any) or any installment of interest on, any such Debt
Security; (b) reduce the principal amount of, or the rate or amount of interest
on, or any premium payable on redemption of, any such Debt Security, or reduce
the amount of principal of an Original Issue Discount Security that would be due
and payable upon acceleration of the maturity thereof or that would be provable
in bankruptcy, or adversely affect any right of repayment at the option of the
holder of any such Debt Security; (c) change the Place of Payment, or the coin
or currency, for payment of principal of, premium, if any, or interest on any
such Debt Security; (d) impair the right to institute suit for the enforcement
of any payment on or with respect to any such Debt Security; (e) reduce the
above-stated percentage in principal amount of Outstanding Debt Securities
necessary to modify or amend the Indenture, reduce the percentage of Outstanding
Debt Securities of any series necessary to waive compliance with certain
provisions thereof or certain defaults and consequences thereunder, or to reduce
the quorum or voting requirements set forth in the Indenture; or (f) modify any
of the foregoing provisions or any of the provisions relating to the waiver of
certain past defaults or certain covenants, except to increase the percentage
required to effect such action or to provide that certain other provisions may
not be modified or waived without the consent of the Holder of each Outstanding
Debt Security affected thereby (Section 902).
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The Indenture provides that the Holders of not less than a majority in
principal amount of a series of Outstanding Debt Securities have the right to
waive compliance by the Operating Partnership with certain covenants relating to
such series of Debt Securities in the Indenture (Section 1013).
Modifications and amendments of the Indenture will be permitted to be made
by the Operating Partnership and the Guarantor, and the Trustee without the
consent of any Holder of Debt Securities for any of the following purposes: (i)
to evidence the succession of another Person to the Operating Partnership or the
Guarantor as obligor under the Indenture; (ii) to add to the covenants of the
Operating Partnership or the Guarantor for the benefit of the Holders of all or
any series of Debt Securities or to surrender any right or power conferred upon
the Operating Partnership in the Indenture; (iii) to add Events of Default for
the benefit of the Holders of all or any series of Debt Securities; (iv) to add
or change any provisions of the Indenture to facilitate the issuance of, or to
liberalize certain terms of, Debt Securities in bearer form, to change or
eliminate any restrictions on payment of the principal of or premium or interest
on Debt Securities, to modify the provisions relating to global Debt Securities,
or to permit or facilitate the issuance of Debt Securities in uncertificated
form, provided that such action shall not adversely affect the interests of the
Holders of the Debt Securities of any series in any material respect; (v) to
change or eliminate any provisions of the Indenture, provided that any such
change or elimination shall become effective only when there are no Debt
Securities Outstanding of any series created prior thereto which are entitled to
the benefit of such provision or such amendment shall not apply to any then
Outstanding Debt Security; (vi) to secure the Debt Securities; (vii) to
establish the form or terms of Debt Securities of any series; (viii) to provide
for the acceptance of appointment by a successor Trustee or facilitate the
administration of the trusts under the Indenture by more than one Trustee; (ix)
to cure any ambiguity, defect or inconsistency in the Indenture, provided that
such action shall not adversely affect the interests of Holders of Debt
Securities of any series in any material respect; or (x) to supplement any of
the provisions of the Indenture to the extent necessary to permit or facilitate
defeasance and discharge of any series of such Debt Securities, provided that
such action shall not adversely affect the interests of the Holders of the Debt
Securities of any series in any material respect (Section 901).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be Outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
acceleration of the maturity thereof, (ii) the principal amount of a Debt
Security denominated in a foreign currency that shall be deemed Outstanding
shall be the U.S. dollar equivalent, determined on the issue date for such Debt
Security, of the principal amount (or, in the case of an Original Issue Discount
Security, the U.S. dollar equivalent on the issue date of such Debt Security of
the amount determined as provided in (i) above) of such Debt Security, (iii) the
principal amount of an Indexed Security that shall be deemed Outstanding shall
be the principal face amount of such Indexed Security at original issuance,
unless otherwise provided with respect to such Indexed Security pursuant to the
Indenture, and (iv) Debt Securities owned by the Operating Partnership or any
other obligor upon the Debt Securities or any affiliate of the Operating
Partnership or of such other obligor shall be disregarded (Section 101).
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series issuable, in whole or in part, as Bearer Securities
(Section 1501). A meeting will be permitted to be called at any time by the
Trustee, and also, upon request, by the Operating Partnership or the Holders of
at least 10% in principal amount of the Outstanding Debt Securities of such
series, in any such case upon notice given as provided in the Indenture (Section
1502). Except for any consent that must be given by the Holder of each Debt
Security affected by certain modifications and amendments of the Indenture, any
resolution presented at a meeting or adjourned meeting duly reconvened at which
a quorum is present will be permitted to be adopted by the affirmative vote of
the Holders of a majority in principal amount of the Outstanding Debt Securities
of that series; provided, however, that, except as referred to above, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
Holders of a specified percentage in principal amount of the Outstanding Debt
Securities of a series may be adopted at a meeting at which a quorum is present
by the affirmative vote of the Holders of such specified
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percentage in principal amount of the Outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of Holders of
Debt Securities of any series duly held in accordance with the Indenture will be
binding on all Holders of Debt Securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
Persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at such meeting with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action which may be
made, given or taken by the Holders of not less than a specified percentage in
principal amount of the Outstanding Debt Securities of a series, then with
respect to such action (and only such action) the Persons holding or
representing such specified percentage in principal amount of the Outstanding
Debt Securities of such series will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Debt Securities of any series with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
the Indenture expressly provides may be made, given or taken by the Holders of a
specified percentage in principal amount of all Outstanding Debt Securities
affected thereby, or of the Holders of such series and one or more additional
series: (i) there shall be no minimum quorum requirement for such meeting and
(ii) the principal amount of the Outstanding Debt Securities of such series that
vote in favor of such request, demand, authorization, direction, notice,
consent, waiver or other action shall be taken into account in determining
whether such request, demand, authorization, direction, notice, consent, waiver
or other action has been made, given or taken under the Indenture (Section
1504).
DISCHARGE
The Operating Partnership may discharge certain obligations to Holders of
any series of Debt Securities that have not already been delivered to the
Trustee for cancellation and that either have become due and payable or will
become due and payable within one year (or scheduled for redemption within one
year) by irrevocably depositing with the Trustee, in trust, funds in an amount
sufficient to pay the entire indebtedness on such Debt Securities in respect of
principal (and premium, if any) and interest to the date of such deposit (if
such Debt Securities have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be (Section 401).
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that, if the provisions of Article Fourteen are made
applicable to the Debt Securities of or within any series pursuant to Section
301 of the Indenture, the Operating Partnership or the Guarantor may elect
either (a) to defease and be discharged from any and all obligations with
respect to such Debt Securities (except for the obligation to pay Additional
Amounts, if any, upon the occurrence of certain events of tax, assessment or
governmental charge with respect to payments on such Debt Securities and the
obligations to register the transfer or exchange of such Debt Securities, to
replace temporary or mutilated, destroyed, lost or stolen Debt Securities, to
maintain an office or agency in respect of such Debt Securities and to hold
moneys for payment in trust) ("defeasance") (Section 1402) or (b) to be released
from its obligations with respect to such Debt Securities under Sections 1006 to
1010, inclusive, of the Indenture (including the restrictions described under
"-- Certain Covenants" above) and its obligations with respect to any other
covenant, and any omission to comply with such obligations shall not constitute
a default or an Event of Default with respect to such Debt Securities ("covenant
defeasance") (Section 1403), in either case upon the irrevocable deposit by the
Operating Partnership or the Guarantor, as the case may be, with the Trustee, in
trust, of an amount, in such currency or currencies, currency unit or units or
composite currency or currencies in which such Debt Securities are payable at
Stated Maturity, or Government Obligations (as defined below), or both,
applicable to such Debt Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any) and interest on
such Debt Securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor (Section 1404).
Such a trust will only be permitted to be established if, among other
things, the Operating Partnership or the Guarantor, as the case may be, has
delivered to the Trustee an Opinion of Counsel (as specified in the Indenture)
to the effect that the Holders of such Debt Securities will not recognize
income, gain or loss for
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U.S. federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such Opinion of Counsel,
in the case of defeasance, must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable United States federal income
tax law occurring after the date of the Indenture (Section 1404).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the foreign
currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligations or a specific payment of interest on
or principal of any such Government Obligations held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt (Section 101).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Operating Partnership or the Guarantor, as the case may be, has deposited
funds or Government Obligations to effect defeasance or covenant defeasance with
respect to Debt Securities of any series, (a) the Holder of a Debt Security of
such series is entitled to, and does, elect pursuant to the Indenture or the
terms of such Debt Security to receive payment in a currency, currency unit or
composite currency other than that in which such deposit has been made in
respect of such Debt Security, or (b) a Conversion Event (as defined below)
occurs in respect of the currency, currency unit or composite currency in which
such deposit has been made, the indebtedness represented by such Debt Security
shall be deemed to have been, and will be, fully discharged and satisfied
through the payment of the principal of (and premium, if any) and interest on
such Debt Security as they become due out of the proceeds yielded by converting
the amount so deposited in respect of such Debt Security into a currency,
currency unit or composite currency in which such Debt Security becomes payable
as a result of such election or such Conversion Event based on the applicable
market exchange rate (Section 1405). "Conversion Event" means the cessation of
use of (i) a currency, currency unit or composite currency both by the
government of the country which issued such currency and for the settlement of
transactions by a central bank or other public institutions of or within the
international banking community, (ii) the ECU both within the European Monetary
System and for the settlement of transactions by public institutions of or
within the European Community or (iii) any currency unit (or composite currency)
other than the ECU for the purposes for which it was established (Section 101).
Unless otherwise provided in the applicable Prospectus Supplement, all payments
of principal of (and premium, if any) and interest on any Debt Security that is
payable in a foreign currency that ceases to be used by its government of
issuance shall be made in U.S. dollars.
In the event the Operating Partnership or the Guarantor effects covenant
defeasance with respect to any Debt Securities and such Debt Securities are
declared due and payable because of the occurrence of any Event of Default other
than the Event of Default described in clause (d) under "-- Events of Default,
Notice and Waiver" with respect to Sections 1006 to 1010, inclusive, of the
Indenture (which sections would no longer be applicable to such Debt Securities)
or described in clause (g) under "-- Events of Default, Notice and Waiver" with
respect to any other covenant as to which there has been covenant defeasance,
the amount in such currency, currency unit or composite currency in which such
Debt Securities are payable, and Government Obligations on deposit with the
Trustee, will be sufficient to pay amounts due on such Debt Securities at the
time of their Stated Maturity but may not be sufficient to pay amounts due on
such Debt Securities at the time of the acceleration resulting from such Event
of Default. However, the Operating Partnership would remain liable to make
payment of such amounts due at the time of acceleration.
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The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above with respect to the Debt
Securities of or within a particular series.
THE GUARANTEE
The Indenture provides that SPG, LP will, and as further set forth in
detail in the applicable Prospectus Supplement, guarantee (the "Guarantee") the
due and punctual payment of the principal of, premium, if any, interest on, and
any other amounts payable with respect to, the Debt Securities, when and as the
same shall become due and payable, whether at a maturity date, on redemption, by
declaration of acceleration or otherwise in accordance with the terms of the
Debt Securities and the Indenture (Section 1701). The Indenture provides that
(i) the Trustee may exercise its rights thereunder on behalf of the Holders and
(ii) SPG, LP shall covenant that it shall take no action which would cause the
Operating Partnership to violate any covenant, agreement or any other condition
thereunder (Section 1705). The Guarantee will terminate upon the consummation of
the reorganizational transactions pursuant to which the Operating Partnership is
expected to own directly all of the assets and partnership interest then owned
by SPG, LP (Section 1706). However, there can be no assurance that such
reorganizational transactions will be so effected. See "The Operating
Partnership." No partner (whether limited or general, including the Company) of
SPG, LP will have any obligation for any obligations of SPG, LP under the
Guarantee (Section 1707).
In the absence of the Guarantee, Holders of the Debt Securities will have
no claims, with regards to any payments in connection with the Debt Securities
against the assets of SPG, LP or the assets of any other Subsidiary of the
Operating Partnership. Any such claim that such Holders may make will have to be
made indirectly through the equity interest that the Operating Partnership has
in SPG, LP (or other Subsidiaries), and will thus be structurally subordinated
to the claims of creditors of SPG, LP (or other Subsidiaries). As a result of
the Guarantee, Holders of the Debt Securities, upon exercising their rights with
respect to the Guarantee against SPG, LP, will be considered creditors of SPG,
LP and their claims will rank pari passu with those of unsecured and
unsubordinated creditors of SPG, LP and will not be structurally subordinated to
such creditors.
MISCELLANEOUS
No Conversion Rights. The Debt Securities will not be convertible into or
exchangeable for any capital stock of the Company or equity interest in the
Operating Partnership.
Global Securities. The Debt Securities of a series may be issued in whole
or in part in the form of one or more global securities (the "Global
Securities") that will be deposited with, or on behalf of, a depositary (the
"Depositary") identified in the applicable Prospectus Supplement relating to
such series. Global Securities may be issued in either registered or bearer form
and in either temporary or permanent form. The specific terms of the depositary
arrangement with respect to a series of Debt Securities will be described in the
applicable Prospectus Supplement relating to such series.
PLAN OF DISTRIBUTION
The Operating Partnership may sell the Debt Securities to or through
underwriters, and also may sell the Debt Securities directly to one or more
other purchasers or through agents. The distribution of the Debt Securities may
be effected from time to time in one or more transactions at a fixed price or
prices, which may be changed, or at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices.
The Prospectus Supplement will set forth terms of the offering of the Debt
Securities, including (i) the name of any underwriters or agents with whom the
Operating Partnership has entered into arrangements with respect to the sale or
issuance of Debt Securities, (ii) the initial public offering or purchase price
of the Debt Securities, (iii) any underwriting discounts, commissions and other
items constituting underwriter's compensation from the Operating Partnership and
any other discounts, concessions or commissions allowed or reallowed or paid by
any underwriters to other dealers, (iv) any commissions paid to any agents and
(v) the net proceeds to the Operating Partnership. In connection with the sale
of Debt Securities, underwriters may
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receive compensation from the Operating Partnership or from purchasers of Debt
Securities, for whom they may act as agents, in the form of discounts,
concessions or commissions. Underwriters may sell Debt Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters or commissions from the
purchasers for whom they may act as agents. Underwriters, dealers and agents
that participate in the distribution of Debt Securities may be deemed to be
underwriters, and any discounts or commissions they receive from the Operating
Partnership, and any profit on the resale of Debt Securities they realize, may
be deemed to be underwriting discounts and commissions under the Securities Act.
Under agreements the Operating Partnership may enter into, underwriters,
dealers and agents who participate in the distribution of Debt Securities may be
entitled to indemnification by the Operating Partnership against certain
liabilities, including liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, the Operating Partnership in the
ordinary course of business.
Unless otherwise set forth in the Prospectus Supplement relating to the
issuance of Debt Securities, the obligations of the underwriters to purchase
such Debt Securities will be subject to certain conditions precedent and each of
the underwriters with respect to such Debt Securities will be obligated to
purchase all of the Debt Securities allocated to it if any such Debt Securities
are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If so indicated in the applicable Prospectus Supplement, the Operating
Partnership will authorize underwriters or other persons acting as the Operating
Partnership's agents to solicit offers by certain institutions to purchase Debt
Securities from the Operating Partnership pursuant to contracts providing for
payment and delivery on a future date. Institutions with which such contracts
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and others,
but in all cases such institutions must be approved by the Operating
Partnership. The obligations of any purchaser under any such contract will be
subject only to the condition that the purchase of the Debt Securities shall not
at any time of delivery be prohibited under the laws of the jurisdiction to
which such purchaser is subject. The underwriters and such other agents will not
have any responsibility in respect of the validity or performance of such
contracts.
LEGAL MATTERS
The validity of each issue of the Debt Securities will be passed upon for
the Operating Partnership by Paul, Weiss, Rifkind, Wharton & Garrison, New York,
New York. Paul, Weiss, Rifkind, Wharton & Garrison will also pass upon certain
tax matters. Rogers & Wells, New York, New York, will act as counsel to any
underwriters, dealers or agents.
EXPERTS
The audited financial statements and schedules of SPG incorporated by
reference, and SPG, LP included, in the Registration Statement of which this
Prospectus is a part, to the extent and for the periods indicated in their
reports, have been audited by Arthur Andersen LLP, independent public
accountants, and are incorporated by reference or included herein in reliance
upon the authority of said firm as experts in giving said reports.
The audited financial statements and schedules of DRC incorporated by
reference, and the Operating Partnership (formerly DeBartolo Realty Partnership,
L.P.) included, in the Registration Statement of which this Prospectus is a
part, to the extent and for the periods indicated in their reports, have been
audited by Ernst & Young LLP, independent public accountants, and are
incorporated by reference or included, as the case may be, herein in reliance
upon the authority of said firm as experts in giving said report.
20
<PAGE> 53
======================================================
NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE OPERATING PARTNERSHIP OR THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCE, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS
SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS OR IN THE AFFAIRS
OF THE OPERATING PARTNERSHIP SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
The Operating Partnership.............. S-3
The Offering........................... S-4
Recent Developments.................... S-6
Use of Proceeds........................ S-8
Capitalization......................... S-9
Selected Financial and Operating
Data................................. S-10
Summary of Portfolio Properties........ S-13
Description of the Notes............... S-14
Underwriting........................... S-21
Legal Matters.......................... S-22
Pro Forma Combined Condensed
Financial Information................ SF-1
PROSPECTUS
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 3
The Operating Partnership.............. 4
The Merger............................. 6
Use of Proceeds........................ 8
Ratio of Earnings to Fixed Charges..... 8
Description of Debt Securities......... 9
Plan of Distribution................... 19
Legal Matters.......................... 20
Experts................................ 20
UNTIL OCTOBER 15, 1997 (90 DAYS AFTER THE
DATE OF THIS PROSPECTUS SUPPLEMENT), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NOTES,
WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS
TO DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
</TABLE>
======================================================
======================================================
LOGO
$100,000,000
6 3/4% NOTES DUE 2004
$150,000,000
7% NOTES DUE 2009
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
MERRILL LYNCH & CO.
CHASE SECURITIES INC.
LEHMAN BROTHERS
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
SALOMON BROTHERS INC
UBS SECURITIES
JULY 17, 1997
======================================================
