UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission file number 333-11491
SIMON DeBARTOLO GROUP, L.P.
(Exact name of registrant as specified in its charter)
Delaware 34-1755769
------------------------- ------------------
(State or other (I.R.S. Employer
jurisdiction
of incorporation or Identification
organization) No.)
115 West Washington Street
Indianapolis, Indiana 46204
------------------------- ------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (317) 636-1600
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [x] NO [ ]
<PAGE>
SIMON DeBARTOLO GROUP, L.P.
FORM 10-Q
INDEX
Part I - Financial Information Page
Item 1: Financial Statements
Consolidated Condensed Balance Sheets
as of September 30, 1997 and December
31, 1996 3
Consolidated Condensed Statements of
Operations for the three-month and
nine-month periods ended September
30, 1997 and 1996 4
Consolidated Condensed Statements of
Cash Flows for the nine-month periods
ended September 30, 1997 and 1996 5
Notes to Unaudited Consolidated
Condensed Financial Statements 6
Simon Property Group, L.P. (Guarantor)
Consolidated Condensed Balance Sheets
as of September 30, 1997 and December
31, 1996 15
Consolidated Condensed Statements of
Operations for the three-month and
nine-month periods ended September
30, 1997 and 1996 16
Consolidated Condensed Statements of
Cash Flows for the nine-month periods
ended September 30, 1997 and 1996 17
Notes to Unaudited Consolidated
Condensed Financial Statements 18
Item 2: Management's Discussion and
Analysis of Financial Condition and
Results of Operations 24
Part II - Other Information
Items 1 through 6 32
Signatures 33
<PAGE>
<TABLE>
SIMON DeBARTOLO GROUP, L.P.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited and dollars in thousands, except per unit amounts)
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS:
Investment properties, at cost $ 5,521,523 $ 5,301,021
Less _ accumulated depreciation 403,741 279,072
----------- ------------
5,117,782 5,021,949
Acquisition of The Retail Property Trust (Note 4) 1,086,526 --
Cash and cash equivalents 50,879 64,309
Restricted cash 14,939 6,110
Tenant receivables and accrued revenue, net 177,563 166,119
Notes and advances receivable from Management Company and
affiliate 96,142 75,452
Investment in partnerships and joint ventures, at equity 620,624 394,409
Other investments 58,803 --
Deferred costs and other assets 156,319 138,492
Minority interest 27,383 29,070
------------ ------------
Total assets $ 7,406,960 $ 5,895,910
============ ============
LIABILITIES:
Mortgages and other indebtedness $ 4,720,885 $ 3,681,984
Accrued acquisition costs 212,429 --
Accounts payable and accrued expenses 186,939 170,203
Cash distributions and losses in partnerships and joint
ventures,at equity 19,730 17,106
Investment in Management Company and affiliates 2,971 8,567
Other liabilities 68,793 72,876
------------ ------------
Total liabilities 5,211,747 3,950,736
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 12)
PARTNERS' EQUITY:
Preferred units, 15,000,000 and 12,000,000 units
outstanding, respectively 439,090 292,912
General Partner, 103,663,845 and 96,880,415 units
outstanding,respectively 1,114,835 1,017,333
Limited Partner, 61,009,648 and 60,974,050 units
outstanding,respectively 656,117 640,283
Unamortized restricted stock award (14,829) (5,354)
Total partners' equity 2,195,213 1,945,174
------------ ------------
Total liabilities and partners' equity $ 7,406,960 $ 5,895,910
============ ============
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
SIMON DeBARTOLO GROUP, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited and dollars in thousands, except per unit amounts)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------- --------------------
--------- --------- --------- --------
1997 1996 1997 1996
--------- --------- --------- --------
<S> <C> <C> <C> <C>
REVENUE:
Minimum rent $152,320 $117,375 $449,693 $277,313
Overage rent 8,650 6,987 26,214 17,738
Tenant reimbursements 81,413 63,512 231,444 157,738
Other income 17,400 14,562 39,901 32,851
--------- --------- --------- ---------
Total revenue 259,783 202,436 747,252 485,640
--------- --------- --------- ---------
EXPENSES:
Property operating 46,203 35,002 130,228 85,608
Depreciation and amortization 48,185 37,606 135,668 88,913
Real estate taxes 23,816 19,676 73,166 48,040
Repairs and maintenance 11,107 10,005 28,653 22,546
Advertising and promotion 8,396 5,542 20,296 14,439
Merger integration costs -- 7,236 -- 7,236
Provision for (recovery of) credit
losses (135) 1,116 2,690 2,867
Other 4,639 3,538 12,818 9,152
--------- --------- --------- ---------
Total operating expenses 142,211 119,721 403,519 278,801
--------- --------- --------- ---------
OPERATING INCOME 117,572 82,715 343,733 206,839
INTEREST EXPENSE 68,940 56,212 203,934 135,346
--------- --------- --------- ---------
INCOME BEFORE MINORITY INTEREST 48,632 26,503 139,799 71,493
MINORITY INTEREST (1,423) (1,219) (3,648) (2,394)
GAINS ON SALES OF ASSETS, NET -- 88 20 88
--------- --------- --------- ---------
INCOME BEFORE UNCONSOLIDATED
ENTITIES 47,209 25,372 136,171 69,187
INCOME FROM UNCONSOLIDATED
ENTITIES 7,077 3,467 9,590 7,452
--------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEMS 54,286 28,839 145,761 76,639
EXTRAORDINARY ITEMS 27,215 (2,530) 2,501 (2,795)
--------- --------- --------- ---------
NET INCOME 81,501 26,309 148,262 73,844
GENERAL PARTNER PREFERRED UNIT
REQUIREMENT (9,101) (2,224) (21,914) (6,286)
--------- --------- --------- ---------
NET INCOME AVAILABLE TO UNITHOLDERS $ 72,400 $ 24,085 $126,348 $ 67,558
========= ========= ========= =========
NET INCOME AVAILABLE TO UNITHOLDERS
ATTRIBUTABLE TO:
General Partner $ 44,642 $ 14,784 $ 77,826 $ 41,350
Limited Partners 27,758 9,301 48,522 26,208
--------- --------- --------- ---------
$ 72,400 $ 24,085 $ 126,348 $ 67,558
========= ========= ========= =========
EARNINGS PER COMMON UNIT:
Income before extraordinary items $ 0.28 $ 0.20 $ 0.78 $ 0.65
Extraordinary items 0.17 (0.02) 0.02 (0.02)
--------- --------- --------- ---------
Net income $ 0.45 $ 0.18 $ 0.80 $ 0.63
========= ========= ========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
SIMON DeBARTOLO GROUP, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited and dollars in thousands)
For the Nine Months Ended
September 30,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 148,262 $ 73,844
Adjustments to reconcile net income to net cash provided
by operating activities-
Extraordinary items (2,501) 2,795
Equity in income of unconsolidated entities (9,590) (7,452)
Gains on sales of assets, net (20) (88)
Minority interest 3,648 2,394
Depreciation and amortization 140,927 94,976
Straight-line rent (6,378) 1,754
Changes in assets and liabilities-
Tenant receivables and accrued revenue (1,341) 9,034
Deferred costs and other assets (18,906) (4,200)
Accounts payable, accrued expenses and other liabilities 8,151 (29,767)
--------- ----------
Net cash provided by operating activities 262,252 143,290
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (736,600) (43,941)
Capital expenditures (219,672) (112,419)
Cash from consolidation of joint venture -- 66,736
Increase in restricted cash (8,829) --
Proceeds from sale of assets 599 399
Investments in and advances to unconsolidated entities (63,656) (54,442)
Distributions from unconsolidated entities 22,199 45,403
Loan repayment from Management Company -- 38,553
Other investing activities (55,400) --
------------ ------------
Net cash used in investing activities (1,061,359) (59,711)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Partnership contributions 327,101 195,205
Minority interest distributions (2,825) (3,810)
Partnership distributions (259,895) (171,346)
Mortgage and other indebtedness proceeds, net of transaction costs 1,595,202 272,945
Mortgage and other indebtedness principal payments (852,906) (346,719)
Other refinancing transaction (21,000) --
------------ ------------
Net cash provided by (used in) financing activities 785,677 (53,725)
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,430) 29,854
CASH AND CASH EQUIVALENTS, beginning of period 64,309 62,721
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 50,879 $ 92,575
============ ============
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
SIMON DeBARTOLO GROUP, L.P.
Notes to Unaudited Consolidated Condensed Financial Statements
(Dollars in thousands)
Note 1 - Organization
Simon DeBartolo Group, L.P. ("SDG, LP") is a subsidiary partnership
of Simon DeBartolo Group, Inc. (the "Company"), a self-administered and
self-managed real estate investment trust ("REIT"). Simon Property
Group, L.P. ("SPG, LP") is a subsidiary partnership of SDG, LP and of
the Company. SDG, LP and SPG, LP are hereafter collectively referred to
as the "Operating Partnership." On August 9, 1996 (the "Merger Date"),
the Company acquired, through merger (the "Merger") the national
shopping center business of DeBartolo Realty Corporation ("DRC") (See
Note 3). Prior to the Merger Date, references to the Operating
Partnership refer to SPG, LP only. 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 September 30, 1997, the
Operating Partnership owned or held an interest in 200 income-producing
properties, consisting of 124 regional malls, 66 community shopping
centers, four specialty retail centers, five mixed-use properties and
one value-oriented super-regional mall in 33 states (the "Properties").
The Operating Partnership also owns interests in five properties under
construction, seven parcels of land held for future development and
substantially all of the economic interest in M.S. Management
Associates, Inc. (the "Management Company" - See Note 8).
Note 2 - Basis of Presentation
The accompanying consolidated condensed financial statements are
unaudited; however, they have been prepared in accordance with generally
accepted accounting principles for interim financial information and in
conjunction with the rules and regulations of the Securities and
Exchange Commission ("SEC"). Accordingly, they do not include all of
the disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting solely of normal recurring matters) necessary
for a fair presentation of the consolidated condensed financial
statements for these interim periods have been included. The results
for the interim period ended September 30, 1997 are not necessarily
indicative of the results to be obtained for the full fiscal year.
These unaudited consolidated condensed financial statements should be
read in conjunction with the December 31, 1996 audited financial
statements and notes thereto included in the Simon DeBartolo Group, L.P.
Annual Report on Form 10-K.
The accompanying consolidated condensed financial statements of
SDG, LP include all accounts of all entities owned or controlled by
SDG, LP. All significant intercompany amounts have been eliminated.
The accompanying consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles,
which requires management to make estimates and assumptions that affect
the reported amounts of the SDG, LP's assets, liabilities, revenues and
expenses during the reported periods. Actual results could differ from
these estimates.
Properties which are wholly-owned or owned less than 100% and are
controlled by the Operating Partnership have been consolidated. The
Operating Partnership's equity interests in certain partnerships and
joint ventures which represent noncontrolling 14.7% to 50.0% ownership
interests and the investment in the Management Company are accounted for
under the equity method of accounting. These investments are recorded
initially at cost and subsequently adjusted for net equity in income
(loss) and cash contributions and distributions.
Net operating results of the Operating Partnership are allocated
after preferred distributions, based on its partners' ownership
interests. The Company's weighted average ownership interest in the
Operating Partnership, after preferred units, for the three-month periods
ended September 30, 1997 and 1996 was 61.8% and 61.3%, respectively. The
Company's weighted average ownership interest in the Operating Partnership
for the nine-month periods ended September 30, 1997 and 1996 was 61.6% and
61.2%, respectively. The Company owned 63.0% and 61.4% of the Operating
Partnership as of September 30, 1997 and December 31, 1996,
respectively.
<PAGE>
Note 3 - The Merger
On August 9, 1996, the Company acquired the national shopping
center business of DRC for an aggregate value of approximately $3.0
billion. The acquired portfolio consisted of 49 regional malls, 11
community centers and 1 mixed-use Property. These Properties included
47,052,267 square feet of retail space gross leasable area ("GLA") and
558,636 square feet of office GLA. The Merger was accounted for using
the purchase method of accounting. Of these Properties, 40 regional
malls, 10 community centers and the mixed-use Property are being
accounted for using the consolidated method of accounting. The
remaining Properties are being accounted for using the equity method of
accounting.
Pro Forma
The following unaudited pro forma summary financial information
combines the consolidated results of operations of the Operating
Partnership as if the Merger had occurred as of January 1, 1996, and was
carried forward through September 30, 1996. Preparation of the pro
forma summary information was based upon assumptions deemed appropriate
by the Operating Partnership. The pro forma summary information is not
necessarily indicative of the results which actually would have occurred
if the Merger had been consummated at January 1, 1996, nor does it
purport to represent the future financial position and results of
operations for future periods.
Nine Months Ended
September 30, 1996
-------------------
Revenue $ 694,343
===================
Net Income available to unitholders 107,383
===================
Net income per Unit $ 0.68
===================
Weighted average number of units
outstanding 156,886,150
===================
Note 4 - Acquisition of The Retail Property Trust
On September 29, 1997, the Operating Partnership completed its cash
tender offer for all of the outstanding shares of beneficial interests
of The Retail Property Trust, a private Massachusetts business trust
("RPT"). RPT owns 98.8% of Shopping Center Associates, a New York
general partnership ("SCA"). SCA owns or has interests in twelve
regional malls and one community center, comprising approximately twelve
million square feet of GLA in eight states. The Operating Partnership
is negotiating the purchase of the remaining 50% interests in two of
these properties owned by a third party and to sell its 50% interests
in two of the other properties to such third party. The Operating
Partnership also intends to acquire the remaining 50% partnership
interest in another of these properties. The Operating Partnership is
also in the process of finalizing an agreement to acquire the remaining
1.2% interest in SCA from its current managing general partner. The
total cost for the acquisition of RPT is estimated at $1.2 billion,
which includes approximately $315,000 of SCA's debt and approximately
$154,000 of SCA's pro rata share of joint venture debt. The Operating
Partnership funded this acquisition with aggregate borrowings of
$730,000 under the Credit Facility and a new $500,000 unsecured
revolving credit facility (see Note 10), which includes a $185,000 draw
on October 1, 1997.
The cost of the acquisition of RPT is temporarily included in the
accompanying unaudited consolidated condensed financial statements as an
investment. Due to the close proximity of the acquisition to the end of
the reporting period, the Operating Partnership is still gathering
information necessary to allocate the purchase price to the fair value
of the assets acquired. Management expects to finalize this allocation
during the fourth quarter and to properly reflect the costs of acquiring
RPT in the Operating Partnership's 1997 annual report on Form 10-K.
Management believes the impact of not applying purchase accounting to
the acquisition of RPT as of September 30, 1997 is immaterial to the
financial statements as a whole.
Note 5 - Cash Flow Information
Cash paid for interest, net of amounts capitalized, during the nine
months ended September 30, 1997 was $199,285, as compared to $127,464
for the same period in 1996. All accrued distributions had been paid as
of September 30, 1997 and December 31, 1996. See Notes 4, 7 and 11 for
information about non-cash transactions during the nine months ended
September 30, 1997.
<PAGE>
Note 6 - Per Unit Data
Per unit data is based on the weighted average number of units of
ownership in the Operating Partnership ("Units") outstanding during the
period. As used herein, the term Units does not include units of
partnership interest entitled to preferential distribution of cash
("Preferred Units"). The weighted average number of Units used in the
computation for the three months ended September 30, 1997 and 1996 was
159,795,424 and 131,056,267, respectively. The weighted average number
of Units used in the computation for the nine-month periods ended
September 30, 1997 and 1996 was 158,752,289 and 107,607,202,
respectively. Units of ownership in the Operating Partnership may be
exchanged for shares of common stock of the Company on a one-for-one
basis in certain circumstances. The outstanding stock options and the
Preferred Units have not been included in the computations of per Unit
data as they did not have a dilutive effect.
Note 7 - Other Acquisitions and Development
West Town Mall
On July 10, 1997, the Operating Partnership acquired a 48% interest
in West Town Mall in Knoxville, Tennessee for $69,930 in cash and 35,598
Units valued at approximately $1,100. This transaction, which increased
the Operating Partnership's ownership of West Town Mall to 50%, was
financed using a portion of the net proceeds, contributed by the Company
in exchange for Units, from the sale of its Series C Preferred Stock
described in Note 11. Effective July 10, 1997, the property is being
accounted for using the equity method of accounting. It was previously
accounted for using the cost method.
Dadeland Mall
On August 8, 1997, a subsidiary of the Operating Partnership
acquired a 50% interest in a trust that owns Dadeland Mall, a 1.4
million square foot super-regional mall in Miami, Florida. Dadeland
Mall is a dominant mall in its trade area with small shop sales of $649
per square foot in 1996 and leased and committed occupancy of 94%. A
portion of the $128,000 purchase price was paid in the form of 658,707
shares of the Company's common stock, valued at approximately $20,000.
The remaining portion of the purchase price was financed using
borrowings from the Credit Facility. This joint venture is being
accounted for using the equity method of accounting.
The Source
On September 5, 1997, the Operating Partnership opened The Source,
a 730,000-square-foot value-oriented retail and entertainment
development project in Westbury (Long Island), New York. This
approximately $150,000 joint venture project is 50%-owned by the
Operating Partnership and is being accounted for using the equity method
of accounting.
<PAGE>
Note 8 - Investment in Unconsolidated Entities
Partnerships and Joint Ventures
Summary financial information of partnerships and joint ventures
accounted for using the equity method of accounting, excluding the RPT
acquisition (See Note 4), and a summary of the Operating Partnership's
investment in and share of income from such partnerships and joint
ventures follow:
September 30, December 31,
BALANCE SHEETS 1997 1996
------------- -------------
Assets:
Investment properties at cost, net $ 2,343,781 $ 1,887,555
Cash and cash equivalents 82,672 61,267
Tenant receivables 72,971 58,548
Other assets 56,405 69,365
------------ ------------
Total assets $ 2,555,829 $ 2,076,735
============ ============
Liabilities and Partners' Equity:
Mortgages and other indebtedness $ 1,351,639 $ 1,121,804
Accounts payable, accrued expenses and
other liabilities 176,825 213,394
------------- -------------
Total liabilities 1,528,464 1,335,198
Partners' equity 1,027,365 741,537
------------- -------------
Total liabilities and
partners' equity $ 2,555,829 $ 2,076,735
============= =============
The Operating Partnership's Share of:
Total assets $ 817,061 $ 602,084
============= =============
Partners' equity $ 290,219 $ 144,376
Add: Excess Investment (See below) 310,675 232,927
------------- -------------
Operating Partnership's net Investment
in Joint Ventures $ 600,894 $ 377,303
============= =============
For the three For the nine
months ended months ended
September 30, September 30,
------------------ ------------------
-------- -------- -------- --------
STATEMENTS OF OPERATIONS 1997 1996 1997 1996
-------- -------- -------- --------
Revenue:
Minimum rent $62,613 $37,295 $168,817 $91,334
Overage rent 2,319 2,057 5,633 3,746
Tenant reimbursements 27,913 18,487 77,491 46,000
Other income 5,384 2,903 12,747 9,061
-------- -------- -------- --------
Total revenue 98,229 60,742 264,688 150,141
Operating Expenses:
Operating expenses and other 33,660 22,888 94,575 55,737
Depreciation and amortization 18,518 12,273 53,579 32,859
-------- -------- -------- --------
Total operating expenses 52,178 35,161 148,154 88,596
-------- -------- -------- --------
Operating Income 46,051 25,581 116,534 61,545
Interest Expense 21,577 14,555 63,155 28,689
Extraordinary Losses -- -- 1,182 --
-------- -------- -------- --------
Net Income 24,474 11,026 52,197 32,856
Third Party Investors' Share of
Net Income 17,970 8,885 38,347 27,581
-------- -------- -------- --------
The Operating Partnership's
Share of Net Income $6,504 $2,141 $13,850 $5,275
Amortization of Excess
Investment (See below) (2,823) -- (8,792) --
======== ======== ======== ========
Income from Unconsolidated
Entities $3,681 $2,141 $5,058 $5,275
======== ======== ======== ========
As of September 30, 1997 and December 31, 1996, the unamortized
excess of the Operating Partnership's investment over its share of the
equity in the underlying net assets of the partnerships and joint
ventures ("Excess Investment") was $310,675 and $232,927, respectively.
This Excess Investment, which resulted primarily from the Merger, is
being amortized generally over the life of the related Properties.
Amortization included in income from unconsolidated entities for the
three-month and nine-month periods ended September 30, 1997 was $2,823
and $8,792, respectively.
<PAGE>
The net income or net loss for each partnership and joint venture
is allocated in accordance with the provisions of the applicable
partnership or joint venture agreement. The allocation provisions in
these agreements are not always consistent with the ownership interest
held by each general or limited partner or joint venturer, primarily due
to partner preferences.
The Management Company
The Management Company, including its consolidated subsidiaries,
provides management, leasing, development, accounting, legal, marketing
and management information systems services to 34 non-wholly owned
Properties, Melvin Simon & Associates, Inc., and certain other nonowned
properties. Certain subsidiaries of the Management Company provide
architectural, design, construction, insurance and other services
primarily to certain of the Properties. The Management Company also
invests in other businesses to provide other synergistic services to the
Properties. The Operating Partnership's share of consolidated net
income of the Management Company, after intercompany profit
eliminations, was $3,396 and $1,326 for the three-month periods ended
September 30, 1997 and 1996, respectively, and was $4,532 and $2,177 for
the nine-month periods ended September 30, 1997 and 1996, respectively.
Note 9 - Other Investment
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 $50,000 using borrowings from the Operating
Partnership's Credit Facility (See below). 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 manufacturer's outlet
shopping centers with 500,000 square feet or more of GLA in the United
States. In accordance with Statement of Financial Accounting Standards
No. 115 "Accounting for Certain Investments in Debt and Equity
Securities", the Operating Partnership's investment in Chelsea is being
reflected at its market value of $58,803, as of September 30, 1997, in
the accompanying consolidated condensed balance sheets in other
investments. The unrealized gain of $8,803 is reflected in partners'
equity.
Note 10 - Debt
On January 31, 1997, the Operating Partnership completed a
refinancing transaction involving debt on four wholly-owned Properties.
The transaction consisted of the payoff of one loan totaling $43,375, a
restatement of the interest rate on the three remaining loans, the
acquisition of the contingent interest feature on all four loans for
$21,000, and $3,904 of principal reductions on two additional loans.
This transaction, which was funded using the Credit Facility (See
below), resulted in an extraordinary loss of $23,247, including the
write-off of deferred mortgage costs of $2,247.
On April 14, 1997, the Operating Partnership obtained improvements
to its $750,000 unsecured revolving credit facility (the "Credit
Facility"), which has an initial maturity of September 1999, subject to
an automatic one-year extension. The Credit Facility agreement was
amended to reduce the interest rate from LIBOR plus 0.90% to LIBOR plus
0.75%. In addition, the Credit Facility's competitive bid feature,
which has further reduced interest costs, was increased from $150,000 to
$300,000.
On May 15, 1997, the Operating Partnership established a Medium-
Term Note ("MTN") program. On June 24, 1997, the Operating Partnership
completed the sale of $100,000 of notes under the MTN program. The
notes sold bear interest at 7.125% and have a stated maturity of June
24, 2005. The net proceeds of approximately $99,000 from this sale were
used primarily to pay down the Credit Facility.
Also on May 15, 1997, the Operating Partnership refinanced
approximately $140,000 in existing debt on The Forum Shops at Caesar's.
The new debt consists of three classes of notes totaling $180,000, with
$90,000 bearing interest at 7.125% and $90,000 bearing interest at LIBOR
plus 0.30%, all of which mature on May 15, 2004. Approximately $40,000
of the borrowings were placed in escrow to pay for construction costs
required in connection with the expansion of this project, which is
scheduled to open on August 28, 1997. As of September 30, 1997, $14,939
remains in escrow, which is reflected in restricted cash in the
accompanying consolidated condensed balance sheet. This refinancing
resulted in an extraordinary loss of $1,461.
On June 5, 1997, the Operating Partnership closed a $115,000
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, contingent upon certain conditions
and subject to extension fees.
<PAGE>
On June 30, 1997, the Operating Partnership closed an unsecured
loan which bears interest at LIBOR plus 0.75% and matures on September
29, 1998. The proceeds were used to retire an existing $55,000 mortgage
on East Towne Mall, which bore interest at LIBOR plus 1.125%.
On July 17, 1997, the Operating Partnership completed a $250,000
public offering of two tranches of its seven-year and twelve-year non-
convertible senior unsecured debt securities. The first tranche was for
$100,000, bears interest at 6 3/4%, and matures on July 15, 2004. The
second tranche was for $150,000, bears interest at 7%, and matures on
July 15, 2009. The notes pay interest semi-annually, are guaranteed by
SPG, LP, and contain covenants relating to minimum leverage, earnings
before interest, taxes, depreciation and amortization ("EBITDA") and
unencumbered EBITDA ratios. The Operating Partnership used $225,000 of
the net proceeds to reduce the amount outstanding on the Credit
Facility.
On September 2, 1997, the Operating Partnership completed a
refinancing of $453,000 of commercial mortgage pass through certificates
and a $48,000 mortgage loan, resulting in releases of mortgages
encumbering 18 of the Properties. The Operating Partnership funded this
refinancing with the proceeds of a $225,000 secured loan, which is
secured by cross-collateralized mortgages encumbering seven of the
Properties, and borrowings of $294,000 under the Credit Facility, which
were reduced with the proceeds from the sale of $180,000 of notes issued
on September 10, 1997, as described below. The Operating Partnership
intends to refinance the $225,000 secured loan. This refinancing
resulted in a net extraordinary loss of $3,462.
On September 4, 1997, the Operating Partnership transferred
ownership of one Property and paid $6,600 to its lender, fully
satisfying the property's mortgage note payable of $42,000. This
property no longer met the Operating Partnership's criteria for its
ongoing strategic plan. The Operating Partnership recognized an
extraordinary gain on this transaction of approximately $31,136 in the
third quarter of 1997.
On September 10, 1997, the Operating Partnership issued $180,000
principal amount of notes under its MTN program. These notes mature on
September 20, 2007 and bear interest at 7.125% per annum. The Operating
Partnership used the net proceeds of this offering to pay down the
borrowings made under the Credit Facility in connection with the
September 2, 1997 refinancing described above.
On September 17, 1997, the Operating Partnership retired a $63,000
mortgage loan secured by Lincolnwood Towne Center with a new unsecured
loan, which bears interest at LIBOR plus 0.75% and has an initial
maturity of January 31, 1998. The retired $63,000 mortgage bore
interest at LIBOR plus 1.25%, and had an initial maturity of January 31,
1998.
On September 26, 1997, the Operating Partnership obtained an
additional unsecured revolving credit facility in the amount of $500,000
for the purpose of funding a portion of the cost of acquiring RPT. This
new credit facility has terms similar to the existing Credit Facility,
including an interest rate of LIBOR plus 0.75% and an initial maturity
of September 1999, with an automatic one-year extension.
At September 30, 1997, the Operating Partnership had consolidated
debt of $4,720,885, of which $3,194,731 was fixed-rate debt and
$1,526,154 was variable-rate debt. The Operating Partnership's pro rata
share of indebtedness of the unconsolidated joint venture Properties as
of September 30, 1997 and December 31, 1996 was $681,671 and $448,218,
respectively. The Operating Partnership's pro rata share of the
September 30, 1997 joint-venture indebtedness includes $154,250 of SCA's
pro rata share of its joint venture debt. As of September 30, 1997 and
December 31, 1996, the Operating Partnership had interest-rate
protection agreements related to $523,348 and $524,561 of its pro rata
share of indebtedness, respectively. The agreements are generally in
effect until the related variable-rate debt matures. As a result of the
various interest rate protection agreements, interest savings were $285
and $654 for the three months ended September 30, 1997 and 1996,
respectively, and $1,371 and $1,935 for the nine-month periods ended
September 30, 1997 and 1996, respectively.
<PAGE>
Note 11 - Partners' Equity
The following table summarizes the change in the Operating
Partnership's partners' equity since December 31, 1996.
<TABLE>
Unamortized Total
Preferred General Limited Restricted Partners'
Units Partner Partner Stock Award Equity
--------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $292,912 $1,017,333 $640,283 $(5,354) $1,945,174
Units issued in connection with
stock incentive program
(458,884 Units) 14,339 (14,339) --
Series C Preferred Units
(3,000,000 Units) 146,178 146,178
Other Units issuances
(6,360,144 Units) 200,726 1,101 201,827
Amortization of stock incentive 4,864 4,864
Unrealized gain on investment 5,542 3,261 8,803
Adjustment to allocate net
equity of the Operating
Partnership (54,582) 54,582 --
Net income 21,914 77,826 48,522 148,262
Distributions (21,914) (146,349) (91,632) (259,895)
--------- ---------- -------- ---------- ----------
Balance at September 30, 1997 $439,090 $1,114,835 $656,117 $(14,829) $2,195,213
========= =========== ======== =========== ==========
</TABLE>
Stock Incentive Programs
Under the terms of the Company's Stock Incentive Programs (the
"Plans"), eligible executives receive restricted stock, subject to
performance standards, vesting requirements and other terms of the
Plans. On March 26, 1997, the compensation committee of the board of
directors of the Company approved the issuance of 458,884 shares, as
adjusted, under the Plans. As of September 30, 1997, there were a total
of 802,225 shares issued under the Plans, with 440,535 shares remaining
available for issuance, subject to applicable performance standards and
other terms of the Plans. The value of shares issued under the Plans is
being amortized pro-rata over their respective vesting periods,
generally four years. Approximately $4,110 and $1,563 have been
amortized for the nine-month periods ended September 30, 1997 and 1996,
respectively.
Series C Preferred Shares
On July 9, 1997 the Company sold 3,000,000 shares of 7.89% Series C
Cumulative Step-Up Premium RateSM Preferred Stock (the "Series C
Preferred Shares") in a public offering at $50.00 per share. Beginning
October 1, 2012, the rate increases to 9.89% per annum. The Series C
Preferred Shares are not redeemable prior to September 30, 2007.
Beginning September 30, 2007, the Series C Preferred Shares may be
redeemed at the option of the Company in whole or in part, at a
redemption price of $50.00 per share, plus accrued and unpaid
distributions, if any, thereon. The redemption price of the Series C
Preferred Shares may only be paid from the sale proceeds of other
capital stock of the Company, which may include other classes or series
of preferred stock. Additionally, the Series C Preferred Shares have no
stated maturity and are not subject to any mandatory redemption
provisions, nor are they convertible into any other securities of the
Company. The Company contributed the net proceeds of this offering of
approximately $146,000 to the Operating Partnership in exchange for
preferred units, the economic terms of which are substantially identical
to the Series C Preferred Shares. The Operating Partnership used the
proceeds to increase its ownership interest in West Town Mall (See Note
7), to pay down the Credit Facility and for general working capital
purposes.
<PAGE>
Common Stock Issuances
On September 16, 1997, the Company issued 747,000 shares of its
Common Stock in a public offering. The Company contributed the net
proceeds of approximately $23,685 to the Operating Partnership in
exchange for an equal number of Units. The Operating Partnership
combined the net proceeds with approximately $4,200 of working capital
to retire an existing mortgage on O'Hare International Center.
On September 19, 1997, the Company issued 4,500,000 shares of its
Common Stock in a public offering. The Company contributed the net
proceeds of approximately $146,790 to the Operating Partnership in
exchange for an equal number of Units. The Operating Partnership used
the net proceeds to retire a portion of the outstanding balance on the
Credit Facility.
Note 12 - Commitments and Contingencies
Litigation
Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. On
October 16, 1996, a complaint was filed in the Court of Common Pleas of
Mahoning County, Ohio, captioned Carlo Angostinelli et al. v. DeBartolo
Realty Corp. et al. The named defendants are SD Property Group, Inc., a
99%-owned subsidiary of the Company, and DeBartolo Properties
Management, Inc., and the plaintiffs are 27 former employees of the
defendants. In the complaint, the plaintiffs allege that they were
recipients of deferred stock grants under the DRC stock incentive plan
(the "DRC Plan") and that these grants immediately vested under the DRC
Plan's "change in control" provision as a result of the Merger.
Plaintiffs assert that the defendants' refusal to issue them
approximately 661,000 shares of DRC common stock, which is equivalent to
approximately 450,000 shares of common stock of the Company computed at
the 0.68 Exchange Ratio used in the Merger, constitutes a breach of
contract and a breach of the implied covenant of good faith and fair
dealing under Ohio law. Plaintiffs seek damages equal to such number of
shares of DRC common stock, or cash in lieu thereof, equal to all
deferred stock ever granted to them under the DRC Plan, dividends on
such stock from the time of the grants, compensatory damages for breach
of the implied covenant of good faith and fair dealing, and punitive
damages. The complaint was served on the defendants on October 28,
1996. The plaintiffs and the Company each filed motions for summary
judgment. On October 31, 1997, the Court entered a judgment in favor of
the Company granting the Company's motion for summary judgment. The
plaintiffs may appeal this judgment. While it is difficult to predict
the ultimate outcome of this action, based on the information known to
date, management does not expect this action will have a material
adverse effect on the Operating Partnership.
Roel Vento et al v. Tom Taylor et al. An affiliate of the Operating
Partnership is a defendant in litigation entitled Roel Vento et al v.
Tom Taylor et al, in the District Court of Cameron County, Texas, in
which a judgment in the amount of $7,800 has been entered against all
defendants. This judgment includes approximately $6,500 of punitive
damages and is based upon a jury's findings on four separate theories of
liability including fraud, intentional infliction of emotional distress,
tortuous interference with contract and civil conspiracy arising out of
the sale of a business operating under a temporary license agreement at
Valle Vista Mall in Harlingen, Texas. The Operating Partnership is
seeking to overturn the award and has appealed the verdict. The
Operating Partnership's appeal is pending. Although the Operating
Partnership is optimistic that it may be able to reverse or reduce the
verdict, there can be no assurance thereof. Management, based upon the
advice of counsel, believes that the ultimate outcome of this action
will not have a material adverse effect on the Operating Partnership.
The Operating Partnership currently is not subject to any other
material litigation other than routine litigation and administrative
proceedings arising in the ordinary course of business. On the basis of
consultation with counsel, management believes that these items will not
have a material adverse impact on the Operating Partnership's financial
position or results of operations.
Note 13 - Subsequent Events
On October 15, 1997, the SEC declared effective a registration
statement filed by the Operating Partnership, which provides for the
offering, from time to time, of up to $1,000,000 aggregate public
offering price of unsecured debt securities of the Operating
Partnership. The net proceeds of such offerings may be used to fund
property acquisition or development activity, retire existing debt or
for any other purpose deemed appropriate by the Operating Partnership.
Securities issued under this registration statement are guaranteed by
SPG, LP.
On October 22, 1997, the Operating Partnership completed a
$150,000 public offering of eight-year non-convertible senior unsecured
debt securities. The notes bear interest at 6 7/8%, and mature on
October 27, 2005. The notes pay interest semi-annually, are guaranteed
by SPG, LP, and contain covenants relating to minimum leverage, EBITDA
and unencumbered EBITDA ratios. The Operating Partnership used $114,750
of the net proceeds of approximately $147,000, along with an escrow
refund of
<PAGE>
approximately $4,000 to retire existing mortgages on Miller
Hill Mall, Muncie Mall, and Towne West Square, with the remaining
proceeds used to reduce the amount outstanding on the Credit Facility.
On November 4, 1997, the Company announced the formation of a
strategic partnership with DLJ Real Estate Capital Partners, L.P.,
("DLJ") to acquire and develop entertainment-oriented real estate
properties, such as theaters and restaurants. Each entity expects to
contribute equity capital to the partnership.
<PAGE>
SIMON PROPERTY GROUP, L.P.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited and dollars in thousands, except per unit amounts)
September 30, December 31,
1997 1996
------------- ------------
ASSETS:
Investment properties, at cost $ 2,561,205 $ 2,467,779
Less _ accumulated depreciation 295,994 238,167
------------- ------------
2,265,211 2,229,612
Cash and cash equivalents 13,931 50,009
Restricted cash 14,939 --
Tenant receivables and accrued revenue, net 133,430 146,996
Notes and advances receivable from Management
Company 84,668 63,978
Investment in partnerships and joint ventures, 153,522 139,711
at equity
Deferred costs and other assets 154,491 129,665
Minority interest 10,093 9,712
Advances to Simon DeBartolo Group, L.P. 53,644 --
------------- ------------
Total assets $ 2,883,929 $ 2,769,683
LIABILITIES:
Mortgages and other indebtedness $ 2,527,807 $ 2,042,254
Advances from Simon DeBartolo Group, L.P. -- 259,382
Accounts payable and accrued expenses 124,977 123,527
Cash distributions and losses in partnerships
and joint ventures, at equity 19,519 17,106
Investment in Management Company and
affiliates 12,923 18,519
Minority interest held by affiliates 70,110 12,128
Other liabilities 35,616 42,139
------------- ------------
Total liabilities 2,790,952 2,515,055
COMMITMENTS AND CONTINGENCIES (Note 10)
PARTNERS' EQUITY:
Preferred units, 4,000,000 units authorized,
issued and outstanding 99,923 99,923
General Partner, 958,429 units outstanding (32) 1,601
Special Limited Partner, 95,356,834 units
outstanding (3,123) 158,458
Unamortized restricted stock award (3,791) (5,354)
------------- ------------
Total partners' equity 92,977 254,628
------------- ------------
Total liabilities and partners' equity $ 2,907,740 $ 2,759,183
============= ============
The accompanying notes are an integral part of these statements.
<PAGE>
SIMON PROPERTY GROUP, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited and dollars in thousands, except per unit amounts)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------- -------------------
1997 1996 1997 1996
--------- --------- --------- ---------
REVENUE:
Minimum rent $90,147 $83,109 $264,157 $243,047
Overage rent 4,637 5,169 15,997 15,920
Tenant reimbursements 52,436 49,368 154,574 143,594
Other income 7,625 8,750 21,500 27,039
--------- --------- --------- ---------
Total revenue 154,845 146,396 456,228 429,600
EXPENSES:
Property operating 30,040 28,406 83,876 79,012
Depreciation and amortization 27,655 26,606 81,449 77,913
Real estate taxes 14,907 14,662 45,318 43,026
Repairs and maintenance 6,843 5,724 18,711 18,265
Advertising and promotion 5,409 4,367 13,441 13,264
Provision for credit losses 82 845 2,274 2,596
Other 3,396 2,785 8,278 8,399
--------- --------- --------- ---------
Total operating expenses 88,332 83,395 253,347 242,475
OPERATING INCOME 66,513 63,001 202,881 187,125
INTEREST EXPENSE 44,657 41,236 130,531 120,370
--------- --------- --------- ---------
INCOME BEFORE MINORITY INTEREST 21,856 21,765 72,350 66,755
MINORITY INTEREST (5,436) (709) (11,829) (1,884)
GAIN ON SALE OF ASSETS, NET -- 88 20 088
--------- --------- --------- ---------
INCOME BEFORE UNCONSOLIDATED
ENTITIES 16,420 21,144 60,541 64,959
INCOME FROM UNCONSOLIDATED
ENTITIES 5,451 1,284 8,612 5,270
--------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY
ITEMS 21,871 22,428 69,153 70,229
EXTRAORDINARY ITEMS (459) (2,530) (25,173) (2,795)
--------- --------- --------- ---------
NET INCOME 21,412 19,898 43,980 67,434
PREFERRED UNIT REQUIREMENT (2,031) (2,032) (6,094) (6,094)
--------- --------- --------- ---------
NET INCOME AVAILABLE TO
UNITHOLDERS $19,381 $17,866 $37,886 $61,340
========= ========= ========= =========
NET INCOME AVAILABLE TO
UNITHOLDERS
ATTRIBUTABLE TO:
General Partner $194 $4,559 $379 $31,125
Limited Partners 19,187 13,307 37,507 30,215
--------- --------- --------- ---------
$19,381 $17,866 $37,886 $61,340
EARNINGS PER UNIT: ========= ========= ========= =========
Income before extraordinary
items $0.20 $0.23 $0.65 $0.73
Extraordinary items (0.00) (0.02) (0.26) (0.03)
--------- --------- --------- ---------
Net income $0.20 $0.21 $0.39 $0.70
========= ========= ========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
SIMON PROPERTY GROUP, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited and dollars in thousands)
For the Nine Months
Ended September 30,
----------------------
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES: ---------- ---------
Net income $43,980 $67,434
Adjustments to reconcile net income to net
cash provided by operating activities_
Depreciation and amortization 87,378 83,976
Loss on extinguishments of debt 25,173 2,795
Gain on sale of assets, net (20) (88)
Straight-line rent (1,311) 534
Minority interest 11,829 1,884
Equity in income of unconsolidated entities (8,612) (5,270)
Changes in assets and liabilities_
Tenant receivables and accrued revenue 12,710 4,954
Deferred costs and other assets (27,978) (4,381)
Accounts payable, accrued expenses and other
liabilities (972) (5,197)
--------- ---------
Net cash provided by operating activities 142,177 146,641
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition -- (43,941)
Capital expenditures (145,726) (95,741)
Cash from consolidation of joint venture -- 1,695
Increase in restricted cash (14,939) --
Proceeds from sale of assets 599 399
Investments in and advances to unconsolidated
entities (45,879) (51,907)
Distributions from unconsolidated entities 16,177 34,493
Loan repayment from Management Company -- 38,553
Other investing activity (5,400) --
--------- ---------
Net cash used in investing activities (195,168) (116,449)
CASH FLOWS FROM FINANCING ACTIVITIES:
Minority interest distributions, net (20,066) (3,610)
Partnership distributions (150,807) (161,644)
Mortgage and other indebtedness proceeds, net
of transaction costs 845,267 77,153
Mortgage and other indebtedness principal
payments (323,455) 266,048
Advances to affiliate, net (313,026) (226,225)
Other refinancing transaction (21,000) --
--------- ---------
Net cash provided by (used in) financing
activities 16,913 (48,278)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (36,078) (18,086)
CASH AND CASH EQUIVALENTS, beginning of period
50,009 62,721
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $13,931 $44,635
========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
SIMON PROPERTY GROUP, L.P.
Notes to Unaudited Consolidated Condensed Financial Statements
(Dollars in thousands)
Note 1 - Organization
Simon DeBartolo Group, L.P. ("SDG, LP") is a subsidiary partnership
of Simon DeBartolo Group, Inc. (the "Company"), a self-administered and
self-managed real estate investment trust ("REIT"). Simon Property
Group, L.P. ("SPG, LP" or the "Simon Operating Partnership") is a
subsidiary partnership of SDG, LP and of the Company. On August 9, 1996
(the "Merger Date"), the Company acquired, through merger (the "Merger")
the national shopping center business of DeBartolo Realty Corporation
("DRC") (See Note 4). The Simon Operating Partnership, is engaged
primarily in the ownership, operation, management, leasing, acquisition,
expansion and development of real estate properties, primarily regional
malls and community shopping centers. As of September 30, 1997, the
Simon Operating Partnership owned or held an interest in 122 income-
producing properties, consisting of 62 regional malls, 53 community
shopping centers, three specialty retail centers, three mixed-use
properties and one value-oriented super-regional mall in 30 states (the
"Properties"). The Simon Operating Partnership also holds substantially
all of the economic interest in M.S. Management Associates, Inc. (the
"Management Company") - (See Note 7.)
Note 2 - Basis of Presentation
The accompanying consolidated condensed financial statements are
unaudited; however, they have been prepared in accordance with generally
accepted accounting principles for interim financial information and in
conjunction with the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the
disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting solely of normal recurring matters) necessary
for a fair presentation of the consolidated condensed financial
statements for these interim periods have been included. The results
for the interim period ended September 30, 1997 are not necessarily
indicative of the results to be obtained for the full fiscal year.
These unaudited consolidated condensed financial statements should be
read in conjunction with the December 31, 1996 audited financial
statements and notes thereto included in the Simon Property
Group, L.P. Annual Report on Form 10-K.
The accompanying consolidated condensed financial statements of the
Simon Operating Partnership include all accounts of the entities owned
or controlled by the Simon Operating Partnership. All significant
intercompany amounts have been eliminated. The accompanying
consolidated condensed financial statements have been prepared in
accordance with generally accepted accounting principles, which requires
management to make estimates and assumptions that affect the reported
amounts of the Simon Operating Partnership's assets, liabilities,
revenues and expenses during the reported periods. Actual results could
differ from these estimates.
Properties which are wholly-owned or owned less than 100% and are
controlled by the Simon Operating Partnership have been consolidated.
The Simon Operating Partnership's equity interests in certain
partnerships and joint ventures which represent noncontrolling 14.7% to
50.0% ownership interests and the investment in the Management Company
are accounted for under the equity method of accounting. These
investments are recorded initially at cost and subsequently adjusted for
net equity in income (loss) and cash contributions and distributions.
Net operating results of the Simon Operating Partnership are
allocated after preferred distributions, based on its partners'
remaining ownership interests. The Company's remaining weighted average
ownership interest in the Simon Operating Partnership for the three-
month periods ended September 30, 1997 and 1996 was 60.8% and 61.1%,
respectively. The Company's remaining weighted average ownership
interest in the Simon Operating Partnership for the nine-month periods
ended September 30, 1997 and 1996 was 60.8% and 61.1%, respectively.
The Company indirectly owned 60.8% of the Simon Operating Partnership as
of September 30, 1997 and December 31, 1996.
Note 3 - Reclassifications
Certain reclassifications of prior period amounts have been made in
the financial statements to conform to the 1997 presentation.
<PAGE>
Note 4 - The Merger
On August 9, 1996, the Company acquired the national shopping
center business of DRC for an aggregate value of $3.0 billion. The
acquired portfolio consisted of 49 regional malls, 11 community centers
and 1 mixed-use Property. These Properties included 47,052,267 square
feet of retail gross leasable area ("GLA") and 558,636 of office GLA.
The Merger was accounted for using the purchase method of accounting. Of
these Properties, 40 regional malls, 10 community centers and the mixed-
use Property are being accounted for using the consolidated method of
accounting. The remaining Properties are being accounted for using the
equity method of accounting. As a result of the merger, the Simon
Operating Partnership became a subsidiary of SDG, LP with 99% of the
profits allocable to SDG, LP and 1% of the profits allocable to the
Company. Cash flow allocable to the Company's 1% profit interest in
SPG, LP is absorbed by public company costs and related expenses
incurred by the Company.
It is currently expected that subsequent to the first anniversary
of the date of the Merger, reorganizational transactions will be
effected so that SDG, LP will directly own all of the assets and
partnership interests now owned by the Simon Operating Partnership. In
connection therewith, the Simon Operating Partnership transferred
partnership interests in certain properties ranging from 1.0% to 49.5%
in the form of a distribution to the partners of the Simon Operating
Partnership, SDG, LP and the Company. The distribution of the
partnership interests in the certain properties has been reflected for
financial reporting purposes as of January 1, 1997. The distribution was
determined based on the historical cost value of the partnership
interests transferred, which aggregated $65,603. The interest in the
properties now held directly by SDG, LP and the Company was $70,110 as
of September 30, 1997, and is reflected as minority interest held by
affiliates in the accompanying consolidated condensed balance sheets.
Earnings related to these minority interests held by SDG, LP and the
Company for the three-month and nine-month periods ended September 30,
1997 were $4,894 and $10,254, respectively.
In September 1997, the Simon Operating Partnership distributed its
interest in a wholly-owned Property to its partners, SDG,LP and the
Company. The non-cash distribution was determined based upon the
historical cost of the interst in the Property distributed.
Note 5 - Cash Flow Information
Cash paid for interest, net of amounts capitalized, during the nine
months ended September 30, 1997 was $117,456, as compared to $114,811
for the same period in 1996. All accrued distributions had been paid as
of September 30, 1997 and December 31, 1996.
Note 6 - Per Unit Data
Per unit data is based on the weighted average number of units of
partnership interest in the Simon Operating Partnership ("Units")
outstanding during the period. As used herein, the term Units does not
include units of partnership interest entitled to preferential
distribution of cash ("Preferred Units"). The weighted average number
of units used in the computation for the three months ended September
30, 1997 and 1996 was 96,315,263 and 95,842,853, respectively. The
weighted average number of Units used in the computation for the nine
months ended September 30, 1997 and 1996 was 96,315,263 and 95,783,720,
respectively. Additionally, Preferred Units may be converted into
common stock of the Company. The outstanding stock options and
Preferred Units have not been included in the computations of per Unit
data as they did not have a dilutive effect.
<PAGE>
Note 7 - Investment in Unconsolidated Entities
Partnerships and Joint Ventures
Summary financial information of partnerships and joint ventures
accounted for using the equity method of accounting and a summary of the
Simon Operating Partnership's investment in and share of income from
such partnerships and joint ventures follow:
September 30, December 31,
BALANCE SHEETS 1997 1996
------------- -------------
Assets:
Investment properties at cost, net $1,501,674 $1,328,600
Cash and cash equivalents 51,965 41,270
Tenant receivables 46,285 37,067
Other assets 38,818 54,981
---------- ----------
Total assets $1,638,742 $1,461,918
========== ==========
Liabilities and Partners' Equity:
Mortgages and other indebtedness $771,558 $569,433
Accounts payable, accrued expenses and
other liabilities 105,207 161,552
---------- ----------
Total liabilities 876,765 730,985
Partners' equity 761,977 730,933
---------- ----------
Total liabilities and
partners' equity $1,638,742 $1,461,918
========== ==========
The Simon Operating Partnership's Share
of:
Total assets $ 408,421 $ 340,449
========== ==========
Investment in partnerships and joint
ventures, at equity $153,522 $139,711
Cash distributions and losses in
partnerships and joint ventures, at
equity (19,519) (17,106)
---------- ----------
Partners' equity $ 134,003 $ 122,605
========== ==========
For the three For the nine
months ended months ended
September 30, September 30,
-------- -------- -------- --------
STATEMENTS OF OPERATIONS 1997 1996 1997 1996
-------- -------- -------- --------
Revenue:
Minimum rent $ 33,682 $ 25,742 $ 94,215 $ 79,781
Overage rent 884 1,064 2,074 2,753
Tenant reimbursements 15,696 12,569 43,393 40,082
Other income 4,223 1,170 8,528 7,328
-------- -------- -------- --------
Total revenue 54,485 40,545 148,210 129,944
Operating Expenses:
Operating expenses and other 18,319 15,934 53,916 48,782
Depreciation and amortization 11,182 9,852 34,153 30,438
-------- -------- -------- --------
Total operating expenses 29,501 25,786 88,069 79,220
-------- -------- -------- --------
Operating Income 24,984 14,759 60,141 50,724
Interest Expense 10,965 8,184 30,290 22,318
Extraordinary Losses - - 1,182 -
-------- -------- -------- --------
Net Income 14,019 6,575 28,669 28,406
Third Party Investors' Share of
Net Income 11,964 6,617 24,589 25,313
-------- -------- -------- --------
The Simon Operating Partnership's
Share of Net Income (Loss)
$ 2,055 $ (42) $ 4,080 $ 3,093
======== ======== ======== ========
The net income or net loss for each partnership and joint venture
is allocated in accordance with the provisions of the applicable
partnership or joint venture agreement. The allocation provisions in
these agreements are not always consistent with the ownership interest
held by each general or limited partner or joint venturer, primarily due
to partner preferences.
<PAGE>
The Management Company
The Management Company, including its consolidated subsidiaries,
provides management, leasing, development, accounting, legal, marketing
and management information systems services to 33 non-wholly owned
Properties, Melvin Simon & Associates, Inc., and certain other nonowned
properties. Certain subsidiaries of the Management Company provide
architectural, design, construction, insurance and other services
primarily to certain of the Properties. The Management Company also
invests in other businesses to provide other synergistic services to the
Properties. The Simon Operating Partnership's share of consolidated net
income of the Management Company, after intercompany profit
eliminations, was $3,396 and $1,326 for the three-month periods ended
September 30, 1997 and 1996, respectively, and was $4,532 and $2,177 for
the nine-month periods ended September 30, 1997 and 1996, respectively.
Note 8 - Debt
On January 31, 1997, the Simon Operating Partnership completed a
refinancing transaction involving debt on four consolidated Properties.
The transaction consisted of the payoff of one loan totaling $43,375, a
restatement of the interest rate on the three remaining loans, the
financing transaction which included the acquisition of the contingent
interest feature on all four loans for $21,000, and $3,904 of principal
reductions on two additional loans. This transaction, which was funded
using the Credit Facility (as defined below), resulted in an
extraordinary loss of $23,247, including the write-off of deferred
mortgage costs of $2,247.
On April 14, 1997, the Simon Operating Partnership, as co-borrower
with SDG, LP, obtained improvements to its unsecured revolving credit
facility (the "Credit Facility"). The Credit Facility agreement was
amended to reduce the interest rate from LIBOR plus 0.90% to LIBOR plus
0.75%. In addition, the Credit Facility's competitive bid feature,
which can further reduce interest costs, was increased from $150,000 to
$300,000.
On May 15, 1997, SDG, LP established a Medium-Term Note ("MTN")
program. On June 24, 1997, SDG, LP completed the sale of $100,000 of
notes under the MTN program. The notes sold bear interest at 7.125% and
have a stated maturity of June 24, 2005. The net proceeds of
approximately $99,000 from this sale were used primarily to pay down the
Credit Facility. These notes are guaranteed by the Simon Operating
Partnership.
Also on May 15, 1997, approximately $140,000 in existing debt on
The Forum Shops at Caesar's was refinanced. The new debt consists of
three classes of notes totaling $180,000, with $90,000 bearing interest
at 7.125% and $90,000 bearing interest at LIBOR plus 0.30%, all of which
mature on May 15, 2004. Approximately $40,000 of the borrowings were
placed in escrow to pay for construction costs required in connection
with the expansion of this project, which is scheduled to open on August
28, 1997. As of September 30, 1997, $14,939 remains in escrow, which is
reflected in restricted cash in the accompanying consolidated condensed
balance sheet.
On June 30, 1997, the Simon Operating Partnership, as co-borrower
with SDG, LP, closed an $70,000 unsecured loan which bears interest at
LIBOR plus 0.75% and matures on September 29, 1998. The proceeds were
used by SPG, LP to retire an existing $55,000 mortgage on East Towne
Mall, which bore interest at LIBOR plus 1.125%, and to fund an expansion
of that mall.
On July 17, 1997, SDG, LP completed a $250,000 public offering of
two tranches of its seven-year and twelve-year non-convertible senior
unsecured debt securities (the "Notes"). The first tranche was for
$100,000 at 6 3/4% with a maturity of July 15, 2004. The second tranche
was for $150,000 at 7% with a maturity of July 15, 2009. The Notes,
which are guaranteed by SPG, LP, pay interest semi-annually, and contain
covenants relating to minimum leverage, EBITDA and unencumbered EBITDA
ratios. SDG, LP used $225,000 of the net proceeds to reduce the amount
outstanding on the Credit Facility.
On September 10, 1997, SDG, LP issued $180,000 principal amount of
notes under its MTN program. These notes mature on September 20, 2007
and bear interest at 7.125% per annum. SDG, LP used the net proceeds of
this offering to pay down borrowings made under the Credit Facility.
These notes are guaranteed by the Simon Operating Partnership.
On September 17, 1997, the Simon Operating Partnership, as co-
borrower with SDG, LP, closed on a new unsecured loan, which bears
interest at LIBOR plus 0.75% and has an initial maturity of January 31,
1998. The proceeds were used to retire a $63,000 mortgage loan secured
by Lincolnwood Towne Center, which bore interest at LIBOR plus 1.25%,
and had an initial maturity of January 31, 1998.
On September 26, 1997, the Simon Operating Partnership, as co-
borrower with SDG, LP obtained an additional unsecured revolving credit
facility in the amount of $500,000 for the purpose of funding an
acquisition by SDG, LP. As of September 30, 1997, a total of $525,000
had been borrowed on this new credit facility and the original Credit
Facility related to this acquisition. This new credit facility has terms
similar to the existing Credit Facility, including an interest rate of
LIBOR plus 0.75% and an initial maturity of September 1999, with an automatic
one-year extension.
<PAGE>
At September 30, 1997, the Simon Operating Partnership had
consolidated debt of $2,527,807 of which $1,290,979 was fixed-rate debt
and $1,236,828 was variable-rate debt. As of September 30, 1997 and
December 31, 1996, the Simon Operating Partnership had interest-rate
protection agreements related to $294,848 and $306,879 principal amount
of debt, respectively. The agreements are generally in effect until the
related variable-rate debt matures. As a result of the various interest
rate protection agreements, interest savings were $285 and $415 for the
three months ended September 30, 1997 and 1996, respectively, and $591
and $1,227 for the nine-month periods ended September 30, 1997 and 1996,
respectively. The Simon Operating Partnership's pro rata share of
indebtedness of the unconsolidated joint venture Properties as of
September 30, 1997 and December 31, 1996 was $262,448 and $193,310,
respectively.
Net advances due from SDG, LP of $53,644 result primarily from
amounts borrowed on the Credit Facility advanced to SDG, LP primarily to
fund acquisition and development activity, partially offset by debt and
equity instruments issued by SDG, LP for which a portion of the proceeds
were advanced to the Simon Operating Partnership to retire mortgages and
other indebtedness and amounts under the Credit Facility. The Simon
Operating Partnership has recognized interest benefits and costs based
on the terms of the Credit Facility and respective instruments issued by
SDG, LP.
Note 9 - Partners' Equity
<TABLE>
The following table summarizes the change in the Simon Operating
Partnership's partners' equity since December 31, 1996.
Special Unamortized Total
Preferred General Limited Restricted Partners'
Units Partner Partner Stock Award Equity
--------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1996 $ 99,923 $ 1,601 $ 158,458 $ (5,354) $ 254,628
Amortization of stock
incentive 1,563 1,563
Adjustment to allocate
net equity of the Simon
Operating Partnership (8) 8 --
Net income 6,094 379 37,507 43,980
Distributions (6,094) (2,004) (199,096) (207,194)
--------- -------- ---------- ----------- -----------
Balance at September 30,
1997 $ 99,923 $ (32) $ (3,123) $ (3,791) $ 92,977
========= ======== ========== =========== ===========
</TABLE>
Note 10 - Commitments and Contingencies
Litigation
Roel Vento et al v. Tom Taylor et al. An affiliate of the Simon
Operating Partnership is a defendant in litigation entitled Roel Vento
et al v. Tom Taylor et al, in the District Court of Cameron County,
Texas, in which a judgment in the amount of $7,800 has been entered
against all defendants. This judgment includes approximately $6,500 of
punitive damages and is based upon a jury's findings on four separate
theories of liability including fraud, intentional infliction of
emotional distress, tortuous interference with contract and civil
conspiracy arising out of the sale of a business operating under a
temporary license agreement at Valle Vista Mall in Harlingen, Texas.
The Simon Operating Partnership is seeking to overturn the award and has
appealed the verdict. Although the Simon Operating Partnership is
optimistic that it may be able to reverse or reduce the verdict, there
can be no assurance thereof. Management, based upon the advice of
counsel, believes that the ultimate outcome of this action will not have
a material adverse effect on the Company or the Simon Operating
Partnership.
The Company or the Simon Operating Partnership currently are not
subject to any other material litigation other than routine litigation
and administrative proceedings arising in the ordinary course of
business. On the basis of consultation with counsel, management
believes that these items will not have a material adverse impact on the
Company's or the Simon Operating Partnership's financial position or
results of operations.
<PAGE>
Note 11 - Significant Subsequent Events
On October 15, 1997, the SEC declared effective SDG, LP's
$1,000,000 debt shelf registration, which provides for the offering,
from time to time, of up to $1,000,000 aggregate public offering price
of unsecured debt securities of SDG, LP. The net proceeds of such
offerings may be used to fund property acquisition or development
activity, retire existing debt or for any other purpose deemed
appropriate by SDG, LP. Securities issued under this registration are
guaranteed by the Simon Operating Partnership.
On October 22, 1997, SDG, LP completed a $150,000 public offering
of eight-year non-convertible senior unsecured debt securities. The
notes bear interest at 6 7/8%, and mature on October 27, 2005. The
notes pay interest semi-annually, are guaranteed by the Simon Operating
Partnership, and contain covenants relating to minimum leverage, EBITDA
and unencumbered EBITDA ratios. SDG, LP used $114,750 of the net
proceeds of approximately $147,000, along with an escrow refund of
approximately $4,000 to retire existing mortgages on Miller Hill Mall,
Muncie Mall, and Towne West Square, with the remaining proceeds used to
reduce the amount outstanding on the Credit Facility.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Certain statements made in this report may constitute "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements
of the Operating Partnership to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the
following: general economic and business conditions, which will, among
other things, affect demand for retail space or retail goods,
availability and creditworthiness of prospective tenants, lease rents
and the terms and availability of financing; changes in the real estate
and retailing markets including, among other things, competition with
other companies and technology; risks of real estate development and
acquisition; governmental actions and initiatives; and
environmental/safety requirements.
Overview
The financial results reported subsequent to August 9, 1996 reflect
the Merger of the Company and DRC, in accordance with the purchase
method of accounting utilized to record the transaction, valued at
approximately $3.0 billion. The Merger resulted in the addition of 49
regional malls, 11 community centers and 1 mixed-use Property. These
Properties included 47,052,267 square feet of retail space GLA and
558,636 of office GLA. Of these Properties, 40 regional malls, 10
community centers and the mixed-use Property are being accounted for
using the consolidated method of accounting. The remaining Properties
are being accounted for using the equity method of accounting.
On September 29, 1997, the Operating Partnership completed its cash
tender offer for all of the outstanding shares of beneficial interests
of The Retail Property Trust, a Massachusetts business trust ("RPT").
RPT owns 98.8% of Shopping Center Associates, a New York general
partnership ("SCA"). SCA owns or has interests in twelve regional malls
and one community center, comprising approximately 12.0 million square
feet of GLA in eight states. The Operating Partnership is in
negotiations to purchase the interests in two SCA properties owned by a
third party and sell its interests in two other SCA properties to such
third party. The Operating Partnership is finalizing an agreement to
acquire the remaining 1.2% interest in SCA from its current managing
general partner. As this acquisition occurred at the end of the third
quarter of 1997, it has not had a significant impact on the Operating
Partnership's Statements of Operations in the comparative periods.
However, presently seven of the SCA properties are being accounted for
using the consolidated method of accounting, which will have a
significant impact in future periods. The total cost for the acquisition
of RPT is estimated at $1.2 billion, which includes approximately $315
million of SCA's debt and approximately $154 million of SCA's pro rata
share of joint venture debt.
In addition, the following Property opening and ownership
acquisitions (the "Property Transactions"), collectively, had a
significant impact on the Operating Partnership's Statements of
Operations in the comparative periods. On April 11, 1996, the Operating
Partnership acquired the remaining 50% economic ownership interest in
Ross Park Mall in Pittsburgh, Pennsylvania, and subsequently began
accounting for the Property using the consolidated method of accounting.
On July 31, 1996, the Operating Partnership opened Cottonwood Mall in
Albuquerque, New Mexico. The Operating Partnership owns 100% of this
regional mall and accounts for it using the consolidated method of
accounting. On October 4, 1996, the Operating Partnership acquired the
remaining interest in North East Mall and subsequently began accounting
for the Property using the consolidated method of accounting.
Results of Operations
For the Three Months Ended September 30, 1997 vs. the Three Months Ended
September 30, 1996
Total revenue increased $57.3 million or 28.3% for the three months ended
September 30, 1997, as compared to the same period in 1996. This increase is
primarily the result of the Merger ($48.3 million) and the Property Transactions
($3.3 million). Excluding these transactions, total revenues increased $5.8
million, primarily due to a $4.5 million increase in minimum rent resulting from
increased occupancy levels and the replacement of expiring tenant leases with
renewal leases at higher minimum base rents.
Total operating expenses increased $22.5 million, or 18.8%, for the three
months ended September 30, 1997, as compared to the same period in 1996. This
increase is primarily the result of the Merger ($14.6 million), and the Property
Transactions ($2.3 million).
Interest expense increased $12.7 million, or 22.6% for the three months
ended September 30, 1997, as compared to the same period in 1996. This increase
is primarily as a result of the Merger ($9.8 million) and the Property
Transactions ($1.2 million).
Income from unconsolidated entities increased $3.6 million for the
three months ended September 30, 1997, as compared to the same period in
1996. This increase is primarily due to an increase in the Operating
Partnership's share of income from unconsolidated joint-venture
Properties ($4.4 million) and from the Management Company ($2.1
million), partially offset by the amortization of the Operating
Partnership's excess investment in unconsolidated joint ventures
acquired in the Merger ($2.8 million). The increased income from
unconsolidated joint-venture Properties includes $1.3 million from West
Town Mall and $1.3 million Dadeland Mall, each of which the Operating
Partnership acquired ownership interest in during third quarter of 1997.
The three months ended September 30, 1997 included a net
extraordinary gain of $27.2 million, as compared to an extraordinary
loss of $2.5 million for the same period in 1996. The 1997 gain is the
result of gains realized on the forgiveness of debt ($31.1 million) and
the write-off of net unamortized debt premium ($8.4 million), partially
offset by losses on the early extinguishment of debt ($12.3 million).
The $2.5 million loss in 1996 is the result of early extinguishments of
debt.
Net Income was $81.5 million for the three months ended September
30, 1997, as compared to $26.3 million for the same period in 1996,
reflecting an increase of $55.2 million, for the reasons discussed
above, and was allocated to the Company based on the Units and Preferred
Units owned by the Company during the period, and to the remaining
Unitholders based upon their respective ownership interests.
Preferred distributions increased by $6.9 million to $9.1 million
in 1997 as a result of the Company's issuance of $200 million of 8 3/4%
Series B cumulative redeemable preferred stock on September 27, 1996 and
$150 million of 7.89% Series C Cumulative Step-Up Premium RateSM
Preferred Stock on July 9, 1997. The proceeds of each of the Series B
and Series C Preferred Stock issuances were contributed to the Operating
Partnership in exchange for Preferred Units with economic terms
substantially identical to the Series B Series C Preferred Stock issued
by the Company, respectively.
For the Nine Months Ended September 30, 1997 vs. the Nine Months Ended
September 30, 1996
Total revenue increased $261.6 million or 53.9% for the nine months ended
September 30, 1997, as compared to the same period in 1996. This increase is
primarily the result of the Merger ($234.1 million) and the Property
Transactions ($22.0 million). Excluding these transactions, total revenues
increased $5.5 million, which includes a $7.8 million increase in minimum rent
and a $3.6 million increase in tenant reimbursements, partially offset by a $6.2
million decrease in other income. The $7.8 million increase in minimum rents
results from increased occupancy levels, the replacement of expiring tenant
leases with renewal leases at higher minimum base rents, and a $2.1 million
increase in rents from tenants operating under license agreements. The $6.1
million decrease in other income is primarily the result of decreases in lease
settlement income ($2.3 million), gains from sales of peripheral properties
($2.1 million) and interest income ($1.5 million).
Total operating expenses increased $124.7 million, or 44.7%, for the nine
months ended September 30, 1997, as compared to the same period in 1996. This
increase is primarily the result of the Merger ($113.5 million), the Property
Transactions ($12.0 million).
Interest expense increased $68.6 million, or 50.7% for the nine months
ended September 30, 1997, as compared to the same period in 1996. This increase
is primarily as a result of the Merger ($61.5 million) and the Property
Transactions ($7.0 million).
The $2.5 million gain from extraordinary items in 1997 is the
result of gains realized on the forgiveness of debt ($31.1 million) and
the write-off of net unamortized debt premium ($8.4 million), partially
offset by the acquisition of the contingent interest feature on four
loans ($21.0 million) and prepayment penalties and write-offs of
mortgage costs associated with early extinguishments of debt ($16.0
million). The $2.8 million loss in 1996 is the result of early
extinguishments of debt.
Net Income was $148.3 million for the nine months ended September
30, 1997, as compared to $73.8 million for the same period in 1996,
reflecting an increase of $74.4 million, for the reasons discussed
above, and was allocated to the Company based on the Units and Preferred
Units owned by the Company during the period, and to the remaining
Unitholders based upon their respective ownership interests.
<PAGE>
Preferred distributions increased by $15.6 million to $21.9 million
in 1997 as a result of the Company's issuance of $200 million of 8 3/4%
Series B cumulative redeemable preferred stock on September 27, 1996 and
$150 million of 7.89% Series C Cumulative Step-Up Premium RateSM
Preferred Stock on July 9, 1997. The proceeds of each of the Series B
and Series C Preferred Stock issuances were contributed to the Operating
Partnership in exchange for Preferred Units with economic terms
substantially identical to the Series B Series C Preferred Stock issued
by the Company, respectively.
Liquidity and Capital Resources
As of September 30, 1997, the Operating Partnership's balance of
unrestricted cash and cash equivalents was $50.9 million. In addition
to its cash balance, the Operating Partnership has a $750 million
unsecured revolving credit facility and a $500 million unsecured
revolving credit facility with approximately $269 million and $225
million available on September 30, 1997 after outstanding borrowings and
letters of credit, respectively. Subsequent to September 30, 1997,
combined net borrowings of $110 million have been made on these credit
facilities, including a borrowing for acquisition of additional
interests in The Retail Property Trust ($185 million), partially offset
by a $40 million paydown primarily from the Operating Partnership's pro
rata share of the net proceeds of a mortgage obtained on West Town Mall
in October of 1997 and a $35 million paydown primarily from the net
proceeds from the sale of $150 million of unsecured notes (See Below).
Consequently, as of November 1, 1997, the amount of borrowing
availability under the Operating Partnership's unsecured revolving
credit facilities was approximately $384 million.
The Company and the Operating Partnership also have access to
public equity and debt markets through various shelf registrations. The
Company has a $750 million equity shelf registration statement currently
effective under which $226.7 million in equity securities may be issued.
The Operating Partnership has a $1 billion debt shelf registration statement
currently effective, under which $850 million in debt securities may be
issued.
Investment and Acquisitions. 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 using borrowings from the Credit Facility. The shares purchased
represent approximately 9.2% of Chelsea's outstanding common stock, and
had a market value of $58.8 million at September 30, 1997. In addition,
the Operating Partnership and Chelsea have formed a strategic alliance
to develop and acquire manufacturer's outlet shopping centers with
500,000 square feet or more of GLA in the United States.
On July 10, 1997, the Operating Partnership acquired a 48% interest
in West Town Mall in Knoxville, Tennessee for $69.9 million in cash and
35,598 Units valued at approximately $1.1 million. This transaction
increased the Operating Partnership's ownership of West Town Mall to
50%. Effective July 10, 1997, the property is being accounted for using
the equity method of accounting. It was previously accounted for using
the cost method.
On August 8, 1997, a subsidiary of the Operating Partnership
acquired a 50% interest in a trust that owns Dadeland Mall, a 1.4
million square foot super-regional mall in Miami, Florida for
approximately $128 million. Dadeland Mall is a dominant mall in its
trade area with small shop sales of $649 per square foot in 1996 and
leased and committed occupancy of 94%. A portion of the purchase price
was paid in the form of 658,707 shares of the Company's common stock,
valued at approximately $20 million. The remaining portion of the
purchase price was financed using borrowings from the Credit Facility.
This joint venture is being accounted for using the equity method of
accounting.
In addition, as described previously, on September 29, 1997, the
Operating Partnership recently acquired RPT. RPT owns 98.8% of SCA,
which owns or has interests in twelve regional malls and one community
center, comprising approximately twelve million square feet of GLA in
eight states. The Operating Partnership is negotiating a purchase of
the remaining 50% interests in two SCA properties owned by a third party
and sale of its 50% interests in two other SCA properties to such third
party. In addition, the Operating Partnership is finalizing an
agreement to acquire the remaining 1.2% interest in SCA from its current
managing general partner. The total cost of the acquisition of RPT is
estimated at $1.2 billion, which includes approximately $315 million of
SCA's debt and approximately $154 million of SCA's pro rata share of
joint venture debt.
Financing and Debt. The Operating Partnership's ratio of
consolidated debt-to-market capitalization was 44.5% at September 30,
1997.
At September 30, 1997, the Operating Partnership had consolidated
debt of $4,721 million, of which $3,195 million was fixed-rate debt and
$1,526 million was variable-rate debt. The Operating Partnership's pro
rata share of indebtedness of the unconsolidated joint venture
Properties as of September 30, 1997 and December 31, 1996 was $682
million and $448 million, respectively. The Operating Partnership's pro
rata share of the September 30, 1997 joint-venture indebtedness includes
$154 million of SCA's pro rata share of its joint venture debt. As of
September 30, 1997 and December 31, 1996, the Operating Partnership had
interest-rate protection agreements related to $523 million and $525
million of its pro rata share of indebtedness, respectively. The
agreements are generally in effect until the related variable-rate debt
matures.
<PAGE>
On January 31, 1997, the Operating Partnership completed a
refinancing transaction involving debt on four wholly-owned Properties.
The transaction consisted of the payoff of one loan totaling $43.4
million, a restatement of the interest rate on the three remaining
loans, the acquisition of the contingent interest feature on all four
loans for $21.0 million, and $3.9 million of principal reductions on two
additional loans. This transaction, which was funded using the Credit
Facility, resulted in an extraordinary loss of $23.2 million, including
the write-off of deferred mortgage costs of $2.2 million.
On April 14, 1997, the Operating Partnership obtained improvements
to its Credit Facility. The Credit Facility agreement was amended to
reduce the interest rate from LIBOR plus 0.90% to LIBOR plus 0.75%. 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 established a Medium-
Term Note ("MTN") program. On June 24, 1997, the Operating Partnership
completed the sale of $100 million of notes under the MTN program. 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.
Additionally, 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 0.30%, 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. As of September 30, 1997, $14.9
million remains in escrow.
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 an 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 RateSM Preferred Stock (the "Series C
Preferred Shares") in a public offering at $50.00 per share. Beginning
October 1, 2012, the rate increases to 9.89% per annum. The Series C
Preferred Shares are not redeemable prior to September 30, 2007.
Beginning September 30, 2007, the Series C Preferred Shares may be
redeemed at the option of the Company in whole or in part, at a
redemption price of $50.00 per share, plus accrued and unpaid
distributions, if any, thereon. The redemption price of the Series C
Preferred Shares may only be paid from the sale proceeds of other
capital stock of the Company, which may include other classes or series
of preferred stock. Additionally, the Series C Preferred Share have no
stated maturity and are not subject to any mandatory redemption
provisions, nor are they convertible into any other securities of the
Company. The Company contributed the net proceeds of this offering of
approximately $146 million to the Operating Partnership in exchange for
preferred units, the economic terms of which are substantially identical
to the Series C Preferred Shares. The Operating Partnership used the
net proceeds for the purchase of additional ownership interest in West
Town Mall, to pay down the Credit Facility and for general working
capital purposes.
On July 17, 1997, the Operating Partnership completed a $250
million public offering, of two tranches of its seven-year and twelve-
year non-convertible senior unsecured debt securities. The first
tranche was for $100 million at 6 3/4% with a maturity of July 15, 2004.
The second tranche was for $150 million at 7% with a maturity of July
15, 2009. The notes pay interest semi-annually, are guaranteed by SPG,
LP, and contain covenants relating to minimum leverage, EBITDA and
unencumbered EBITDA ratios.
On September 2, 1997, the Operating Partnership completed a
refinancing of $453 million of commercial mortgage pass through
certificates and a $48 million mortgage loan, resulting in releases of
mortgages encumbering 18 of the Properties. The Operating Partnership
funded this refinancing with the proceeds of a $225 million secured
loan, which is secured by cross-collateralized mortgages encumbering
seven of the Properties, and borrowings of $294 million under the Credit
Facility, which were reduced with the proceeds from the sale of $180
million of notes issued on September 10, 1997, as described below. The
Operating Partnership intends to refinance the $225 million secured
loan.
On September 4, 1997, the Operating Partnership transferred
ownership of one Property and paid $6.6 million to its lender, fully
satisfying the property's mortgage note payable of $42 million. This
property no longer met the Operating Partnership's criteria for its
ongoing strategic plan. The Operating Partnership recognized a gain on
this transaction of approximately $31.1 million in the third quarter of
1997.
<PAGE>
On September 10, 1997, the Operating Partnership issued $180
million principal amount of notes under its MTN program. These notes
mature on September 20, 2007 and bear interest at 7.125% per annum. The
Operating Partnership used the net proceeds of this offering to pay down
the borrowings made under the Credit Facility in connection with the
September 2, 1997 refinancing described above.
On September 16, 1997, the Company issued 747,000 shares of its
Common Stock in a public offering. The Company contributed the net
proceeds of approximately $23.7 million to the Operating Partnership in
exchange for an equal number of Units. The Operating Partnership
subsequently combined the net proceeds with approximately $4.2 million
of working capital to retire an existing mortgage on O'Hare
International Center.
On September 17, 1997, the Operating Partnership retired a $63
million mortgage loan secured by Lincolnwood Towne Center with a new
unsecured loan, which bears interest at LIBOR plus 0.75%. The retired
$63 million mortgage bore interest at LIBOR plus 1.25%, and had an
initial maturity of January 31, 1998.
On September 19, 1997, the Company issued 4,500,000 shares of its
Common Stock in a public offering. The Company contributed the net
proceeds of approximately $146.8 million to the Operating Partnership in
exchange for an equal number of Units. The Operating Partnership used
the net proceeds to retire a portion of the outstanding balance on the
Credit Facility.
On September 26, 1997, the Operating Partnership obtained an
additional unsecured revolving credit facility in the amount of $500
million. This new credit facility has terms similar to the existing
Credit Facility, including an interest rate of LIBOR plus 0.75% and an
initial maturity of September 1999, with an automatic one-year
extension. The primary reason for obtaining this facility was to fund a
portion of the cost of the acquisition of RPT. This facility may,
however, be used to fund real estate acquisition, development and
general working capital requirements.
On October 15, 1997, the SEC declared effective the Operating
Partnership's registration statement, which provides for
the offering, from time to time, of up to $1 billion aggregate public
offering price of unsecured debt securities of the Operating
Partnership. The net proceeds of such offerings may be used to fund
property acquisition or development activity, retire existing debt or
for any other purpose deemed appropriate by the Operating Partnership.
Securities issued under this registration statement are guaranteed
by SPG, LP.
On October 22, 1997, the Operating Partnership completed a $150
million public offering of its eight-year non-convertible senior
unsecured debt securities under its new $1 billion debt shelf
registration. The notes bear interest at 6 7/8%, and mature on October
27, 2005. The notes pay interest semi-annually, are guaranteed by SPG,
LP, and contain covenants relating to minimum leverage, EBITDA and
unencumbered EBITDA ratios. The Operating Partnership used $114.8
million of the net proceeds of approximately $147 million, along with an
escrow refund of approximately $4 million to retire existing mortgages
on Miller Hill Mall, Muncie Mall, and Towne West Square, with the
remaining proceeds going to reduce the amount outstanding on the Credit
Facility.
Development, Expansions and Renovations. The Operating Partnership
is involved in several development, expansion and renovation efforts.
In March 1997, the Operating Partnership opened Indian River
Commons, a 265,000 square foot community shopping center in Vero Beach,
Florida. This 50%-owned joint venture is accounted for using the equity
method of accounting.
On August 29, 1997, the Operating Partnership opened the $89
million phase II expansion of The Forum Shops at Caesar's ("Forum")
comprising an additional 235,000 square feet of GLA. This expansion
nearly doubled the size of the existing center in Las Vegas, Nevada.
The Operating Partnership has a 60% ownership interest in the original
phase of Forum and a 55% ownership interest in this new expansion, and
accounts for both phases using the consolidated method of accounting.
On September 5, 1997, the Operating Partnership opened The Source,
an approximately $150 million value-oriented retail and entertainment
development project containing 730,000 square feet of GLA in Westbury
(Long Island), New York. This 50%-owned joint venture is accounted for
using the equity method of accounting.
<PAGE>
On October 31, 1997 the Operating Partnership opened Grapevine
Mills, an approximately $200 million retail development project
containing approximately 1.4 million square feet of GLA in Grapevine
(Dallas/Fort Worth), Texas. This 38%-owned joint venture is accounted
for using the equity method of accounting.
Construction also continues on the following development projects:
Arizona Mills, an approximately $190 million retail development project
containing 1.2 million square feet of GLA, is expected to open in
November 1997 in Tempe, Arizona; The Shops at Sunset Place, an
approximately $150 million destination-oriented retail and entertainment
project containing approximately 500,000 square feet of GLA, and is
scheduled to open in 1998 in South Miami, Florida; Muncie Plaza, an
approximately $14 million, wholly-owned project, is scheduled to open in
April of 1998 in Muncie, Indiana; and Lakeline Plaza, an approximately
$34 million, 50%-owned joint venture project, is scheduled to open in
two phases in May and November of 1998 in Austin, Texas. Muncie Plaza
and Lakeline Plaza are both immediately adjacent to existing regional
mall Properties.
A key objective of the Operating Partnership is to increase the
profitability and market share of its Properties through the completion
of strategic renovations and expansions. The Operating Partnership
currently has a number of expansion projects under construction and in
the preconstruction development stage. The Operating Partnership's
share of the projected costs to fund these projects for the year 1997 is
approximately $300 million. It is anticipated that the cost of these
projects will be financed principally with the Credit Facility, project-
specific indebtedness, access to debt and equity markets, and cash flows
from operations. Included in consolidated investment properties at
September 30, 1997 is approximately $185 million of construction in
progress, with another $346 million in the unconsolidated joint venture
investment properties.
Distributions. During the first quarter of 1997, the Operating
Partnership paid a distribution of $0.4925 per Unit to Unitholders of
record on February 7, 1997. On each of May 6, 1997, July 28, 1997 and
October 23, 1997, the Operating Partnership declared distributions of
$0.505 per Unit. Future distributions will be determined based on
actual results of operations and cash available for distribution. In
addition, Preferred Unit distributions of $1.5234 per Series A Preferred
Unit, $1.6406 per Series B Preferred Unit and $0.8986 per Series C
Preferred Unit were paid during the first nine months of 1997.
Distributions on the Series C Preferred Units were pro-rated due to the
Units being issued during the third quarter of 1997. Quarterly
distributions on the Series C Preferred Units through September 30, 2012
are set at $0.9863 per Unit.
Capital Resources. Management anticipates that cash generated from
operating performance will provide the necessary funds on a short- and
long-term basis for its operating expenses, interest expense on
outstanding indebtedness, recurring capital expenditures, and
distributions to Unitholders in accordance with tax requirements
applicable to REITs. Sources of capital for nonrecurring capital
expenditures, such as major building renovations and expansions, as well
as for scheduled principal payments, including balloon payments, on
outstanding indebtedness are expected to be obtained from: (i) excess
cash generated from operating performance; (ii) working capital
reserves; (iii) additional debt financing; and (iv) additional equity
sold in the public markets.
Management continues to actively review and evaluate a number of
individual property and portfolio acquisition opportunities. Management
believes that funds on hand, amounts available under the Credit
Facility, and securities which may be issued under existing debt and
equity shelf registrations are sufficient to finance likely
acquisitions. No assurance can be given that the Operating Partnership
will not be required to, or will not elect to, even if not required to,
obtain funds from outside sources, including through the sale of debt or
equity securities, to finance significant acquisitions, if any.
Investing and Financing Activities
Cash used in investing activities for the nine months ended
September 30, 1997 of $1,061 million is primarily the result of
acquisitions of $736.6 million, $219.7 million of capital expenditures,
net investments in and advances to unconsolidated entities of $41.5
million and other investing activities including $50.0 million for the
purchase of Chelsea stock. Acquisitions includes $558.9 million for the
RPT tender offer, $108.0 million for ownership interests in
Dadeland Mall and $69.9 million for ownership interests in West Town
Mall. Capital expenditures includes construction costs of $54.2
million, including $23.6 million at The Shops at Sunset Place and $9.2
million for the acquisition of the land for the construction of North
East Plaza. Also included in capital expenditures is renovation and
expansion costs of approximately $129.6 million, including $34.7 million
for the phase II expansion of Forum Shops at Caesar's, and tenant costs
and other operational capital expenditures of approximately $35.9
million. Investments in and advances to unconsolidated entities includes
$22.6 million, $14.3 million and $8.6 million to the Management Company,
Grapevine Mills and The Source, respectively.
Cash flows from financing activities for the nine months ended
September 30, 1997 includes net proceeds from the sales of the Company's
common stock and Series C preferred stock of $327.1 million,
distributions of $259.9 million, net borrowings of $742.3 million
primarily used to fund acquisition, development and investment activity,
and $21.0 million for the retirement of a contingent interest feature on
four mortgage loans.
<PAGE>
EBITDA-Earnings from Operating Results before Interest, Taxes,
Depreciation and Amortization
Management believes that there are several important factors that
contribute to the ability of the Operating Partnership to increase rent
and improve profitability of its shopping centers, including aggregate
tenant sales volume, sales per square foot, occupancy levels and tenant
costs. Each of these factors has a significant effect on EBITDA.
Management believes that EBITDA is an effective measure of shopping
center operating performance because: (i) it is industry practice to
evaluate real estate properties based on operating income before
interest, taxes, depreciation and amortization, which is generally
equivalent to EBITDA; and (ii) EBITDA is unaffected by the debt and
equity structure of the property owner. EBITDA: (i) does not represent
cash flow from operations as defined by generally accepted accounting
principles; (ii) should not be considered as an alternative to net
income as a measure of operating performance; (iii) is not indicative of
cash flows from operating, investing and financing activities; and (iv)
is not an alternative to cash flows as a measure of liquidity.
Total EBITDA for the Properties increased from $390.2 million for
the nine months ended September 30, 1996 to $649.5 million for the same
period in 1997, representing a growth rate of 66.5%. This increase is
primarily attributable to the Merger ($212.9 million) and the Properties
opened or acquired during 1996 and 1997 ($43.7 million). During this
period, operating profit margin increased from 61.4% to 64.2%.
FFO-Funds from Operations
FFO, as defined by the National Association of Real Estate
Investment Trusts ("NAREIT"), means the consolidated net income of the
Operating Partnership and its subsidiaries 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 funds from operations 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. FFO: (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.
The following summarizes FFO of the Operating Partnership and
reconciles net income to FFO for the periods presented:
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------- -------- -------- --------
1997 1996 1997 1996
-------- -------- -------- --------
(In thousands)
FFO $102,189 $74,270 $283,413 $173,482
======== ======== ======== ========
Reconciliation:
Income before extraordinary
items $54,286 $28,839 $145,761 $76,639
Plus:
Depreciation and amortization
from consolidated Properties 47,981 37,469 135,067 88,507
The Operating Partnership's
share of depreciation and
amortization from
unconsolidated affiliates 9,995 3,775 28,005 9,725
Merger integration costs N/A 7,236 N/A 7,236
Less:
Gain on the sale of real
estate -- (88) (20) (88)
Minority interest portion of
depreciation, amortization
and extraordinary items (972) (737) (3,486) (2,251)
Preferred distributions (9,101) (2,224) (21,914) (6,286)
-------- -------- -------- --------
FFO $102,189 $74,270 $283,413 $173,482
======== ======== ======== ========
<PAGE>
Portfolio Data
Operating statistics give effect to the Merger and are based upon
the business and Properties of the Operating Partnership and DRC on a
combined basis for all periods presented. The purpose of this
presentation is to provide a more comparable set of statistics on the
portfolio as a whole. The following statistics exclude the Properties
owned by SCA (the "SCA Properties"), which the Operating Partnership
acquired a 98.8% ownership interest in, through the acquisition of RPT.
Due to the close proximity of the RPT acquisition to the end of the
third quarter, the Operating Partnership has not been able to compile
the information necessary to include the effects of the SCA Properties
in the following statistics. The Operating Partnership intends to
present statistical information, which includes the SCA Properties in
its 1997 annual report. Also excluded are Ontario Mills and Charles
Towne Square. Ontario Mills is a new value-oriented super-regional mall
which management believes is not comparable to the remaining Properties.
The Operating Partnership intends to create a separate reporting
category for its Mills Properties in 1997, following the expected
openings of Grapevine Mills and Arizona Mills. The Operating
Partnership is converting Charles Towne Square into a community center.
Aggregate Tenant Sales Volume. For the nine months ended September
30, 1997 compared to the same period in 1996, total reported retail
sales for mall and freestanding stores at the regional malls for GLA
owned by the Operating Partnership ("Owned GLA") increased 5.6% from
$4,302 million to $4,541 million. Total reported sales for all stores
at the community shopping centers for Owned GLA decreased 1.9% from
$1,009 million to $990 million. Retail sales at Owned GLA affect
revenue and profitability levels because they determine the amount of
minimum rent that can be charged, the percentage rent realized, and the
recoverable expenses (common area maintenance, real estate taxes, etc.)
the tenants can afford to pay.
Occupancy Levels. Occupancy levels for regional malls increased
1.7% to 86.0% at September 30, 1997 as compared to 84.3% at September
30, 1996. Occupancy levels for community shopping centers increased
from 92.1% at September 30, 1996 to 93.1% at September 30, 1997. Total
GLA has increased 3.7 million square feet from September 30, 1996 to
September 30, 1997, primarily as a result of the openings of Ontario
Mills, the Tower Shops, The Source, Indian River Mall and Indian River
Commons and the expansion of The Forum Shops at Caesar's, and the
acquisition of Dadeland Mall, partially offset by the sale of Bristol
Plaza and the transfer of Mall of the Mainland back to the lender.
Average Base Rents. Average base rents per square foot of mall and
freestanding stores at regional mall Owned GLA increased 8.1%, from
$20.18 at September 30, 1996 to $21.82 as of September 30, 1997. In
community shopping centers, average base rents per square foot of Owned
GLA increased 3.9%, from $7.49 to $7.78 during this same period.
Inflation
Inflation has remained relatively low during the past three years
and has had a minimal impact on the operating performance of the
Properties. Nonetheless, substantially all of the tenants' leases
contain provisions designed to lessen the impact of inflation. Such
provisions include clauses enabling the Operating Partnership to receive
percentage rentals based on tenants' gross sales, which generally
increase as prices rise, and/or escalation clauses, which generally
increase rental rates during the terms of the leases. In addition, many
of the leases are for terms of less than ten years, which may enable the
Operating Partnership to replace existing leases with new leases at
higher base and/or percentage rentals if rents of the existing leases
are below the then-existing market rate. Substantially all of the
leases, other than those for anchors, require the tenants to pay a
proportionate share of operating expenses, including common area
maintenance, real estate taxes and insurance, thereby reducing the
Operating Partnership's exposure to increases in costs and operating
expenses resulting from inflation.
However, inflation may have a negative impact on some of the
Operating Partnership's other operating items. Interest and general and
administrative expenses may be adversely affected by inflation as these
specified costs could increase at a rate higher than rents. Also, for
tenant leases with stated rent increases, inflation may have a negative
effect as the stated rent increases in these leases could be lower than
the increase in inflation at any given time.
Other
The shopping center industry is seasonal in nature, particularly in
the fourth quarter during the holiday season, when tenant occupancy and
retail sales are typically at their highest levels. In addition,
shopping malls achieve most of their temporary tenant rents during the
holiday season. As a result of the above, earnings are generally
highest in the fourth quarter of each year.
<PAGE>
Part II - Other Information
Item 1: Legal Proceedings
None.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
Four Forms 8-K were filed during the current
period.
On July 22, 1997, as amended on July 23, 1997, under
Item 5 - Other Events, the Operating Partnership reported
the offering and sale of $100 million aggregate principal
amount of its 6 3/4% Notes due 2004 and $150 million
aggregate principal amount of its 7% Notes due 2009.
In addition, under Item 7 - Financial
Statements and Exhibits, the Operating Partnership made
available, in the form of exhibits, certain documents
relating to the issuance of these notes.
On August 14, 1997 under Item 5 - Other Events, the
Operating Partnership reported that its Board of
Directors authorized the sale of up to $280 million
aggregate principal amount of Medium-Term Notes Due Nine
Months or more from the Date of Issue. The Board of
Directors had previously authorized the sale of only $100
million aggregate principal amount of such notes. In
addition, under Item 7 - Financial Statements and
Exhibits, the Operating Partnership made available, in
the form of exhibits, the opinion of its special counsel
as to the legality of the Medium-Term Notes.
On September 3, 1997 under Item 5 - Other Events,
the Operating Partnership reported that it had commenced
a tender offer to purchase all of the outstanding
beneficial interest in The Retail Property Trust. In
addition, under Item 7 - Financial Statements and
Exhibits, the Operating Partnership made available, in
the form of exhibits, certain documents relating to its
tender offer.
On September 12, 1997 under Item 5 - Other Events,
the Operating Partnership reported that it amended its
tender offer to purchase all of the outstanding
beneficial interest in The Retail Property Trust. In
addition, under Item 7 - Financial Statements and
Exhibits, the Operating Partnership made available, in
the form of exhibits, certain documents relating to its
tender offer.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SIMON DEBARTOLO GROUP, L.P.
By: Simon DeBartolo Group, Inc.
General Partner
Principal Financial Officers:
Date: February 18, 1998 /s/ Stephen E. Sterrett /s/James R.Giuliano, III
Stephen E. Sterrett, James R. Giuliano, III,
Senior Vice President Senior Vice President
and Treasurer
Principal Accounting Officer:
Date: February 18, 1998 /s/ John Dahl
John Dahl,
Senior Vice President and
Chief Accounting Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 50,879
<SECURITIES> 0
<RECEIVABLES> 177,563<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 5,521,523
<DEPRECIATION> 403,741
<TOTAL-ASSETS> 7,406,960
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 4,720,885
0
439,090
<COMMON> 0
<OTHER-SE> 1,756,123
<TOTAL-LIABILITY-AND-EQUITY> 7,406,960
<SALES> 0
<TOTAL-REVENUES> 747,252
<CGS> 0
<TOTAL-COSTS> 400,829
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,690
<INTEREST-EXPENSE> 203,934
<INCOME-PRETAX> 145,761
<INCOME-TAX> 145,761
<INCOME-CONTINUING> 145,761
<DISCONTINUED> 0
<EXTRAORDINARY> 2,501
<CHANGES> 0
<NET-INCOME> 148,262
<EPS-PRIMARY> 0.80
<EPS-DILUTED> 0.80
<FN>
<F1>Receivables are stated net of allowances and also include accrued revenues.
<F2>The Registrant does not report using a classified balance sheet.
</FN>
</TABLE>
