UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 2)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 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 jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
---------------------------------- -----------------------
115 West Washington Street
Indianapolis, Indiana 46204
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (317) 636-1600
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. N/A
Documents Incorporated By Reference
Portions of Simon DeBartolo Group, Inc.'s Form 10-K/A (Amendment No. 2) are
incorporated by reference in Part III.
<PAGE>
Simon DeBartolo Group, L.P. hereby amends its Annual Report on Form 10-K for
the year ended December 31, 1997 to include supplementary disclosure to the
funds from operations discussion on page 45, footnotes 4 and 11 of the
consolidated financial statements on pages 59 and 71, respectively, and the
Notes to Schedule III on page 81.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this amended report to be signed on its behalf by
the undersigned, hereunto duly authorized.
SIMON DeBARTOLO GROUP, L.P.
By: Simon DeBartolo Group, Inc.
General Partner
By: /s/ James M. Barkley
James M. Barkley,
Secretary/General Counsel
<PAGE>
Part I
Item 1. Business
Background
Simon DeBartolo Group, L.P. ("the Operating Partnership" or "SDG, LP"), a
Delaware limited partnership, is a majority owned subsidiary of Simon DeBartolo
Group, Inc. (the "Company"), a Maryland corporation, formerly known as Simon
Property Group, Inc. The Company is a self-administered and self-managed real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended (the "Code"). 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 December 31, 1997, the Operating Partnership owns or holds an
interest in 202 income-producing properties, which consist of 120 regional
malls, 72 community shopping centers, three specialty retail centers, four
mixed-use properties and three value-oriented super-regional mall located in 33
states (the "Properties"). The Operating Partnership also owns interests in one
specialty retail center and two community centers currently under construction
and nine parcels of land either in preconstruction development or held for
future development (collectively, the "Development Properties", and together
with the Properties, the "Portfolio Properties"). The Operating Partnership
also holds substantially all of the economic interest in M.S. Management
Associates, Inc. (the "Management Company"), while substantially all of the
voting stock is held by Melvin Simon, Herbert Simon and David Simon. The
Management Company manages Properties generally not wholly-owned by the
Operating Partnership and certain other properties, and also engages in certain
property development activities. The Operating Partnership also holds
substantially all of the economic interest in, and the Management Company holds
substantially all of the voting stock of, DeBartolo Properties Management, Inc.
("DPMI"), which provides architectural, design, construction and other services
to substantially all of the Portfolio Properties, as well as certain other
regional malls and community shopping centers owned by third parties.
The DRC Merger
On August 9, 1996, the national shopping center business of DeBartolo
Realty Corporation ("DRC") was acquired for an aggregate value of $3.0 billion
(the "DRC Merger"). 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
of office GLA. Pursuant to the DRC Merger, the Company changed its name to
Simon DeBartolo Group, Inc. In addition, the Management Company purchased from
The Edward J. DeBartolo Corporation all of the voting stock of DPMI, for $2.5
million in cash.
For additional information concerning the DRC Merger, please see Note 3 to
the consolidated financial statements.
The Partnership Merger
On December 31, 1997, Simon Property Group, L.P., a Delaware limited
partnership ("SPG, LP"), merged (the "Partnership Merger") into the Operating
Partnership. Prior to the Partnership Merger, the Operating Partnership and the
Company held all of the partnership interests of SPG, LP, which held interests
in certain of the Portfolio Properties. As a result of the Partnership Merger,
the Operating Partnership now directly or indirectly owns or holds interests in
all of the Portfolio Properties and directly holds substantially all of the
economic interest in the Management Company. Prior to the DRC Merger,
references to the Operating Partnership refer to SPG, LP only.
Definitive Merger Agreement
The Company, Corporate Property Investors ("CPI") and Corporate Realty
Consultants, Inc. ("CRC") entered into an Agreement and Plan of Merger, dated
as of February 18, 1998 (the "Merger Agreement"), pursuant to which a
subsidiary of CPI shall be merged with and into the Company (the "Merger").
Upon consummation of the Merger, CPI will be renamed and holders of the
Company's common stock will receive shares of CPI common stock on a one-for-one
basis and beneficial interests in shares of CRC common stock. Based upon the
capitalization of the Company and CPI as of December 31, 1997, the Company's
stockholders would own in the aggregate approximately 67% of the outstanding
<PAGE>
shares of the new entity's common stock. Even though the Company's stockholders
will receive shares of common stock of a new entity, substantially all the
members of the current Board of Directors and senior management of the Company
will be members of the new Board of Directors and senior management of the new
entity. All of the Company's policies, including investment and financing
policies, and practices are expected to continue as the new entity's policies
and practices.
The Merger Agreement provides that prior to the Merger each holder of CPI
common stock will receive consideration of $179 per share, consisting of a
dividend of : (i) the Cash Amount (as defined below); (ii) 1.0818 shares of CPI
common stock; and (iii) 0.19 shares of CPI 6.5% convertible preferred stock.
The "Cash Amount" is equal to $90.00 per share of CPI common stock, subject to
adjustment as follows: (i) if the Market Price (as defined below) for the
Company's common stock at the effective time of the Merger exceeds $38.67, then
the Cash Amount shall be reduces by an amount equal to such excess multiplied
by 2.0818 and (ii) if the Market Price for the Company's common stock at the
effective time of the Merger is less than $28.58, then the Cash Amount shall be
increased by an amount equal to such deficiency multiplied by 2.0818. The
"Market Price" shall be the average of the closing prices per share for the
Company's common stock on the New York Stock Exchange for the 20 consecutive
trading days ending on the fifth trading day prior to the effective time of the
Merger.
The transaction is expected to be consummated during the third quarter of
1998 and is subject to the approval of the Company's stockholders, as well as
customary regulatory and other conditions. The requisite number of CPI
stockholders already have agreed to approve the transaction. The foregoing
description of the Merger Agreement does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement, which appears
as Exhibit 10.1 to the Company's Form 8-K dated February 19, 1998 and is
incorporated herein by reference.
General
As of December 31, 1997, the Operating Partnership owned or held interests
in a diversified portfolio of 202 income-producing Properties, including 120
enclosed regional malls, 72 community shopping centers, three specialty retail
centers, four mixed-use Properties and three value-oriented super-regional
malls, located in 33 states. Regional malls, community centers and the
remaining portfolio comprised 82.8%, 8.3%, and 8.9%, respectively of total rent
revenues and tenant reimbursements in 1997. The value-oriented super-regional
malls are not included in consolidated rent revenues and tenant reimbursements
as they are each accounted for using the equity method of accounting. The
Properties contain an aggregate of approximately 128.8 million square feet of
GLA, of which 78.0 million square feet is owned by the Operating Partnership
("Owned GLA"). Approximately 3,600 different retailers occupy more than 14,000
stores in the Properties. Total estimated retail sales at the Properties
exceeded $25 billion in 1997.
Operating Strategies
The Operating Partnership's primary business objectives are to increase
cash generated from operations per unit of partnership interest in the
Operating Partnership ("Unit") and the value of the Operating Partnership's
Properties and operations. The Operating Partnership plans to achieve these
objectives through a variety of methods discussed below, although no assurance
can be made that such objectives will be achieved.
Leasing. The Operating Partnership pursues an active leasing strategy,
which includes aggressively marketing available space; renewing existing
leases at higher base rents per square foot; and continuing to sign leases
that provide for percentage rents and/or regular or periodic fixed
contractual increases in base rents.
Management. Drawing upon the expertise gained through management of
approximately 140 million square feet of GLA of retail and mixed-use
Properties, the Operating Partnership seeks to maximize cash flow through
a combination of an active merchandising program to maintain its shopping
centers as inviting shopping destinations, continuation of its successful
efforts to minimize overhead and operating costs, coordinated marketing
and promotional activities, and systematic planning and monitoring of
results.
Acquisitions. The Operating Partnership intends to selectively acquire
individual properties and portfolios of properties that meet its
investment criteria as opportunities arise. Management believes that
consolidation will continue to occur within the shopping center industry,
creating opportunities for the Operating Partnership to acquire additional
portfolios of shopping centers and increase operating profit margins.
Management also believes that its extensive experience in the shopping
center business, access to capital markets, national operating scope,
familiarity with real estate markets and advanced management systems will
<PAGE>
allow it to evaluate and execute acquisitions competitively. Additionally,
the Operating Partnership may be able to acquire properties on a tax-
advantaged basis for the transferors.
During 1997, the Operating Partnership, through the acquisition of The
Retail Property Trust ("RPT"), and other related transactions, acquired a
portfolio of ten wholly-owned Properties and one 50%-owned Property
comprising approximately twelve million square feet of GLA in eight
states. RPT is also a REIT. In addition, the Operating Partnership made
several other single-Property ownership acquisitions in 1997. The
Operating Partnership acquired a 50% ownership interest in Dadeland Mall
and an additional 48% ownership interest in West Town Mall, increasing its
ownership in that Property to 50%. In addition, the Operating Partnership
acquired The Fashion Mall at Keystone at the Crossing, a 597,000 square-
foot regional mall, along with an adjacent community center. Also acquired
in 1997 was the remaining 30% ownership interest in Virginia Center
Commons. On December 29, 1997, the Operating Partnership formed a joint
venture partnership with The Macerich Company ("Macerich") to acquire a
portfolio of twelve regional malls comprising approximately 10.7 million
square feet of GLA. This transaction closed on February 27, 1998, with the
Operating Partnership assuming leasing and management responsibilities for
six of the regional malls and Macerich assuming leasing and management for
the remaining properties.
Development. The Operating Partnership's focus is to selectively develop
new Properties in major metropolitan areas that exhibit strong population
and economic growth. During 1997, the Operating Partnership opened one new
regional mall, two value-oriented super-regional malls and one new
community shopping center. On September 5, 1997, the Operating Partnership
opened The Source, a 730,000 square-foot regional mall in Westbury (Long
Island), New York. On October 31, 1997 the Operating Partnership opened
Grapevine Mills, a 1.2 million square-foot value-oriented super-regional
mall in Grapevine (Dallas/Fort Worth), Texas, and on November 20, 1997,
the Operating Partnership opened Arizona Mills, a 1.2 million square-foot
value-oriented super-regional mall in Tempe, Arizona. In March 1997, the
Operating Partnership opened Indian River Commons, a 260,000 square-foot
community shopping center in Vero Beach, Florida, which is immediately
adjacent to an existing regional mall Property.
Development activities are ongoing at several other locations including
the following projects, which have an aggregate construction cost of
approximately $200 million:
* The Shops at Sunset Place, a destination-oriented retail and entertainment
project containing approximately 510,000 square feet of GLA is scheduled to
open in October of 1998 in South Miami, Florida.
* Muncie Plaza, a 196,000 square-foot community center project, is scheduled
to open in April of 1998 in Muncie, Indiana, adjacent to Muncie Mall.
* Lakeline Plaza, a 380,000 square-foot community center project, is
scheduled to open in two phases in May and November of 1998 in Austin, Texas,
adjacent to Lakeline Mall.
The Operating Partnership also has direct or indirect interests in nine
other parcels of land either in preconstruction development or being held
for future development in eight states totaling approximately 677 acres.
Management believes the Operating Partnership is well positioned to pursue
future development opportunities as conditions warrant.
The Operating Partnership is in the preconstruction development phase on
one new value-oriented super-regional mall, a factory outlet center and
one new community center project. Concord Mills, an approximately $200
million development, is scheduled to open in 1999. This 1.4 million square-
foot value-oriented super-regional mall development project is 50%-owned
by the Operating Partnership. Houston Premium Outlets is a 462,000 square-
foot factory outlet project in Houston, Texas. This approximately $89
million project, of which the Operating Partnership has a 50% ownership
interest in, is scheduled to begin construction in 1998 and open in 1999.
The Shops at North East Mall, which is immediately adjacent to an existing
regional mall in the Company's portfolio, is an approximately $55 million
development. This 391,000 square-foot wholly-owned development project is
scheduled to open in Hurst, Texas, in 1999.
Strategic Expansions and Renovations. A key objective of the Operating
Partnership is to increase the profitability and market share of the
Properties through the completion of strategic renovations and expansions.
<PAGE>
In 1997, the Operating Partnership completed construction and opened
fourteen expansion and/or renovation projects: Alton Square in Alton,
Illinois; Aventura Mall in Miami, Florida; Chautauqua Mall in Jamestown,
New York; Columbia Center in Kennewick, Washington; The Forum Shops at
Caesar's in Las Vegas, Nevada; Knoxville Center in Knoxville, Tennessee;
La Plaza in McAllen, Texas; Muncie Mall in Muncie, Indiana; Northfield
Square in Bradley, Illinois; Northgate Mall in Seattle, Washington; Orange
Park Mall in Jacksonville, Florida; Paddock Mall in Ocala, Florida;
Richmond Square in Richmond, Indiana; and Southern Park Mall in
Youngstown, Ohio.
The Operating Partnership has a number of renovation and/or expansion
projects currently under construction, or in preconstruction development.
The Operating Partnership expects to commence construction on many of
these projects in the next 12 to 24 months.
Competition
The Operating Partnership believes that it has a competitive advantage in
the retail real estate business as a result of (i) its use of innovative
retailing concepts, (ii) its management and operational expertise, (iii) its
extensive experience and relationship with retailers and lenders, (iv) the
size, quality and diversity of its Properties and (v) through the mall
marketing initiatives of Simon Brand Ventures, which the Operating Partnership
believes is the world's largest and most sophisticated mall marketing
initiative. Management believes that the Properties are the largest, as
measured by GLA, of any publicly traded REIT, with more regional malls than any
other publicly traded REIT. For these reasons, management believes the
Operating Partnership to be the leader in the industry.
All of the Portfolio Properties are located in developed areas. With
respect to certain of such properties, there are other properties of the same
type within the market area. The existence of competitive properties could have
a material effect on the Operating Partnership's ability to lease space and on
the level of rents the Operating Partnership can obtain.
There are numerous commercial developers, real estate companies and other
owners of real estate that compete with the Operating Partnership in its trade
areas. This results in competition for both acquisition of prime sites
(including land for development and operating properties) and for tenants to
occupy the space that the Operating Partnership and its competitors develop and
manage.
Environmental Matters
General Compliance. Management believes that the Portfolio Properties are
in compliance, in all material respects, with all Federal, state and local
environmental laws, ordinances and regulations regarding hazardous or toxic
substances (see Item 3. Legal Proceedings). Substantially all of the Portfolio
Properties have been subjected to Phase I or similar environmental audits
(which generally involve only a review of records and visual inspection of the
property without soil sampling or ground water analysis) by independent
environmental consultants. The Phase I environmental audits are intended to
discover information regarding, and to evaluate the environmental condition of,
the surveyed properties and surrounding properties. The environmental audits
have not revealed, nor is management aware of, any environmental liability that
management believes will have a material adverse effect on the Operating
Partnership. No assurance can be given that existing environmental studies with
respect to the Portfolio Properties reveal all potential environmental
liabilities; that any previous owner, occupant or tenant of a Portfolio
Property did not create any material environmental condition not known to
management; that the current environmental condition of the Portfolio
Properties will not be affected by tenants and occupants, by the condition of
nearby properties, or by unrelated third parties; or that future uses or
condition (including, without limitation, changes in applicable environmental
laws and regulations or the interpretation thereof) will not result in
imposition of additional environmental liability.
Asbestos-containing materials. Asbestos-containing materials are present
in most of the Properties, primarily in the form of vinyl asbestos tile,
mastics and roofing materials, which are generally in good condition.
Fireproofing and insulation containing asbestos is also present in certain
Properties in limited concentrations or in limited areas. Management believes
the presence of such asbestos-containing materials does not violate currently
applicable laws. Asbestos-containing materials will be removed by the Operating
Partnership in the ordinary course of any renovation, reconstruction and
expansion, and in connection with the retenanting of space.
Underground Storage Tanks. Several of the Portfolio Properties contain or
at one time contained underground storage tanks used to store waste oils or
<PAGE>
other petroleum products primarily related to the operation of auto service
center establishments. All such tanks had been removed or previously abandoned
in place and filled with inert materials in accordance with applicable
environmental laws. Site assessments have revealed seven Properties contain
certain soil and/or groundwater contamination associated with such tanks.
Subsurface investigations (Phase II assessments) and remediation work are
either ongoing or scheduled to be conducted at such Properties. The costs of
remediation with respect to such matters have not been and are not expected to
be material.
Properties to be Developed or Acquired. Land being held for shopping mall
development or that may be acquired for development may contain residues or
debris associated with the use of the land by prior owners or third parties. In
certain instances, such residues or debris could be or contain hazardous wastes
or hazardous substances. Prior to exercising any option to acquire any of the
optioned properties, the Operating Partnership will conduct environmental due
diligence consistent with past practice.
Employees
The Operating Partnership and its affiliates employ approximately, 6,300
persons at various centers and offices throughout the United States.
Approximately 730 of such employees are located at the Operating Partnership's
headquarters in Indianapolis, Indiana, and approximately 3,400 of all employees
are part-time.
Insurance
The Operating Partnership has comprehensive liability, fire, flood,
extended coverage and rental loss insurance with respect to its Properties.
Management believes that such insurance provides adequate coverage.
Headquarters
The Operating Partnership's executive offices are located at National City
Center, 115 West Washington Street, Indianapolis, Indiana 46204, and its
telephone number is (317) 636-1600.
<PAGE>
Executive Officers of the Registrant
The following table sets forth certain information with respect to the
executive officers of the Company, which is one of the general partners of the
Operating Partnership, as of December 31, 1997.
Name Age Position
- --------------------- ---- -------------------------------------
Melvin Simon (1) 71 Co-Chairman
Herbert Simon (1) 63 Co-Chairman
David Simon (1) 36 Chief Executive Officer
Richard S. Sokolov 48 President and Chief Operating Officer
Randolph L. Foxworthy 53 Executive Vice President - Corporate
Development
William J. Garvey 59 Executive Vice President - Property
Development
James A. Napoli 51 Executive Vice President - Leasing
John R. Neutzling 45 Executive Vice President - Property
Management
James M. Barkley 46 General Counsel; Secretary
Stephen E. Sterrett 42 Treasurer
John Rulli 41 Senior Vice President - Human
Resources & Corporate Operations
James R. Giuliano, III 40 Senior Vice President
(1) Melvin Simon is the brother of Herbert Simon and the father of David Simon.
Set forth below is a summary of the business experience of the executive
officers of the Company and SD Property Group, Inc. The executive officers
serve at the pleasure of the Board of Directors and have served in such
capacities since the formation of the Company in 1993, with the exception of
Mr. Sokolov and Mr. Giuliano who have held their offices since the DRC Merger.
For biographical information of Melvin Simon, Herbert Simon, David Simon, and
Richard Sokolov, see Item 10 of this report.
Mr. Foxworthy is the Executive Vice President - Corporate Development of
the Company. Mr. Foxworthy joined Melvin Simon & Associates, Inc. ("MSA") in
1980 and has been an Executive Vice President in charge of Corporate
Development of MSA since 1986 and has held the same position with the Company
since its formation in 1993.
Mr. Garvey is the Executive Vice President - Property Development of the
Company. Mr. Garvey, who was Executive Vice President and Director of
Development at MSA, joined MSA in 1979 and held various positions with MSA.
Mr. Napoli is the Executive Vice President - Leasing of the Company. Mr.
Napoli also served as Executive Vice President and Director of Leasing of MSA,
which he joined in 1989.
Mr. Neutzling is the Executive Vice President - Property Management of the
Company. Mr. Neutzling has also been an Executive Vice President of MSA since
1992 overseeing all property and asset management functions. He joined MSA in
1974 and has held various positions with MSA.
Mr. Barkley serves as the Company's General Counsel and Secretary. Mr.
Barkley holds the same position for MSA. He joined MSA in 1978 as Assistant
General Counsel for Development Activity.
Mr. Sterrett serves as the Company's Treasurer. He joined MSA in 1989 and
has held various positions with MSA.
Mr. Rulli holds the position of Senior Vice President - Human Resources
and Corporate Operations. He joined MSA in 1988 and has held various positions
with MSA.
Mr. Giuliano has served as Senior Vice President since the DRC Merger. He
joined DRC in 1993, where he served as Senior Vice President and Chief
Financial Officer up to the DRC Merger.
The foregoing persons also hold the same offices with SD Property Group,
Inc., the managing general partner of the Operating Partnership.
<PAGE>
Item 2. Properties
Portfolio Properties
The Properties primarily consist of two types: regional malls and
community shopping centers. Regional malls contain two or more anchors and a
wide variety of smaller stores ("Mall" stores) located in enclosed malls
connecting the anchors. Additional stores ("Freestanding" stores) are usually
located along the perimeter of the parking area. The 120 regional malls in the
Properties range in size from approximately 200,000 to 1.6 million square feet
of GLA, with 116 regional malls over 400,000 square feet. These regional malls
contain in the aggregate nearly 11,600 occupied stores, including 480 anchors
which are mostly national retailers. As of December 31, 1997, regional malls
(including specialty retail centers, and retail space in the mixed-use
Properties) represented 81.8% of total GLA, 76.5% of Owned GLA and 81.5% of
total annualized base rent of the Properties.
Community shopping centers are generally unenclosed and smaller than
regional malls. Most of the 72 community shopping centers in the Properties
range in size from approximately 100,000 to 400,000 square feet of GLA.
Community shopping centers generally are of two types: (i) traditional
community centers, which focus primarily on value-oriented and convenience
goods and services, are usually anchored by a supermarket, drugstore or
discount retailer and are designed to service a neighborhood area; and (ii)
power centers, which are designed to serve a larger trade area and contain at
least two anchors that are usually national retailers among the leaders in
their markets and occupy more than 70% of the GLA in the center. As of December
31, 1997, community shopping centers represented 13.5% of total GLA, 16.1% of
Owned GLA and 8.7% of the total annualized base rent of the Properties.
The Operating Partnership also has an interest in three specialty retail
centers, four mixed-use Properties and three value-oriented super-regional
malls. The specialty retail centers contain approximately 760,000 square feet
of GLA and do not have anchors; instead, they feature retailers and
entertainment facilities in a distinctive shopping environment and location.
The four mixed-use Properties range in size from approximately 500,000 to
1,025,000 square feet of GLA. Two of these Properties are regional malls with
connected office buildings, and two are located in mixed-use developments and
contain primarily office space. The value-oriented super-regional malls are
each joint venture partnerships ranging in size from approximately 1,160,000 to
1,330,000 square feet of GLA. These include Arizona Mills, Grapevine Mills and
Ontario Mills. These Properties combine retail outlets, manufacturers, off-
price stores and other value-oriented tenants. As of December 31, 1997, value-
oriented super-regional malls represented 2.9% of total GLA, 4.6% of Owned GLA
and 5.6% of the total annualized base rent of the Properties.
As of December 31, 1997, approximately 87.3% of the Mall and Freestanding
Owned GLA in regional malls, specialty retail centers and the retail space in
the mixed use Properties was leased, approximately 93.8% of the Owned GLA in
the value-oriented super-regional malls was leased, and approximately 91.3% of
Owned GLA in the community shopping centers was leased.
Of the 202 Properties, 154 are owned 100% by the Operating Partnership and
the remainder are held as joint venture interests. The Operating Partnership is
the managing or co-managing general partner of all but eight of the Properties
held as joint venture interests.
<PAGE>
Additional Information
The following table sets forth certain information, as of December
31, 1997, regarding the Properties:
<TABLE>
<CAPTION>
The Operating
Ownership Partnership's
Interest (Expiration Percentage Year Built or Total
Name/Location if Lease)(1) Interest(2) Acquired GLA Anchors/Specialty/Anchors
REGIONAL MALLS
<C> <S> <S> <C> <S> <C> <S> <C>
1. Alton Square Fee 100.0 Acquired 641,145 Famous Barr, JCPenney,
Alton, IL 1993 Sears
2. Amigoland Mall Fee 100.0 Built 560,318 Beall's, Dillard's, JCPenney,
Brownsville, TX 1974 Montgomery Ward
3. Anderson Mall Fee 100.0 Built 637,872 Gallant Belk, JCPenney,
Anderson, SC 1972 Sears, Uptons
4. Aventura Mall(3) Fee 33.3 Built 1,459,397 AMC Theatre (4), Bloomingdales,
Miami, FL 1983 Burdines (4), JCPenney, Lord &
Taylor, Macy's, Sears
5. Avenues, The Fee 25.0 Built 1,113,651 Dillard's, Gayfers,
Jacksonville, FL 1990 Sears, Parisian, JCPenney
6. Barton Creek Fee 100.0 Built 1,374,794 Dillard's (5), Foley's,
Square 1981 JCPenney, Sears,
Austin, TX Montgomery Ward
7. Battlefield Fee and Ground 100.0 Built 1,156,592 Dillard's, Famous Barr,
Mall Lease (2056) 1970 Montgomery Ward, Sears,
Springfield, MO JCPenney
8. Bay Park Square Fee 100.0 Built 641,929 Kohl's, Montgomery Ward,
Green Bay, WI 1980 Shopko, Elder-Beerman
9. Bergen Mall Fee and Ground 100.0 Acquired 1,013,718 Value City, Stern's,
Paramus, NJ Lease (6)(2061) 1987 Marshall's, Off 5th-Saks Fifth
Avenue Outlet
10. Biltmore Square Fee (7) 66.7 Built 494,436 Belk, Dillard's, Proffitt's,
Asheville, NC 1989 Goody's
11. Boynton Beach Mall Fee 100.0 Built 1,064,072 Burdines, Macy's, Sears,
Boynton Beach, FL 1985 Dillard's (4) (5)
JCPenney
12. Broadway Square Fee 100.0 Acquired 571,429 Dillard's, JCPenney, Sears
Tyler, TX 1994
13. Brunswick Square Fee 100.0 Built 736,479 Brunswick Square Movies,
East Brunswick, NJ 1973 Macy's, JCPenney
14. Castleton Square Fee 100.0 Built 1,352,729 LS Ayres, Lazarus, Montgomery
Indianapolis, IN 1972 Ward (8), JCPenney, Sears
<PAGE>
15. Century III Mall Fee 50.0 Built 1,287,251 Lazarus, Kaufmann's, JCPenney
Pittsburgh, PA 1979 Sears, T.J. Maxx, Wickes
Furniture
16. Charlottesville Ground Lease 50.0 Acquired 573,614 Belk, JCPenney, Sears
Fashion Square (2076) 1997 Stone & Thomas
Charlottesville, VA
17. Chautauqua Mall Fee 100.0 Built 428,285 The Bon Ton (4), Sears,
Jamestown, NY 1971 JCPenney, Office Max
18. Cheltenham Square Fee 100.0 Built 624,790 Burlington Coat Factory,
Philadelphia, PA 1981 Movies at Cheltenham, Home
Depot, Value City,
Seaman's Furniture, Shop Rite
19. Chesapeake Square Fee and Ground (7)75.0 Built 704,463 Dillard's, Belk, JCPenney, Sears,
Chesapeake, VA Lease (2062) 1989 Montgomery Ward
20. Cielo Vista Mall Fee and Ground 100.0 Built 1,196,102 Dillard's (5), JCPenney, Montgomery
El Paso, TX Lease (9)(2027) 1974 Ward, Sears
21. Circle Centre Property Lease 14.7 Built 793,234 Nordstrom, Parisian,
Indianapolis, IN (2097) 1995 United Artists
22. College Mall Fee and Ground 100.0 Built 707,220 JCPenney, Lazarus,
Bloomington, IN Lease (10)(2048) 1965 L.S. Ayres, Sears, Target
23. Columbia Center Fee 100.0 Acquired 772,894 Barnes & Noble,
Kennewick, WA 1987 The Bon Marche, Lamonts,
JCPenney, Sears
24. Coral Square Fee 50.0 Built 941,370 Burdines (5), Dillard's,
Coral Springs, FL 1984 JCPenney, Sears
25. Cottonwood Mall Fee 100.0 Built 1,022,835 Dillard's, Foley's,
Albuquerque, NM 1996 JCPenney, Mervyn's,
Montgomery Ward
United Artists
26. Crossroads Mall Fee 100.0 Acquired 871,356 Dillard's, Sears,
Omaha, NE 1994 Younkers
27. Crystal River Mall Fee 100.0 Built 425,277 Belk, Kmart,
Crystal River, FL 1990 JCPenney, Regal Cinema,
Sears
28. Dadeland Mall Fee 50.0 Acquired 1,403,416 Burdine's, Burdine's Home
Miami, FL 1997 Gallery, JCPenney, Limited
Lord & Taylor, Saks Fifth
Avenue
29. DeSoto Square Fee 100.0 Built 686,408 Burdines, JCPenney,
Bradenton, FL 1973 Sears, Dillard's
<PAGE>
30. Eastern Hills Mall Fee 100.0 Built 997,172 Sears, The Bon Ton,
Buffalo, NY 1971 JCPenney, Kaufmann's,
Burlington Coat Factory (4),
Waccamaw (11)
31. Eastland Mall Fee 100.0 Built 702,496 Dillard's, General Cinema,
Tulsa, OK 1986 JCPenney, Mervyn's,
Service Merchandise
32. Edison Mall Fee 100.0 Acquired 987,103 Burdines (5), Dillard's,
Fort Meyers, FL 1997 JCPenney, Sears
33. Fashion Mall at Ground Lease 100.0 Acquired 651,671 Jacobsons, Parisian
Keystone at the (2067) 1997
Crossing, The
Indianapolis, IN
34. Florida Mall, The Fee 50.0 Built 1,119,871 Burdines (4), Dillard's (5),
Orlando, FL 1986 Gayfers, JCPenney, Saks Fifth
Avenue, Sears
35. Forest Mall Fee 100.0 Built 484,131 JCPenney, Kohl's,
Fond Du Lac, WI 1973 Younkers, Sears, Staples
36. Forest Village Fee 100.0 Built 417,344 JCPenney, Kmart
Park Mall 1980
Forestville, MD
37. Fremont Mall Fee 100.0 Built 199,266 1/2 Price Store, JCPenney
Fremont, NE 1966
38. Golden Ring Mall Fee 100.0 Built 719,625 Caldor, Hecht's,
Baltimore, MD 1974 Montgomery Ward,
United Artists
39. Great Lakes Mall Fee 100.0 Built 1,295,872 Dillard's (5), Great Lakes
Cleveland, OH 1961 Mall Theatres, Kaufmann's,
JCPenney, Sears
40. Greenwood Park Fee 100.0 Acquired 1,273,258 JCPenney, Lazarus,
Mall 1979 L.S. Ayres, Sears,
Greenwood, IN Montgomery Ward (8),
Service Merchandise
41. Gulf View Square Fee 100.0 Built 809,913 Burdines, Dillard's,
Port Richey, FL 1980 Montgomery Ward,
JCPenney, Sears
42. Heritage Park Mall Fee 100.0 Built 634,178 Dillard's, Sears,
Midwest City, OK 1978 Montgomery Ward,
Service Merchandise
43. Hutchinson Mall Fee 100.0 Built 525,702 Cinema 8, Dillard's,
Hutchinson, KS 1985 JCPenney,
Sears, Wal-Mart (12),
Service Merchandise
44. Independence Center Fee 100.0 Acquired 1,030,462 The Jones Store Co.,
Independence, MO 1994 Dillard's, Sears
<PAGE>
45. Indian River Mall Fee 50.0 Built 749,613 AMC Theatre, Burdines, Sears,
Vero Beach, FL 1996 JCPenney, Dillard's
46. Ingram Park Mall Fee 100.0 Built 1,133,183 Dillard's (5), Foley's,
San Antonio, TX 1979 JCPenney, Sears, Beall's
47. Irving Mall Fee 100.0 Built 1,040,628 Barnes & Noble (4),
Irving, TX 1971 Dillard's, Foley's,
General Cinema (4) JCPenney,
Mervyn's, Sears,
48. Jefferson Valley Fee 100.0 Built 589,601 Macy's, Sears,
Mall 1983 Service Merchandise
Yorktown Heights, NY
49. Knoxville Center Fee 100.0 Built 970,673 Dillard's, JCPenney,
Knoxville, TN 1984 Proffitt's, Sears,
Service Merchandise
50. La Plaza Fee and Ground 100.0 Built 987,645 Dillard's, JCPenney, Beall's,
McAllen, TX Lease (6)(2040) 1976 Foley's, Sears,
Service Merchandise,
Joe Brand-Lady Brand
51. Lafayette Square Fee 100.0 Built 1,220,043 JCPenney, LS Ayres, Sears,
Indianapolis, IN 1968 Lazarus, Waccamaw,
Montgomery Ward (11)
52. Laguna Hills Mall Fee 100.0 Acquired 812,581 JCPenney,
Laguna Hills, CA 1997 Macy's, Sears
53. Lakeland Square Fee 50.0 Built 900,556 Belk, Burdines,
Lakeland, FL 1988 Dillard's (5),
JCPenney, Sears
54. Lakeline Mall Fee 50.0(14) Built 1,102,670 Dillard's, Foley's, Sears,
N. Austin, TX 1995 JCPenney, Mervyn's, United
Artists
55. Lima Mall Fee 100.0 Built 753,127 Elder-Beerman, Sears,
Lima, OH 1965 Lazarus, JCPenney
56. Lincolnwood Town Fee 100.0 Built 441,085 Carson Pirie Scott,
Center 1990 JCPenney
Lincolnwood, IL
57. Longview Mall Fee 100.0 Built 617,025 Dillard's (5), JCPenney,
Longview, TX 1978 Sears, Service Merchandise,
Beall's
58. Machesney Park Mall Fee 100.0 Built 555,860 Kohl's, JCPenney,
Rockford, IL 1979 Bergners, (13)
59. Markland Mall Ground Lease 100.0 Built 391,284 Lazarus, Sears,
Kokomo, IN (2041) 1968 Target
60. McCain Mall Ground Lease 100.0 Built 776,516 Dillard's, JCPenney,
N. Little Rock, AR (15)(2032) 1973 M.M. Cohn, Sears
61. Melbourne Square Fee 100.0 Built 734,323 Belk, Burdines,
Melbourne, FL 1982 Dillard's (5), JCPenney
<PAGE>
62. Memorial Mall Fee 100.0 Built 416,698 JCPenney, Kohl's,
Sheboygan, WI 1969 Sears
63. Menlo Park Mall Fee 100.0 Acquired 1,296,127 Macy's, Nordstrom,
Edison, New Jersey 1997 (16) Cineplex Odeon
64. Miami Fee 60.0 Built 972,296 Burdines (5), Sears,
International Mall 1982 Dillard's, JCPenney
Miami, FL
65. Midland Park Mall Fee 100.0 Built 618,924 Dillard's (5), JCPenney,
Midland, TX 1980 Sears, Beall's
66. Miller Hill Mall Fee 100.0 Built 801,511 Glass Block, JCPenney,
Duluth, MN 1973 Montgomery Ward, Sears
67. Mission Viejo Mall Fee 100.0 Built 817,167 Macy's,
Mission Viejo, CA 1979 Robinsons - May (5),
Nordstrom (4)
68. Mounds Mall Ground Lease 100.0 Built 407,233 Elder-Beerman, JCPenney,
Anderson, IN (2033) 1965 Sears
69. Muncie Mall Fee 100.0 Built 658,672 JCPenney, L.S. Ayres,
Muncie, IN 1970 Sears, Elder Beerman, (5)
70. North East Mall Fee 100.0 Built 1,142,147 Dillard's (5), JCPenney,
Hurst, TX 1971 Montgomery Ward, Sears
71. North Towne Square Fee 100.0 Built 761,659 Lion, Montgomery Ward, (13)
Toledo, OH 1980
72. Northfield Square Fee (7)31.6 Built 558,420 Cinemark Movies 10, Carson
Bradley, IL 1990 Pirie Scott, JCPenney, Sears,
Venture
73. Northgate Mall Fee 100.0 Acquired 1,123,787 The Bon Marche, Lamonts,
Seattle, WA 1987 (17) Nordstrom, JCPenney
74. Northwoods Mall Fee 100.0 Acquired 667,937 Famous Barr, JCPenney,
Peoria, IL 1983 Sears (4)
75. Oak Court Mall Fee 100.0 Acquired 847,964 Dillard's (5), Goldsmith's
Memphis, TN 1997 (18)
76. Orange Park Mall Fee 100.0 Acquired 916,174 AMC 24 Theatre, Dillard's,
Jacksonville, FL 1994 Gayfer's, JCPenney, Sears
77. Orland Square Fee 100.0 Acquired 1,224,962 Carson Pirie Scott, JCPenney,
Orland Park, IL 1997 Marshall Field, Plitt
Theatres, Sears
78. Paddock Mall Fee 100.0 Built 559,414 Belk, Burdines,
Ocala, FL 1980 JCPenney, Sears
<PAGE>
79. Palm Beach Mall Fee 50.0 Built 1,200,692 JCPenney, Sears,
West Palm Beach, FL 1967 Lord & Taylor,
Dillards, Burdines
80. Port Charlotte Ground Lease (7)80.0 Built 716,149 Burdines, Dillard's,
Town Center (2064) 1989 Montgomery Ward,
Port Charlotte, FL JCPenney, Regal Cinema (4),
Sears
81. Prien Lake Mall Fee and Ground 100.0 Built 455,550 Dillards (4), JCPenney,
Lake Charles, LA Lease (6)(2025) 1972 Montgomery Ward,
Sears (4), The White House
82. Promenade, The Fee 100.0 Acquired 600,437 Macy's, Macy's Home,
Woodland Hills, CA 1997 AMC Theatre
83. Raleigh Springs Fee and Ground 100.0 Built 907,976 Dillard's, Goldsmith's
Mall Lease (6)(2018) 1979 JCPenney, Sears
Memphis, TN
84. Randall Park Mall Fee 100.0 Built 1,572,080 Dillard's, Kaufmann's,
Cleveland, OH 1976 LaSalle Interiors (5),
JCPenney, Sears,
Burlington Coat Factory
85. Richardson Square Fee 100.0 Built 723,365 Barnes & Noble, Dillard's,
Dallas, TX 1977 Ross Dress for Less (4),
Sears, Stein Mart (4),
Montgomery Ward
86. Richmond Town Fee 100.0 Built 872,989 JCPenney, Kaufmann's (4),
Square 1966 Sears, Sony Theatres
Cleveland, OH
87. Richmond Square Fee 100.0 Built 393,388 Dillard's, JCPenney,
Richmond, IN 1966 Sears, Office Max
88. River Oaks Center Fee 100.0 Acquired 1,341,165 Carson Pirie Scott,
Calumet City, IL 1997 (19) Cineplex Odeon, JCPenney,
Marshall Field, Sears
89. Rolling Oaks Mall Fee 49.9 Built 758,939 Dillard's, Foley's,
North San Antonio, TX 1988 Sears
90. Ross Park Mall Fee (7)100.0 Built 1,274,883 Lazarus, JCPenney,
Pittsburgh, PA 1986 Kaufmann's, Sears,
Service Merchandise
91. St. Charles Towne Fee 100.0 Built 1,053,244 Cineplex Odeon, Hecht's,
Center 1990 JCPenney, Kohl's, Sears,
Waldorf, MD Montgomery Ward,
92. Seminole Towne Fee 45.0 Built 1,153,861 Burdines, Dillard's,
Center 1995 JCPenney, Parisian, Sears
Sanford, FL United Artists
93. Smith Haven Mall Fee 25.0 Acquired 1,341,959 Sterns, Macy's,
Lake Grove, NY 1995 Sears, JCPenney
<PAGE>
94. Source, The Fee 50.0 Built 732,820 ABC Home, Cheesecake Factory,
Long Island, NY 1997 Circuit City, Fortunoff,
Loehmann's, Nordstrom Rack,
Off 5th- Saks Fifth Avenue,
Old Navy, Rainforest Cafe,
Virgin Megastore
95. South Hills Fee 100.0 Acquired 1,107,269 Carmike Cinemas, Kaufmann's,
Village 1997 Lazarus, Sears
Pittsburgh, PA
96. South Park Mall Fee 100.0 Built 857,337 Burlington Coat Factory,
Shreveport, LA 1975 Dillard's, JCPenney,
Montgomery Ward,
Regal Cinema, Stage
97. Southtown Mall Fee 100.0 Built 858,202 Kohl's, JCPenney (11),
Ft. Wayne, IN 1969 L.S. Ayres (11), Sears,
Service Merchandise (11)
98. Southern Park Mall Fee 100.0 Built 1,210,446 Dillard's, Kaufmann's,
Youngstown, OH 1970 JCPenney, Sears
99. Southgate Mall Fee 100.0 Acquired 321,336 Albertson's (12), Sears,
Yuma, AZ 1988 Dillard's, JCPenney
100. Summit Mall Fee 100.0 Built 717,774 Kaufmann's, Dillard's (5) (4)
Akron, OH 1965
101. Sunland Park Mall Fee 100.0 Built 920,882 General Cinemas, JCPenney,
El Paso, TX 1988 Mervyn's, Sears, Dillard's,
Montgomery Ward
102. Tacoma Mall Fee 100.0 Acquired 1,280,841 The Bon Marche, Sears,
Tacoma, WA 1987 Nordstrom, JCPenney,
Mervyn's, Plitt Theatres
103. Tippecanoe Mall Fee 100.0 Built 865,341 Kohl's, Lazarus, Sears,
Lafayette, IN 1973 L.S. Ayres, JCPenney
104. Towne East Square Fee 100.0 Built 1,152,772 Dillard's, JCPenney,
Wichita, KS 1975 Sears, Service Merchandise
105. Towne West Square Fee 100.0 Built 938,536 Dillard's, Sears, JCPenney,
Wichita, KS 1980 Montgomery Ward,
Service Merchandise
106. Treasure Coast Square Fee 100.0 Built 884,720 Burdines, Dillard's (5),
Jenson Beach, FL 1987 Sears,
JCPenney
107. Tyrone Square Fee 100.0 Built 1,091,641 Burdines, Dillard's,
St. Petersburg, FL 1972 JCPenney, Sears
108. University Mall Ground Lease 100.0 Built 565,953 JCPenney, M.M. Cohn,
Little Rock, AR (20)(2026) 1967 Montgomery Ward
<PAGE>
109. University Mall Fee 100.0 Acquired 711,327 McRae's, JCPenney,
Pensacola, FL 1994 Sears, United Artists
110. University Park Mall Fee 60.0 Built 941,094 LS Ayres, JCPenney, Sears,
South Bend, IN 1979 Marshall Fields
111. Upper Valley Mall Fee 100.0 Built 751,062 Lazarus, JCPenney,
Springfield, OH 1971 Sears, Elder-Beerman
112. Valle Vista Mall Fee 100.0 Built 647,603 Dillard's, Mervyn's,
Harlingen, TX 1983 Sears, JCPenney, Marshalls,
Beall's
113. Virginia Center Fee 100.0 Built 791,130 Belk, Dillard's, Hecht's,
Commons 1991 JCPenney, Sears
Richmond, VA
114. Washington Square Fee 100.0 Built 1,172,130 L.S. Ayres, Lazarus,
Indianapolis, IN 1974 Montgomery Ward (11),
JCPenney, Sears
115. West Ridge Mall Fee 100.0 Built 1,040,337 Dillard's, JCPenney,
Topeka, KS (21) 1988 Jones, Sears,
Montgomery Ward
116. West Town Mall Fee 50.0 Acquired 1,337,046 Dillard's, JCPenney,
Knoxville, TN 1991 Parisian, Proffitt's,
Regal Cinema (4), Sears
117. Westchester, The (3) Fee 50.0 Acquired 827,470 Neiman Marcus, Nordstrom
(22) 1997
White Plains, NY
118. White Oaks Mall Fee 77.0 Built 904,127 Bergner's, Famous Barr,
Springfield, IL 1977 Montgomery Ward, Sears
119. Windsor Park Mall Fee 100.0 Built 1,095,248 Dillard's (5), JCPenney,
San Antonio, TX 1976 Mervyn's, Beall's,
Montgomery Ward
120. Woodville Mall Fee 100.0 Built 794,005 Andersons, Sears,
Toledo, OH 1969 Elder-Beerman, (13)
<PAGE>
VALUE-ORIENTED REGIONAL MALLS
1. Arizona Mills(3) Fee 26.3 Built 1,157,159 Burlington Coat Factory,
1997 Harkins Theater, Mikasa,
Oshman's Supersport, Off
5th- Saks Fifth Avenue Outlet,
JCPenney Outlet, Mikasa,
Rainforest Cafe, GameWorks,
Hi Health, Linens `N Things
2. Grapevine Mills (3) Fee 37.5 Built 1,213,779 Books-A-Million,
Grapevine (Dallas/Ft. 1997 Burlington Coat Factory,
Worth), TX Off 5th- Saks, Fifth Avenue
Outlet, JCPenney Outlet,
Rainforest Cafe, Group USA,
Bed, Bath & Beyond, AMC Theatres,
GameWorks, American
Wilderness (4)
3. Ontario Mills Fee 25.0 Built 1,326,284
(3) 1996 JCPenney Outlet,
Ontario, CA Burlington Coat Factory,
Marshall's, Sports
Authority, Dave & Busters,
Group USA, IWERKS, American
Wilderness Experience, T.J.Maxx,
Foozles, Totally for Kids, Bed,
Bath & Beyond, Off Rodeo, Mikasa,
Virgin, GameWorks, Off
5th-Saks Fifth Avenue Outlet
SPECIALTY RETAIL CENTERS
- -------------------------
1. Forum Shops at Ground (23) Built 477,584 -
Caesars, The Lease 1992
Las Vegas, NV (2050)
2. Tower Shops, Space 50.0 Built 59,810 -
The Lease 1996
Las Vegas, NV (2051)
3. Trolley Square Fee and 90.0 Acquired 223,793 -
Salt Lake City, Ground 1986
UT Lease (24)
<PAGE>
MIXED-USE PROPERTIES
- --------------------
1. Fashion Centre Fee 21.0 Built 988,517 Lowe's Theatres,
at Pentagon 1989 (25) Macy's,
City, The Nordstrom
Arlington, VA
2. New Orleans Fee and 100.0 Built 1,023,690 Macy's,
Centre/CNG Ground 1988 (26) Lord & Taylor
Tower Lease
New Orleans, LA (2084)
3. O'Hare Fee 100.0 Built 496,058 -
International 1988 (27)
Center
Rosemont, IL
4. Riverway Fee 100.0 Acquired 818,278 -
Rosemont, IL 1991 (28)
COMMUNITY SHOPPING CENTERS
- --------------------------
1. Arvada Plaza Fee 100.0% Built 96,831 King Soopers
Arvada, CO 1966
2. Aurora Plaza Ground 100.0 Built 150,209 King Soopers,
Aurora, CO Lease 1965 MacFrugel's
(2058) Bargains,
Super Saver
Cinema
3. Bloomingdale Fee 100.0 Built 598,521 Builders Square,
Court 1987 T.J. Maxx,
Bloomingdale, Cineplex Odeon,
IL Frank's Nursery,
Marshalls,
Office Max, Old
Navy,
Service
Merchandise,
Wal-Mart, (13)
4. Boardman Plaza Fee 100.0 Built 651,181 Burlington Coat
Youngstown, OH 1951 Factory,
Giant Eagle,
Stein Mart,
T.J. Maxx,
Reyers Outlet
Hills
5. Bridgeview Fee 100.0 Built 280,299 Omni, Venture
Court 1988
Bridgeview, IL
6. Brightwood Fee 100.0 Built 41,893 Revco Drug,
Plaza 1965 Safeway
Indianapolis,
IN
7. Buffalo Grove Fee 92.5 Built 134,131 Buffalo Grove
Towne Center 1988 Theatres
Buffalo Grove,
IL
8. Celina Plaza Fee and 100.0 Built 32,622 General Cinema
El Paso, TX Ground 1978
Lease (29)
(2027)
<PAGE>
9. Century Mall Fee 100.0 Acquired 415,245 Burlington Coat
(30) 1982 Factory,
Merrillville, Montgomery Ward
IN
10. Charles Towne Fee 100.0 Built 130,399 Montgomery Ward,
Square (31) 1976 Regal Cinema (4)
Charleston, SC
11. Chesapeake Fee 100.0 Built 305,904 Movies 10, Phar
Center 1989 Mor,
Chesapeake, VA K-Mart, Service
Merchandise
12. Cobblestone Fee and 35.0 Built 261,107 Dick's Sporting
Court Ground 1993 Goods,
Victor, NY Lease (10) Kmart, Office
(2038) Max
13. Cohoes Commons Fee and 100.0 Built 262,959 Bryant &
Rochester, NY Ground 1984 Stratton
Lease (6) Business
(2032) Institute,
Cohoes,
Xerox (32)
14. Countryside Fee and 100.0 Built 435,543 Best Buy,
Plaza Ground 1977 Builders Square,
Countryside, IL Lease (10) Frank's Nursery,
(2058) Old Country
Buffet,
Venture, (13)
15. Crystal Court Fee 35.0 Built 284,816 Cub Foods,
Crystal Lake, 1989 Wal-Mart,
IL Service
Merchandise,
(13)
16. Eastgate Fee 100.0 Acquired 462,510 Builder's
Consumer Mall 1981 Square,
(30) Burlington Coat
Indianapolis, Factory, Cub
IN Foods,
General Cinema
17. Eastland Plaza Fee 100.0 Built 188,229 Marshalls,
Tulsa, OK 1986 Target,
Toys "R" Us
18. Fairfax Court Ground 26.3 Built 249,305 Circuit City
Fairfax, VA Lease 1992 Superstore,
(2052) Montgomery Ward,
Today's Man
19. Forest Plaza Fee 100.0 Built 422,689 Builders Square
Rockford, IL 1985 (12), Kohl's,
Marshalls,
Factory Card
Outlet, Office
Max,
T.J. Maxx
20. Fox River Plaza Fee 100.0 Built 324,956 Builders Square,
Elgin, IL 1985 Venture,
Service
Merchandise,
(13) (13)
21. Gaitway Plaza Fee 23.3 Built 229,909 Books-A-Million,
Ocala, FL 1989 Montgomery Ward,
Office Depot,
T.J. Maxx
22. Glen Burnie Fee 100.0 Built 459,219 Montgomery Ward,
Mall (30) 1963 Best Buy, Toys
Glen Burnie, MD "R" Us, Dick's
Clothing and
Sporting Goods
23. Great Lakes Fee 100.0 Built 163,919 Best Buy,
Plaza 1976 Circuit City,
Cleveland, OH Home Place,
Michael's
24. Great Northeast Fee 50.0 Acquired 298,242 Sears, Phar Mor
Plaza 1989
Philadelphia,
PA
<PAGE>
25. Greenwood Plus Fee 100.0 Built 226,297 Best Buy, Cinema
Greenwood, IN 1979 I-IV,
Kohl's
26. Griffith Park Ground 100.0 Built 274,230 General Cinema,
Plaza Lease 1979 Service
Griffith, IN (2060) Merchandise,
Venture
27. Grove at Fee 100.0 Built 215,591 Lakeland Square
Lakeland 1988 10 Theatre,
Square, The Sports
Lakeland, FL Authority,
Wal-Mart
28. Hammond Square Space 100.0 Built 87,705 Burlington Coat
Sandy Springs, Lease 1974 Factory,
GA (2011) Service
Merchandise
29. Highland Lakes Fee 100.0 Built 477,324 Bed, Bath &
Center 1991 Beyond,
Orlando, FL Goodings,
Marshalls,
Ross Dress for
Less,
Movies 12,
Service
Merchandise,
Office Max,
Target
30. Indian River Fee 50.0 Built 263,507 HomePlace,
Commons 1997 Lowe's,
Vero Beach, FL Office Max
Service
Merchandise
31. Ingram Plaza Fee 100.0 Built 111,518 _
San Antonio, TX 1980
32. Keystone Ground 100.0 Acquired 29,140 _
Shoppes Lease 1997
Indianapolis, (2067)
IN
33. Knoxville Fee 100.0 Built 180,463 Circuit City,
Commons 1987 Office Max, (13)
Knoxville, TN
34. Lake Plaza Fee 100.0 Built 218,208 Builders Square
Waukegan, IL 1986 (11),
Venture
35. Lake View Plaza Fee 100.0 Built 388,358 Best Buy (33),
Orland Park, IL 1986 Dominick's,
Ultra 3 (33),
Factory Card
Outlet,
Linens-N-Things
(33),
Marshalls,
Pet Care
Plus (33),
Service
Merchandise,
(13)
36. Lima Center Fee 100.0 Built 201,154 Regal Cinema,
Lima, OH 1978 Hills,
Service
Merchandise
37. Lincoln Fee 100.0 Built 161,337 PetsMart,
Crossing 1990 Wal-Mart
O'Fallon, IL
38. Mainland Fee (7) Built 390,986 Sam's Club, Wal-
Crossing 80.0 1991 Mart,
Galveston, TX Hobby Lobby
39. Maplewood Fee 100.0 Built 130,780 Bag `N Save, Big
Square 1970 Lots
Omaha, NE
<PAGE>
40. Markland Plaza Fee 100.0 Built 108,296 Service
Kokomo, IN 1974 Merchandise,
Spiece
41. Martinsville Space 100.0 Built 102,162 Food Lion,
Plaza Lease 1967 Rose's
Martinsville, (2036)
VA
42. Marwood Plaza Fee 100.0 Built 105,785 Kroger, Revco
Indianapolis, 1962 Drug
IN
43. Matteson Plaza Fee 100.0 Built 275,455 Dominick's,
Matteson, IL 1988 Michael's Arts &
Crafts, Kmart,
Service
Merchandise
44. Memorial Plaza Fee 100.0 Built 129,202 Dunham's
Sheboygan, WI 1966 Sporting Goods,
Marcus Theatre,
Office Max
(13)
45. Mounds Mall Fee 100.0 Built 7,500 Kerasotes
Cinema 1974 Theater
Anderson, IN
46. New Castle Fee 100.0 Built 91,648 Goody's
Plaza 1966
New Castle, IN
47. North Ridge Fee 100.0 Built 323,672
Plaza 1985 Hobby Lobby, The
Joliet, IL TJX
Companies(12),
Service
Merchandise
48. North Riverside Fee 100.0 Built 119,608 Dominick's
Park Plaza 1977
North
Riverside, IL
49. Northland Plaza Fee and 100.0 Built 205,775 Marshalls,
Columbus, OH Ground 1988 Phar-Mor,
Lease (6) Service
(2085) Merchandise
50. Northwood Plaza Fee 100.0 Built 211,840 Kroger, Target,
Fort Wayne, IN 1974 (13)
51. Park Plaza Fee and 100.0 Built 114,458 Wal-Mart (11)
Hopkinsville, Ground 1968
KY Lease (6)
(2039)
52. Plaza at Fee 35.0 Built 337,966 Toys "R" Us,
Buckland 1993 Kids "R" Us,
Hills, The Service
Manchester, CT Merchandise,
Comp USA,
Linens-N-Thing',
Filene's
Basement, (13)
53. Regency Plaza Fee 100.0 Built 277,521 Sam's Wholesale,
St. Charles, MO 1988 Wal-Mart
54. Ridgewood Court Fee 35.0 Built 240,843 Home Quarters,
Jackson, MS 1993 T.J. Maxx,
Service
Merchandise,
(13)
55. Royal Eagle Fee 35.0 Built 203,140 Kmart,
Plaza 1989 Stein Mart
Coral Springs,
FL
<PAGE>
56. Sherwood Fee 100.0 Acquired 187,000 _
Gardens (34) 1997
Salinas, CA
57. St. Charles Fee 100.0 Built 435,035 Ames, Hechinger,
Towne Plaza 1987 Jo Ann Fabrics,
Waldorf, MD CVS, T.J. Maxx,
Service
Merchandise,
Shoppers Food
Warehouse
58. Teal Plaza Fee and 100.0 Built 100,831 Circuit City
Lafayette, IN Ground 1962 (4), Hobby-
Lease Lobby, The Pep
(2007) (6) Boys (4)
59. Terrace at The Fee 100.0 Built 332,980 J.J. Byrons
Florida Mall 1989 (11), Marshalls,
Orlando, FL Service
Merchandise,
Target, Waccamaw
60. Tippecanoe Fee 100.0 Built 94,739 Barnes & Noble
Plaza 1974 Bookseller,
Lafayette, IN Service
Merchandise
61. University Fee 60.0 Built 150,548 Best Buy,
Center 1980 Michaels,
South Bend, IN Service
Merchandise
62. Village Park Fee 35.0 Built 503,052 Frank's Nursery,
Plaza 1990 Gaylan's,
Westfield, IN Jo-Ann Fabrics,
Kohl's,
Marsh, Regal
Cinemas,
Wal-Mart
63. Wabash Village Ground 100.0 Built 124,748 Kmart
West Lafayette, Lease 1970
IN (2063)
64. Washington Fee (7) Built 50,302 Kids "R" Us
Plaza 85.0 1976
Indianapolis,
IN
65. West Ridge Fee 100.0 Built 237,650 Magic Forest,
Plaza 1988 Target,
Topeka, KS TJ Maxx, Toys
"R" Us
66. West Town Fee 23.3 Built 384,832 PetsMart,
Corners 1989 Wal-Mart,
Altamonte Service
Springs, FL Merchandise,
Sports
Authority, (13)
67. Westland Park Fee 23.3 Built 163,154 Burlington Coat
Plaza 1989 Factory,
Orange Park, FL PetsMart, Sports
Authority
68. White Oaks Fee 100.0 Built 389,063 Cub Foods, Kids
Plaza 1986 "R" Us,
Springfield, IL Kohl's, Office
Max,
T.J. Maxx, Toys
"R" Us
69. Wichita Mall Ground 100.0 Built 379,461 Cinema III,
(30) Lease 1969 Office Max,
Wichita, KS (2022) Montgomery Ward
70. Willow Knolls Fee 35.0 Built 383,230 Kohl's,
Court 1990 Phar-Mor,
Peoria, IL Sam's Wholesale
Club,
Willow Knolls
Theaters 14
71. Wood Plaza Ground 100.0 Built 94,993 Country General
Fort Dodge, IA Lease 1968
(2045)
72. Yards Plaza, Fee 35.0 Built 273,097 Burlington Coat
The 1990 Factory,
Chicago, IL Omni Superstore,
Montgomery Ward
<PAGE>
PROPERTIES UNDER CONSTRUCTION
- -----------------------------
1. Lakeline Plaza Fee 50.0 (35) 381,000 Linens `N
Austin, TX (14) Things, Office
Max, Old Navy,
Ross Dress for
Less, T.J. Maxx,
Party City, Toys
"R" Us
2. Muncie Plaza Fee 100.0 (36) 195,500 Factory Card
Muncie, IN Outlet, Kohl's,
OfficeMax, Shoe
Carnival,
T.J. Maxx
3. Shops at Sunset Fee 75.0 (37) 500,000 Nike Town, AMC
Place, The Theatres Virgin
Miami, FL Megastore,
Z Gallerie, IMAX
Theatre, Barnes
& Noble, Twin
Palms
</TABLE>
<PAGE>
(1) The date listed is the expiration date of the last renewal option
available to the Operating Partnership under the ground lease. In a
majority of the ground leases, the lessee has either a right of first
refusal or the right to purchase the lessor's interest. Unless otherwise
indicated, each ground lease listed in this column covers at least 50% of
its respective property.
(2) The Operating Partnership's interests in some of the Properties held as
joint venture interests are subject to preferences on distributions in
favor of other partners.
(3) This property is managed by a third party.
(4) Indicates anchor is currently under construction.
(5) This retailer operates two stores at this property.
(6) Indicates ground lease covers less than 15% of the acreage of this
property.
(7) The Operating Partnership receives substantially all of the economic
benefit of these properties.
(8) Retailer vacated subsequent to December 31, 1997 and the space was sold to
Von Maur, which is scheduled to open in the fourth quarter of 1998.
(9) Indicates two ground leases which taken together, cover less than 50% of
the acreage of the property
(10) Indicates ground lease covers less than 50% of the acreage of the
property.
(11) Indicates anchor has closed, but the Operating Partnership still collects
rents and/or fees under an agreement
(12) Indicates this anchor is currently subleasing the space to other
retailers.
(13) Includes an anchor space currently vacant.
(14) Effective January 30, 1998, the Operating Partnership acquired an
additional 15% interest in Lakeline Mall and Lakeline Plaza.
(15) Indicates ground lease covers all of the property except for parcels owned
in fee by anchors.
(16) Primarily retail space with approximately 54,884 square feet of office
space.
(17) Primarily retail space with approximately 69,876 square feet of office
space.
(18) Primarily retail space with approximately 126,190 square feet of office
space.
(19) Primarily retail space with approximately 70,991 square feet of office
space.
(20) Indicates one ground lease covers substantially all of the property and a
second ground lease covers the remainder.
(21) Includes outlots in which the Operating Partnership has an 85% interest
and which represent less than 3% of the GLA and total annualized base rent
for the property.
(22) The Operating Partnership purchased the management contract on this
property during 1998.
(23) The Operating Partnership owns 60% of the original phase of this Property
and 55% of phase II, which opened in August 1997.
(24) Indicates a ground lease covers a pedestrian walkway and steps at this
property. The Operating Partnership, as ground lessee, has the right to
successive five-year renewal options, subject to specified exceptions.
(25) Primarily retail space with approximately 167,150 square feet of office
space.
(26) Primarily retail space with 486,723 square feet of office space.
(27) Primarily office space with approximately 12,800 square feet of retail
space.
(28) Primarily office space with approximately 24,300 square feet of retail
space.
(29) Indicates ground lease covers outparcel.
(30) Effective December 31, 1997, Eastgate Consumer Mall, Glen Burnie Mall,
Century Mall and Wichita Mall have been reclassified as community centers.
These Properties are currently being operated and marketed to tenant
operations which are typically included in community centers.
(31) The Operating Partnership demolished the previously existing regional
mall, Charles Towne Square, and is in the process of rebuilding this
community center and a cinema on the land.
(32) Lease was terminated subsequent to December 31, 1997.
(33) Subleased from TJX Companies.
(34) This Property was sold in 1998.
(35) Phase I is scheduled to open during May 1998 and phase II is scheduled to
open during November 1998.
(36) This center is scheduled to open during April 1998, however the OfficeMax
and T.J. Maxx opened in 1997.
(37) Scheduled to open during October 1998.
<PAGE>
Land Held for Development
The Operating Partnership has direct or indirect ownership interests in
nine parcels of land either in preconstruction development or being held for
future development, containing an aggregate of approximately 677 acres located
in eight states, and, through the Management Company, interest in a mortgage on
a parcel of land held for development containing approximately 134 acres.
Management believes that the Operating Partnership's significant base of
commercially zoned land, together with the Operating Partnership's status as a
fully integrated real estate firm, gives it a competitive advantage in future
development activities over other commercial real estate development companies
in its principal markets.
The following table describes the acreage of the parcels of land either in
preconstruction development or being held for future development in which the
Operating Partnership has an ownership interest, as well as the ownership
percentage of the Operating Partnership's interest in each parcel:
Ownership
Location Acreage Interest (1)
Bowie, MD 93.74 100%
Concord, NC 187.48 50%
Duluth, MN 11.17 100%
Hurst, TX 36.09 100%
Lafayette, IN 22.87 100%
Little Rock, AR 97.00 50%
Mt. Juliet, TN 109.26 100%
Sanford, FL 77.24 22.5%
Miami, FL 41.71 60%
-------
676.56
(1) The Operating Partnership has a direct ownership interest in each
parcel except Duluth, MN and Mt. Juliet, TN. The Operating Partnership
has the option to acquire those parcels from the Management Company.
The Management Company has granted options to the Operating Partnership
(for no additional consideration) to acquire for a period of ten years
(expiring December 2003) the Management Company's interest in the two parcels
of land held for development, indicated in footnote (1) to the above table, at
a price equal to the actual cost incurred to acquire and carry such properties.
The Management Company may not sell its interest in any parcel subject to
option through December 1998 without the consent of the Operating Partnership,
and thereafter, may only sell its interest subject to certain notice and first
purchase rights of the Operating Partnership.
The Management Company also holds indebtedness secured by 134 acres of
land held for development, Lakeview at Gwinnett ("Lakeview") in Gwinnett
County, Georgia, in which Melvin Simon, Herbert Simon and certain of their
affiliates (the "Simons") hold a 64% partnership interest. In addition, the
Management Company holds unsecured debt owed by the Simons as partners of this
partnership. The Management Company has an option to acquire the Simons'
partnership interests in Lakeview for nominal consideration in the event the
requisite partner consents to such transfers are obtained. The Management
Company is required to fund certain operating expenses and carrying costs of
the partnership that are owed by the Simons as partners thereof. The Management
Company has granted to the Operating Partnership the option to acquire (i) the
Simons' partnership interests and the secured debt or (ii) the property, if the
Management Company forecloses the secured indebtedness, for nominal
consideration plus the amount of all advances and outstanding debt.
<PAGE>
Joint Ventures
At certain of the Properties held as joint-ventures, the Operating
Partnership and its partners each have rights of first refusal, subject to
certain conditions, to acquire additional ownership in the Property should the
other partner decide to sell its ownership interest. In addition, certain of
the Properties held as joint ventures contain "buy-sell" provisions, which
gives the partners the right to trigger a purchase or sale of ownership
interest amongst the partners.
Mortgage Financing on Properties
The following table sets forth certain information regarding the mortgages
and other debt encumbering the Properties. All mortgage and property related
debt is nonrecourse, although certain Unitholders have guaranteed a portion of
the property related debt in the aggregate amount of $583.2 million.
<PAGE>
MORTGAGE AND OTHER DEBT ON PORTFOLIO PROPERTIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Annual
Interest Face Amount Debt Maturity
Property Name Rate @ 12/31/97 Service Date
- -------------------------------- -------- ----------- --------- --------
Consolidated Properties:
- ------------------------
Secured Indebtness
<S> <C> <C> <C> <C> <C> <C> <C>
Anderson Mall (1) 6.57% $ 19,000 $ 1,248 (2) 9/15/02
Barton Creek Square 8.10% 62,868 5,867 12/30/99
Battlefield Mall 7.50% 49,730 4,765 6/1/03
Biltmore Square 7.15% 27,534 2,795 1/1/01
Bloomingdale Court (3) 8.75% 29,009 2,538 (2) 12/1/00
Chesapeake Center 8.44% 6,563 554 (2) 5/15/15
Chesapeake Square 7.28% 49,490 4,883 1/1/01
Cielo Vista Mall - 1 (4) 9.38% 55,615 5,828 5/1/07
Cielo Vista Mall - 2 8.13% 2,323 189 (2) 7/1/04
College Mall (5) 7.00% 42,936 3,563 7/1/04
Columbia Center 7.62% 42,867 3,789 3/15/02
Crossroads Mall 7.75% 41,440 3,212 (2) 7/31/02
Crystal River 7.72% (6) 16,000 1,235 (2) 1/1/01
Eastgate Consumer Mall 6.00% (7) (8) 22,929 1,376 (2) 12/31/98
Eastland Mall 7.22% (9) 30,000 2,166 (2) 3/1/98
Edison Mall 6.37% (10) (11) 41,000 2,611 (2) 3/19/98
Forest Mall (1) 6.57% 12,800 841 (2) 9/15/02
Forest Plaza (3) 8.75% 16,904 1,479 (2) 12/1/00
Forest Village Park Mall (1) 6.57% 20,600 1,353 (2) 9/15/02
Forum Phase I - Class A-1 7.13% 46,997 3,349 (2) 5/15/04
Forum Phase I - Class A-2 6.02% (12) (13) 44,385 2,671 (2) 5/15/04
Forum Phase II - Class A-1 7.13% 43,004 3,064 (2) 5/15/04
Forum Phase II - Class A-2 6.02% (12) (13) 40,614 2,444 (2) 5/15/04
Fox River Plaza (3) 8.75% 12,654 1,107 (2) 12/1/00
Golden Ring Mall (1) 6.57% 29,750 1,955 (2) 9/15/02
Great Lakes Mall - 1 6.74% 53,410 4,354 3/1/01
Great Lakes Mall - 2 7.07% 8,608 724 3/1/99
Greenwood Park Mall (5) 7.00% 35,960 2,984 7/1/04
Grove at Lakeland Square, The 8.44% 3,750 317 (2) 5/15/15
Gulf View Square 8.25% 38,157 3,652 10/1/06
Highland Lakes Center 7.22% (9) 14,377 1,038 (2) 3/1/02
Hutchinson Mall (1) 8.44% 11,523 973 (2) 10/1/02
Ingram Park Mall - 1 8.10% 48,580 4,533 12/1/99
Ingram Park Mall - 2 9.63% 7,000 674 (2) 11/1/99
Jefferson Valley Mall 6.27% (14) (15) 50,000 3,134 (2) 1/12/00
Keystone at the Crossing 7.85% 64,772 5,085 7/1/27
La Plaza Mall 8.25% 50,044 4,677 12/30/99
Lake View Plaza (3) 8.75% 22,169 1,940 (2) 12/1/00
Lima Mall - 1 7.12% 14,377 1,215 3/1/02
Lima Mall - 2 7.12% 4,789 405 3/1/02
Lincoln Crossing (3) 8.75% 997 87 (2) 12/1/00
Longview Mall (1) 6.57% 22,100 1,452 (2) 9/15/02
Mainland Crossing 7.22% (9) 2,226 161 (2) 3/31/02
Markland Mall (1) 6.57% 10,000 657 (2) 9/15/02
Matteson Plaza (3) 8.75% 11,159 976 (2) 12/1/00
McCain Mall (4) 9.38% 26,059 2,721 5/1/07
Melbourne Square 7.42% 39,841 3,374 2/1/05
Miami International Mall 6.91% 47,009 3,758 12/21/03
Midland Park Mall (1) 6.57% 22,500 1,478 (2) 9/15/02
North East Mall 10.00% 22,201 2,475 9/1/00
North Riverside Park Plaza - 1 9.38% 4,054 452 9/1/02
North Riverside Park Plaza - 2 10.00% 3,617 420 9/1/02
North Towne Square (1) 6.57% 23,500 1,544 (2) 9/15/02
Northgate Shopping Center 7.62% 80,046 7,075 3/15/02
Orland Square 7.74% (16) (17) 50,000 3,871 (2) 9/1/01
Paddock Mall 8.25% 30,347 2,905 10/1/06
Port Charlotte Town Center 7.28% 46,102 3,857 1/1/01
Randall Park Mall 9.25% 33,879 4,338 1/1/11
Regency Plaza (3) 8.75% 1,878 164 (2) 12/1/00
River Oaks Center 8.67% 32,500 2,818 (2) 6/1/02
Riverway - 1 6.38% (18) (8) 85,571 5,455 (2) 12/31/98
<PAGE>
Riverway - 2 6.38% (18) (8) 45,880 2,925 (2) 12/31/98
Ross Park Mall 6.14% 60,000 3,684 (2) 8/15/98
Shops at Sunset Place, The 6.97% (19) 23,546 1,641 (2) 6/30/00
South Park Mall (1) 7.25% 24,748 1,794 (2) 6/15/03
St. Charles Towne Plaza (3) 8.75% 30,742 2,690 (2) 12/1/00
Sunland Park Mall (20) 8.63% 39,855 3,773 1/1/26
Tacoma Mall 7.62% 93,656 8,278 3/15/02
Terrace at Florida Mall, The 8.44% 4,688 396 (2) 5/15/15
Tippecanoe Mall (5) 8.45% 46,961 4,647 7/1/04
Towne East Square (5) 7.00% 56,767 4,711 7/1/04
Treasure Coast Square 7.42% 53,953 4,714 1/1/06
Trolley Square - 1 5.81% 19,000 1,104 (2) 7/23/00 (21)
Trolley Square - 2 7.22% (9) 4,641 335 (2) 7/23/00 (21)
Trolley Square - 3 7.22% (9) 3,500 253 (2) 7/23/00 (21)
University Park Mall 7.43% 59,500 4,421 (2) 10/1/07
Valle Vista Mall (4) 9.38% 34,514 3,604 5/1/07
West Ridge Plaza (3) 8.75% 4,612 404 (2) 12/1/00
White Oaks Mall - 55%/50% 7.70% 16,500 1,271 (2) 3/1/98
White Oaks Plaza (3) 8.75% 12,345 1,080 (2) 12/1/00
Windsor Park Mall - 1 8.00% 5,948 544 6/1/00
Windsor Park Mall - 2 8.00% 8,863 811 5/1/12
Cross - Collaterized Mortgages (22) 7.27% 175,000 12,720 (2) 12/19/04
Cross - Collaterized Mortgages (22) 6.08% (23) (24) 50,000 3,042 (2) 12/19/04
----------
Total Secured Indebtedness $ 2,705,333
Unsecured Indebtness
Simon DeBartolo Group, L.P.:
Unsecured Revolving Credit
Facility (25) 6.56% 952,000 62,490 (2) 9/27/99
Unsecured Notes - 1 6.88% 250,000 17,188 (26) 11/15/06
Putable Asset Trust Securities 6.75% 100,000 6,750 (26) 11/15/03
Medium Term Notes - 1 7.13% 100,000 7,125 (26) 6/24/05
Medium Term Notes - 2 7.13% 180,000 12,825 (26) 9/20/07
Unsecured Term Loan (Knoxville) 6.47% (27) 70,000 4,528 (2) 9/25/98
Unsecured Term Loan (Lincolnwood) 6.47% (28) 63,000 4,075 (2) 1/31/99
Unsecured Notes - 2A 6.75% 100,000 6,750 (26) 7/15/04
Unsecured Notes - 2B 7.00% 150,000 10,500 (26) 7/15/09
Unsecured Notes - 3 6.88% 150,000 10,313 (26) 10/27/05
-----------
2,115,000
Shopping Center Associates:
Unsecured Notes - SCA 1 6.75% 150,000 10,125 (26) 1/15/04
Unsecured Notes - SCA 2 7.63% 110,000 8,388 (26) 5/15/05
-----------
260,000
Total Unsecured Indebtedness $2,375,000
-----------
Total Indebtedness-Consolidated $5,080,333 (29)
===========
<PAGE>
Joint Venture Properties (30):
- ------------------------------
Arizona Mills 7.02% (31) (13) 121,991 8,562 (2) 2/1/02
Aventura Mall - 1 7.68% (32) 100,000 7,680 (2) 8/8/98
Aventura Mall - 2 9.75% (33) 5,500 1,678 8/8/98
Aventura Mall - 3 6.82% (34) 43,766 2,984 (2) 8/8/98
Avenues, The 8.36% 58,408 5,555 5/15/03
Century III Mall - 1 6.78% 66,000 4,475 (2) 7/1/03
Circle Centre Mall 6.16% (35) (36) 60,000 3,695 (2) 1/31/04
Cobblestone Court 7.22% (37) 6,180 446 (2) 11/30/05
Coral Square 7.40% 53,300 3,944 (2) 12/1/00
Crystal Court 7.22% (37) 3,570 258 (2) 11/30/05
Dadeland Mall 6.42% (38) 140,000 8,986 (2) 12/10/99
Fairfax Court 7.22% (37) 10,320 745 (2) 11/30/05
Florida Mall, The 8.65% (39) 75,000 6,488 (2) 12/1/98
Gaitway Plaza 7.22% (37) 7,350 531 (2) 11/30/05
Grapevine Mills 7.07% (40) 112,096 7,924 (2) 4/25/01
Great Northeast Plaza 9.04% 17,812 1,744 6/1/06
Indian River Commons 7.58% 8,399 637 (41) 11/1/04
Indian River Mall 7.58% 46,602 3,532 (41) 11/1/04
Lakeland Square 7.26% 52,961 4,368 12/22/03
Lakeline Mall 7.65% 73,620 6,300 5/1/07
Lakeline Plaza - 1 6.09% (42) 14,000 853 (2) 6/6/02
Northfield Square 9.52% 24,330 2,575 4/1/00
Ontario Mills - 1 7.37% (7) (43) 50,000 3,685 (2) 5/7/02
Ontario Mills - 2 7.21% (7) (44) 20,000 1,442 (2) 5/7/02
Ontario Mills - 3 7.46% (19) (44) 50,000 3,730 (2) 5/7/02
Ontario Mills - 4 0.00% (45) 4,450 0 (2) 12/28/09
Palm Beach Mall 8.21% 51,360 5,072 12/15/02
Plaza at Buckland Hills, The 7.22% (37) 17,680 1,276 (2) 11/30/05
Ridgewood Court 7.22% (37) 7,980 576 (2) 11/30/05
Royal Eagle Plaza 7.22% (37) 7,920 572 (2) 11/30/05
Seminole Towne Center 6.88% 70,500 4,850 (2) 1/1/06
Smith Haven Mall 7.86% 115,000 9,039 (2) 6/1/06
Source, The 7.07% (40) 108,428 7,665 (2) 7/16/01
Tower Shops, The 7.72% (6) 15,755 1,216 (2) 3/13/99
Village Park Plaza 7.22% (37) 8,960 647 (2) 11/30/05
West Town Corners 7.22% (37) 10,330 746 (2) 11/30/05
West Town Mall 6.90% 76,000 5,244 (2) 5/1/08
Westchester, The 8.74% 153,234 14,478 9/1/05
Westland Park Plaza 7.22% (37) 4,950 357 (2) 11/30/05
Willow Knolls Court 7.22% (37) 6,490 469 (2) 11/30/05
Yards Plaza, The 7.22% (37) 8,270 597 (2) 11/30/05
-----------
Total Joint Venture Properties
Indebtedness $1,888,512 (46)
===========
</TABLE>
<PAGE>
<TABLE>
<C> <S>
(1) Loans secured by these ten properties are cross-collateralized and cross-defaulted. The aggregate
principal amount of the loans is $196,521, with an annual debt service of $13,295, and weighted
average interest rate of 6.77%. The interest rate and maturity date of eight of these loans were
reset in October 1997 and all ten require monthly payments of interest only.
(2) Requires monthly payments of interest only.
(3) These ten properties are cross-defaulted.
(4) On January 31, 1997, the Operating Partnership closed on a restructure of these loans, which included
repaying the Irving Mall loan, paying $21,000 to remove the contingent interest feature and paying
down a total of $3,900 on two other Property loans with the same lender.
(5) Loans secured by these four properties are cross-collateralized and cross-defaulted. The aggregate
principal amount of the loans is $182,624, with an annual debt service of $15,905, and an interest
rate of 7.0% except for Tippecanoe Mall, which bears interest at 8.45%. During the term of these
loans, there is amortization of a portion of the principal amount.
(6) LIBOR + 2.000%.
(7) LIBOR + 1.000%.
(8) LIBOR Capped at 5.000%.
(9) LIBOR + 1.500%.
(10) LIBOR + 0.650%.
(11) LIBOR Capped at 8.350%.
(12) LIBOR + 0.300%.
(13) LIBOR Capped at 11.530%. On January 6, 1998, through an interest rate protection agreement, the
interest rate was effectively fixed at an all-in-one rate of 6.19%.
(14) LIBOR + 0.550%.
(15) LIBOR Capped at 8.700%.
(16) LIBOR + 0.500%.
(17) LIBOR Swapped at 7.242%.
(18) LIBOR + 1.375%.
(19) LIBOR + 1.250%.
(20) Lender also participates in a percentage of gross revenues above a
specified base.
(21) July 23, 2000 is the earliest date on which the lender may call the bonds.
(22) On September 2, 1997, a refinancing was completed 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 refinancing was funded, in part, with the proceeds of this $225
million loan, which is secured by cross-collateralized mortgages
encumbering seven of the Properties (Bay Park Square, Boardman Plaza,
Cheltenham Square, De Soto Square, Upper Valley Mall, Washington Square
and West Ridge Mall).
(23) LIBOR + 0.365%.
(24) Minimum LIBOR Cap at 12.553%.
(25) $1,250,000 unsecured revolving credit facility. Currently, bears interest at LIBOR + 0.65% and
provides for different pricing based upon the Operating Partnership's investment grade rating. As of
12/31/97 $284,300 was available, after outstanding borrowings and letters of credit.
(26) Requires semi-annual payments of interest only.
(27) LIBOR + 0.750%. In March of 1998, the interest rate was reduced to LIBOR + 0.65%.
(28) LIBOR + 0.750%. In January 1998, through an interest rate protection agreement, the interest rate was
effectively fixed at 6.14% through maturity.
(29) Includes minority interest partners' share ($132,824) of total consolidated indebtedness.
(30) As defined in the accompanying consolidated financial statments, Joint Venture Properties are those
accounted for using the equity method of accounting.
(31) LIBOR + 1.300%.
(32) Bank of Tokyo CD Rate + 0.900%.
(33) PRIME + 1.250%.
(34) LIBOR + 1.100%.
(35) LIBOR + 0.440%.
(36) LIBOR Capped at 8.810%.
(37) Rate is fixed at 7.22% through December 1998 and thereafter the rate is the greater of 7.22% or 2.0%
over the then current yield of a six month treasury bill selected by the lender.
(38) LIBOR + 0.700%.
(39) Commercial Paper rate + 0.750%.
(40) LIBOR + 1.350%.
(41) Loans require monthly interest payments only until they begin amortizing November, 2000.
(42) LIBOR + 0.375%.
(43) LIBOR Swapped at 6.370%.
(44) LIBOR Swapped at 6.210%.
(45) Beginning January 2000, this note will bear interest at 6.00%.
(46) Includes outside partners' share ($1,117,736) of indebtedness.
</TABLE>
<PAGE>
Item 3. Legal Proceedings
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 DPMI, and the plaintiffs are 27 former employees of the
defendants. In the complaint, the plaintiffs alleged 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 DRC Merger. Plaintiffs asserted 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 DRC Merger,
constituted a breach of contract and a breach of the implied covenant of good
faith and fair dealing under Ohio law. Plaintiffs sought 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 have appealed this judgment and the appeal is
pending. While it is difficult for the Company to predict the ultimate outcome
of this action, based on the information known to the Company to date, it is
not expected that this action will have a material adverse effect on the
Company or the Operating Partnership.
Roel Vento et al v. Tom Taylor et al. A subsidiary 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 $7.8 million has been entered against all defendants.
This judgment includes approximately $6.5 million 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.
Browning-Ferris Industries of Illinois, et al. v. Richard Ter Maat, et al.
v. Craig J. Cain, et al., Case No. 92 C 20259. On April 4, 1994, a third-party
action was filed by Richard Ter Maat and five other parties (collectively
referred to as "Third-Party Plaintiffs") named as defendants in the above
referenced litigation, which had begun in 1992, against Machesney Park
Associates (a predecessor to the Operating Partnership) (the "Affiliate") and
approximately 74 other parties (collectively referred to as "Third-Party
Defendants"). That third-party action alleged generally that the Third-Party
Defendants are liable under the Comprehensive Environmental response,
Compensation and Liability Act of 1980, 42 U.S.C. section 9601 et seq., and
under Illinois statutory and common law for certain response costs expended and
to be expended by Third-Party Plaintiffs in connection with the claims asserted
by Browning-Ferris Industries of Illinois and approximately 20 other parties
(collectively referred to as "Plaintiffs") against the Third-Party Plaintiffs.
In the original lawsuit, Plaintiffs sought reimbursement of response costs they
allegedly incurred and will incur in response to the release or threat of
release of hazardous substances from the M.I.G./Dewane Landfill located one
mile east of the City of Belvidere, in Boone County, Illinois (the "Site"), and
declaratory judgment on liability against Defendants for such response costs.
To date, the Plaintiffs have alleged response costs in excess of $5.0 million
in connection with the Site. In February 1996, the Affiliate settled this
pending litigation by the payment of $40,000 to the original Plaintiffs.
Pursuant to that settlement, the Operating Partnership agreed that it would
take part in a nonbinding arbitration or mediation at sometime in the future to
allocate expenses incurred in remediating the Site. No such arbitration or
mediation has yet been instituted. In addition, the Operating Partnership has
made a demand upon its insurer for indemnification with respect to the claims
asserted against the Operating Partnership in this matter. 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.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
Part II
Item 5. Market for Registrant and Related Unitholder Matters
There is no established public trading market for the Operating
Partnership's Units or preferred units (all of which are owned by the Company).
The following table sets forth for the periods indicated, the distributions
declared on the Units:
Declared
Distribution
1996
1st Quarter 1996 $0.4925
2nd Quarter 1996 $0.4925
3rd Quarter 1996 $0.1515 (1)
4th Quarter 1996 $0.4925
1997
1st Quarter 1997 $0.4925
2nd Quarter 1997 $0.5050
3rd Quarter 1997 $0.5050
4th Quarter 1997 $0.5050
(1) Represents a distribution declared in the third quarter of 1996
related to the DRC Merger, designated to align the time periods of
distribution payments of the merged entities. The current annual
distribution rate is $2.02 per Unit.
Holders
The number of holders of Units was 132 as of March 6, 1998.
Unregistered Sales of Equity Securities
The Operating Partnership did not issue any equity securities that were
not required to be registered under the Securities Act of 1933, as amended (the
"Act") during the fourth quarter of 1997, except as follows: On November 14,
1997, the Operating Partnership issued 841,114 Units in connection with the
acquisition of the remaining ownership interest of SCA. (see Note 3 to the
financial statements) The foregoing transaction was exempt from registration
under the Act in reliance on Section 4(2).
<PAGE>
Item 6. Selected Financial Data
The following table sets forth selected consolidated financial data for
the Operating Partnership and combined historical financial data of Simon
Property Group (the "Predecessor" of SPG, LP). The financial statements of the
Operating Partnership for periods after the DRC Merger reflect the reverse
acquisition of DeBartolo Realty Partnership, L.P. by the Company using the
purchase method of accounting. The financial statements for all pre-merger
comparative periods reflect the financial statements of SPG, LP the predecessor
for accounting purposes to SDG, LP. All references herein to the Operating
Partnership are to SDG, LP or SPG, LP as the case may be. The financial data
should be read in conjunction with the financial statements and notes thereto
and with Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Other data management believes is important in understanding trends in the
Operating Partnership's business is also included in the table.
<TABLE>
<CAPTION>
Prede-
The Operating Partnership cessor
December January
20 to 1 to
December December
For the Year Ended December 3l, 31, 19,
1997(1) 1996(1) 1995(1) 1994 1993 1993
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA: (in thousands, except per Unit data)
Total revenue $1,054,167 $ 747,704 $ 553,657 $473,676 $ 18,424 $405,869
Income before
extraordinary items 203,133 134,663 101,505 60,308 8,707 6,912
Net income (loss)
available to
Unitholders $ 173,943 $ 118,448 $ 96,730 $ 42,328 $(21,774) $ 33,101
BASIC EARNINGS PER
UNIT (2):
Income before
extraordinary items $ 1.08 $ 1.02 $ 1.08 $ 0.71 $ 0.11 N/A
Extraordinary items -- (0.03) (0.04) (0.21) (0.39) N/A
Net income (loss) $ 1.08 $ 0.99 $ 1.04 $ 0.50 $ (0.28) N/A
Weighted average Units
outstanding 161,023 120,182 92,666 84,510 78,447 N/A
DILUTED EARNINGS PER
UNIT (2):
Income before
extraordinary items $ 1.08 $ 1.01 $ 1.08 $ 0.71 $ 0.11 N/A
Extraordinary items -- (0.03) (0.04) (0.21) (0.39) N/A
Net income (loss) $ 1.08 $ 0.98 $ 1.04 $ 0.50 $ (0.28) N/A
Diluted weighted
average Units
outstanding 161,407 120,317 92,776 84,712 78,454 N/A
Distributions per Unit
(3) $ 2.01 $ 1.63 $ 1.97 $ 1.90 - N/A
BALANCE SHEET DATA:
Cash and cash
equivalents $ 109,699 $ 64,309 $ 62,721 $ 105,139 $ 110,625 N/A
Total assets 7,662,667 5,895,910 2,556,436 2,316,860 1,793,654 N/A
Mortgages and other 1,455,884
indebtedness 5,077,990 3,681,984 1,980,759 1,938,091 N/A
Limited partners' 843,373
interest (4) - - 908,764 909,306 N/A
Partners' equity $(791,820)
(deficit) $2,251,299 $1,945,174 $(589,126) $(807,613) N/A
OTHER DATA:
Cash flow provided by
(used in):
Operating activities $ 370,907 $ 236,464 $ 194,336 $ 128,023 N/A N/A
Investing activities (1,243,804) (199,742) (222,679) (266,772) N/A N/A
Financing activities 918,287 (35,134) (14,075) 133,263 N/A N/A
Funds from Operations N/A
(FFO) (5) $ 415,128 $ 281,495 $ 197,909 $ 167,761 N/A
</TABLE>
Notes
(1) Note 3 to the accompanying financial statements describes the DRC
Merger, which occurred on August 9, 1996, and the 1997, 1996, and 1995
real estate acquisitions and development.
(2) Per Unit data is reflected only for the Operating Partnership,
because the historical combined financial statements of the Predecessor
are a combined presentation of partnerships and corporations.
(3) Represents distributions declared per period. A distribution of
$0.1515 per Unit was declared on August 9, 1996, in connection with the
DRC Merger, designated to align the time periods of distributions of the
merged companies. The current annual distribution rate is $2.02 per Unit.
(4) See Note 11 for discussion regarding the accounting for Limited
Partners' Interest.
(5) Please refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations for a definition of Funds from
Operations.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the Selected
Financial Data, and all of the financial statements and notes thereto included
elsewhere herein. Certain statements made in this report may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Operating Partnership to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions, which
will, among other things, affect demand for retail space or retail goods,
availability and creditworthiness of prospective tenants, lease rents and the
terms and availability of financing; adverse changes in the real estate markets
including, among other things, competition with other companies and technology;
risks of real estate development and acquisition; governmental actions and
initiatives; and environmental/safety requirements.
Overview
The financial results reported reflect the merger completed on August 9,
1996 (the "DRC Merger") of Simon Property Group, Inc. and DeBartolo Realty
Corporation ("DRC"), in accordance with the purchase method of accounting,
valued at $3.0 billion. The DRC 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 gross leasable area ("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 ("RPT"). RPT owned 98.8% of Shopping Center Associates ("SCA"),
which owned or had interests in twelve regional malls and one community center,
comprising approximately twelve million square feet of GLA in eight states.
Following the completion of the tender offer, the SCA portfolio was
restructured. The Operating Partnership exchanged its 50% interests in two SCA
properties to a third party for similar interests in two other SCA properties,
in which it had 50% interests, with the result that SCA now owns interests in a
total of eleven properties. Effective November 30, 1997, the Operating
Partnership also acquired the remaining 50% ownership interest in another of
the SCA properties. In addition, an affiliate of the Operating Partnership
acquired the remaining 1.2% interest in SCA. At the completion of these
transactions, the Operating Partnership directly or indirectly now owns 100% of
ten of the eleven SCA properties, and 50% of the remaining property.
In addition, the Operating Partnership acquired ownership interests in or
commenced operations of several other Properties throughout the comparative
periods and, as a result, increased the number of Properties it accounts for
using the consolidated method of accounting (the "Property Transactions"). The
following is a listing of such transactions: On February 23, 1995, the
Operating Partnership acquired an additional 50% interest in White Oaks Mall,
increasing its ownership to 77%. On August 1, 1995, the Operating Partnership
purchased the remaining 50% ownership in Crossroads Mall. On September 25,
1995, the Operating Partnership acquired the remaining 55% ownership in
Knoxville Center. On April 11, 1996, the Operating Partnership acquired the
remaining 50% economic ownership interest in Ross Park Mall. On July 31, 1996,
the Operating Partnership opened the wholly-owned Cottonwood Mall in
Albuquerque, New Mexico. On August 29, 1997, the Operating Partnership opened
the 55%-owned, $89 million phase II expansion of The Forum Shops at Caesar's.
(see "Liquidity and Capital Resources" for additional information regarding
these transactions.)
Results of Operations
Year Ended December 31, 1997 vs. Year Ended December 31, 1996
Total revenue increased $306.5 million or 41.0% in 1997 as compared to
1996. This increase is primarily the result of the DRC Merger ($234.1 million),
the RPT acquisition ($30.6 million) and the Property Transactions ($28.4
million). Excluding these transactions, total revenues increased $13.4 million,
which includes a $15.4 million increase in minimum rent and a $7.1 million
increase in tenant reimbursements, partially offset by a $7.5 million decrease
in other income. The $15.4 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 $4.4 million increase in
<PAGE>
rents from tenants operating under license agreements. The $7.1 million
increase in tenant reimbursements is partially offset by a net increase in
recoverable expenses. The $7.5 million decrease in other income is primarily
the result of decreases in lease settlement income ($3.0 million), interest
income ($1.3 million) and gains from sales of peripheral properties ($1.7
million).
Total operating expenses increased $160.9 million, or 38.7%, in 1997 as
compared to 1996. This increase is primarily the result of the DRC Merger
($113.5 million), the RPT acquisition ($15.9 million), the Property
Transactions ($17.3 million), and the increase in depreciation and amortization
($10.1 million), primarily due to an increase in depreciable real estate
realized through renovation and expansion activities.
Interest expense increased $85.6 million, or 42.4% in 1997 as compared to
1996. This increase is primarily as a result of the DRC Merger ($61.1 million),
the RPT acquisition ($13.9 million) and the Property Transactions ($9.1
million).
The $0.1 million gain from extraordinary items in 1997 is the net result
of gains realized on the forgiveness of debt ($31.1 million) and the write-off
of net unamortized debt premiums ($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 ($18.4 million). The $3.5 million extraordinary loss in
1996 is the result of write-offs of mortgage costs associated with early
extinguishments of debt.
Income (loss) from unconsolidated entities increased from $9.5 million in
1996 to $19.2 million in 1997, resulting from an increase in the Operating
Partnership's share of M.S. Management Associates Inc.'s (the "Management
Company") income ($5.0 million) and an increase in its share of income from
partnerships and joint ventures ($4.6 million). The increase in Management
Company income is primarily the result of income realized through marketing
initiatives ($2.0 million) and the Operating Partnership's share of the
Management Company's gains on sales of peripheral property ($1.9 million). The
increase in the Operating Partnership's share of income from partnerships and
joint ventures is primarily the result of the DRC Merger ($4.9 million), the
RPT acquisition ($3.2 million), and the nonconsolidated joint-venture
Properties acquired or commencing operations during 1997 ($5.0 million),
partially offset by the increase in the amortization of the excess of the
Operating Partnership's investment over its share of the equity in the
underlying net assets of unconsolidated joint-venture Properties ($8.8
million).
Net income was $203.2 million in 1997, as compared to $131.1 million in
1996, reflecting an increase of $72.0 million, for the reasons discussed above,
and was allocated to the Company based on the Company's preferred unit
preference and ownership interest in the Operating Partnership during the
period.
Preferred unit requirement increased by $16.6 million to $29.2 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 net proceeds from the preferred stock issuances were contributed to
the Operating Partnership in exchange for preferred units of partnership
interest ("Preferred Units") with terms substantially identical to the
preferred stock issued by the Company. This increase was partially offset by a
reduction in preferred distributions ($2.0 million) resulting from the
conversion of the $100 million 8 1/8% Series A Preferred Units into 3,809,523
units of partnership interest of the Operating Partnership ("Units") on
November 11, 1997.
Year Ended December 31, 1996 vs. Year Ended December 31, 1995
Total revenue increased $194.0 million, or 35.0%, in 1996 as compared to
1995. Of this increase, $155.7 million and $37.7 million are attributable to
the DRC Merger and the Property Transactions, respectively. The remaining
increase includes net increases in minimum rent, lease settlements and
miscellaneous income of $9.3 million, $1.8 million and $2.3 million,
respectively, partially offset by a net decrease in tenant reimbursements of
$11.8 million. The minimum rent increase results from increases of $1.50 and
$0.36 in average base minimum rents per square foot for regional mall stores
and community shopping centers, respectively. Regional mall store leases
executed during 1996 were $4.86 per square foot greater than leases expiring;
community shopping center leases were $2.02 greater.
Total operating expenses increased $113.7 million, or 37.6%, in 1996 as
compared to 1995. Of this increase, $85.1 million and $18.6 million are the
result of the DRC Merger (including $7.2 million of integration costs) and the
Property Transactions, respectively. The remaining $10.0 million increase is
primarily the result of a net increase in depreciation and amortization ($8.9
million).
Interest expense increased $52.0 million, or 34.6%, to $202.2 million for
1996 as compared to $150.2 million for 1995. Of this increase, $41.1 million
and $15.4 million are attributable to the DRC Merger and the Property
<PAGE>
Transactions, respectively. In addition, the Operating Partnership realized
incremental interest expenses in 1996 related to borrowings used to acquire
additional ownership interests in and/or make equity investments in
unconsolidated joint venture properties of $4.9 million. Offsetting these
increases were interest savings realized as a result of restructuring the
Operating Partnership's credit facilities, from the proceeds of the Company's
6,000,000 share common stock offering on April 19, 1995, and from the proceeds
of the Series A preferred stock offering and a portion ($34.4 million) of the
proceeds of the Series B preferred stock offering, which were used to pay down
debt (described under "Financing and Debt").
Income (loss) from unconsolidated entities increased from $1.4 million in
1995 to $9.5 million in 1996, primarily resulting from an increase in the
Operating Partnership's share of the Management Company income ($9.2 million),
partially offset by a decrease in its share of income from partnerships and
joint ventures ($1.1 million). The increase in Management Company income is
primarily the result of the DRC Merger ($4.4 million) and the Management
Company's losses in 1995 related to the settlement of a mortgage receivable
($3.9 million) and the liquidation of a partnership investment ($1.0 million).
Extraordinary items of $3.5 million in 1996 and $3.3 million in 1995
result from write-offs of mortgage costs associated with early extinguishments
of debt.
Net income increased from $98.2 million in 1995 to $131.1 million in 1996,
an increase of $32.9 million, for the reasons discussed above, and was
allocated to the Company based on the Company's ownership interest during the
period.
Preferred Unit requirement increased by $11.2 million in 1996 as a result
of the Company's issuance of $100 million of 8 1/8% Series A convertible
preferred stock on October 27, 1995, and $200 million of 8 3/4% Series B
cumulative redeemable preferred stock on September 27, 1996, the proceeds of
which were contributed to the Operating Partnership in exchange for Preferred
Units with terms substantially identical to the preferred stock issued by the
Company.
Liquidity and Capital Resources
As of December 31, 1997, the Operating Partnership's balance of
unrestricted cash and cash equivalents was $109.7 million. In addition to its
cash balance, the Operating Partnership has a $1.25 billion unsecured revolving
credit facility (the "Credit Facility") which had $284.3 million available
after outstanding borrowings and letters of credit at December 31, 1997. The
Operating Partnership and the Company also have access to public equity and
debt markets. The Operating Partnership has a debt shelf registration statement
currently effective, under which $850 million in debt securities may be issued.
The Company has an equity shelf registration statement currently effective,
under which $950 million in equity securities may be issued.
Management anticipates that cash generated from operating performance will
provide the necessary funds on a short- and long-term basis for its operating
expenses, interest expense on outstanding indebtedness, recurring capital
expenditures, and distributions to Unitholders. Sources of capital for
nonrecurring capital expenditures, such as major building renovations and
expansions, as well as for scheduled principal payments, including balloon
payments, on outstanding indebtedness are expected to be obtained from: (i)
excess cash generated from operating performance; (ii) working capital
reserves; (iii) additional debt financing; and (iv) additional equity raised in
the public markets.
Sensitivity Analysis. The Operating Partnership's future earnings, cash
flows and fair values relating to financial instruments is primarily dependent
upon prevalent market rates of interest, such as LIBOR. Based upon consolidated
indebtedness and interest rates at December 31, 1997, a 1% increase in the
market rates of interest would decrease future earnings and cash flows by
approximately $14 million, and would decrease the fair value of debt by
approximately $505 million. A 1% decrease in the market rates of interest would
increase future earnings and cash flows by approximately $14 million, and would
increase the fair value of debt by approximately $683 million.
Financing and Debt
At December 31, 1997, the Operating Partnership had consolidated debt of
$5,078.0 million, of which $3,467.6 million is fixed-rate debt bearing interest
at a weighted average rate of 7.4% and $1,610.4 million is variable-rate debt
bearing interest at a weighted average rate of 6.4%. As of December 31, 1997,
the Operating Partnership had interest rate protection agreements related to
$430.4 million of consolidated variable-rate debt. In addition, interest rate
protection agreements which effectively fix the interest rates on an additional
$148 million of consolidated variable-rate debt were obtained in January of
1998. The Operating Partnership's hedging activity as a result of these
interest rate protection agreements resulted in net interest savings of $1.6
million for the year ended December 31, 1997. This did not materially impact
the Operating Partnership's weighted average borrowing rates.
<PAGE>
Scheduled principal payments of consolidated mortgage indebtedness over
the next five years is $2,638 million, with $2,442 million thereafter. The
Operating Partnership's ratio of consolidated debt-to-market capitalization was
46.0% and 41.5% at December 31, 1997 and 1996, respectively.
The following summarizes significant financing and refinancing transactions
completed in 1997:
Secured Indebtedness. 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 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 opened
on August 29, 1997. As of December 31, 1997, $8.6 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 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 and borrowings of $294 million under the Credit
Facility, which were later reduced with the proceeds from the sale of $180
million of notes issued on September 10, 1997, as described below.
Subsequently, on December 22, 1997, the Operating Partnership retired the $225
million secured loan with the net proceeds from a $225 million series of
multiclass mortgage pass-through certificates. This new facility includes six
classes of certificates cross-collaterallized by the same seven Properties as
the original $225 million secured loan and matures on December 19, 2004. Five
of the six classes covering $175 million bear fixed interest rates ranging from
6.716% to 8.233%, with the remaining $50 million class bearing interest at
LIBOR plus 0.365%.
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.
Credit Facility. During 1997, the Operating Partnership obtained several
improvements to its Credit Facility. The Credit Facility agreement was amended
to increase the borrowing limit to $1.25 billion and reduce the interest rate
from LIBOR plus 0.90% to LIBOR plus 0.65%. In addition, the Credit Facility's
competitive bid feature, which has further reduced interest costs, was
increased from $150 million to $625 million.
Medium Term Notes. 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.
On September 10, 1997, the Operating Partnership issued an additional $180
million principal amount of notes under its MTN program, which 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.
Equity Financings. 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 Company intends to redeem
the Series C Preferred Shares prior to October 1, 2012. The Company contributed
the net proceeds of this offering of approximately $146 million to the
Operating Partnership in exchange for preferred units with terms 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.
During 1997, the Company and the Operating Partnership issued 8,051,924
additional shares of common stock and 876,712 additional Units, respectively,
in public and private offerings, at prices ranging from $30.09 to $33.25 per
share/Unit, and generating net proceeds of approximately $286 million. The
proceeds of such offerings were used primarily to acquire additional ownership
interests in Properties and to repay existing indebtedness.
Unsecured Notes. 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, and contain covenants relating to minimum leverage, EBITDA and
unencumbered EBITDA ratios.
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
nonconvertible investment grade 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. Subsequently, on
October 22, 1997, the Operating Partnership completed the sale of $150 million
of its eight-year non-convertible senior unsecured debt securities under this
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, 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.
Other. During 1997, in connection with the RPT acquisition, the Operating
Partnership assumed consolidated mortgages of $123.5 million, unsecured debt
totaling $275.0 million and a pro-rata share of joint venture mortgage
indebtedness of $76.8 million.
Acquisitions and Investment
Management continues to actively review and evaluate a number of
individual property and portfolio acquisition opportunities. Management
believes that funds on hand, amounts available under the Credit Facility,
together with the ability to issue shares of common stock and/or Units, provide
the means to finance certain 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.
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 $53.8 million at December 31, 1997. In
connection with this transaction 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 an additional 48%
interest in West Town Mall in Knoxville, Tennessee for $67.4 million and 35,598
Units valued at approximately $1.1 million. This transaction increased the
Operating Partnership's ownership of West Town Mall to 50%.
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. 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.
As described previously, during 1997 the Operating Partnership completed
the purchase of RPT and its subsidiary SCA, which owned or had interests in
twelve regional malls and one community center, comprising approximately twelve
million square feet of GLA in eight states. The Operating Partnership exchanged
its 50% interests in two SCA properties to a third party for similar interests
in two other SCA properties, in which it had 50% interests, with the result
that SCA now owns interests in a total of eleven properties. Effective November
<PAGE>
30, 1997, the Operating Partnership also acquired the remaining 50% ownership
interest in another of the SCA properties. The Operating Partnership now owns
100% of ten of the eleven SCA properties acquired, and a noncontrolling 50%
interest in the remaining property. The total cost for the acquisition of RPT
and related transactions is estimated at $1.3 billion, including shares of the
Company's common stock valued at approximately $50 million, Units valued at
approximately $25.3 million, the assumption of $398.5 million of consolidated
indebtedness and the Operating Partnership's $76.8 million pro rata share of
joint venture indebtedness.
On December 29, 1997, the Operating Partnership formed a joint venture
partnership with The Macerich Company ("Macerich") to acquire a portfolio of
twelve regional malls comprising approximately 10.7 million square feet of GLA.
This transaction closed on February 27, 1998 at a total purchase price of
$974.5 million, including the assumption of $485.0 million of indebtedness. The
Operating Partnership and Macerich were each responsible for one half of the
purchase price, including indebtedness assumed and each assumed leasing and
management responsibilities for six of the regional malls. The Operating
Partnership funded its share of the cash due at closing with a new six-month
$242.0 million unsecured loan which bears interest at 6.42%. The Operating
Partnership owns 50% of this joint venture.
On December 30, 1997, the Operating Partnership acquired The Fashion Mall
at Keystone at the Crossing, a 651,671 square-foot regional mall, along with an
adjacent 29,140 square-foot community center, in Indianapolis, Indiana for
$124.5 million, including the assumption of a $64.8 million mortgage. These
Properties are wholly-owned by the Operating Partnership.
On December 31, 1997, the Operating Partnership acquired the remaining 30%
ownership interest in Virginia Center Commons as well as the management
contract on that Property for a total of $2.3 million. The Operating
Partnership now owns 100% of this Property.
On January 26, 1998, the Operating Partnership acquired Cordova Mall in
Pensacola, Florida for $87.3 million, which included the assumption of a $28.9
million mortgage and 1,713,016 Units, valued at approximately $55.5 million.
This 874,000 square-foot regional mall is wholly-owned by the Operating
Partnership.
See Note 3 to the consolidated financial statements for 1996 and 1995
acquisition activity.
Development Activity
Development activities are an ongoing part of the Operating Partnership's
business. The Operating Partnership opened one new regional mall, two value-
oriented super-regional malls and one new community shopping center during
1997. On September 5, 1997, the Operating Partnership opened The Source, a
730,000 square-foot regional mall in Westbury (Long Island), New York. On
October 31, 1997 the Operating Partnership opened Grapevine Mills, a 1.2
million square feet value-oriented super-regional mall in Grapevine
(Dallas/Fort Worth), Texas, and on November 20, 1997, the Operating Partnership
opened Arizona Mills, a 1.2 million square-foot value-oriented super-regional
mall in Tempe, Arizona. In March 1997, the Operating Partnership opened Indian
River Commons, a 260,000 square-foot community shopping center in Vero Beach,
Florida, which is immediately adjacent to an existing regional mall Property.
The Operating Partnership has joint venture partners on each of these
Properties and accounts for them using the equity method of accounting.
Construction also continues on the following projects:
*The Shops at Sunset Place, a destination-oriented retail and entertainment
project containing approximately 510,000 square feet of GLA is scheduled to
open in October of 1998 in South Miami, Florida. The Operating Partnership owns
75% of this $149 million project. Construction financing of $115 million closed
on this property in June 1997. The loan initially bears interest at LIBOR plus
125 basis points and matures on June 30, 2000.
*Muncie Plaza, a 196,000 square-foot community center project, is scheduled
to open in April of 1998 in Muncie, Indiana, adjacent to Muncie Mall. This
approximately $14 million project is wholly-owned by the Operating Partnership.
*Lakeline Plaza, a 380,000 square-foot community center project, is
scheduled to open in two phases in May and November of 1998 in Austin, Texas,
adjacent to Lakeline Mall. On January 30, 1998, the Operating Partnership
increased its ownership interest in this approximately $34 million project from
50% to 65%.
<PAGE>
In addition, the Operating Partnership is in the preconstruction
development phase on a new value-oriented super-regional mall, a factory outlet
center and a new community center project. Concord Mills, an approximately $200
million development, is scheduled to open in 1999. This 1,400,000 square-foot
value-oriented super-regional mall development project is 50%-owned by the
Operating Partnership. Houston Premium Outlets is a 462,000 square-foot factory
outlet project in Houston, Texas. This approximately $89 million project, of
which the Operating Partnership has a 50% ownership interest in, is scheduled
to begin construction in 1998 and open in 1999. The Shops at North East Mall,
an approximately $55 million development, which is immediately adjacent to
North East Mall, an existing regional mall in the Company's portfolio, is
scheduled to open in Hurst, Texas, in 1999. This 391,000 square-foot
development project is wholly-owned by the Operating Partnership.
Strategic Expansions and Renovations
A key objective of the Operating Partnership is to increase the
profitability and market share of the Properties through the completion of
strategic renovations and expansions. In 1997, the Operating Partnership
completed construction and opened fourteen major expansion and/or renovation
projects: Alton Square in Alton, Illinois; Aventura Mall in Miami, Florida;
Chautauqua Mall in Jamestown, New York; Columbia Center in Kennewick,
Washington; The Forum Shops at Caesar's in Las Vegas, Nevada; Knoxville Center
in Knoxville, Tennessee; La Plaza in McAllen, Texas; Muncie Mall in Muncie,
Indiana; Northfield Square in Bradley, Illinois; Northgate Mall in Seattle,
Washington; Orange Park Mall in Jacksonville, Florida; Paddock Mall in Ocala,
Florida; Richmond Square in Richmond, Indiana; and Southern Park Mall in
Youngstown, Ohio.
The Operating Partnership currently has four major expansion projects
under construction, and is in the preconstruction development stage with two
additional major expansion projects. The aggregate cost of the projects is
approximately $208 million.
* A 255,000 square-foot small shop expansion and the addition of a 24-screen
AMC Theatre complex to Aventura Mall in Miami, Florida, are scheduled to open
in March 1998. Lord & Taylor, Macy's, JCPenney and Sears are also expanding at
this Property. In addition, the Operating Partnership added a Bloomingdales to
this project in November of 1997. The Operating Partnership has a 33% ownership
interest in this project.
* A 180,000 square-foot small shop expansion of The Florida Mall in Orlando,
Florida, as well as the addition of Burdines, is scheduled for completion in
the winter of 1999. The Operating Partnership has a 50% ownership interest in
this project. Dillard's, Gayfers, JCPenney and Sears are also expanding.
* A 68,000 square-foot small shop expansion of Prien Lake Mall in Lake
Charles, Louisiana, as well as the addition of Dillard's and Sears, is
scheduled for completion in the winter of 1998. The Operating Partnership owns
100% of Prien Lake Mall.
The Operating Partnership has a number of smaller renovation and/or
expansion projects currently under construction aggregating approximately $105
million, of which the Operating Partnership's share is approximately $100
million. In addition, preconstruction development continues on a number of
project expansions, renovations and anchor additions at additional properties.
The Operating Partnership expects to commence construction on many of these
projects in the next 12 to 24 months.
It is anticipated that these projects will be financed principally with
access to debt and equity markets, existing credit facilities and cash flow
from operations.
Capital Expenditures
Capital expenditures, excluding acquisitions, were $330.9 million, $211.4
million and $102.9 million for the periods ended December 31, 1997, 1996 and
1995, respectively.
1997 1996 1995
New Developments $ 79.9 $ 80.1 $ 29.7
Renovations and Expansions 196.6 86.3 38.9
Tenant Allowances--Retail 36.7 24.0 17.2
Tenant Allowances--Offices 1.2 6.1 4.3
Capital Expenditures
Recoverable from Tenants 12.9 11.4 8.0
Other 3.6 3.5 4.8
Total $ 330.9 $ 211.4 $ 102.9
<PAGE>
Distributions
The Operating Partnership declared distributions on its Units in 1997
aggregating $2.01 per Unit. On January 23, 1998, the Operating Partnership
declared a distribution of $0.5050 per Unit payable on February 20, 1998, to
Unitholders of record on February 6, 1998. The current annual distribution rate
is $2.02 per Unit. For federal income tax purposes, 35% of the 1997 Unit
distributions and 64% of the 1996 Unit distributions represented a return of
capital. Future distributions will be determined based on actual results of
operations and cash available for distribution.
Investing and Financing Activities
Cash used in investing activities for the year ended December 31, 1997 of
$1,243.8 million is primarily the result of acquisitions of $980.4 million,
$305.2 million of capital expenditures, advances to the Management Company of
$18.4 million and other investing activities of $55.4 million, including $50.0
million for the purchase of Chelsea stock, partially offset by net
distributions from unconsolidated entities of $97.7 million and cash received
from the acquisition of RPT of $19.7 million. Cash paid for acquisitions
includes $745.5 million for the RPT acquisition and related transactions,
$108.0 million for Dadeland Mall, $66.3 million for West Town Mall and $60.6
million for the acquisition of The Fashion Mall at Keystone at the Crossing and
Keystone Shoppes. Capital expenditures includes development costs of $62.6
million, including $31.0 million at The Shops at Sunset Place, $11.3 million at
Muncie Plaza, $7.0 million at Cottonwood Mall and $11.2 million for the
acquisition of the land ($9.2 million) and other development costs ($2.0
million) at The Shops at North East Mall. Also included in capital expenditures
is renovation and expansion costs of approximately $191.6 million, including
$34.7 million, $15.6 million, $15.1 million, $12.2 million, and $10.6 million
for the phase II expansion of Forum Shops at Caesar's, Miami International
Mall, Northgate Mall, Charles Towne Square and Knoxville Center, respectively,
and tenant costs and other operational capital expenditures of approximately
$51.0 million. Net distributions from unconsolidated entities is primarily due
to reimbursements of $70.1 million and $38.8 million from Dadeland Mall and
West Town Mall, respectively, as a result of mortgages obtained on those
Properties during 1997.
Cash received from financing activities for the year ended December 31,
1997 of $918.3 million includes contributions from the Company of the net
proceeds from the sales its common stock and Series C preferred stock of $344.4
million and net borrowings of $945.5 million, partially offset by partnership
distributions of $350.4 million and $21.0 million for the retirement of a
contingent interest feature on four mortgage loans. Net borrowings were used
primarily to fund the acquisition of RPT and the related transactions ($757.0
million), other acquisitions ($180.0 million) and development and investment
activity.
<PAGE>
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
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
the Operating Partnership's 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 the Operating Partnership's
liquidity.
Total EBITDA for the Properties increased from $346.7 million in 1993 to
$940.0 million in 1997, representing a compound annual growth rate of 28.3%. Of
this growth, $336.8 million, or 56.8%, is a result of the DRC Merger and $34.5
million or 5.8% is a result of the RPT acquisition. The remaining growth in
total EBITDA reflects the addition of GLA to the Portfolio Properties through
property acquisitions, developments and expansions, increased rental rates,
increased tenant sales, improved occupancy levels and effective control of
operating costs. During this period, the operating profit margin increased from
58.6% to 64.4%. This improvement is also primarily attributable to aggressive
leasing of new and existing space and effective control of operating costs.
The following summarizes total EBITDA for the Portfolio Properties and the
operating profit margin of such properties, which is equal to total EBITDA
expressed as a percentage of total revenue:
For the Year Ended December 31,
1997 1996 1995 1994 1993
(in thousands)
EBITDA of consolidated
Properties $677,930 $467,292 $343,875 $290,243 $244,397
EBITDA of unconsolidated
Properties 262,098 148,030 93,673 96,592 102,282
Total EBITDA of Portfolio
Properties (1) $940,028 $615,322 $437,548 $386,835 $346,679
EBITDA after minority
interest (2) $746,842 $497,215 $357,158 $307,372 $256,169
Increase in total EBITDA
from prior period 52.8% 40.6% 13.1% 11.6% 9.5%
Increase in EBITDA after
minority interest from
prior period 50.2% 39.2% 16.2% 20.0% 12.4%
Operating profit margin of
the Portfolio Properties
64.4% 62.5%(3) 63.1% 61.9% 58.6%
(1) On a pro forma basis, assuming the DRC Merger and the RPT acquisition
and related transactions had occurred on January 1, 1996, EBITDA would
be $1,019 million and $911 million in 1997 and 1996, respectively,
representing an 11.8% growth.
(2) EBITDA after minority interest represents earnings before interest,
taxes, depreciation and amortization for all Properties after
distribution to the third-party joint ventures' partners.
(3) The 1996 operating profit margin, excluding the $7.2 million merger
integration costs, is 63.2%.
<PAGE>
Funds from Operations ("FFO")
FFO, as defined by NAREIT, means the consolidated net income of the
Operating Partnership and its subsidiaries without giving effect to real estate
related 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 of the Operating Partnership. The Operating
Partnership's method of calculating FFO may be different from the methods used
by other REITS. FFO: (i) does not represent cash 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 the Operating
Partnership's 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 the Operating Partnership's liquidity. In March 1995, NAREIT
modified its definition of FFO. The modified definition provides that
amortization of deferred financing costs and depreciation of nonrental real
estate assets are no longer to be added back to net income in arriving at FFO.
This modification was adopted by the Operating Partnership beginning in 1996.
Additionally the FFO for prior periods has been restated to reflect the
modification in order to make the amounts comparative. Under the previous
definition, FFO for the year ended December 31, 1995 was $208.3 million.
The following summarizes FFO of the Operating Partnership and reconciles
income before extraordinary items to FFO for the periods presented:
For the Year Ended December 31,
1997 1996 1995
(in thousands)
FFO of the Operating Partnership $ 415,128 $ 281,495 $ 197,909
Increase in FFO from prior period 47.5% 42.2% 18.0%
Reconciliation:
Income before extraordinary items $ 203,133 $ 134,663 $ 101,505
Plus:
Depreciation and amortization from
consolidated properties 200,084 135,226 92,274
The Operating Partnership's share of
depreciation and amortization and
extraordinary items from unconsolidated
affiliates 46,760 20,159 6,466
Merger integration costs -- 7,236 --
The Operating Partnership's share of
(gains) or losses on sales of real estate
(20) (88) 2,054
Less:
Minority interest portion of depreciation,
and amortization and extraordinary items
(5,581) (3,007) (2,900)
Preferred Unit requirement (29,248) (12,694) (1,490)
FFO of the Operating Partnership $ 415,128 $ 281,495 $ 197,909
Portfolio Data
Operating statistics give effect to the DRC 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 Charles Towne Square, Richmond Town Square and Mission Viejo
Mall, which are all undergoing extensive redevelopment. The value-oriented
super-regional mall category consists of Arizona Mills, Grapevine Mills and
Ontario Mills.
Aggregate Tenant Sales Volume and Sales per Square Foot. From 1994 to
1997, total reported retail sales at mall and freestanding GLA owned by the
Operating Partnership ("Owned GLA") in the regional malls and value-oriented
super-regional malls, and all reporting tenants at community shopping centers
increased 25.3% from $7,611 million to $9,539 million, a compound annual growth
rate of 7.8%. Retail sales at Owned GLA affect revenue and profitability levels
<PAGE>
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.
The following illustrates the total reported sales of tenants at Owned
GLA:
Annual
Total Tenant Percentage
Year Ended December 31, Sales (in Increase
millions)
1997 $ 9,539 20.4%
1996 7,921 3.6
1995 7,649 0.5
1994 7,611 4.7
Regional mall sales per square foot increased 8.8% in 1997 to $315 as
compared to $290 in 1996. In addition, sales per square foot of reporting
tenants operating for at least two consecutive years ("Comparable Sales")
increased from $298 to $318, or 6.7%, from 1996 to 1997. The Operating
Partnership believes its strong sales growth in 1997 is the result of its
aggressive retenanting efforts and the redevelopment of many of the Properties.
Sales per square foot at the community shopping centers decreased in 1997 to
$183 as compared to $187 in 1996. Sales statistics for value-oriented super-
regional malls are not provided as this category is comprised of new malls with
insufficient history to provide meaningful comparisons.
Occupancy Levels. Occupancy levels for regional malls increased from 84.7%
at December 31, 1996, to 87.3% at December 31, 1997. Occupancy levels for value-
oriented super-regional malls was 93.8% at December 31, 1997. Occupancy levels
for community shopping centers decreased slightly, from 91.6% at December 31,
1996, to 91.3% at December 31, 1997. Owned GLA has increased 10.7 million
square feet from December 31, 1996, to December 31, 1997, primarily as a result
of the RPT acquisition, the acquisitions of Dadeland Mall, The Fashion Center
at Keystone at the Crossing, and Keystone Shoppes and the 1997 Property
openings.
Occupancy Levels
Value-
Oriented Community
Regional Regional Shopping
December 31, Malls Malls Centers
1997 87.3% 93.8% 91.3%
1996 84.7 N/A 91.6
1995 85.5 N/A 93.6
1994 85.6 N/A 93.9
Tenant Occupancy Costs. Tenant occupancy costs as a percentage of sales
increased slightly from 11.4% in 1996 to 11.5% in 1997 in the regional mall
portfolio, excluding the SCA Properties. A tenant's ability to pay rent is
affected by the percentage of its sales represented by occupancy costs, which
consist of rent and expense recoveries. As sales levels increase, if expenses
subject to recovery are controlled, the tenant can pay higher rent. Management
believes the Operating Partnership is one of the lowest-cost providers of
retail space, which has permitted the rents in both regional malls and
community shopping centers to increase without raising a tenant's total
occupancy cost beyond its ability to pay. Management believes continuing
efforts to increase sales while controlling property operating expenses will
continue the trend of increasing rents at the Properties.
Average Base Rents. Average base rents per square foot of mall and
freestanding Owned GLA at regional malls increased 28.7%, from $18.37 in 1994
to $23.65 in 1997. Average base rents per square foot of Owned GLA at value-
oriented super-regional malls was $16.20 in 1997. In community shopping
centers, average base rents of Owned GLA increased 4.5%, from $7.12 in 1994 to
$7.44 in 1997.
<PAGE>
The following highlights this trend:
Average Base Rent per Square Foot
Mall and Freestanding Stores at:
----------------------------------
Value-
Oriented Community
Year Ended Regional % Regional % Shopping %
December 31, Malls Change Malls Change Centers Change
1997 $23.65 14.4% $16.20 N/A $7.44 (2.7%)
1996 20.68 7.8 N/A N/A 7.65 4.9
1995 19.18 4.4 N/A N/A 7.29 2.4
1994 18.37 3.8 N/A N/A 7.12 N/A
Inflation
Inflation has remained relatively low during the past four years and has
had a minimal impact on the operating performance of the Properties.
Nonetheless, substantially all of the tenants' leases contain provisions
designed to lessen the impact of inflation. Such provisions include clauses
enabling the 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.
Year 2000 Costs
Management continues to assess the impact of the Year 2000 Issue on its
reporting systems and operations. The Year 2000 Issue exists because many
computer systems and applications abbreviate dates by eliminating the first two
digits of the year, assuming that these two digits would always be "19". Unless
corrected, this shortcut would cause problems when the century date occurs. On
that date, some computer programs may misinterpret the date January 1, 2000 as
January 1, 1900. This could cause systems to incorrectly process critical
financial and operational information, or stop processing altogether.
To help facilitate the Operating Partnership's continued growth,
substantially all of the computer systems and applications in use in its home
office in Indianapolis have been, or are in the process of being, upgraded and
modified. The Operating Partnership is of the opinion that, in connection with
those upgrades and modifications, it has addressed applicable Year 2000 Issues
as they might affect the computer systems and applications located in its home
office. The Operating Partnership continues to evaluate what effect, if any the
Year 2000 Issue might have at its Portfolio Properties. The Operating
Partnership anticipates that the process of reviewing this issue at the
Portfolio Properties and the implementation of solutions to any Year 2000 Issue
which it may discover will require the expenditure of sums which the Operating
Partnership does not expect to be material. Management expects to have all
systems appropriately modified before any significant processing malfunctions
could occur and does not expect the Year 2000 Issue will materially impact the
financial condition or operations of the Operating Partnership.
Definitive Merger Agreement
Effective February 18, 1998, the Company and Corporate Property Investors
("CPI") signed a definitive agreement to merge the two companies. The merger is
expected to be completed in the third quarter of 1998 and is subject to
approval by the shareholders of the Company as well as customary regulatory and
other conditions. A majority of the CPI shareholders have already approved the
transaction. Under the terms of the agreement, the shareholders of CPI will
receive, in a reverse triangular merger, consideration valued at $179 for each
share of CPI common stock held consisting of $90 in cash, $70 in the Company's
common stock and $19 worth of 6.5% convertible preferred stock. The common
<PAGE>
stock component of the consideration is based upon a fixed exchange ratio using
the Company's February 18, 1998 closing price of $33 5/8 per share, and is
subject to a 15% symmetrical collar based upon the price of the Company's
common stock determined at closing. In the event the Company's common stock
price at closing is outside the parameters of the collar, an adjustment will be
made in the cash component of consideration. The total purchase price,
including indebtedness which would be assumed, is estimated at $5.8 billion.
Seasonality
The shopping center industry is seasonal in nature, particularly in the
fourth quarter during the holiday season, when tenant occupancy and retail
sales are typically at their highest levels. In addition, shopping malls
achieve most of their temporary tenant rents during the holiday season. As a
result of the above, earnings are generally highest in the fourth quarter of
each year.
Item 7A. Qualitative and Quantitative Disclosure About Market Risk
Reference is made to Item 7 of this Form 10-K under the caption "Liquidity
and Capital Resources".
Item 8. Financial Statements and Supplementary Data
Reference is made to the Index to Financial Statements contained in Item
14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
The general partners of the Operating Partnership are the Company and SD
Property Group, Inc., a majority owned subsidiary of the Company. SD Property
Group, Inc. is the managing general partner of the Operating Partnership. The
directors and executive officers of the Company also hold the same offices with
SD Property Group, Inc. The information required by this item is incorporated
herein by reference to the Company's Form 10-K/A (Amendment No. 2) and is
included under the caption "EXECUTIVE OFFICERS OF THE REGISTRANT" in Part I
hereof.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to
the Company's Form 10-K/A (Amendment No. 2).
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by reference to
the Company's Form 10-K/A (Amendment No. 2).
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by reference to
the Company's Form 10-K/A (Amendment No. 2).
<PAGE>
Part IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a) (1) Financial Statements
Report of Independent Public Accountants
Simon DeBartolo Group, L.P. Consolidated Balance Sheets as of
December 31, 1997 and 1996
Simon DeBartolo Group, L.P. Consolidated Statements of
Operations for the years ended December 31, 1997, 1996 and 1995
Simon DeBartolo Group, L.P. Consolidated Statements of Changes
in Partners' Equity for the years ended December 31, 1997, 1996
and 1995
Simon DeBartolo Group, L.P. Consolidated Statements of Cash
Flows for the years ended December 31, 1997, 1996 and 1995
Notes to Financial Statements
(2) Financial Statement Schedules
Report of Independent Public Accountants
Schedule III - Schedule of Real Estate and Accumulated Depreciation
Notes to Schedule III
(3) Exhibits
The Exhibit Index attached hereto is hereby incorporated by
reference to this Item.
(b) Reports on Form 8-K
Two Forms 8-K were filed during the fourth quarter ended
December 31, 1997.
On October 14, 1997. Under Item 5 - Other Events, the Operating
Partnership reported that it completed its cash tender offer to
purchase all of the outstanding beneficial interests in The
Retail Property Trust. In addition, under Item 7 - Financial
Statements and Exhibits, the Operating Partnership included, as
an exhibit, a press release which outlined additional
information regarding the offer.
On October 27, 1997. Under Item 5 - Other Events, the Operating
Partnership reported the offering and sale of $150 million
aggregate principal amount of its 6 7/8% Notes due October 27,
2005. 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.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Simon DeBartolo Group, Inc.:
We have audited the accompanying consolidated balance sheets of SIMON DeBARTOLO
GROUP, L.P. (a Delaware limited partnership) and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, partners' equity and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Operating Partnership's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Simon DeBartolo
Group, L.P. and subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana
February 17, 1998
<PAGE>
Balance Sheets
Simon DeBartolo Group, L.P. Consolidated
(Dollars in thousands, except per unit
amounts)
December 31, December 31,
1997 1996
----------- -----------
ASSETS:
Investment properties, at cost $6,867,354 $5,301,021
Less - accumulated depreciation 461,792 279,072
----------- -----------
6,405,562 5,021,949
Cash and cash equivalents 109,699 64,309
Restricted cash 8,553 6,110
Tenant receivables and accrued revenue, net 188,359 166,119
Notes and advances receivable from 93,809 75,452
Management Company and affiliate
Investment in partnerships and joint 612,140 394,409
ventures, at equity
Investment in Management Company and 3,192 0
affiliates
Other investment 53,785 0
Deferred costs and other assets 164,413 138,492
Minority interest 23,155 29,070
----------- -----------
Total assets $7,662,667 $5,895,910
LIABILITIES:
Mortgages and other indebtedness $5,077,990 $3,681,984
Accounts payable and accrued expenses 245,121 170,203
Cash distributions and losses in 20,563 17,106
partnerships and joint ventures, at equity
Investment in Management Company and 0 8,567
affiliates
Other liabilities 67,694 72,876
----------- -----------
Total liabilities 5,411,368 3,950,736
COMMITMENTS AND CONTINGENCIES (Note 14)
PARTNERS' EQUITY:
Preferred units, 11,000,000 and 12,000,000 339,061 292,912
units outstanding, respectively
General Partner, 109,643,001 and 96,880,415 1,231,031 1,017,333
units outstanding, respectively
Limited Partners, 61,850,762 and 60,974,050 694,437 640,283
units outstanding, respectively
Unamortized restricted stock award (13,230) (5,354)
----------- -----------
Total partners' equity 2,251,299 1,945,174
----------- -----------
Total liabilities and partners' equity $7,662,667 $5,895,910
The accompanying notes are an integral part of these statements.
<PAGE>
Statements of Operations
Simon DeBartolo Group, L.P. Consolidated
(Dollars in thousands, except per unit amounts)
For the Year Ended December 31,
1997 1996 1995
REVENUE: --------- --------- ---------
Minimum rent $641,352 $438,089 $307,857
Overage rent 38,810 30,810 23,278
Tenant reimbursements 322,416 233,974 192,994
Other income 51,589 44,831 29,528
--------- --------- ---------
1,054,167 747,704 553,657
--------- --------- ---------
EXPENSES:
Property operating 176,846 129,094 96,851
Depreciation and amortization 200,900 135,780 92,739
Real estate taxes 98,830 69,173 53,941
Repairs and maintenance 43,000 31,779 24,614
Advertising and promotion 32,891 24,756 18,888
Merger integration costs 0 7,236 0
Provision for credit losses 5,992 3,460 2,858
Other 18,678 14,914 12,630
--------- --------- ---------
577,137 416,192 302,521
--------- --------- ---------
OPERATING INCOME 477,030 331,512 251,136
INTEREST EXPENSE 287,823 202,182 150,224
--------- --------- ---------
INCOME BEFORE MINORITY INTEREST 189,207 129,330 100,912
MINORITY INTEREST (5,270) (4,300) (2,681)
GAINS ON SALES OF ASSETS, NET 20 88 1,871
--------- --------- ---------
INCOME BEFORE UNCONSOLIDATED 183,957 125,118 100,102
ENTITIES
INCOME FROM UNCONSOLIDATED 19,176 9,545 1,403
ENTITIES
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEMS 203,133 134,663 101,505
EXTRAORDINARY ITEMS 58 (3,521) (3,285)
--------- --------- ---------
NET INCOME 203,191 131,142 98,220
PREFERRED UNIT REQUIREMENT (29,248) (12,694) (1,490)
--------- --------- ---------
NET INCOME AVAILABLE TO $173,943 $118,448 $96,730
UNITHOLDERS ========= ========= =========
NET INCOME AVAILABLE TO
UNITHOLDERS
ATTRIBUTABLE TO:
General Partner $107,989 $72,561 $57,781
Limited Partners 65,954 45,887 38,949
--------- --------- ---------
$173,943 $118,448 $96,730
========= ========= =========
BASIC EARNINGS PER UNIT:
Income before extraordinary items $1.08 $1.02 $1.08
Extraordinary items -- (0.03) (0.04)
--------- --------- ---------
Net income $1.08 $0.99 $1.04
========= ========= =========
DILUTED EARNINGS PER UNIT:
Income before extraordinary items $1.08 $1.01 $1.08
Extraordinary items -- (0.03) (0.04)
--------- --------- ---------
Net income $1.08 $0.98 $1.04
========= ========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
Statements of Partners' Equity
Simon DeBartolo Group, L.P. Consolidated
(Dollars in thousands)
<CAPTION>
Limited
Unamortized Total Partners'
Preferred General Limited Restricted Partners' Equity
Units Partner Partner Stock Award Equity Interest
-------- ---------- -------- ---------- --------- --------
<S> <C> <C> <C> <S> <C> <C>
Balance at December 31, 1994 $0 ($807,613) $0 $0 ($807,613) $909,306
General Partner Contributions 216,545 216,545
(9,470,977 units)
Limited Partners' 0 (16,869)
Contributions (120,000 units)
Preferred unit contributions,
net of issuance costs
(4,000,000 units) 99,923 99,923
Acquisition of Limited
Partners' interest and other
(333,462 and 334,522 units, 5,036 5,036 (301)
respectively)
Stock incentive program 3,608 (3,605) 3
(143,311 units)
Amortization of stock 918 918
incentive
Adjustment to allocate net (94,035) (94,035) 94,035
equity of the Operating
Partnership
Adjustment to reflect limited
partners' equity interest at
Redemption Value (Note 11) 42,848 42,848 (42,848)
Net income 1,490 57,781 59,271 38,949
Distributions (1,490) (110,532) (112,022) (73,508)
-------- ---------- -------- ---------- --------- --------
Balance at December 31, 1995 99,923 (686,362) 0 (2,687) (589,126) 908,764
1996 Adjustment to reflect
limited partners' interest at
Historical Value (Note 11) 822,072 86,692 908,764 (908,764)
-------- ---------- -------- --------- ---------- ---------
99,923 135,710 86,692 (2,687) 319,638 0
=========
General Partner Contributions 10,518 10,518
(442,225 units)
Units issued in connection
with Merger (37,877,965
and 23,219,012 units, 922,379 565,448 1,487,827
respectively)
Other unit issuances (472,410 275 275
units)
Preferred units issued, net
of issuance costs
(8,000,000 units) 192,989 192,989
Stock incentive program 4,751 (4,751) 0
(200,030 units)
Amortization of stock 2,084 2,084
incentive
Adjustment to allocate net (14,382) 14,382 0
equity of the Operating
Partnership
Net income 12,694 72,561 45,887 131,142
Distributions (12,694) (114,142) (72,401) (199,237)
Other (62) (62)
-------- --------- -------- -------- ---------
Balance at December 31, 1996 292,912 1,017,333 640,283 (5,354) 1,945,174
General Partner Contributions 200,920 200,920
(6,311,273 units)
Units issued in connection
with
acquisitions (2,193,037 and 70,000 26,408 96,408
876,712, respectively)
Stock incentive program 14,016 (13,262) 754
(448,753 units)
Amortization of stock 5,386 5,386
incentive
Preferred units issued, net 146,072 146,072
of issuance costs (3,000,000
units)
Conversion of 4,000,000
Series A preferred units
into 3,809,523 common units (99,923) 99,923 0
Adjustment to allocate net (82,869) 82,869 0
equity of the Operating
Partnership
Unrealized gain on long-term 2,420 1,365 3,785
investments
Net income 29,248 107,989 65,954 203,191
Distributions (29,248) (198,701) (122,442) (350,391)
-------- ---------- -------- --------- ----------
Balance at December 31, 1997 $339,061 $1,231,031 $694,437 ($13,230) $2,251,299
======== ========== ======== ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Statements of Cash Flows
Simon DeBartolo Group, L.P. Consolidated
(Dollars in thousands)
For the Year Ended December 31,
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES: ---------- ---------- ---------
Net income $ 203,191 $ 131,142 $ 98,220
Adjustments to reconcile net income to
net cash provided
by operating activities-
Depreciation and amortization 208,539 143,582 101,262
Extraordinary items (58) 3,521 3,285
Gains on sales of assets, net (20) (88) (1,871)
Straight-line rent (9,769) (3,502) (1,126)
Minority interest 5,270 4,300 2,681
Equity in income of unconsolidated (19,176) (9,545) (1,403)
entities
Changes in assets and liabilities-
Tenant receivables and accrued revenue (23,284) (6,422) 5,502
Deferred costs and other assets (30,203) (12,756) (14,290)
Accounts payable, accrued expenses and 36,417 (13,768) 2,076
other liabilities
Net cash provided by operating
activities 370,907 236,464 194,336
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (980,427) (56,069) (88,272)
Capital expenditures (305,178) (195,833) (98,220)
Cash from DRC Merger, acquisitions and
consolidation of
joint ventures, net 19,744 37,053 4,346
Change in restricted cash (2,443) 1,474 0
Proceeds from sale of assets 599 399 2,550
Investments in unconsolidated entities (47,204) (62,096) (22,180)
Distributions from unconsolidated 144,862 36,786 6,214
entities
Investments in and advances (to)/from (18,357) 38,544 (27,117)
Management Company
Other investing activities (55,400) 0 0
Net cash used in investing activities (1,243,804) (199,742) (222,679)
CASH FLOWS FROM FINANCING ACTIVITIES:
Partnership contributions 344,438 201,704 242,377
Partnership distributions (350,391) (257,403) (177,726)
Minority interest distributions, net (219) (5,115) (3,680)
Mortgage and other note proceeds, net of 2,976,222 1,293,582 456,520
transaction costs
Mortgage and other note principal (2,030,763) (1,267,902) (531,566)
payments
Other refinancing transaction (21,000) 0 0
Net cash provided by (used in) financing 918,287 (35,134) (14,075)
activities
INCREASE (DECREASE) IN CASH AND CASH 45,390 1,588 (42,418)
EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of 64,309 62,721 105,139
period
CASH AND CASH EQUIVALENTS, end of period $ 109,699 $ 64,309 $ 62,721
The accompanying notes are an integral part of these statements.
<PAGE>
SIMON DeBARTOLO GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands, except per share/unit amounts)
1. Organization
Simon DeBartolo Group, L.P. ("the Operating Partnership") is a subsidiary
partnership of Simon DeBartolo Group, Inc. (the "Company"). The Operating
Partnership is engaged primarily in the ownership, operation, management,
leasing, acquisition, expansion and development of real estate properties,
primarily regional malls and community shopping centers. The Company, formerly
known as Simon Property Group, Inc., is a self-administered and self-managed
real estate investment trust ("REIT") under the Internal Revenue Code of 1986,
as amended (the "Code"). On August 9, 1996, the Company acquired the national
shopping center business of DeBartolo Realty Corporation ("DRC"), The Edward J.
DeBartolo Corporation and their affiliates as the result of the DRC Merger.
(see Note 3)
On December 31, 1997, Simon Property Group, L.P., a Delaware limited
partnership ("SPG, LP"), merged (the "Partnership Merger") into the Operating
Partnership. Prior to the Partnership Merger, the Operating Partnership and the
Company held all of the partnership interests of SPG, LP, which held interests
in certain of the Portfolio Properties (as defined below). As a result of the
Partnership Merger, the Operating Partnership now directly or indirectly owns
or holds interests in all of the Portfolio Properties and directly holds
substantially all of the economic interest in the Management Company (described
below).
As of December 31, 1997, the Operating Partnership owns or holds an
interest in 202 income-producing properties, which consist of 120 regional
malls, 72 community shopping centers, three specialty retail centers, four
mixed-use properties and three value-oriented super-regional malls in 33 states
(the "Properties"). The Operating Partnership also owns interests in one
specialty retail center and two community centers currently under construction
and nine parcels of land held for future development (collectively, the
"Development Properties", and together with the Properties, the "Portfolio
Properties"). At December 31, 1997 and 1996, the Company's ownership interest
in the Operating Partnership was 63.9% and 61.4%, respectively. The Operating
Partnership also holds substantially all of the economic interest in M.S.
Management Associates, Inc. (the "Management Company"). See Note 7 for a
description of the activities of the Management Company.
The Operating Partnership is subject to risks incidental to the ownership
and operation of commercial real estate. These include, among others, the risks
normally associated with changes in the general economic climate, trends in the
retail industry, creditworthiness of tenants, competition for tenants, changes
in tax laws, interest rate levels, the availability of financing, and potential
liability under environmental and other laws. Like most retail properties, the
Operating Partnership's regional malls and community shopping centers rely
heavily upon anchor tenants. As of December 31, 1997, 248 of the approximately
715 anchor stores in the Properties were occupied by three retailers. An
affiliate of one of these retailers is a limited partner in the Operating
Partnership and the Chief Operating Officer of another of these retailers is a
director of the Company.
2. Basis of Presentation
The accompanying consolidated financial statements of the Operating
Partnership include all accounts of all entities owned or controlled by the
Operating Partnership. All significant intercompany amounts have been
eliminated. The accompanying consolidated financial statements have been
prepared in accordance with generally accepted accounting principles, which
requires management to make estimates and assumptions that affect the reported
amounts of the Operating Partnership's assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reported periods. Actual results could differ
from these estimates.
Properties which are wholly-owned ("Wholly-Owned Properties") or owned
less than 100% and are controlled by the Operating Partnership ("Minority
Interest Properties") are accounted for using the consolidated method of
accounting. Control is demonstrated by the ability of the general partner to
manage day-to-day operations, refinance debt and sell the assets of the
partnership without the consent of the limited partner and the inability of the
limited partner to replace the general partner. Investments in partnerships and
joint ventures which represent noncontrolling 14.7% to 50.0% ownership
interests ("Joint Venture Properties") and the investment in the Management
Company (see Note 7) are accounted for using the equity method of accounting.
<PAGE>
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 (see Note 11), based on its partners' ownership
interests. The Company's weighted average ownership interest in the Operating
Partnership during 1997, 1996 and 1995 was 62.1%, 61.2% and 60.3%,
respectively. At December 31, 1997 and 1996, the Company's ownership interest
was 63.9% and 61.4%, respectively.
The deficit minority interest balance in the accompanying Consolidated
Balance Sheets represents outside partners' interests in the net equity of
certain Properties. Deficit minority interests were recorded when a partnership
agreement provided for the settlement of deficit capital accounts before
distributing the proceeds from the sale of partnership assets and/or from the
intent (legal or otherwise) and ability of the partner to fund additional
capital contributions.
3. The DRC Merger and Real Estate Acquisitions and Developments
The DRC Merger
On August 9, 1996, the Company acquired the national shopping center
business of DRC for an aggregate value of $3.0 billion (the "DRC Merger"). 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 of office GLA. Pursuant to the
DRC Merger, the Company acquired all the outstanding common stock of DRC
(55,712,529 shares), at an exchange ratio of 0.68 shares of the Company's
common stock for each share of DRC common stock (the "Exchange Ratio"). A total
of 37,873,965 shares of the Company's common stock was issued by the Company,
to the DRC shareholders. DRC and the acquisition subsidiary merged. DRC became
a 99.9% subsidiary of the Company and changed its name to SD Property Group,
Inc. This portion of the transaction was valued at approximately $923,179,
based upon the number of DRC shares of common stock acquired (55,712,529
shares), the Exchange Ratio and the last reported sales price of the Company's
common stock on August 9, 1996 ($24.375). In connection therewith, the Company
changed its name to Simon DeBartolo Group, Inc.
In connection with the DRC Merger, the general and limited partners of
SPG, LP contributed 49.5% (47,442,212 units of partnership interest) of the
total outstanding units of partnership interest ("Units") in SPG, LP to the
operating partnership of DRC, DeBartolo Realty Partnership, L.P. ("DRP, LP") in
exchange for 47,442,212 Units of partnership interest in DRP, LP, whose name
was changed to Simon DeBartolo Group, L.P. ("SDG, LP"). As used herein, the
term Units does not include units of partnership interest entitled to
preferential distribution of cash ("Preferred Units") (see Note 11). The
Company retained a 50.5% partnership interest (48,400,641 Units) in SPG, LP but
assigned its rights to receive distributions of profits on 49.5% (47,442,212
Units) of the outstanding Units of partnership interest in SPG, LP to SDG, LP.
The limited partners of DRP, LP approved the contribution made by the partners
of SPG, LP and simultaneously exchanged their 38.0% (34,203,623 Units)
partnership interest in DRP, LP, adjusted for the Exchange Ratio, for a smaller
partnership interest in SDG, LP. The exchange of the limited partners' 38.0%
partnership interest in DRP, LP for Units of SDG, LP has been accounted for as
an acquisition of minority interest by the Company and is valued based on the
estimated fair value of the consideration issued (approximately $566,900). The
Units of SDG, LP may under certain circumstances be exchangeable for common
stock of the Company on a one-for-one basis. Therefore, the value of the
acquisition of the DRP, LP limited partners' interest acquired was based upon
the number of DRP, LP Units exchanged (34,203,623), the Exchange Ratio and the
last reported sales price per share of the Company's common stock on August 9,
1996 ($24.375). The limited partners of SPG, LP received a 23.7% partnership
interest in SDG, LP (37,282,628 Units) for the contribution of their 38.9%
partnership interest in SPG, LP (37,282,628 Units) to SDG, LP. The interests
transferred by the partners of SPG, LP to DRP, LP have been appropriately
reflected at historical costs.
Upon completion of the DRC Merger, the Company became a general partner of
SDG, LP with 36.9% (57,605,796 Units) of the outstanding partnership Units in
SDG, LP and became the managing general partner of SPG, LP with 24.3%
(37,873,965 Units in SPG, LP) of the outstanding partnership Units in SPG, LP.
The Company remained the sole general partner of SPG, LP with 1% of the
outstanding partnership Units (958,429 Units) and 49.5% interest in the capital
of SPG, LP, and SDG, LP became a special limited partner in SPG, LP with 49.5%
(47,442,212 Units) of the outstanding partnership Units in SPG, LP and an
additional 49.5% interest in the profits of SPG, LP. SPG, LP did not acquire
any interest in SDG, LP. Upon completion of the DRC Merger, the Company
directly and indirectly owned a controlling 61.2% (95,479,761 Units)
partnership interest in SDG, LP.
<PAGE>
For financial reporting purposes, the completion of the DRC Merger
resulted in a reverse acquisition by the Company, using the purchase method of
accounting, directly or indirectly, of 100% of the net assets of DRP, LP for
consideration valued at $1.5 billion, including related transaction costs. The
purchase price was allocated to the fair value of the assets and liabilities.
Final adjustments to the purchase price allocation were not completed until
1997, however no material changes were recorded in 1997.
Although the Company was the accounting acquirer, SDG, LP (formerly DRP,
LP) became the primary operating partnership through which the business of the
Company is being conducted. As a result of the DRC Merger, the Company's
initial operating partnership, SPG, LP, became a subsidiary of SDG, LP with 99%
of the profits allocable to SDG, LP and 1% of the profits allocable to the
Company. Cash flow allocable to the Company's 1% profit interest in SDG, LP was
absorbed by public Company costs and related expenses incurred by the Company.
However, because the Company was the accounting acquirer and, upon completion
of the DRC Merger, acquired majority control of SDG, LP; SPG, LP is the
predecessor to SDG, LP for financial reporting purposes. Accordingly, the
financial statements of SDG, LP for the post-Merger periods reflect the reverse
acquisition of DRP, LP by the Company and for all pre-Merger comparative
periods, the financial statements of SDG, LP reflect the financial statements
of SPG, LP as the predecessor to SDG, LP for financial reporting purposes.
As described in Note 1, on December 31, 1997, SPG, LP merged into the
Operating Partnership and as a result, the Operating Partnership now directly
or indirectly owns or holds interests in all of the Portfolio Properties and
directly holds substantially all of the economic interest in the Management
Company.
Acquisitions
On January 26, 1998, the Operating Partnership acquired a regional mall in
Pensacola, Florida for $87,283, which included Units valued at $55,523 and the
assumption of $28,935 of mortgage indebtedness.
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 ("RPT"). RPT owned 98.8% of Shopping Center Associates ("SCA"),
which owned or had interests in twelve regional malls and one community center,
comprising approximately twelve million square feet of GLA in eight states.
Following the completion of the tender offer, the SCA portfolio was
restructured. The Operating Partnership exchanged its 50% interests in two SCA
properties to a third party for similar interests in two other SCA properties,
in which it had 50% interests, with the result that SCA now owns interests in a
total of eleven properties. Effective November 30, 1997, the Operating
Partnership also acquired the remaining 50% ownership interest in another of
the SCA properties. In addition, an affiliate of the Operating Partnership
acquired the remaining 1.2% interest in SCA. At the completion of these
transactions, the Operating Partnership now owns 100% of ten of the eleven SCA
properties, and a noncontrolling 50% ownership interest in the remaining
property. The total cost for the acquisition of RPT and related transactions is
estimated at $1,300,000, which includes shares of common stock of the Company
valued at approximately $50,000, Units valued at approximately $25,300, the
assumption of $398,500 of consolidated indebtedness and the Operating
Partnership's pro rata share of joint venture indebtedness of $76,750. Final
adjustments to the purchase price allocation were not completed at December 31,
1997. While no material changes to the allocation are anticipated, changes will
be recorded in 1998.
Also in 1997, the Operating Partnership acquired a 100% ownership interest
in the Fashion Mall at Keystone at the Crossing, along with an adjacent
community center, the remaining 30% ownership interest and management contract
of Virginia Center Commons, a noncontrolling 50% ownership of Dadeland Mall and
an additional noncontrolling 48% ownership interest of West Town Mall,
increasing its total ownership interest to 50%. The Operating Partnership paid
an aggregate purchase price of approximately $322,000 for these Properties,
which included Units valued at $1,100, common stock of the Company valued at
approximately $20,000 and the assumption of $64,772 of mortgage indebtedness,
with the remainder paid in cash.
In 1996, the Operating Partnership acquired the remaining 50% ownership
interest in two regional malls at an aggregate purchase price of $113,100 plus
472,410 Units.
During 1995, the Operating Partnership acquired the remaining ownership
interest in two regional malls, an additional controlling 50% interest in a
third mall and a controlling 75% ownership interest in a joint venture
redevelopment project. The aggregate purchase price for the regional mall
interests acquired included $18,500; 2,142,247 Units; and the assumption of
$41,250 of mortgage indebtedness. The 75% interest in the redevelopment project
was acquired for $11,406.
<PAGE>
Developments
During 1997, the Operating Partnership opened four new Joint Venture
Properties at an aggregate cost of approximately $550,000 (of which the
Operating Partnership's share was approximately $206,000): Indian River
Commons, an approximately 260,000 square-foot community center, which is
immediately adjacent to an existing regional mall Property, opened in March of
1997; The Source, an approximately 730,000 square-foot regional mall opened in
September; Grapevine Mills, a 1.2 million square-foot value-oriented super-
regional mall, opened in October; and Arizona Mills, a 1.2 million square-foot
value-oriented super-regional mall, opened in November.
During 1996, the Operating Partnership opened one new approximately
$75,000 Wholly-Owned Property and three Joint Venture Properties at an
aggregate cost of approximately $250,000 (of which the Operating Partnership's
share was approximately $83,000): Cottonwood Mall, an approximately 750,000
square-foot wholly-owned regional mall opened in July; Ontario Mills, an
approximately 1.3 million square-foot value oriented super-regional mall,
opened in November; Indian River Mall, an approximately 750,000 square-foot
regional mall, also opened in November; and The Tower Shops, an approximately
60,000 square-foot specialty retail center, opened in November as well.
The Operating Partnership also opened three new Joint Venture Properties
during 1995 at an aggregate cost of approximately $370,000 (of which the
Operating Partnership's share was approximately $133,000): Circle Centre, an
approximately 800,000 square-foot regional mall, opened in September; Seminole
Towne Center, an approximately 1.1 million square-foot regional mall, also
opened in September; and Lakeline Mall, an approximately 1.1 million square-
foot regional mall, opened in October.
Pro Forma
The following unaudited pro forma summary financial information combines
the consolidated results of operations of the Operating Partnership as if the
DRC Merger and the RPT acquisition had occurred as of January 1, 1996, and were
carried forward through December 31, 1997. 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 DRC Merger and the RPT
acquisition had been consummated at January 1, 1996, nor does it purport to
represent the future financial position and results of operations for future
periods.
Year Ended December 31,
1997 1996
----------- -----------
Revenue $ 1,172,082 $ 1,099,903
Net income available for Unitholders
attributable to:
General Partner 103,118 86,845
Limited Partners 63,006 54,690
Total $ 166,124 $ 141,535
Net income per Unit $ 1.02 $ 0.89
Net income per Unit - assuming dilution $ 1.02 $ 0.89
Weighted average number of Units outstanding 163,186,832 159,449,229
Weighted average number of Units outstanding
- assuming dilution 163,570,896 159,584,761
4. Summary of Significant Accounting Policies
Investment Properties
Investment Properties are recorded at cost (predecessor cost for
Properties acquired from Melvin Simon, Herbert Simon and certain of their
affiliates (the "Simons")). Investment Properties for financial reporting
purposes are reviewed for impairment on a Property-by-Property basis whenever
events or changes in circumstances indicate that the carrying value of
investment Properties may not be recoverable. Impairment of investment
Properties is recognized when estimated undiscounted operating income is less
than the carrying value of the Property. To the extent an impairment has
occurred, the excess of carrying value of the Property over its estimated fair
value will be charged to income. The Operating Partnership adopted Statement of
Financial Accounting Standards ("SFAS") No. 121 (Accounting for Impairment of
<PAGE>
Long-Lived Assets and for Long-Lived Assets to be Disposed Of) on January 1,
1996. The adoption of this pronouncement had no impact on the accompanying
consolidated financial statements.
Investment Properties include costs of acquisitions, development and
predevelopment, construction, tenant allowances and improvements, interest and
real estate taxes incurred during construction, certain capitalized
improvements and replacements, and certain allocated overhead. Depreciation on
buildings and improvements is provided utilizing the straight-line method over
an estimated original useful life, which is generally 35 years or the term of
the applicable tenant's lease in the case of tenant inducements. Depreciation
on tenant allowances and improvements is provided utilizing the straight-line
method over the term of the related lease.
Certain improvements and replacements are capitalized when they extend the
useful life, increase capacity, or improve the efficiency of the asset. All
other repair and maintenance items are expensed as incurred.
Capitalized Interest
Interest is capitalized on projects during periods of construction.
Interest capitalized by the Operating Partnership during 1997, 1996 and 1995
was $11,589, $5,831 and $1,515, respectively.
Deferred Costs
Deferred costs consist primarily of financing fees incurred to obtain long-
term financing, costs of interest rate protection agreements, and internal and
external leasing commissions and related costs. Deferred financing costs,
including interest rate protection agreements, are amortized on a straight-line
basis over the terms of the respective loans or agreements. Deferred leasing
costs are amortized on a straight-line basis over the terms of the related
leases. Deferred costs consist of the following:
December 31,
1997 1996
--------- ----------
Deferred financing costs $ 72,348 $ 64,931
Leasing costs and other 121,060 97,380
--------- ----------
193,408 162,311
Lessaccumulated
amortization 87,666 70,386
--------- ----------
Deferred costs, net $ 105,742 $ 91,925
Interest expense in the accompanying Consolidated Statements of Operations
includes amortization of deferred financing costs of $8,338, $8,434 and $8,523
for 1997, 1996 and 1995, respectively, and has been reduced by amortization of
debt premiums and discounts of $699, $632 and $0 for 1997, 1996 and 1995,
respectively.
Revenue Recognition
The Operating Partnership, as a lessor, has retained substantially all of
the risks and benefits of ownership of the investment Properties and accounts
for its leases as operating leases. Minimum rents are accrued on a straight-
line basis over the terms of their respective leases. Overage rents are
recognized when earned.
Reimbursements from tenants for real estate taxes and other recoverable
operating expenses are recognized as revenue in the period the applicable
expenditures are incurred.
Allowance for Credit Losses
<PAGE>
A provision for credit losses is recorded based on management's judgment
of tenant creditworthiness. The activity in the allowance for credit losses
during 1997, 1996 and 1995 was as follows:
Balance Provision Accounts Balance
at for Written at End
Year Ended Beginning Credit Off of Year
of Year Losses
December 31, l997 $ 7,918 $ 5,992 $ (106) $ 13,804
December 31, l996 $ 5,485 $ 3,460 $(1,027) $ 7,918
December 31, l995 $ 4,169 $ 2,858 $(1,542) $ 5,485
Income Taxes
As a partnership, the allocated share of income or loss for each year is
included in the income tax returns of the partners, accordingly, no accounting
for income taxes is required in the accompanying consolidated financial
statements. State and local taxes are not material.
Taxable income of the Operating Partnership for the year ended December
31, 1997, is estimated to be $160,000 and was $164,008 and $100,915 for the
years ended 1996 and 1995, respectively. Reconciling differences between book
income and tax income primarily result from timing differences consisting of
(i) depreciation expense, (ii) prepaid rental income and (iii) straight-line
rent. Furthermore, the Operating Partnership's share of income or loss from the
affiliated Management Company is excluded from the tax return of the Operating
Partnership.
Per Unit Data
The Operating Partnership adopted SFAS No. 128 (Earnings Per Share) in the
current period. Basic earnings per Unit is based on the weighted average number
of Units outstanding during the period. The weighted average number of Units
used in the computation for 1997, 1996 and 1995 was 161,022,887; 120,181,895;
and 92,666,469, respectively. In accordance with SFAS No. 128, diluted earnings
per Unit is based on the weighted average number of Units outstanding combined
with the incremental weighted average Units that would have been outstanding if
all dilutive potential Units would have been converted into Units at the
earliest date possible. The diluted weighted average number of Units used in
the computation for 1997, 1996 and 1995 was 161,406,951; 120,317,426; and
92,776,083, respectively. Units may be exchanged for shares of common stock of
the Company on a one-for-one basis in certain circumstances and therefore are
not dilutive (see Note 11). The Preferred Units have not been considered in the
computations of diluted earnings per Unit for any of the periods presented, as
they did not have a dilutive effect. Accordingly, the increase in weighted
average Units outstanding under the diluted method over the basic method in
every period presented for the Operating Partnership is due entirely to the
effect of outstanding options under both the Employee Plan and the Director
Plan (see Note 12). There were no changes in earnings from basic earnings per
Unit to diluted earnings per Unit for any of the periods presented.
It is the Operating Partnership's policy to accrue distributions when they
are declared. The Operating Partnership declared distributions in 1997
aggregating $2.01 per Unit. In 1996 accrued distributions totaled $1.63 per
Unit, which included a $0.1515 distribution on August 9, 1996, in connection
with the DRC Merger, designated to align the time periods of distribution
payments of the merged companies. The current annual distribution rate is $2.02
per Unit. The following is a summary of distributions per Unit declared in 1997
and 1996, which represented a return of capital measured using generally
accepted accounting principles:
For the Year Ended
December 31,
Distributions per Unit 1997 1996
From book net income $ 1.08 $ 0.99
Representing return of capital 0.93 0.64
Total distributions $ 2.01 $ 1.63
<PAGE>
On a federal income tax basis, 35% of the 1997 distributions and 64% of
the 1996 distributions represented return of capital.
Statements of Cash Flows
For purposes of the Statements of Cash Flows, all highly liquid
investments purchased with an original maturity of 90 days or less are
considered cash and cash equivalents. Cash equivalents are carried at cost,
which approximates market value. Cash equivalents generally consist of
commercial paper, bankers acceptances, Eurodollars, repurchase agreements and
Dutch auction securities. Cash and cash equivalents do not include restricted
cash of $8,553 and $6,110 as of December 31, 1997 and 1996, respectively. Cash
is restricted at December 31, 1997 primarily to pay for construction costs for
the phase II expansion of The Forum Shops at Caesar's, and in 1996 cash was
restricted primarily for renovations, redevelopment and other activities of the
17 properties which collateralized the commercial pass-through certificates
that were retired in 1997 (see Note 9).
Cash paid for interest, net of any amounts capitalized, during 1997, 1996
and 1995 were $282,501; $197,796; and $142,345, respectively.
Noncash Transactions
Please refer to Notes 3 and 11 for a discussion of noncash transactions.
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation. These reclassifications
have no impact on net operating results previously reported.
5. Investment Properties
Investment properties consist of the following:
December 31,
1997 1996
---------- ---------
Land $1,253,953 $1,003,221
Buildings and improvements 5,560,112 4,270,244
---------- ---------
Total land, buildings and
improvements 6,814,065 5,273,465
Furniture, fixtures and equipment 53,289 27,556
---------- ---------
Investment properties at cost 6,867,354 5,301,021
Less-accumulated depreciation 461,792 279,072
---------- ---------
Investment properties at cost, net $6,405,562 $5,021,949
Building and improvements includes $158,609 and $86,461 of construction in
progress at December 31, 1997 and 1996, respectively.
6. Investment in Partnerships and Joint Ventures
As of December 31, 1997 and 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
approximately $364,119 and $232,927, respectively. This Excess Investment is
being amortized generally over the life of the related Properties. Amortization
included in income from unconsolidated entities for the years ended December
31, 1997 and 1996 was $13,878 and $5,127, respectively.
Summary financial information of partnerships and joint ventures accounted
for using the equity method and a summary of the Operating Partnership's
investment in and share of income from such partnerships and joint ventures
follows.
<PAGE>
DECEMBER 31,
-------------------------
BALANCE SHEETS 1997 1996
ASSETS: ---------- ----------
Investment properties at cost, net $2,734,686 $1,887,555
Cash and cash equivalents 101,582 61,267
Tenant receivables 87,008 58,548
Other assets 71,873 69,365
---------- ----------
Total assets $2,995,149 $2,076,735
========== ==========
LIABILITIES AND PARTNERS' EQUITY:
Mortgages and other notes payable $1,888,512 $1,121,804
Accounts payable, accrued expenses and other
liabilities 212,543 213,394
---------- ----------
Total liabilities 2,101,055 1,335,198
Partners' equity 894,094 741,537
---------- ----------
Total liabilities and partners' equity $2,995,149 $2,076,735
========== ==========
THE OPERATING PARTNERSHIP'S SHARE OF:
Total assets $1,009,691 $602,084
========== ==========
Partners' equity $227,458 $144,376
Add: Excess Investment 364,119 232,927
---------- ----------
Operating Partnership's net Investment in Joint
Ventures $591,577 $377,303
========== ==========
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
STATEMENTS OF OPERATIONS 1997 1996 1995
REVENUE: -------- -------- --------
Minimum rent $256,100 $144,166 $83,905
Overage rent 10,510 7,872 2,754
Tenant reimbursements 120,380 73,492 39,500
Other income 19,364 11,178 13,980
-------- -------- --------
Total revenue 406,354 236,708 140,139
OPERATING EXPENSES:
Operating expenses and other 144,256 88,678 46,466
Depreciation and amortization 85,423 50,328 26,409
-------- -------- --------
Total operating expenses 229,679 139,006 72,875
-------- -------- --------
OPERATING INCOME 176,675 97,702 67,264
INTEREST EXPENSE 96,675 48,918 28,685
EXTRAORDINARY ITEMS (1,925) (1,314) (2,687)
-------- -------- --------
NET INCOME $78,075 $47,470 $35,892
======== ======== ========
THIRD-PARTY INVESTORS' SHARE OF NET INCOME
55,507 38,283 30,752
-------- -------- --------
THE OPERATING PARTNERSHIP'S SHARE
OF NET INCOME $22,568 $9,187 $5,140
AMORTIZATION OF EXCESS INVESTMENT 13,878 5,127 --
-------- -------- --------
INCOME FROM UNCONSOLIDATED ENTITIES $8,690 $4,060 $5,140
======== ======== ========
The net income or net loss for each partnership and joint venture is
allocated in accordance with the provisions of the applicable partnership or
joint venture agreement. The allocation provisions in these agreements are not
always consistent with the ownership interests held by each general or limited
partner or joint venturer, primarily due to partner preferences. The Operating
Partnership receives substantially all of the economic benefit of Biltmore
Square, Chesapeake Square, Northfield Square and Port Charlotte Town Center,
resulting from advances made to these joint ventures.
<PAGE>
7. Investment in Management Company
The Operating Partnership holds 80% of the outstanding common stock, 5% of
the outstanding voting common stock, and all of the preferred stock of the
Management Company. The remaining 20% of the outstanding common stock of the
Management Company (representing 95% of the voting common stock) is owned
directly by Melvin Simon, Herbert Simon and David Simon. The Management
Company, including its consolidated subsidiaries, provides management, leasing,
development, accounting, legal, marketing and management information systems
services to one Wholly-Owned Property and 27 Minority Interest and Joint
Venture Properties, Melvin Simon & Associates, Inc. ("MSA"), and certain other
nonowned properties. Because the Operating Partnership exercises significant
influence over the financial and operating policies of the Management Company,
it is reflected in the accompanying statements using the equity method of
accounting.
In connection with the DRC Merger, the Management Company purchased 95% of
the voting stock (665 shares of common stock) of DeBartolo Properties
Management, Inc. ("DPMI"), a DRC management company, for $2,500 in cash. DPMI
provides architectural, design, construction and other services primarily to
the Properties. During 1996, DPMI formed a captive insurance company, which
provided property damage and general liability insurance for certain Properties
in 1997 and 1996. The Operating Partnership paid a total of $9,628 and $2,383
to this wholly-owned subsidiary of the Management Company for insurance
coverage during 1997 and 1996, respectively. The Management Company accounts
for both DPMI and the captive insurance company using the consolidated method
of accounting.
During 1995, the Management Company liquidated its interest in a
partnership investment which held a 9.8-acre parcel of land, resulting in a
loss of $958 to the Management Company. Further, an undeveloped two-acre parcel
of land, for which the Management Company held a mortgage, was sold in December
1995, resulting in a loss of $3,949 for the Management Company.
Management, development and leasing fees charged to the Operating
Partnership relating to the Minority Interest Properties were $8,343, $6,916
and $5,353 for the years ended December 31, 1997, 1996 and 1995, respectively.
Architectural, contracting and engineering fees charged to the Operating
Partnership for 1997 and 1996 were $67,258 and $21,650, respectively. Fees for
services provided by the Management Company to MSA were $3,073, $4,000 and
$4,572 for the years ended December 31, 1997, 1996 and 1995, respectively.
At December 31, 1997 and 1996, total notes receivable and advances due
from the Management Company and consolidated affiliates were $93,809 and
$75,452, respectively, which included $11,474 due from DPMI in 1997 and 1996.
Unpaid interest income receivable from the Management Company at December 31,
1997 and 1996, was $485 and $0, respectively. All preferred dividends due from
the Management Company were paid by December 31, 1997 and 1996.
Summarized consolidated financial information of the Management Company
and a summary of the Operating Partnership's investment in and share of income
(loss) from the Management Company follows.
DECEMBER 31,
--------------------
BALANCE SHEET DATA: 1997 1996
-------- --------
Total assets $137,750 $110,263
Notes payable to the Operating Partnership at 11%, 66,859 63,978
due 2008
Shareholders' equity (deficit) 482 (11,879)
THE OPERATING PARTNERSHIP'S SHARE OF:
Total assets $128,596 $96,316
======== ========
Shareholders' equity (deficit) $3,088 $(13,567)
======== ========
<PAGE>
<TABLE>
FOR THE YEAR ENDED DECEMBER 31,
OPERATING DATA: 1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Total revenue 85,542 78,665 43,118
Operating Income 13,766 9,073 1,986
------- ------- --------
Net Income (Loss) Available for
Common Shareholders $12,366 $7,673 $(4,321)
======= ======= ========
The Operating Partnership's Share of Net Income
(Loss) after intercompany profit elimination
$10,486 $5,485 $(3,737)
======= ======= ========
</TABLE>
The Operating Partnership manages substantially all Wholly-Owned
Properties and substantially all of the Minority Interest and Joint Venture
Properties that were owned by DRC prior to the DRC Merger, and, accordingly, it
reimburses the Administrative Services Partnership ("ASP"), a subsidiary of the
Management Company, for costs incurred, including management, leasing,
development, accounting, legal, marketing, and management information systems.
Substantially all employees (other than direct field personnel) are employed by
ASP which is owned 1% by the Operating Partnership and 99% by the Management
Company. The Management Company records costs net of amounts reimbursed by the
Operating Partnership. Common costs are allocated based on payroll and related
costs. In management's opinion, allocations under the cost-sharing arrangement
are reasonable. The Operating Partnership's share of allocated common costs was
$35,341, $29,262 and $21,874 for 1997, 1996 and 1995, respectively.
Amounts payable by the Operating Partnership under the cost-sharing
arrangement and management contracts were $1,725 and $3,288 at December 31,
1997 and 1996, respectively, and are reflected in accounts payable and accrued
expenses in the accompanying Consolidated Balance Sheets.
8. 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 SFAS No. 115 "Accounting for Certain
Investments in Debt and Equity Securities", the Operating Partnership's shares
of Chelsea stock are classified as `available-for-sale securities'.
Accordingly, the investment is being reflected at its market value of $53,785,
as of December 31, 1997, in the accompanying consolidated balance sheets in
other investments. Management currently does not intend to sell these
securities. The unrealized gain of $3,785 is reflected in partners' equity.
<PAGE>
9. Indebtedness
Mortgages and other notes payable consist of the following:
December 31,
1997 1996
FIXED-RATE DEBT ----------- ----------
Mortgages, net $2,006,552 $2,076,428
Unsecured public notes, net 905,547 249,161
Medium-term notes, net 279,229 --
Commercial mortgage pass-through
certificates, net 175,000 377,650
6 3/4% Putable Asset Trust
Securities, net 101,297 101,472
---------- ----------
Total fixed-rate debt 3,467,625 2,804,711
VARIABLE-RATE DEBT
Mortgages, net 451,820 561,985
Credit facility 952,000 230,000
Unsecured term loans 133,000 --
Commercial mortgage pass-through 50,000 85,288
certificates, net
Construction loan 23,545 --
---------- ----------
Total variable-rate debt 1,610,365 877,273
---------- ----------
Total mortgages and other notes
payable $5,077,990 $3,681,984
========== ==========
Fixed-Rate Debt
Mortgage Loans & Other Notes. The fixed-rate mortgage loans bear interest
ranging from 5.81% to 10.00% (weighted average of 7.71% at December 31, 1997),
require monthly payments of principal and/or interest and have various due
dates through 2027 (average maturity of 6.5 years). Certain of the Properties
are pledged as collateral to secure the related mortgage note. The fixed and
variable mortgage notes are nonrecourse and certain ones have partial
guarantees by affiliates of approximately $583,158. Certain of the Properties
are cross-defaulted and cross-collateralized as part of a group of properties.
Under certain of the cross-default provisions, a default under any mortgage
included in the cross-defaulted package may constitute a default under all
such mortgages and may lead to acceleration of the indebtedness due on each
Property within the collateral package. Certain of the Properties are subject
to financial performance covenants relating to debt-to-market capitalization,
minimum earnings before interest, taxes, depreciation and amortization
("EBITDA") ratios and minimum equity values.
Unsecured Notes. The Operating Partnership has consolidated nonconvertible
investment-grade unsecured debt securities aggregating $905,547 (the "Notes")
at December 31, 1997. The Notes pay interest semiannually, and bear interest
rates ranging from 6.75% to 7.625% (weighted average of 6.95%), and have
various due dates through 2009 (average maturity of 8.2 years). Certain of the
Notes are guaranteed by the Operating Partnership and contain leverage ratios
and minimum EBITDA and unencumbered EBITDA ratios.
The Operating Partnership currently has $850,000 remaining available for
issuance on its debt shelf registration statement.
Medium-Term Notes. 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, which bear
interest at 7.125% and have a stated maturity of June 24, 2005. On September
<PAGE>
10, 1997, the Operating Partnership issued an additional $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 net proceeds from each of these
sales were used primarily to pay down the Credit Facility (defined below).
Commercial Mortgage Pass-Through Certificates. Prior to September 2, 1997,
DeBartolo Capital Partnership ("DCP"), a Delaware general partnership whose
interest is owned 100% by affiliated entities, held commercial mortgage pass-
through certificates in the face amount of approximately $453,000. This debt
was secured by assets of 17 of the Wholly-Owned Properties. On September 2,
1997, the Operating Partnership refinanced these certificates along with a
$48,000 mortgage loan, resulting in releases of mortgages encumbering 18 of the
Properties.
The Operating Partnership subsequently issued a series of six classes of
commercial mortgage pass-through certificates cross-collaterallized by seven of
such Properties, which matures on December 19, 2004. Five of the six classes
totaling $175,000 bear fixed interest rates ranging from 6.716% to 8.233%, with
the remaining $50,000 class bearing interest at LIBOR plus 0.365%. In addition,
the Operating Partnership used the net proceeds from the sale of the $180,000
MTN's described above and net borrowings under the Credit Facility of
approximately $114,000 to retire the original certificates and the $48,000
mortgage loan.
6 3/4% Putable Asset Trust Securities (PATS). The PATS, issued December
1996, pay interest semiannually at 6.75% and mature in 2003. These notes
contain leverage ratios and minimum EBITDA and unencumbered EBITDA ratios.
Variable-Rate Debt
Mortgages and Other Notes. The variable-rate mortgage loans and other
notes bear interest ranging from 6.00% to 7.74% (weighted average of 6.58% at
December 31, 1997) and are due at various dates through 2004 (average maturity
of 2.5 years). Certain of the Properties are subject to collateral, cross-
default and cross-collateral agreements, participation agreements or other
covenants relating to debt-to-market capitalization, minimum EBITDA ratios and
minimum equity values.
Credit Facility. The Operating Partnership has a $1,250,000 unsecured
revolving credit facility (the "Credit Facility") which initially matures in
September of 1999, with a one-year extension available at the option of the
Operating Partnership. The Credit Facility bears interest at LIBOR plus 65
basis points. The maximum and average amounts outstanding during 1997 under the
Credit Facility were $952,000 and $461,362, respectively. The Credit Facility
is primarily used for funding acquisition, renovation and expansion and
predevelopment opportunities. At December 31, 1997, the Credit Facility had an
effective interest rate of 6.56%, with $284,300 available after outstanding
borrowings and letters of credit. The Credit Facility contains financial
covenants relating to a capitalization value, minimum EBITDA and unencumbered
EBITDA ratios and minimum equity values.
Unsecured Term Loans. The Operating Partnership has two unsecured term
loans outstanding at December 31, 1997. On June 30, 1997, the Operating
Partnership closed a $70,000 unsecured term loan which bears interest at LIBOR
plus 0.75% and matures on September 29, 1998. On September 17, 1997, the
Operating Partnership retired a $63,000 mortgage loan secured by Lincolnwood
Towne Center with a second unsecured term loan, which bears interest at LIBOR
plus 0.75% and matures on January 31, 1999.
Debt Maturity and Other
As of December 31, 1997, scheduled principal repayments on indebtedness
were as follows:
1998 $ 390,835
1999 1,209,011
2000 291,740
2001 250,091
2002 496,321
Thereafter 2,442,335
------------
Total principal maturities 5,080,333
Net unamortized debt premiums (2,343)
Total mortgages and other notes payable $ 5,077,990
<PAGE>
Debt premiums and discounts are being amortized over the terms of the
related debt instruments. Certain mortgages and notes payable may be prepaid
but are generally subject to a prepayment of a yield-maintenance premium.
The unconsolidated partnerships and joint ventures have $1,888,512 and
$1,121,804 of mortgages and other notes payable at December 31, 1997 and 1996,
respectively. The Operating Partnership's share of this debt was $770,776 and
$448,218 at December 31, 1997 and 1996, respectively. This debt becomes due in
installments over various terms extending to December 28, 2009, with interest
rates ranging from 6.09% to 9.75% (weighted average rate of 7.34% at December
31, 1997). The debt matures $228,626 in 1998; $20,490 in 1999; $222,076 in
2000; $228,475 in 2001; $310,681 in 2002; and $878,164 thereafter.
The $58 net extraordinary gain in 1997 results from a $31,136 gain
realized on the forgiveness of debt and an $8,409 gain from write-offs of net
unamortized debt premiums, partially offset by the $21,000 acquisition of the
contingent interest feature on four loans, and $18,487 of prepayment penalties
and write-offs of mortgage costs associated with early extinguishments of debt.
In addition, net extraordinary losses resulting from the early extinguishment
or refinancing of debt of $3,521 and $3,285 were incurred for the years ended
December 31, 1996 and 1995, respectively.
Interest Rate Protection Agreements
The Operating Partnership has entered into certain interest rate
protection agreements, in the form of "cap" or "swap" arrangements, with
respect to the majority of its variable-rate mortgages and other notes payable.
Cap arrangements, which effectively limit the amount by which variable interest
rates may rise, have been entered into for $380,379 principal amount of
consolidated debt and cap LIBOR at rates ranging from 5.0% to 16.765% through
the related debt's maturity. One swap arrangement, which effectively fixes the
Operating Partnership's interest rates on the respective borrowings, has been
entered into for $50,000 principal amount of consolidated debt, which matures
September 2001. In addition, interest rate protection agreements which
effectively fix the interest rates on an additional $148,000 of consolidated
variable-rate debt were obtained in January of 1998. Costs of the caps ($7,580)
are amortized over the life of the agreements. The unamortized balance of the
cap arrangements was $2,006 as of December 31, 1997. The Operating
Partnership's hedging activity as a result of interest swaps and caps resulted
in net interest savings of $1,586, $2,165 and $3,528 for the years ended
December 31, 1997, 1996 and 1995, respectively. This did not materially impact
the Operating Partnership's weighted average borrowing rate.
Fair Value of Financial Instruments
The carrying value of variable-rate mortgages and other loans represents
their fair values. The fair value of fixed-rate mortgages and other notes
payable was approximately $3,900,000 and $3,000,000 at December 31, 1997 and
1996, respectively. The fair value of the interest rate protection agreements
at December 31, 1997 and 1996, was ($692) and $5,616, respectively. At December
31, 1997 and 1996, the estimated discount rates were 6.66% and 7.25%,
respectively.
10. Rentals under Operating Leases
The Operating Partnership receives rental income from the leasing of
retail and mixed-use space under operating leases. Future minimum rentals to be
received under noncancelable operating leases for each of the next five years
and thereafter, excluding tenant reimbursements of operating expenses and
percentage rent based on tenant sales volume, as of December 31, 1997, are as
follows:
1998 $ 623,652
1999 580,561
2000 521,398
2001 469,331
2002 420,169
Thereafter 1,768,777
-----------
$ 4,383,888
Approximately 2.9% of future minimum rents to be received are attributable
to leases with JCPenney Company, Inc., an affiliate of a limited partner in the
Operating Partnership.
<PAGE>
11. Partners' Equity
As described in Note 3, in connection with the DRC Merger on August 9,
1996, the Operating Partnership issued 37,877,965 Units to its non-managing
general partner, the Company, and 23,219,012 Units to limited partners.
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 $146,800 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 November 11, 1997, the Operating Partnership issued 3,809,523 Units
upon the conversion of all of the outstanding 8.125% Series A Preferred Units.
On September 27, 1996, the Company completed a $200,000 public offering of
8,000,000 shares of Series B cumulative redeemable preferred stock ("Series B
Preferred Stock"), generating net proceeds of approximately $193,000. Dividends
on the Series B Preferred Stock are paid quarterly in arrears at 8.75% per
annum. The Company may redeem the Series B Preferred Stock any time on or after
September 29, 2006, at a redemption price of $25.00 per share, plus accrued and
unpaid dividends. The redemption price (other than the portion thereof
consisting of accrued and unpaid dividends) is payable solely out of the sale
proceeds of other capital shares of the Company, which may include other series
of preferred shares. The Company contributed the proceeds to the Operating
Partnership in exchange for Preferred Units, the economic terms of which are
substantially identical to the Series B Preferred Stock. The Operating
Partnership pays a preferred distribution to the Company equal to the dividends
paid on the Series B Preferred Stock.
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
Stock") in a public offering at $50.00 per share. Beginning October 1, 2012,
the rate increases to 9.89% per annum. The Company intends to redeem the Series
C Preferred Stock prior to October 1, 2012. The Series C Preferred Stock is not
redeemable prior to September 30, 2007. Beginning September 30, 2007, the
Series C Preferred Stock 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
Stock 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 Stock has no stated maturity and is not
subject to any mandatory redemption provisions, nor is it 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 Stock. The Operating Partnership used the
proceeds to increase its ownership interest in West Town Mall (see Note 3), to
pay down the Credit Facility and for general working capital purposes. The
Operating Partnership pays a preferred distribution to the Company equal to the
dividends paid on the Series C Preferred Stock.
Exchange Rights
The former limited partners in SPG, LP had the right at any time after
December 1994 to exchange all or any portion of their Units for shares of
common stock of the Company on a one-for-one basis or cash, as selected by the
Company's Board of Directors. If the Company had selected to use cash, the
Company would have caused SPG, LP to redeem the Units. The amount of cash to be
paid if the exchange right was exercised and the cash option was selected would
have been based on the trading price of the Company's common stock at that
time. In the periods when the Operating Partnership did not control whether
cash would be used to settle the limited partners' exchange rights, the limited
partners' equity interest was excluded from partners' equity and was reflected
in the consolidated balance sheet at redemption value.
In connection with the DRC Merger, the Operating Partnership agreement was
amended eliminating the exchange right provision. However, the limited partners
in SPG, LP exchanged their interest for Units in the Operating Partnership. The
Operating Partnership extended rights to its limited partners similar to the
rights previously held by the limited partners of SPG, LP. However, on November
13, 1996, an agreement was reached between the Company and the Operating
Partnership which restricts the Company's ability to cause the Operating
Partnership to redeem for cash the limited partners' Units without contributing
cash to the Operating Partnership as partners' equity sufficient to effect the
redemption. If sufficient cash is not contributed, the Company will be deemed
to have elected to acquire the limited partners' Units for shares of the
Company's common stock. As a result of these arrangements, the limited
partners' equity interest in the Operating Partnership has been included as
<PAGE>
partners' equity at historical carrying value. Previous adjustments to exclude
limited partners' equity interest from partners' equity have been reversed.
The Operating Partnership has the right to issue Units and Preferred Units
under certain circumstances. As of December 31, 1997, the Company has reserved
61,850,762 shares of common stock for issuance upon the exchange of Units.
12. Stock Option Plans
The Company and the Operating Partnership adopted an Employee Stock Plan
(the "Employee Plan"). The Company also adopted a Director Stock Option Plan
(the "Director Plan" and, together with the Employee Plan, the "Stock Option
Plans") for the purpose of attracting and retaining eligible officers,
directors and employees. The Company has reserved for issuance 4,595,000 shares
of common stock under the Employee Plan and 100,000 shares of common stock
under the Director Plan. If stock options granted in connection with the Stock
Option Plans are exercised at any time or from time to time, the partnership
agreement requires the Company to sell to the Operating Partnership, at fair
market value, shares of the Company's common stock sufficient to satisfy the
exercised stock options. The Company also is obligated to purchase Units for
cash in an amount equal to the fair market value of such shares.
Employee Plan
The Employee Plan is currently administered by the Company's Compensation
Committee (the "Committee"). During the ten-year period following the adoption
of the Employee Plan, the Committee may, subject to the terms of the Employee
Plan and in certain instances subject to board approval, grant to key employees
(including officers and directors who are employees) of the Operating
Partnership or its "affiliates" (as defined in the Employee Plan) the following
types of awards: stock options (including options with a reload feature), stock
appreciation rights, performance units and shares of restricted or unrestricted
common stock. Awards granted under the Employee Plan become exercisable over
the period determined by the Committee. The exercise price of an option may not
be less than the fair market value of the shares of the common stock on the
date of grant. The options vest 40% on the first anniversary of the date of
grant, an additional 30% on the second anniversary of the grant date and become
fully vested three years after the grant date. The options expire ten years
from the date of grant.
Director Plan
Directors of the Company who are not also employees of the Company or its
"affiliates" (as defined in the Director Plan) participate in the Director
Plan. Under the Director Plan, each eligible director is automatically granted
options ("Director Options") to purchase 5,000 shares of common stock upon the
director's initial election to the Board of Directors and 3,000 shares of
common stock upon each reelection of the director to the Board of Directors.
The exercise price of the options is equal to 100% of the fair market value of
the Company's common stock on the date of grant. Director Options become
exercisable on the first anniversary of the date of grant or at such earlier
time as a "change in control" of the Company occurs and will remain exercisable
through the tenth anniversary of the date of grant (the "Expiration Date").
Prior to their Expiration Dates, Director Options will terminate 30 days after
the optionee ceases to be a member of the Board of Directors.
SFAS No. 123, "Accounting for Stock-Based Compensation," requires entities
to measure compensation costs related to awards of stock-based compensation
using either the fair value method or the intrinsic value method. Under the
fair value method, compensation expense is measured at the grant date based on
the fair value of the award. Under the intrinsic value method, compensation
expense is equal to the excess, if any, of the quoted market price of the stock
at the grant date over the amount the employee must pay to acquire the stock.
Entities electing to measure compensation costs using the intrinsic value
method must make pro forma disclosures of net income and earnings per Unit as
if the fair value method had been applied. The Operating Partnership has
elected to account for stock-based compensation programs using the intrinsic
value method consistent with existing accounting policies. The impact on pro
forma net income and earnings per Unit as a result of applying the fair value
method was not material.
<PAGE>
The fair value at date of grant for options granted during the years ended
December 31, 1997, 1996 and 1995 was $3.18, $2.13 and $2.06 per option,
respectively. The fair value of the options at the date of grant was estimated
using the Black-Scholes option pricing model with the following assumptions:
December 31,
1997 1996 1995
Expected Volatility 17.63% 17.48% 17.86%
Risk-Free Interest 6.82% 6.63% 6.82%
Rate
Dividend Yield 6.9% 7.5% 7.9%
Expected Life 10 years 10 years 10 years
The weighted average remaining contract life for options outstanding as of
December 31, 1997 was 6.1 years.
Information relating to the Stock Option Plans from January 1, 1995
through December 31, 1997 is as follows:
Director Plan Employee Plan
------------------ ----------------------
OPTION OPTION
PRICE PER PRICE PER
OPTIONS SHARE OPTIONS SHARE
------- ----------- ----------- -----------
SHARES UNDER OPTION AT $22.25 - $22.25 -
DECEMBER 31, 1994 40,000 $27.00 2,070,147 $25.25
Granted 15,000 24.9375 -- N/A
Exercised -- -- (6,876) 23.44
Forfeited -- -- (49,137) 23.60 (1)
------- ----------- ----------- -----------
SHARES UNDER OPTION AT $22.25 - $22.25 -
DECEMBER 31, 1995 55,000 27.00 2,014,134 25.25
Granted 44,080 23.50 (1) -- N/A
Exercised (5,000) 22.25 (367,151) 23.33 (1)
Forfeited (9,000) 25.52 (1) (24,000) 24.21 (1)
------- ----------- ----------- -----------
SHARES UNDER OPTION AT $22.25 -
DECEMBER 31, 1996 85,080 $15 - 27.38 1,622,983 25.25
Granted 9,000 29.3125 -- N/A
Exercised (8,000) 23.62 (1) (361,902) 23.29 (1)
Forfeited -- N/A (13,484) 23.99 (1)
------- ----------- ----------- -----------
SHARES UNDER OPTION AT $22.25 -
DECEMBER 31, 1997 86,080 $15 - 27.38 1,247,597 25.25
======= =========== =========== ===========
OPTIONS EXERCISABLE AT
DECEMBER 31, 1997 77,080 23.96 (1) 1,247,597 $22.90 (1)
======= =========== =========== ===========
SHARES AVAILABLE FOR GRANT AT
DECEMBER 31, 1997 920 1,611,474
======= ===========
(1) Represents the weighted average price.
Stock Incentive Programs
Two stock incentive programs are currently in effect.
In October 1994, under the Employee Plan of the Company and the Operating
Partnership, the Company's Compensation Committee approved a five-year stock
incentive program (the "Stock Incentive Program"), under which shares of
restricted common stock of the Company were granted to certain employees at no
cost to those employees. A percentage of each of these restricted stock grants
can be earned and awarded each year if the Company attains certain growth
targets measured in Funds From Operations, as those growth targets may be
established by the Company's Compensation Committee from time to time. Any
restricted stock earned and awarded vests in four installments of 25% each on
January 1 of each year following the year in which the restricted stock is
deemed earned and awarded.
<PAGE>
In 1994, and prior to the DRC Merger, DRC also established a five-year
stock incentive program (the "DRC Plan") under which shares of restricted
common stock were granted to certain DRC employees at no cost to those
employees. The DRC Plan also provided that this restricted stock would be
earned and awarded based upon DRC's attainment of certain economic goals
established by the Compensation Committee of DRC's Board of Directors. At the
time of the DRC Merger, the Company and the Operating Partnership agreed to
assume the terms and conditions of the DRC Plan and the economic criteria upon
which restricted stock under both the Stock Incentive Program and the DRC Plan
would be deemed earned and awarded were aligned with one another. Further,
other terms and conditions of the DRC Plan and Stock Incentive Program were
modified so that beginning with calendar year 1996, the terms and conditions of
these two programs are substantially the same. It should be noted that the
terms and conditions concerning vesting of the restricted stock grant to the
Company's President and Chief Operating Officer, a former DRC employee, are
different from those established by the DRC Plan and are specifically set forth
in the employment contract between the Company and such individual.
In March 1995, an aggregate of 1,000,000 shares of restricted stock was
granted to 50 executives, subject to the performance standards, vesting
requirements and other terms of the Stock Incentive Program. Prior to the DRC
Merger, 2,108,000 shares of DRC common stock were deemed available for grant to
certain designated employees of DRC, also subject to certain performance
standards, vesting requirements and other terms of the DRC Plan. During 1997,
1996 and 1995, a total of 448,753; 200,030; and 144,196 shares of common stock
of the Company, respectively, net of forfeitures, were deemed earned and
awarded under the Stock Incentive Program and the DRC Plan. Approximately
$5,386; $2,084; and $918 relating to these programs were amortized in 1997,
1996 and 1995, respectively. The cost of restricted stock grants, based upon
the stock's fair market value at the time such stock is earned, awarded and
issued, is charged to partners' equity and subsequently amortized against
earnings of the Operating Partnership over the vesting period.
13. Employee Benefit Plan
The Operating Partnership and affiliated entities maintain a tax-qualified
retirement 401(k) savings plan. Under the plan, eligible employees can
participate in a cash or deferred arrangement permitting them to defer up to a
maximum of 12% of their compensation, subject to certain limitations.
Participants' salary deferrals are matched at specified percentages, and the
plan provides annual contributions of 3% of eligible employees' compensation.
The Operating Partnership contributed $2,727; $2,350; and $1,716 to the plans
in 1997, 1996 and 1995, respectively.
Except for the 401(k) plan, the Operating Partnership offers no other
postretirement or postemployment benefits to its employees.
14. 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 DPMI, and the plaintiffs are 27 former employees of the
defendants. In the complaint, the plaintiffs alleged 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 DRC Merger. Plaintiffs asserted 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 DRC Merger,
constituted a breach of contract and a breach of the implied covenant of good
faith and fair dealing under Ohio law. Plaintiffs sought 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 have appealed this judgment and the appeal is
pending. While it is difficult for the Company to predict the ultimate outcome
of this action, based on the information known to the Company to date, it is
not expected that this action will have a material adverse effect on the
Company or the Operating Partnership.
<PAGE>
Roel Vento et al v. Tom Taylor et al. A subsidiary 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.
Lease Commitments
As of December 31, 1997, a total of 31 of the Properties are subject to
ground leases. The termination dates of these ground leases range from 1998 to
2087. These ground leases generally require payments by the Operating
Partnership of a fixed annual rent, or a fixed annual rent plus a participating
percentage over a base rate. Ground lease expense incurred by the Operating
Partnership for the years ended December 31, 1997, 1996 and 1995, was $10,511,
$8,506 and $6,700, respectively.
Future minimum lease payments due under such ground leases for each of the
next five years ending December 31 and thereafter are as follows:
1998 $ 7,208
1999 7,218
2000 7,280
2001 7,378
2002 7,658
Thereafter 492,270
$ 529,012
Environmental Matters
Substantially all of the Properties have been subjected to Phase I
environmental audits. Such audits have not revealed nor is management aware of
any environmental liability that management believes would have a material
adverse impact on the Operating Partnership's financial position or results of
operations. Management is unaware of any instances in which it would incur
significant environmental costs if any or all Properties were sold, disposed of
or abandoned.
<PAGE>
15. Quarterly Financial Data (Unaudited)
Summarized quarterly 1997 and 1996 data is as follows:
<TABLE>
First Second Third Fourth
Quarter Quarter Quarter (1) Quarter Total
----------- ----------- ----------- ----------- -----------
<S> <S> <S> <S> <S>
1997
Total revenue $242,414 $245,055 $259,783 $310,222 $1,057,474
Operating income 111,706 114,455 117,572 133,297 477,030
Income before
extraordinary items 43,062 48,413 54,286 57,372 203,133
Net income available
to Unitholders 13,409 40,539 72,400 47,595 173,943
Net income before
extraordinary items
per Unit (2) 0.23 0.27 0.28 0.29 1.08
Net income per Unit
(2) 0.08 0.26 0.45 0.28 1.08
Weighted Average Units
Outstanding 157,946,908 158,494,224 159,795,424 167,760,629 161,022,887
Net income before
extraordinary items
per Unit - assuming
dilution (2) 0.23 0.27 0.28 0.29 1.08
Net income per Unit -
assuming dilution (2)
$0.08 $0.26 0.45 0.28 $1.08
Weighted Average Units
Outstanding -
Assuming Dilution 158,343,827 158,337,889 160,180,477 168,146,728 161,406,951
1996
Total revenue $139,444 $143,761 $202,436 $262,063 $747,704
Operating income 61,073 63,051 82,715 124,673 331,512
Income before
extraordinary items 23,832 23,968 28,839 58,024 134,663
Net income available
to Unitholders 21,536 21,937 24,085 50,890 118,448
Net income before
extraordinary items
per Unit (2) 0.23 0.23 0.20 0.33 1.02
Net income per Unit
(2) 0.23 0.23 0.18 0.32 0.99
Weighted Average Units
Outstanding 95,664,804 95,842,853 131,056,267 157,632,609 120,181,895
Net income before
extraordinary items
per Unit - assuming
dilution (2) 0.23 0.23 0.20 0.33 1.01
Net income per Unit -
assuming dilution (2)
$0.23 $0.23 $0.18 $0.32 $0.98
Weighted Average Units
Outstanding -
Assuming Dilution 95,686,946 95,882,210 131,174,020 157,946,730 120,317,426
</TABLE>
(1) The third quarter of 1997 reflects the amounts as amended in Form
10-Q/A.
(2) Primarily due to the cyclical nature of earnings available to
Unitholders and the issuance of additional Units during the periods, the
sum of the quarterly earnings per Unit varies from the annual earnings
per Unit.
<PAGE>
16. Subsequent Events (Unaudited)
Proposed CPI Merger
Effective February 18, 1998, the Company and Corporate Property Investors
("CPI") signed a definitive agreement to merge the two companies. The merger is
expected to be completed by the end of the third quarter of 1998 and is subject
to approval by the shareholders of the Company as well as customary regulatory
and other conditions. A majority of the CPI shareholders have already approved
the transaction. Under the terms of the agreement, the shareholders of CPI will
receive, in a reverse triangular merger, consideration valued at $179 for each
share of CPI common stock held consisting of $90 in cash, $70 in the Company's
common stock and $19 worth of 6.5% convertible preferred stock. The common
stock component of the consideration is based upon a fixed exchange ratio using
the Company's February 18, 1998 closing price of $33 5/8 per share, and is
subject to a 15% symmetrical collar based upon the price of the Company's
common stock determined at closing. In the event the Company's common stock
price at closing is outside the parameters of the collar, an adjustment will be
made in the cash component of consideration. The total purchase price,
including indebtedness which would be assumed, is estimated at $5.8 billion.
Macerich Partnership
On February 27, 1998, the Operating Partnership, in a joint venture
partnership with The Macerich Company ("Macerich"), acquired a portfolio of
twelve regional malls comprising approximately 10.7 million square feet of GLA
at a purchase price of $974,500, including the assumption of $485,000 of
indebtedness. The Operating Partnership and Macerich, as 50/50 partners in the
joint venture, were each responsible for one half of the purchase price,
including indebtedness assumed and each assumed leasing and management
responsibilities for six of the regional malls.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULE
To Simon DeBartolo Group, Inc.:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of SIMON DeBARTOLO GROUP, L.P. included in
this Form 10-K, and have issued our report thereon dated February 17, 1998. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule, "Schedule III: Real Estate and
Accumulated Depreciation", as of December 31, 1997, is the responsibility of
the Operating Partnership's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. The schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
February 17, 1998
<PAGE>
<TABLE>
SIMON DeBARTOLO GROUP, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997 SCHEDULE III
(Dollars in thousands)
<CAPTION>
Cost Capitalized Gross Amounts At
Subsequent to Which Carried At
Initial Cost Acquisition Close of Period
-------------------- ---------------- -------------------
Buildings Build- Buildings Accum-
and ings and and ulated
Encum- Improv- Improv- Improv- Depre- Date of
Name, Location brances Land ements Land ements Land ements Total ciation Construction
REGIONAL MALLS
- ------------------------- ---------- ---------- ---------- ------- -------- ---------- ---------- ---------- -------- -------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <S>
Alton Square, Alton, IL $0 $154 $7,641 $0 $11,825 $154 $19,466 $19,620 $1,508 1993 (Note 3)
Amigoland Mall, 0 1,045 4,518 0 986 1,045 5,504 6,549 1,426 1974
Brownsville, TX
Anderson Mall, Anderson, SC 19,000 1,838 18,122 1,363 2,197 3,201 20,319 23,520 3,698 1972
Barton Creek Square, 62,868 4,413 20,699 771 18,893 5,184 39,592 44,776 6,659 1981
Austin, TX
Battlefield Mall, 49,730 4,040 29,783 3,225 32,636 7,265 62,419 69,684 9,131 1976
Springfield, MO
Bay Park Square, Green Bay, 24,848 6,997 25,623 0 193 6,997 25,816 32,813 1,051 1996 (Note 4)
WI
Bergen Mall, Paramus, NJ 0 11,020 92,541 0 4,569 11,020 97,110 108,130 3,471 1996 (Note 4)
Biltmore Square, Asheville, 27,534 10,907 19,315 0 793 10,907 20,108 31,015 831 1996 (Note 4)
NC
Boynton Beach Mall, Boynton 0 33,758 67,710 0 1,789 33,758 69,499 103,257 2,805 1996 (Note 4)
Beach, FL
Broadway Square, Tyler, TX 0 11,470 32,450 0 1,586 11,470 34,036 45,506 3,133 1994 (Note 3)
Brunswick Square, East 0 8,436 55,838 0 935 8,436 56,773 65,209 2,284 1996 (Note 4)
Brunswick, NJ
Castleton Square, 0 45,011 80,963 0 1,234 45,011 82,197 127,208 3,309 1996 (Note 4)
Indianapolis, IN
Charlottesville Fashion 0 0 55,115 0 0 0 55,115 55,115 393 1997 (Note 4)
Square, Charlottesville,
VA
Chautauqua Mall, Jamestown, 0 3,258 9,641 0 10,106 3,258 19,747 23,005 474 1996 (Note 4)
NY
Cheltenham Square, 34,226 14,226 43,799 0 1,371 14,226 45,170 59,396 1,883 1996 (Note 4)
Philadelphia, PA
Chesapeake Square, 49,490 11,533 70,461 0 398 11,533 70,859 82,392 2,866 1996 (Note 4)
Chesapeake, VA
Cielo Vista Mall, El Paso, 57,938 1,307 18,512 608 13,461 1,915 31,973 33,888 7,087 1974
TX
College Mall, Bloomington, 42,936 1,012 16,245 722 16,995 1,734 33,240 34,974 6,530 1965
IN
Columbia Center, Kennewick, 42,867 27,170 58,185 0 4,522 27,170 62,707 89,877 2,416 1996 (Note 4)
WA
Cottonwood Mall, 0 14,010 69,173 0 983 14,010 70,156 84,166 5,507 1993
Albuquerque, NM
Crossroads Mall, Omaha, NE 41,440 884 37,293 409 22,290 1,293 59,583 60,876 4,547 1994 (Note 3)
Crystal River Mall, Crystal 16,000 11,679 14,252 0 2,376 11,679 16,628 28,307 574 1996 (Note 4)
River, FL
DeSoto Square, Bradenton, 38,880 9,531 52,716 0 2,658 9,531 55,374 64,905 2,235 1996 (Note 4)
FL
Eastern Hills Mall, 0 15,444 47,604 0 468 15,444 48,072 63,516 1,952 1996 (Note 4)
Buffalo, NY
Eastland Mall, Tulsa, OK 30,000 3,124 24,035 518 6,106 3,642 30,141 33,783 4,525 1986
Edison Mall, Fort Myers, FL 41,000 13,618 108,215 0 0 13,618 108,215 121,833 773 1997 (Note 4)
Fashion Mall at Keystone at 64,772 0 112,952 0 0 0 112,952 112,952 0 1997 (Note 4)
the Crossing,
Indianapolis, IN
Forest Mall, Fond Du Lac, 12,800 754 4,498 0 2,334 754 6,832 7,586 1,431 1973
WI
Forest Village Park, 20,600 1,212 4,625 757 3,694 1,969 8,319 10,288 1,562 1980
Forestville, MD
Fremont Mall, Fremont, NE 0 26 1,280 265 2,156 291 3,436 3,727 392 1983
Golden Ring Mall, 29,750 1,130 8,955 572 8,459 1,702 17,414 19,116 3,523 1974 (Note 3)
Baltimore, MD
Great Lakes Mall, 62,018 14,608 100,362 0 2,166 14,608 102,528 117,136 4,152 1996 (Note 4)
Cleveland, OH
Greenwood Park Mall, 35,960 2,606 23,500 5,275 52,357 7,881 75,857 83,738 11,534 1977
Greenwood, IN
Gulf View Square, Port 38,157 13,689 39,997 0 401 13,689 40,398 54,087 1,633 1996 (Note 4)
Richey, FL
Heritage Park, Midwest 0 598 6,213 0 1,487 598 7,700 8,298 1,581 1978
City, OK
Hutchinson Mall, Hutchison, 11,523 1,777 18,427 0 2,903 1,777 21,330 23,107 3,658 1985
KS
Independence Center, 0 5,539 45,822 0 2,888 5,539 48,710 54,249 4,386 1994 (Note 3)
Independence, MO
Ingram Park Mall, San 55,580 820 17,182 169 13,083 989 30,265 31,254 5,832 1979
Antonio, TX
Irving Mall, Irving, TX 0 6,736 17,479 2,539 12,858 9,275 30,337 39,612 7,248 1971
Jefferson Valley Mall,
Yorktown
Heights, NY 50,000 4,869 30,304 0 2,910 4,869 33,214 38,083 5,690 1983
Knoxville Center, 0 5,269 22,965 3,712 30,601 8,981 53,566 62,547 4,064 1984
Knoxville, TN
La Plaza, McAllen, TX 50,044 2,194 9,828 0 2,763 2,194 12,591 14,785 2,157 1976
Lafayette Square, 0 25,546 43,294 0 4,503 25,546 47,797 73,343 1,813 1996 (Note 4)
Indianapolis, IN
Laguna Hills Mall, Laguna 0 28,074 56,436 0 0 28,074 56,436 84,510 401 1997 (Note 4)
Hills, CA
Lima Mall, Lima, OH 19,166 7,910 35,495 0 586 7,910 36,081 43,991 1,476 1996 (Note 4)
<PAGE>
Lincolnwood Town Center, 0 11,197 63,490 28 138 11,225 63,628 74,853 8,583 1990
Lincolnwood, IL
Longview Mall, Longview, TX 22,100 278 3,602 124 3,459 402 7,061 7,463 1,679 1978
Machesney Park Mall, 0 613 7,460 120 3,101 733 10,561 11,294 2,319 1979
Rockford, IL
Markland Mall, Kokomo, IN 10,000 0 7,568 0 1,111 0 8,679 8,679 1,317 1983
Mc Cain Mall, N. Little 26,059 0 9,515 0 6,326 0 15,841 15,841 3,873 1973
Rock, AR
Melbourne Square, 39,841 20,552 51,110 0 1,439 20,552 52,549 73,101 2,096 1996 (Note 4)
Melbourne, FL
Memorial Mall, Sheboygan, 0 175 4,881 0 784 175 5,665 5,840 1,025 1980
WI
Menlo Park Mall, Edison, NJ 65,684 225,131 0 0 65,684 225,131 290,815 1,606 1997 (Note 4)
Miami International Mall, 47,009 18,685 69,959 12,687 3,146 31,372 73,105 104,477 13,352 1996 (Note 4)
Miami, FL
Midland Park Mall, Midland, 22,500 704 9,613 0 4,646 704 14,259 14,963 2,818 1980
TX
Miller Hill Mall, Duluth, 0 2,537 18,114 0 1,893 2,537 20,007 22,544 3,443 1973
MN
Mission Viejo Mall, Mission 0 9,139 54,445 0 12,536 9,139 66,981 76,120 2,206 1996 (Note 4)
Viejo, CA
Mounds Mall, Anderson, IN 0 0 2,689 0 1,702 0 4,391 4,391 1,077 1964
Muncie Mall, Muncie, IN 0 210 5,964 49 18,913 259 24,877 25,136 2,152 1975
North East Mall, Hurst, TX 22,201 1,440 13,473 784 16,158 2,224 29,631 31,855 1,942 1996 (Note 4)
North Towne Square, Toledo, 23,500 579 8,382 0 1,798 579 10,180 10,759 3,156 1980
OH
Northgate Mall, Seattle, WA 80,046 89,991 57,873 0 15,802 89,991 73,675 163,666 2,471 1996 (Note 4)
Northwoods Mall, Peoria, IL 0 1,202 12,779 1,449 19,429 2,651 32,208 34,859 6,078 1983 (Note 3)
Oak Court Mall, Memphis, TN 15,673 57,392 0 0 15,673 57,392 73,065 410 1997 (Note 4)
Orange Park Mall, 0 13,345 65,173 0 10,759 13,345 75,932 89,277 5,986 1994 (Note 3)
Jacksonville, FL
Orland Square, Orland Park, 50,000 36,770 131,054 0 0 36,770 131,054 167,824 545 1997 (Note 4)
IL
Paddock Mall, Ocala, FL 30,347 20,420 30,490 0 3,713 20,420 34,203 54,623 1,265 1996 (Note 4)
Port Charlotte Town Center,
Port Charlotte, FL 46,102 5,561 59,381 0 34 5,561 59,415 64,976 2,404 1996 (Note 4)
Prien Lake Mall, Lake 0 1,926 2,829 731 11,386 2,657 14,215 16,872 1,187 1972
Charles, LA
Promenade, Woodland Hills, 0 13,072 14,487 0 0 13,072 14,487 27,559 103 1997 (Note 4)
CA
Raleigh Springs Mall, 0 9,137 28,604 0 554 9,137 29,158 38,295 1,193 1996 (Note 4)
Memphis, TN
Randall Park Mall, 33,879 4,421 52,456 0 2,106 4,421 54,562 58,983 2,170 1996 (Note 4)
Cleveland, OH
Richardson Square, Dallas, 0 4,867 6,329 1,075 1,866 5,942 8,195 14,137 353 1996 (Note 4)
TX
Richmond Square, Richmond, 0 3,410 11,343 0 7,928 3,410 19,271 22,681 566 1996 (Note 4)
IN
Richmond Towne Square, 0 2,666 12,112 0 1,050 2,666 13,162 15,828 490 1996 (Note 4)
Cleveland, OH
River Oaks Center, Calumet 32,500 30,884 102,357 0 0 30,884 102,357 133,241 413 1997 (Note 4)
City, IL
Ross Park Mall, Pittsburgh, 60,000 14,557 50,995 9,617 46,014 24,174 97,009 121,183 6,089 1996 (Note 4)
PA
South Hills Village, 0 23,453 126,887 0 0 23,453 126,887 150,340 302 1997 (Note 4)
Pittsburgh, PA
South Park Mall, 24,748 855 13,691 74 2,531 929 16,222 17,151 3,615 1975
Shreveport, LA
Southern Park Mall, 0 16,982 77,774 97 11,506 17,079 89,280 106,359 3,387 1996 (Note 4)
Youngstown, OH
Southgate Mall, Yuma, AZ 0 1,817 7,974 0 2,969 1,817 10,943 12,760 1,741 1988 (Note 3)
Southtown Mall, Ft. Wayne, 0 2,059 13,288 0 974 2,059 14,262 16,321 6,244 1969
IN
St Charles Towne Center 0 9,328 52,974 1,180 9,412 10,508 62,386 72,894 10,611 1990
Waldorf, MD
Summit Mall, Akron, OH 0 25,037 45,036 0 9,551 25,037 54,587 79,624 2,133 1996 (Note 4)
Sunland Park Mall, El Paso, 39,855 2,896 28,900 0 2,291 2,896 31,191 34,087 6,571 1988
TX
Tacoma Mall, Tacoma, WA 93,656 39,504 125,826 0 2,441 39,504 128,267 167,771 5,177 1996 (Note 4)
Tippecanoe Mall, Lafayette, 46,961 4,320 8,474 5,517 31,314 9,837 39,788 49,625 6,816 1973
IN
Towne East Square, Wichita, 56,767 9,495 18,479 2,042 8,372 11,537 26,851 38,388 6,082 1975
KS
Towne West Square, Wichita, 0 988 21,203 76 4,584 1,064 25,787 26,851 5,477 1980
KS
Treasure Coast Square, 53,953 11,124 73,108 0 1,296 11,124 74,404 85,528 2,972 1996 (Note 4)
Jenson Beach, FL
Tyrone Square, St. 0 15,638 120,962 0 1,418 15,638 122,380 138,018 4,939 1996 (Note 4)
Petersburg, FL
University Mall, Little 0 123 17,411 0 714 123 18,125 18,248 3,815 1967
Rock, AR
<PAGE>
University Mall, Pensacola, 0 4,741 26,657 0 1,700 4,741 28,357 33,098 2,610 1994 (Note 3)
FL
University Park Mall, South 59,500 15,105 61,466 0 6,539 15,105 68,005 83,110 14,721 1996 (Note 4)
Bend, IN
Upper Valley Mall, 30,940 8,422 38,745 0 439 8,422 39,184 47,606 1,607 1996 (Note 4)
Springfield, OH
Valle Vista Mall, 34,514 1,398 17,266 372 6,899 1,770 24,165 25,935 4,305 1983
Harlingen, TX
Virginia Center Commons, 0 9,765 63,098 1,839 397 11,604 63,495 75,099 2,853 1996 (Note 4)
Richmond, VA
Washington Square, 33,541 20,146 41,248 0 546 20,146 41,794 61,940 1,703 1996 (Note 4)
Indianapolis, IN
West Ridge Mall, Topeka, KS 44,288 5,775 34,132 197 3,892 5,972 38,024 43,996 6,070 1988
White Oaks Mall, 16,500 3,024 35,692 1,153 13,579 4,177 49,271 53,448 5,088 1977
Springfield, IL
Windsor Park Mall, San 14,811 1,194 16,940 130 3,285 1,324 20,225 21,549 4,189 1976
Antonio, TX
Woodville Mall, Toledo, OH 0 1,830 4,454 0 339 1,830 4,793 6,623 221 1996 (Note 4)
COMMUNITY SHOPPING CENTERS
- -------------------------
Arvada Plaza, Arvada, CO 0 70 342 608 581 678 923 1,601 207 1966
Aurora Plaza, Aurora, CO 0 35 5,754 0 1,004 35 6,758 6,793 1,381 1966
Bloomingdale Court, 29,009 9,735 26,184 0 1,323 9,735 27,507 37,242 3,218 1987
Bloomingdale, IL
Boardman Plaza, Youngstown, 18,277 8,189 26,355 0 1,479 8,189 27,834 36,023 1,087 1996 (Note 4)
OH
Bridgeview Court, 0 308 3,638 0 50 308 3,688 3,996 596 1988
Bridgeview, IL
Brightwood Plaza, 0 65 128 0 256 65 384 449 93 1965
Indianapolis, IN
Buffalo Grove Towne Center,
Buffalo
Grove, IL 0 2,044 6,602 0 270 2,044 6,872 8,916 468 1988
Celina Plaza, El Paso, TX 0 138 815 0 13 138 828 966 144 1977
Century Mall, Merrillville, 0 2,190 9,589 0 1,376 2,190 10,965 13,155 2,792 1992 (Note 3)
IN
Charles Towne Square, 0 446 1,768 500 8,655 946 10,423 11,369 0 1976
Charleston, SC
Chesapeake Center, 6,563 5,500 12,279 0 23 5,500 12,302 17,802 498 1996 (Note 4)
Chesapeake, VA
Cohoes Commons, Rochester, 0 1,698 8,426 0 80 1,698 8,506 10,204 1,765 1984
NY
Countryside Plaza, 0 1,243 8,507 0 548 1,243 9,055 10,298 1,856 1977
Countryside, IL
Eastgate Consumer Mall, 22,929 425 4,722 187 2,868 612 7,590 8,202 2,935 1991 (Note 3)
Indianapolis, IN
Eastland Plaza, Tulsa, OK 0 908 3,709 0 11 908 3,720 4,628 506 1987
Forest Plaza, Rockford, IL 16,904 4,270 16,818 453 455 4,723 17,273 21,996 1,782 1985
Fox River Plaza, Elgin, IL 12,654 2,907 9,453 0 60 2,907 9,513 12,420 1,016 1985
Glen Burnie Mall, Glen 0 7,422 22,778 0 2,265 7,422 25,043 32,465 930 1996 (Note 4)
Burnie, MD
Great Lakes Plaza, 0 1,027 2,025 0 3,073 1,027 5,098 6,125 226 1996 (Note 4)
Cleveland, OH
Greenwood Plus, Greenwood, 0 1,350 1,792 0 4,221 1,350 6,013 7,363 766 1979 (Note 3)
IN
Griffith Park Plaza, 0 0 2,412 0 110 0 2,522 2,522 533 1979
Griffith, IN
Grove at Lakeland Square, 3,750 5,237 6,016 0 892 5,237 6,908 12,145 305 1996 (Note 4)
The, Lakeland, FL
Hammond Square, Sandy 0 0 27 0 1 0 28 28 5 1974
Springs, GA
Highland Lakes Center, 14,377 13,950 18,490 0 314 13,950 18,804 32,754 769 1996 (Note 4)
Orlando, FL
Ingram Plaza, San Antonio, 0 421 1,802 4 22 425 1,824 2,249 449 1980
TX
Keystone Shoppes , 0 0 12,550 0 0 0 12,550 12,550 0 1997 (Note 4)
Indianapolis, IN
Knoxville Commons, 0 3,730 5,345 0 1,608 3,730 6,953 10,683 869 1990
Knoxville, TN
Lake Plaza, Waukegan, IL 0 2,868 6,420 0 267 2,868 6,687 9,555 654 1986
Lake View Plaza, Orland 22,169 4,775 17,586 0 445 4,775 18,031 22,806 1,806 1986
Park, IL
Lima Center Lima, OH 0 1,808 5,151 0 9 1,808 5,160 6,968 204 1996 (Note 4)
Lincoln Crossing, O'Fallon, 997 1,079 2,692 0 268 1,079 2,960 4,039 408 1990
IL
Mainland Crossing, 2,226 1,850 1,737 0 124 1,850 1,861 3,711 81 1996 (Note 4)
Galveston, TX
Maplewood Square, Omaha, NE 0 466 1,249 0 157 466 1,406 1,872 303 1987
Markland Plaza, Kokomo, IN 0 210 1,258 0 475 210 1,733 1,943 385 1975
Martinsville Plaza, 0 0 584 0 45 0 629 629 266 1980
Martinsville, VA
Marwood Plaza, 0 52 3,597 0 107 52 3,704 3,756 558 1962
Indianapolis, IN
Matteson Plaza, Matteson, 11,159 1,830 9,737 0 1,557 1,830 11,294 13,124 1,218 1988
IL
<PAGE>
Memorial Plaza, Sheboygan, 0 250 436 0 871 250 1,307 1,557 230 1966
WI
Mounds Mall Cinema, 0 88 158 0 1 88 159 247 40 1975
Anderson, IN
New Castle Plaza, New 0 128 1,621 0 547 128 2,168 2,296 460 1966
Castle, IN
North Ridge Plaza, Joliet, 0 2,831 7,699 0 374 2,831 8,073 10,904 898 1985
IL
North Riverside Park Plaza,
N. Riverside, IL 7,671 1,062 2,490 0 254 1,062 2,744 3,806 617 1977
Northland Plaza, Columbus, 0 4,490 8,893 0 360 4,490 9,253 13,743 897 1988
OH
Northwood Plaza, Fort 0 304 2,922 0 362 304 3,284 3,588 670 1977
Wayne, IN
Park Plaza, Hopkinsville, 0 300 1,572 0 24 300 1,596 1,896 299 1968
KY
Regency Plaza, St. Charles, 1,878 616 4,963 0 150 616 5,113 5,729 478 1988
MO
Sherwood Gardens, Salinas, 0 0 9,106 0 0 0 9,106 9,106 136 1997 (Note 4)
CA
St. Charles Towne Plaza, 30,742 8,780 18,993 0 117 8,780 19,110 27,890 2,067 1987
Waldorf, MD
Teal Plaza, Lafayette, IN 0 99 878 0 2,712 99 3,590 3,689 148 1986
Terrace at The Florida 4,688 5,647 4,126 0 956 5,647 5,082 10,729 272 1996 (Note 4)
Mall, Orlando, FL
Tippecanoe Plaza, 0 265 440 305 4,728 570 5,168 5,738 579 1962
Lafayette, IN
University Center, South 0 2,388 5,214 0 46 2,388 5,260 7,648 2,197 1996 (Note 4)
Bend, IN
Wabash Village, West 0 0 976 0 203 0 1,179 1,179 232 1976
Lafayette, IN
Washington Plaza, 0 942 1,697 0 0 942 1,697 2,639 434 1996 (Note 4)
Indianapolis, IN
West Ridge Plaza, Topeka, 4,612 1,491 4,620 0 508 1,491 5,128 6,619 504 1988
KS
White Oaks Plaza, 12,345 3,265 14,267 0 188 3,265 14,455 17,720 1,460 1986
Springfield, IL
Wichita Mall, Wichita, KS 0 0 4,535 0 1,635 0 6,170 6,170 1,184 1981
Wood Plaza, Fort Dodge, IA 0 45 380 0 760 45 1,140 1,185 216 1967
SPECIALTY RETAIL CENTERS
- ------------------------
The Forum Shops at Caesars,
Las Vegas, NV 175,000 0 72,866 0 57,655 0 130,521 130,521 12,508 1992
Trolley Square, Salt Lake 27,141 4,899 27,539 263 3,661 5,162 31,200 36,362 4,353 1986 (Note 3)
City, UT
MIXED-USE PROPERTIES
- ------------------------
New Orleans Centre/CNG
Plaza,
New Orleans, LA 0 3,679 41,231 0 725 3,679 41,956 45,635 1,670 1996 (Note 4)
O Hare International
Center,
Rosemont, IL 0 125 60,287 1 8,796 126 69,083 69,209 14,771 1986
Riverway, Rosemont, IL 131,451 8,738 129,175 16 6,560 8,754 135,735 144,489 28,737 1988
DEVELOPMENT PROJECTS
- -------------------------
Bowie Town Center, Bowie, 6,000 570 0 0 6,000 570 6,570 0
MD
Indian River Peripheral, 826 57 0 0 826 57 883 0 1996 (Note 4)
Vero
Beach, FL
Muncie Plaza, Muncie, IN 625 10,626 625 10,626 11,251 0
North East Plaza, Hurst, TX 8,988 2,198 0 0 8,988 2,198 11,186 0
The Shops at Sunset Place,
Miami, FL 23,546 12,297 68,111 0 0 12,297 68,111 80,408 0
Victoria Ward, Honolulu, HI 0 0 1,400 0 0 0 1,400 1,400 0
Waterford Lakes, Orlando, 0 0 1,114 0 0 0 1,114 1,114 0
FL
Other 0 0 314 0 0 0 314 314
---------- ---------- ---------- ------- -------- ---------- ---------- ---------- --------
$2,705,333 $1,191,370 $4,802,609 $62,583 $757,503 $1,253,953 $5,560,112 $6,814,065 $448,353
========== ========== ========== ======= ======== ========== ========== ========== ========
</TABLE>
<PAGE>
SIMON DeBARTOLO GROUP, L.P.
NOTES TO SCHEDULE III AS OF DECEMBER 31, 1997
(Dollars in thousands)
(1) Reconciliation of Real Estate Properties:
The changes in real estate assets for the years ended December 31, 1997,
1996 and 1995 are as follows:
1997 1996 1995
Balance, beginning of year $5,273,465 $2,143,925 $1,887,122
Acquisitions 1,238,909 2,843,287 32,547
Improvements 312,558 224,605 73,097
Disposals (10,867) (19,579) (12,722)
Consolidation -- 81,227 163,881
Balance, close of year $6,814,065 $5,273,465 $2,143,925
The aggregate net book value for federal income tax purposes as of
December 31, 1997 was $4,745,605.
(2) Reconciliation of Accumulated Depreciation:
The changes in accumulated depreciation and amortization for the years
ended December 31, 1997, 1996 and 1995 are as follows:
1997 1996 1995
Balance, beginning of year $270,637 $147,341 $ 68,222
Carryover of minority partners'
interest in accumulated
depreciation of DeBartolo
Properties -- 13,505 --
Depreciation expense 183,357 120,565 79,126
Disposals (5,641) (10,774) (7)
Balance, close of year $448,353 $270,637 $147,341
Depreciation of the Operating Partnership's investment in buildings and
improvements reflected in the statements of operations is calculated over the
estimated original lives of the assets as follows:
Buildings and Improvements - typically 35 years
Tenant Inducements - shorter of lease term or useful life
(3) Initial cost represents net book value at December 20, 1993.
(4) Not developed/constructed by the Operating Partnership or the Simons. The
date of construction represents acquisition date.
<PAGE>
INDEX TO EXHIBITS
Exhibits
2.1 Agreement and Plan of Merger among SPG, Sub and DRC, dated as of
March 26, 1996, as amended (included as Annex I to the
Prospectus/Joint Proxy Statement filed as part of Form S-4 of Simon
Property Group, Inc. (Registration No. 333-06933))
2.2 Amendment and supplement to Offer to Purchase for Cash all
Outstanding Beneficial Interests in The Retail Property Trust
(incorporated by reference to Exhibit 99.1 of the Form 8-K filed by
the Operating Partnership on September 12, 1997)
2.3 (d) Merger agreement between SDG, LP and SPG, LP
2.4 (d) Purchase and Sale Agreement between The Equitable Life Assurance
Society of the United States and SM Portfolio Partners
2.5 Agreement and Plan of Merger among the Company and Corporate
Property Investors and Corporate Realty Consultants, Inc.
(incorporated by reference to Exhibit 10.1 in the Form 8-K filed by
the Company on February 24, 1998)
3.1 (c) Amended and Restated Charter
3.2 (c) Amended and Restated Bylaws, incorporated by reference to Annex VIII
of the Company's Schedule 14A on May 8, 1996.
3.3 (c) Articles Supplementary with respect to the Series B Preferred Stock
of the Company to the Amended and Restated Charter.
3.4 Articles Supplementary with respect to the Series C Preferred Stock
of the Company to the Amended and Restated Charter. (incorporated by
reference to Exhibit 4.1 of the Form 8-K filed by the Company on
July 8, 1997)
3.5 (d) Articles Supplementary with respect to the conversion of the Series
A Preferred Stock of the Company into Common Stock.
4.2 (a) Secured Promissory Note and Open-End Mortgage and Security Agreement
from Simon Property Group, L.P. in favor of Principal Mutual Life
Insurance Company (Pool 2).
4.3 (d) Second Amended and Restated Credit Agreement dated as of December
22, 1997 among the Operating Partnership and Morgan Guaranty Trust
Company of New York, Union Bank of Switzerland and Chase Manhattan
Bank as Lead Agents.
9.1 (a) Voting Trust Agreement, Voting Agreement and Proxy between MSA, on
the one hand, and Melvin Simon, Herbert Simon and David Simon, on
the other hand.
10.1 Fifth Amended and Restated Limited Partnership Agreement of Simon
DeBartolo Group, L.P. (Incorporated by Reference to Exhibit 10.1.1
of the Company's Form S-4 (Registration No. 333-06933))
10.3 (a)Noncompetition Agreement dated as of December 1, 1993 between the
Company and each of Melvin Simon and Herbert Simon.
10.4 (a)Noncompetition Agreement dated as of December 1, 1993 between the
Company and David Simon.
10.5 (a)Restriction and Noncompetition Agreement dated as of December 1,
1993 among the Company and the Management Companies.
10.6 (a)Simon Property Group, L.P. Employee Stock Plan.
10.7 (a)Simon DeBartolo Group, Inc. Director Stock Option Plan.
10.8 (c)Restated Indemnity Agreement dated as of August 9, 1996 between the
Company and its directors and officers.
10.9 (a)Option Agreement to acquire the Excluded Retail Properties.
(Previously filed as Exhibit 10.10.)
10.10 (a) Option Agreement to acquire the Excluded PropertiesLand.
(Previously filed as Exhibit 10.11.)
10.11 (a) Registration Rights Agreement dated as of December 1, 1993
between the Company, certain Limited Partners and certain other
parties. (Previously filed as Exhibit 10.12.)
10.12 (a) Option Agreements dated as of December 1, 1993 between the
Management Company and Simon Property Group, L.P. (Previously filed
as Exhibit 10.20.)
10.13 (a) Option Agreement dated as of December 1, 1993 to acquire
Development Land. (Previously filed as Exhibit 10.22.)
10.14 (a) Option Agreement dated December 1, 1993 between the Management
Company and Simon Property Group, L.P. (Previously filed as Exhibit
10.25.)
10.15 (a) Option Agreement dated December 1, 1993 between Simon
Enterprises, Inc. and Simon Property Group, L.P. (Previously filed
as Exhibit 10.26.)
10.16 (a) Lock-Up Agreement dated December 20, 1993 between MSA and Simon
Property Group, L.P. (Previously filed as Exhibit 10.27.)
10.17 (b) Operating Agreement of Summit Mall Company, L.L.C. dated
February 23, 1995.
10.19 Partnership Agreement of DeBartolo Capital Partnership (the
"Financing Partnership") (Incorporated by reference to the 1994 DRC
Form 10-K Exhibit 10(b).)
10.20 Amended and Restated Articles of Incorporation of DPMI (Incorporated
by reference to the 1994 DRC Form 10-K Exhibit 10(c).)
10.21 Amended and Restated Code of Regulations of DPMI (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(d).)
10.25 First Amendment to the Corporate Services Agreement between DRC and
DPMI (Incorporated by reference to the 1995 DRC Form 10-K Exhibit
10.17.)
10.26 Service Agreement between EJDC and DPMI (Incorporated by reference
to the 1994 DRC Form 10-K Exhibit 10.(f).)
10.27 Master Services Agreement between DRP, LP and DPMI (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(g).)
10.28 First Amendment to Master Services Agreement between DRP, LP and
DPMI (Incorporated by reference to the 1995 DRC Form 10-K Exhibit
10.20.)
10.33 DRC 1994 Stock Incentive Plan (Incorporated by reference to the 1994
DRC Form 10-K Exhibit 10(k).)
10.34 Purchase Option and Right of First Refusal Agreement between DRP, LP
and Edward J. DeBartolo (for Northfield Square) (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(o).)
10.35 Indemnification Agreement between DRC and its directors and officers
(Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(u).)
10.36 Amendment to Indemnification Agreement between DRP, LP and the
directors and officers of DPMI (Incorporated by reference to the
1995 DRC Form 10-K Exhibit 10.49.)
10.37 Indemnification Agreement between DRP, LP and the directors and
officers of DPMI (Incorporated by reference to the 1995 DRC Form 10-
K Exhibit 10.50.)
10.38 Indemnification Agreement between DPMI and its directors and
officers (Incorporated by reference to the 1995 DRC Form 10-K
Exhibit 10.51.)
10.43 Office Lease between DRP, LP and an affiliate of EJDC (Southwoods
Executive Center) (Incorporated by reference to the 1995 DRC Form 10-
K Exhibit 10.69.)
10.44 Sublease between DRP, LP and DPMI (Incorporated by reference to the
1995 DRC Form 10-K Exhibit 10.70.)
10.45 Purchase Option and Right of First Refusal Agreement between DRP, LP
and Robinson Mall, Inc. (for The Mall at Robinson Town Center)
(Incorporated by reference to the 1994 DRC Form 10-K Exhibit
10(p)(1).)
10.46 Purchase Option and Right of First Refusal Agreement between DRP, LP
and EJDC (for SouthPark Center Development Site) (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(p)(2).)
10.47 Purchase Option and Right of First Refusal Agreement between DRP, LP
and Washington Mall Associates (for Washington, Pennsylvania Site)
(Incorporated by reference to the 1994 DRC Form 10-K Exhibit
10(p)(3).)
10.48 Purchase Option and Right of First Offer Agreement between DRP, LP
and Cutler Ridge Mall, Inc. (for Cutler Ridge Mall) (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(q)(1).)
10.49 Purchase Option and Right of First Offer Agreement between DRP, LP
and Almonte, Inc. (for Red Bird Mall) (Incorporated by reference to
the 1994 DRC Form 10-K Exhibit 10(q)(2).)
10.50 Purchase Option and Right of First Refusal Agreement between DRP, LP
and DeBartolo-Stow Associates (for University Town Center)
(Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(r).)
10.51 Acquisition Option Agreement between DRP, LP and Coral Square
Associates (for Coral Square) (Incorporated by reference to the 1994
DRC Form 10-K Exhibit 10(s)(1).)
10.52 Acquisition Option Agreement between DRP, LP and Lakeland Square
Associates (for Lakeland Square) (Incorporated by reference to the
1994 DRC Form 10-K Exhibit 10(s)(2).)
10.53 (c) Amended and Restated Articles of Incorporation of SD Property
Group, Inc.
10.54 (c) Amended and Restated Regulations of SD Property Group, Inc.
10.55 (c) Indemnity Agreement by and between the Company and its new
Directors, dated as of August 9, 1996
10.56 (c) Contribution Agreement, dated as of June 25, 1996, by and among
DRC and the former limited partners of SPG, LP., excluding JCP
Realty, Inc. and Brandywine Realty, Inc.
10.57 (c) JCP Contribution Agreement, dated as of August 8, 1996, by and
among DRC and JCP Realty, Inc., and Brandywine Realty, Inc.
10.58 (c) Subscription Agreement by and between Day Acquisition Corp.,
and the Purchaser (as defined in this Exhibit)
10.59 (c) Amendment to Service Agreement dated as of August 9, 1996,
between EJDC and DPMI
10.60 (c) Registration Rights Agreement (the "Agreement"), dated as of
August 9, 1996, by and among the "Simon Family Members" (As defined
in the Agreement), SPG, Inc., JCP Realty, Inc., Brandywine Realty,
Inc., and the Estate of Edward J. DeBartolo Sr., Edward J.
DeBartolo, Jr., Marie Denise DeBartolo York, and the Trusts and
other entities listed on Schedule 2 of the Agreement, and any of
their respective successors-in-interest and permitted assigns.
10.61 (c) Fourth Amendment to Purchase Option Agreement, dated as of July
15, 1996, between JCP Realty, Inc., and DRP, LP.
10.62 (d) Partnership Agreement of SM Portfolio Limited Partnership
10.63 (d) Limited Partnership Agreement of SDG Macerich Properties, L.P.
10.64 (d) Agreement of Limited Partnership of Simon Capital Limited
Partnership
21.1 List of Subsidiaries.
23.1 Consent of Arthur Andersen LLP.
99.1 Agreement dated November 13, 1996 between Simon DeBartolo Group,
Inc. and Simon DeBartolo Group, L.P. (Incorporated by reference to
Amendment No. 3 of Form S-3 filed by Simon DeBartolo Group, L.P. and
Simon Property Group, L.P. on November 20, 1996 under Registration
No. 333-11491)
(a) Incorporated by reference to the exhibit with the same number (or as
indicated) that was filed with the Company's Form 10-K for the fiscal
year ended December 31, 1993.
(b) Incorporated by reference to the exhibit numbered as indicated that
was filed with the Company's Form 10-K for the fiscal year ended December
31, 1995.
(c) Incorporated by reference to the exhibit numbered as indicated that
was filed with the Company's Form 10-K for the fiscal year ended December
31, 1996.
(d) Incorporated by reference to the exhibit numbered as indicated that
was filed with the Company's Form 10-K, as amended, for the fiscal year
ended December 31, 1997.
<PAGE>
EXHIBIT 21.1
List of Subsidiaries
Subsidiary Jurisdiction
Charles Mall Company Limited Partnership Maryland
DeBartolo Capital Partnership Delaware
DeBartolo Properties, Inc. Delaware
DeBartolo Properties II, Inc. Delaware
DeBartolo Properties III, Inc. Delaware
East Towne Mall Company Limited Partnership Tennessee
Forestville Associates Maryland
Forum Finance Corp Delaware
Golden Ring Mall Company Limited Partnership Indiana
Jefferson Valley Mall Limited Partnership Delaware
Knoxville Developers Limited Partnership Indiana
The Retail Property Trust Massachusetts
Shopping Center Associates Delaware
Simon Property Group (Delaware), Inc. Delaware
Simon Property Group (Illinois), L.P. Illinois
Simon Property Group (Texas), L.P. Texas
SD Property Group, Inc. Ohio
SDG Properties VII, Inc. Delaware
SDG Dadeland Associates, Inc. Delaware
SDG Dadeland Developers, Inc. Delaware
SDG EQ Associates, Inc. Delaware
SDG Orland, Inc. Delaware
SDG Fashion Mall, Inc. Delaware
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports, included in this Form 10-K, into Simon DeBartolo Group, L.P.'s
previously filed Registration Statement File No. 333-33545-01.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
July 17, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from SEC Form 10-K/A and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 109,699
<SECURITIES> 0
<RECEIVABLES> 202,163
<ALLOWANCES> (13,804)
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 6,867,354
<DEPRECIATION> 461,792
<TOTAL-ASSETS> 7,662,667
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 5,077,990
0
339,061
<COMMON> 11
<OTHER-SE> 1,217,790
<TOTAL-LIABILITY-AND-EQUITY> 7,662,667<F2>
<SALES> 0
<TOTAL-REVENUES> 1,054,167
<CGS> 0
<TOTAL-COSTS> 571,145
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,992
<INTEREST-EXPENSE> 287,823
<INCOME-PRETAX> 203,133
<INCOME-TAX> 203,133
<INCOME-CONTINUING> 203,133
<DISCONTINUED> 0
<EXTRAORDINARY> 58
<CHANGES> 0
<NET-INCOME> 137,237
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
<FN>
<F1>The Registrant does not report using a classified balance sheet.
<F2>Includes limited parters' interest in the Operating Partnership.
</FN>
</TABLE>
