UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Date of Report(Date of earliest event reported): September 18, 1998
SIMON DeBARTOLO GROUP, L.P.
(Exact name of registrant as specified in its charter)
Commission file number 333-11491
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 offices) (Zip Code)
Registrant's telephone number, including area code: (317) 636-1600
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<PAGE>
Item 5. OTHER EVENTS
Simon DeBartolo Group, LP (the Operating Partnership) is a subsidiary
partnership of Simon DeBartolo Group, Inc. ("SDG or the Company"). The
Operating Partnership is engaged primarily in the ownership, development,
management, leasing, acquisition and expansion of income-producing properties,
primarily regional malls and community shopping centers. The Company is a self
administered and self managed real estate investment trust (`REIT') under the
Internal Revenue Code of 1986, as amended. At June 30, 1998, the Operating
Partnership owned or had an interest in 216 properties.
In February 1998, SDG, Corporate Property Investors, Inc. ("CPI") and
Corporate Property Investors, Inc. ("CRC") entered into a Merger Agreement,
which provides for the Merger of a substantially wholly owned subsidiary of CPI
with and into SDG. Legally, SDG will become a majority-owned subsidiary of CPI.
Pursuant to the Merger Agreement, the outstanding shares of SDG Common Stock
will be exchanged for like shares of CPI. Beneficial interests in CRC will be
acquired for cash. CPI's name will be changed to Simon Property Group, Inc.
(SPG). In connection with, the Merger, the holders of CPI Common Stock will
receive a dividend per share consisting of $90 in cash, 1.0818 shares of CPI
Common Stock and 0.19 shares of Series B Convertible Preferred Stock of CPI.
The aggregate purchase price is estimated by SDG to be approximately $5.9
billion.
CPI is a self-administered and self-managed privately held REIT which
invests in income-producing properties. At June 30, 1998, CPI owned or held
interests in 30 properties, 23 shopping centers and seven commercial
properties. CRC is engaged in the ownership, operation, acquisition and
development of income producing properties directly or through interests in
joint ventures and other non-REIT qualifying activities.
Included under Item 7 are unaudited interim financial statements of CPI as
of June 30, 1998 and for the six months then ended and pro forma financial
statements as if the Merger and Other Property Transactions described hereunder
had occurred as of June 30, 1998 or for the beginning of the periods presented.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
a) and b) Updated interim financial statements of CPI and pro forma
financial information follow beginning at page F-1.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: September 18, 1998
SIMON DeBARTOLO GROUP, INC.
By /s/ John Dahl
John Dahl
Senior Vice President and Chief Accounting Officer
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<PAGE> F-1
CORPORATE PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1998 1997
($ in thousands) (Unaudited)
Assets
Real estate investments:
Operating properties $ 1,892,694 $ 2,341,678
Operating properties held for sale 590,308 --
Investments in real estate joint
ventures 89,757 109,172
Construction-in-progress and pre-
construction
costs ($21,360 and $20,510) 46,519 31,697
Land held for development 7,350 22,420
Properties subject to net lease and 18,781 21,529
other
$2,645,409 $2,526,496
Cash and cash equivalents 75,866 124,808
Short-term investments 40,000
Receivables and other assets 113,246 118,950
Total assets $ 2,834,521 $2,810,254
Liabilities and Shareholders' Equity
Liabilities:
Mortgages payable $ 12,909 $ 15,645
Notes and Bonds payable 843,310 843,415
Accounts payable and other 158,392 148,580
liabilities
Total liabilities 1,014,611 1,007,640
Shareholders' equity:
6.5% First Series Perpetual
Preference Shares,
$1,000 par value, 209,249 shares
authorized,
issued and outstanding 209,249 209,249
Series A Common Shares, $1 par value,
33,423,973
and 33,427,848 authorized, and
26,422,480 and
26,419,355 issued and outstanding 26,422 26,419
Capital in excess in par value 1,602,870 1,602,111
Undistributed net income 95,338 78,851
Treasury shares, 1,092,071 and
1,092,500 Common
Shares at cost (113,969) (114,016)
Total shareholders' equity 1,819,910 1,802,614
Total liabilities and shareholders' $ 2,834,521 $2,810,254
equity
The accompanying notes are an integral part of these statements.
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<PAGE> F-2
CORPORATE PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the three Months For the Six Months
ended June 30, ended June 30,
-------------------- --------------------
1998 1997 1998 1997
--------- ------- --------- --------
($ in thousands)
(Unaudited)
Revenue:
Minimum rent $ 84,720 $78,793 $ 170,201 $154,557
Overage rent (40) 2,357 3,058 4,730
Expense recoveries 38,450 33,988 75,423 67,608
Other revenues 2,020 1,184 3,564 2,156
Interest income 1,092 4,213 2,400 10,574
Total revenue 126,242 120,535 254,646 239,625
Expenses:
Property expenses 49,266 45,774 96,729 90,364
Provision for bad debts 719 654 1,445 1,283
Depreciation and 19,428 23,021 41,762 45,509
amortization
Administrative, trustee 2,483 2,160 4,689 4,347
and other expenses
Interest expense 16,325 16,718 32,799 35,732
Total expenses 88,221 88,327 177,424 177,235
Income before equity in 38,021 32,208 77,222 62,390
earnings of joint ventures
Equity in earnings of 5,107 4,657 10,661 9,911
joint ventures
Income before gain on
sales of properties and
merger-related costs 43,128 36,865 87,883 72,301
Gain (loss) on sales of 983 (480) 45,294 116,042
properties
Merger-related costs (4,034) (11,573)
Net income 40,077 36,385 121,604 188,343
Preference share (3,428) (3,428) (6,856) (6,856)
distributions earned
Net Income available to
Common Shareholders $ 36,649 $ 32,957 $ 114,748 $ 181,487
Net Income per average $1.45 $1.26 $4.53 $6.96
Common Share outstanding
Net Income per average
Common Share
outstanding assuming $1.45 $1.26 $4.49 $6.83
dilution
The accompanying notes are an integral part of these statements.
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<PAGE> F-3
CORPORATE PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30,
($ in thousands)
1998 1997
(Unaudited)
Operating Activities
Net Income 121,604 188,343
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in earnings of real estate joint ventures (10,661) (9,911)
Depreciation and amortization 41,762 45,509
Gain on disposition of properties (45,294) (116,042)
Decrease in receivables and other assets 7,948 6,733
Increase/(decrease) in accounts payable
and accrued expenses 1,548 (38,133)
Net cash provided by operating activities 116,907 76,499
Investing Activities
Investments in real estate (240,003) (47,732)
Investments in real estate joint ventures (14,399) (17,281)
Distributions from real estate joint ventures 43,900 59,645
Purchases of short-term investments 0 (185,450)
Maturities of short-term investments 40,000 218,562
Proceeds from repayment of mortgage receivable from 17,468 0
related party
Proceeds from repayment of mortgages receivable from
real estate joint venture partners 0 45,822
Proceeds from disposition of properties 82,337 3,482
Other (1,223) (910)
Net cash (used in)/provided by investing activities (71,920) 76,138
Financing Activities
Repayment of Bonds payable at maturity (100,000)
Proceeds from revolving credit drawdown 75,000 0
Repayment of revolving credit drawdown (62,000) 0
Issuance of Common Shares 924 60
Acquisition of Common Shares 0 (351)
Principal payments on mortgages (2,736) (2,620)
Cash distributions (105,117) (108,360)
Net cash used in financing activities (93,929) (211,271)
Decrease in cash and cash equivalents (48,942) (58,634)
Cash and cash equivalents at beginning of period 124,808 106,495
Cash and cash equivalents at end of period 75,866 47,861
Supplemental Disclosure:
Interest paid (net of amounts capitalized) during the 32,899 41,339
period
Non-cash investing and financing activities:
Redemption of common shares in exchange for real
estate interests 142,521
The accompanying notes are an integral part of these statements.
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<PAGE> F-4
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Description of Business
Corporate Property Investors, Inc. ("CPI") is a self managed real
estate investment trust (REIT) under the Internal Revenue Code of
1986, as amended. On March 13, 1998, CPI, formerly a Massachusetts
business trust, reorganized into a corporation under the laws of
the State of Delaware. CPI engages in the ownership, operation,
management, leasing, acquisition, development and expansion of
income producing properties located throughout the United States.
As of June 30, 1998, CPI owns interests in, directly or through
interests in joint ventures, 23 super-regional and regional
shopping centers, The General Motors Building, N.Y.C., 3 smaller
office buildings and other properties.
The proportionate property revenues of CPI's lines of business for
the six months ended June 30, 1998 and 1997 are summarized as
follows:
June 30
1998 1997
Super-regional and
regional shopping centers 80% 78%
General Motors Building 17 18
Other office buildings 2 3
Other 1 1
100% 100%
CPI shareholders, in proportion to their respective number of CPI
shares, own the beneficial interests in the Corporate Realty
Consultants, Inc. ("CRC") Trusts, in which all of the outstanding
shares of CRC have been deposited. Ownership of CRC shares is not
evidenced by a separate stock certificate and cannot be transferred
separately from the corresponding CPI shares. All directors of CRC
must be directors of CPI and the senior executive officers of CPI
are also officers of CRC. The foregoing arrangements create a
"Paired-Share REIT" structure for federal income tax purposes.
On February 19, 1998 CPI and CRC signed a definitive agreement to
merge with Simon DeBartolo Group, Inc. which is described in note
(1) of the Commitments, Contingencies and Other Comments footnote.
Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and in conjunction
with the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the
disclosures required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting solely of normal recurring matters)
necessary for a fair presentation of the consolidated financial
statements for these interim periods have been included. The
results for the three month and six month periods ended June 30,
1998 are not necessarily indicative of the results to be obtained
for the year ended December 31, 1998. These financial statements
should be read in conjunction with the consolidated financial
statements and accompanying notes included in CPI's registration
statement on Form S-4 dated August 13, 1998.
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<PAGE> F-5
The consolidated financial statements include the accounts of CPI
and its consolidated subsidiaries. Significant intercompany
balances, transactions and accounts are eliminated in
consolidation. Investments in real estate joint ventures which
represent non-controlling ownership interests are accounted for
using the equity method of accounting.
Investments in Real Estate Joint Ventures
CPI has a 50% interest in seven real estate joint ventures each of
which own and operate a shopping center. CPI also has a 50%
interest in Mall of Georgia, L.L.C., a joint venture which is
developing a super-regional shopping center in Georgia. CPI has
guaranteed the joint venture's $200 million loan in exchange for a
priority distribution (see "Commitments, Contingencies and Other
Comments"). Generally, net income/(loss) for each joint venture is
allocated consistent with the ownership interests held by each
joint venturer.
As of June 30, 1998 and December 31, 1997 the unamortized excess of
CPI's investment over its share of the equity in the underlying net
assets of the joint ventures was approximately $42.0 million and
$42.4 million, respectively. This excess is amortized over the
estimated lives of the related real estate assets. The combined
condensed balance sheets of the real estate joint ventures, as of
June 30, 1998 and December 31, 1997 and the related statements of
net income for the six months ended June 30, 1998 and 1997 follows:
($ in thousands) 1998 1997
Assets
Real estate assets $ 357,748 $ 322,467
Other 41,403 26,995
Total Assets $ 399,151 $ 349,462
Liabilities
Mortgages payable $ 306,712 $ 237,868
Other 11,345 10,675
Total Liabilities $ 318,057 $ 248,543
Joint Venturers' Equity
CPI $ 47,710 $ 66,816
Others 33,384 34,103
Total Joint Venturers' Equity$ 81,094 $ 100,919
Income $ 60,339 $ 57,261
Expenses (37,995) ( 38,943)
Net Income $ 22,344 $ 18,318
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<PAGE> F-6
Income Per Common Share
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share." Statement 128 replaced
the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Basic earnings per
share excludes any dilutive effects of options, warrants and
convertible securities. All earnings per share amounts for all
periods have been presented to conform to Statement 128
requirements. The following table sets forth the computation of
basic and diluted earnings per common share for the six months
ended June 30, 1998 and 1997:
($ in thousands, except per share data) 1998 1997
Numerator:
Net income $ 121,604 $ 188,343
Preference Share distributions earned (6,856) (6,856)
Numerator for basic earnings per
share-income available to
Common Shareholders 114,748 181,487
Effect of dilutive securities:
Preference Share distributions earned 6,856 6,856
Numerator for diluted earnings
per share $ 121,604 $ 188,343
Denominator:
Denominator for basic earnings per
share-weighted average shares 25,353,000 26,063,000
Effect of dilutive securities:
Employee Stock Options 235,000
Convertible Preference Shares 1,504,000 1,504,000
Denominator for diluted earnings
per share 27,092,000 27,567,000
Basic earnings per share $ 4.53 $ 6.96
Diluted earnings per share $ 4.49 $ 6.83
The above computations are based upon the dilutive effects of
agreements presently in effect. The basis for such computations is
anticipated to change in the event the merger with Simon DeBartolo
Group, Inc. (See "Commitments, Contingencies and other Comments")
is closed.
==========================================================================
<PAGE> F-7
New Accounting Pronouncements
On May 21, 1998, the Emerging Issues Task Force of the Financial
Accounting Standards Board reached a final consensus regarding
Issue 98-9, "Accounting for Contingent Rent in Interim Financial
Periods" (EITF 98-9). The final consensus requires that the lessor
defer recognition of contingent rental income, such as overage
rent, until specified targets are met and amounts become billable
to tenants. Although this consensus will not have a material effect
on CPI's annual results, it is anticipated to impact the amount of
overage rent recognized in the first three quarters of the calendar
year. CPI adopted the consensus reached in EITF 98-9 during the
second quarter of 1998 which had the effect of reducing net income
by $3.3 million ($.13 per Common Share) for the six months ended
June 30, 1998. Had this been applied to the 1997 financial
statements it would have resulted in a $2.3 million ($.09 per
Common Share) decrease to net income for the six months ended June
30, 1997.
In June 1997, the Financial Accounting Standards Board issued
Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which is effective for fiscal years beginning
after December 15, 1997. CPI intends to implement the operating
and reportable segment rules in its year-end, audited financial
statements.
Reclassifications
Certain reclassifications have been made to the June 30, 1997
financial statements to conform to the presentation for the period
ended June 30, 1998. These reclassifications have no significant
impact on CPI's financial statements.
Acquisitions and Dispositions
On December 31, 1996 and January 2, 1997, respectively, CPI, at a
cost of $198 million and $145 million, respectively, redeemed 1.51
million and 1.09 million Series A Common Shares (and acquired
related interests in CRC) held by a shareholder in exchange for
cash of $13 million and interests in three shopping center
properties valued at $330 million. The exchanges resulted in gain
on disposition of the properties of $186.7 million, of which $71.7
million was recognized in December 1996 and $115 million was
recognized in January 1997.
On January 9, 1998, CPI purchased a super-regional shopping center
and adjoining land parcels located in Atlanta, Georgia for $198
million. Approximately $40 million was borrowed under a revolving
credit facility to partially fund the purchase.
On January 30, 1998, CPI sold a super-regional shopping center for
$81 million and recorded a gain on sale of $43 million. Proceeds
from the sale were used to repay the aforementioned borrowing under
the revolving credit facility.
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<PAGE> F-8
The following pro forma results of operations for the six months
ended June 30, 1998 and 1997 assume the acquisition and
dispositions closed as of January 1, 1997 and give effect to
adjustments for depreciation expense related to the interest in
property acquired and elimination of gain on the disposition of the
properties.
Six Months Ended June 30, 1998 1997
($ in thousands)
Rentals and related
property income $ 251,224 $ 232,129
Net Income $ 78,300 $ 76,052
Net Income per average Common
Share outstanding $ 2.82 $ 2.65
==========================================================================
<PAGE> F-9
REAL ESTATE
($ in thousands)
<TABLE>
Construction & Land Held Accumulated
Pre-Construction for Depreciation and
Buildings & Mortgages
June 30, 1998 Land Leaseholds Costs Development Amortization Payable
<S> <C> <C> <C> <C> <C> <C>
Shopping centers $225,215 $2,122,427 $46,519 $6,834 $520,623 $1,250
Office buildings held for
sale 14,606 685,454 1,809 111,561 10,707
Office buildings
(including
related mortgage loan of
$20,565) and industrial
park 11,053 74,339 516 19,717
Properties subject to net
lease
(principally retail
facilities)
and other (including
mortgage
loans of $6,939) 6,040 19,172 6,431 952
-------- ---------- ---------------- ----------- -------------- ---------
$256,914 $2,901,392 $48,328 $7,350 $658,332 $12,909
======= ========== ================ =========== ============== =========
Construction & Land Held Accumulated
Buildings & Pre-Construction for Depreciation and Mortgages
December 31, 1997 Land Leaseholds Costs Development Amortization Payable
Shopping centers $196,052 $2,013,456 $30,994 $6,835 $517,386 $1,361
Office buildings
(including
related mortgage loan of
$20,565) and industrial
park 25,819 744,839 703 516 121,102 13,230
Properties subject to net
lease
(principally retail
facilities)
and other (including
mortgage
loans of $22,054 of which
$15,069 is related) 6,796 20,993 15,069 6,260 1,054
------- --------- --------------- ------------ -------------- ----------
$228,667 $2,779,288 $31,697 $22,420 $644,748 $15,645
</TABLE>
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<PAGE> F-10
Commitments, Contingencies and Other Comments
(1) On February 19, 1998 CPI and CRC signed a definitive agreement to
merge with Simon DeBartolo Group, Inc. ("SDG"); a publicly-traded real
estate investment trust. In connection therewith, on August 13, 1998
CPI and CRC filed a registration statement on Form S-4, which included
the prospectus for CPI and CRC and the proxy statement for SDG, with
the Securities and Exchange Commission. The Merger has been approved
by all companies' Boards of Directors/Trustees. A majority of CPI's
shareholders have agreed to approve the transaction which is subject
to the approval of the shareholders of SDG, as well as customary
regulatory and other conditions. The CPI and SDG shareholders'
meetings to vote on the merger are scheduled for September 23, 1998.
The transaction is expected to be completed soon thereafter, between
September 24 and September 30, 1998 (the "Effective Time"). As of the
Effective Time, a substantially wholly owned subsidiary of CPI will
merge with and into SDG as stipulated in the merger agreement and
discussed in the registration statement. CPI will then be renamed
Simon Property Group Inc. ("SPG") and CRC will be renamed SPG Realty
Consultants, Inc. The Board of Directors of SPG will consist of 13
directors which will include three directors designated by CPI and the
officers of SPG and SPG Realty Consultants, Inc. shall include two
present officers of CPI and CRC.
As of February 18 the transaction values CPI at approximately
$5.8 billion, including the assumption of debt. Each CPI
common share will be entitled to $90 in cash, 2.0818 in the
combined REIT's common stock and $19 of liquidation preference
in 6 1/2% convertible preferred stock of the combined REIT. The
common stock component of the consideration is based upon a
fixed exchange ratio of 2.0818 combined REIT shares and is
subject to a 15% symmetrical collar based upon the price of
SDG common stock determined in a period ending shortly before
closing. Adjustments related to such collar will be in cash.
It is anticipated that on the day prior to the Merger,
substantially all of CPI's assets will be transferred to
Retail Properties Trust ("RPT"), a REIT substantially owned
by the SDG Operating Partnership. RPT will assume CPI's
obligations under the Notes. SDG and CPI have received
inquiries from certain note holders as to the means being
utilized to effect compliance with the terms of the note
indentures in connection with the Merger. Certain of such
holders have expressed their view that they do not believe
compliance may be effected without receiving waivers from the
requisite percentage of CPI's noteholders. CPI and SDG believe
that the assignment of CPI's assets to RPT and RPT's
assumption of CPI's liabilities fully complies with the
provisions of the Note Indentures.
==========================================================================
<PAGE> F-11
In the first six months of 1998 CPI incurred approximately
$11.6 million of merger-related costs, principally legal and
advisory fees, which are included in the accompanying
statements of income. If the merger is effected additional
merger costs, including severance payments pursuant to CPI's
present policies, professional fees and other transaction
costs, payable by CPI or its successor are projected to be
approximately $71 million.
(2) CPI sold the General Motors Building, New York City on July
31, 1998 for $800 million in cash and realized at a gain of
$204 million ($8.05 per Common Share). CPI has agreed in
principle to sell the Rockaway Office Building in Rockaway,
New Jersey for $6.8 million. Such sale is anticipated to
close sometime in the third quarter of 1998. The sale will
result in an estimated gain of approximately $2 million ($.08
per Common Share).
The combined carrying amount of the General Motors Building
and the Rockaway Office Building of $590 million is separately
classified in the June 30, 1998 consolidated balance sheet.
CPI ceased recording depreciation on these properties on the
date they became properties held for sale. Rentals and related
property income and net income from these properties included
in the consolidated statements of income are summarized as
follows:
Six Months Ended June 30, 1998 1997
($ in thousands)
Rentals and related
property income $46,172 $45,264
Net income $22,882 $15,739
(3) CPI has entered into commitments for future real estate
investments aggregating approximately $138 million and $122
million at June 30, 1998 and December 31, 1997, respectively.
(4) CPI is a defendant in various lawsuits arising in the ordinary
course of business. In the opinion of management, based upon
the advice of both outside and corporate counsel, resolving
these actions will not have a material effect upon CPI's
financial condition.
(5) On August 6, 1998, the CPI Directors declared: (i)
distributions ($49.1 million) of $1.94 per common share to
shareholders of record at the close of business on August 14,
1998, payable August 17, 1998; (ii) in accordance with the
terms of the Merger Agreement a per share, per diem
distribution of $.0213 from and including July 1, 1998,
through the date of the Merger, payable on the Effective Date
of the Merger to shareholders of record as of the close of
business the day prior to the Effective Date of the Merger and
(iii) subject to the earning of sufficient cash flow for the
six month period ending September 30, 1998, $32.76 per 6.5%
First Series Perpetual Preference Share to shareholders of
record at the close of business September 15, 1998, payable
September 30, 1998.
==========================================================================
<PAGE> F-12
(6) On August 6, 1998, the Directors of CRC declared distributions
($.27 million) of $.10 per CRC common share (which is
equivalent to 1 cent per CPI common share) to shareholders of
record at the close of business on August 14, 1998, payable
August 17, 1998 and, in accordance with the terms of the
Merger Agreement, the Directors of CRC declared a per share,
per diem distribution of $.0011 (which is equivalent to $.0001
per CPI common share) from and including July 1, 1998, through
the date of the Merger, payable on the Effective Date of the
Merger to shareholders of record as of the close of business
the day prior to the Effective Date of the Merger.
(7) CPI has agreed to fully guarantee the payment of all
installments of interest and principal on a $200 million loan
dated June 30, 1998 between Mall of Georgia, L.L.C., a joint
venture developing a super-regional shopping center in which
CPI has a 50% interest, and Teachers Insurance and Annuity
Association of America and the Prudential Insurance Company of
America (the
"Guaranty"). CPI has further guaranteed the lien free
completion of construction of the improvements, as defined, on
the Mall of Georgia site. In exchange for the Guaranty, CPI
receives a priority distribution from the joint venture equal
to the excess of 9% on the guaranteed loan balance over the
actual interest accrued on the loan, such interest accruing at
7.09% per annum. Prior to December 31, 2002, CPI can fully or
partially be released from the Guaranty if certain conditions
are met as defined in the Guaranty agreement. As of June 30,
1998, $71 million has been drawn down under the loan
agreement. CPI has not accrued a liability at June 30, 1998
as no events have occurred, or are probable of occurring,
which would require funding of the guaranteed payments.
(8) CPI has entered into a $250 million revolving credit agreement
with 13 banks. The agreement terminates on June 26, 2001,but
is anticipated to be terminated at the time of the Merger.
Interest, at CPI's choice, is computed at (1) a rate
determined by a competitive bidding process, (2) a rate equal
to a spread (currently 5/8%) over the adjusted London
interbank (LIBOR) rate or (3) a rate equal to a spread
(currently 0%) over the higher of the prime
rate or 1/2% over the Federal Funds rate. The interest rate
on each LIBOR-based borrowing is fixed at the time of
borrowing. As of June 30, 1998, $13 million was outstanding
pursuant to this agreement. Such outstanding balance was
repaid in July 1998.
==========================================================================
<PAGE> F-13
PRO FORMA COMBINED FINANCIAL INFORMATION
The accompanying financial statements prepared by the management of
Simon DeBartolo Group, Inc., ("SDG") present the pro forma combined
condensed Balance Sheet of Simon Property Group, LP ("SPG, LP or the
Operating Partnership", formerly Simon DeBartolo Group, LP), as of June
30, 1998 and the pro forma combined condensed Statements of Operations of
the Operating Partnership for the six months ended June 30, 1998 and for
the year ended December 31, 1997.
The pro forma combined condensed Balance Sheet as of June 30, 1998 is
presented as if (i) the CPI Merger Dividends and the Merger of SDG,
Corporate Property Investors, Inc., ("CPI") and Corporate Realty
Consultants, Inc., ("CRC") and cash contributed by the Operating
Partnership to CRC and CRC's newly formed operating partnership on behalf
of the SDG stockholders and limited partners of the Operating Partnership
and the transfer of substantially all of the assets and liabilities of
CPI, other than assets valued at $153.1 million including Ocean County
Mall valued at $145.8 million, to the Operating Partnership or one or more
of its subsidiaries in exchange for Operating Partnership Units and, (ii)
the sale by CPI of the General Motors Building had occurred as of June 30,
1998. The pro forma combined condensed Statement of Operations for the
six months ended June 30, 1998 and for the year ended December 31, 1997,
are presented as if (i) the CPI merger dividends and the Merger of SDG,
CPI and CRC and cash contributed by the Operating Partnership to CRC and
CRC's newly formed operating partnership on behalf of the SDG stockholders
and limited partners of the Operating Partnership and the transfer of
substantially all of the assets and liabilities of CPI, other than assets
valued at $153.1 million including Ocean County Mall valued at $145.8
million, to the Operating Partnership or one or more of its subsidiaries
in exchange for Operating Partnership Units, (ii) the September and
November 1997 transactions by SDG to acquire ten portfolio properties and
50% ownership interest in an eleventh property of The Realty Property
Trust, ("RPT"), (iii) the December 1997 acquisition by SDG of the Fashion
Mall at Keystone at the Crossing, (iv) the January 1998 acquisition by
CPI of Phipps Plaza, (v) the January 1998 sale by CPI of Burnsville Mall,
(vi) the January 1998 acquisition by SDG of Cordova Mall, (vii) the
February 1998 acquisition by SDG of a 50% interest in a portfolio of
twelve regional malls and (viii) the sale by CPI of the General Motors
Building had occurred as of January 1, 1997, (items (ii) through (vii)
collectively, the "Other Property Transactions").
Preparation of the pro forma financial information was based on
assumptions deemed appropriate by management. These assumptions give
effect to the Merger being accounted for as a reverse purchase in
accordance with generally accepted accounting principles resulting in the
assets and liabilities of CPI transferred to the Operating Partnership
being reflected in the accompanying pro forma financial statements at fair
value. The cash contributed by the Operating Partnership on behalf of its
partners to CRC and the CRC Operating Partnership is being reflected as a
distribution. The pro forma financial information is not necessarily
indicative of the results which actually would have occurred if the
transactions had been consummated at the beginning of the periods
presented, nor does it purport to represent the future financial position
and results of operations for future periods. The pro forma information
should be read in conjunction with the historical financial statements of
the Operating Partnership and CPI.
==========================================================================
<PAGE> F-14
<TABLE>
SIMON PROPERTY GROUP, LP
PRO FORMA COMBINED CONDENSED BALANCE SHEET
As of June 30, 1998
(unaudited, in thousands)
Pro Forma
------------------------------------------------------------------
Sale Merger and
SDG, LP CPI of GM Related
(Historical)(Historical) Building Transactions
(A) (A) (B) Adjustments Total
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment in properties,
partnerships and
joint ventures, net $7,241,697 $2,624,844 $(586,000) $2,725,509(D) $12,006,050
Goodwill -- -- -- 78,866(D) 78,866
Cash and cash
equivalents and
short-term investments 103,365 75,866 783,292 (789,731)(D) 150,792
(22,000)(E)
Receivables, net 189,344 66,786 -- (36,925)(D) 219,205
Investment,
notes receivable
and advances
from management
company and affiliate 109,881 -- -- 20,565(D) 130,446
Other assets 263,685 46,460 -- 2,110(D) 312,255
Total assets $7,907,972 $2,813,956 $ 197,292 $1,978,394 $12,897,614
LIABILITIES:
Mortgages and other
indebtedness $5,228,015 $ 856,219 $ (10,708) $1,537,435(D) $ 7,610,961
Accounts payable,
accrued expenses
and other liabilities 329,739 137,827 (4,000) 101,592(D) 565,158
Total liabilities 5,557,754 994,046 (14,708) 1,639,027 8,176,119
PARTNERS'EQUITY:
Preferred Units 339,195 -- -- 765,940(D) 1,105,135
General partners
Units 1,301,017 -- -- 1,627,337(D) 2,614,175
(300,179)(F)
(14,000)(E)
Limited Partners
Units 734,554 -- -- 300,179(F) 1,026,733
(8,000)(E)
Unamortized
restricted
stock award
(24,548) -- -- -- (24,548)
Net assets -- 1,819,910 212,000 (2,031,910)(D) --
Total partners'
equity (net assets) 2,350,218 1,819,910 212,000 339,367 4,721,495
Total liabilities
partners'equity $7,907,972 $2,813,956 $197,292 $1,978,394 $12,897,614
The accompanying notes and management's assumptions are an integral part of this
statement.
</TABLE>
==========================================================================
<PAGE> F-15
Simon Property Group, LP -- Notes and Management's Assumptions to Pro
Forma Combined Condensed Financial Information (in thousands, except share
and per share amounts, unaudited)
1. Basis of Presentation
Simon DeBartolo Group, LP (the Operating Partnership) is a subsidiary
partnership of Simon DeBartolo Group, Inc. ("SDG or the Company"). The
Operating Partnership is engaged primarily in the ownership, development,
management, leasing, acquisition and expansion of income-producing
properties, primarily regional malls and community shopping centers. The
Company is a self administered and self managed real estate investment
trust (`REIT') under the Internal Revenue Code of 1986, as amended. At
June 30, 1998, the Operating Partnership owned or had an interest in 216
properties.
In February 1998, SDG, CPI and CRC entered into a Merger Agreement,
which provides for the Merger of a substantially wholly owned subsidiary
of CPI with and into SDG. Legally, SDG will become a majority-owned
subsidiary of CPI. Pursuant to the Merger Agreement, the outstanding
shares of SDG Common Stock will be exchanged for like shares of CPI.
Beneficial interests in CRC will be acquired for cash. CPI's name will be
changed to Simon Property Group, Inc. (SPG). In connection with, the
Merger, the holders of CPI Common Stock will receive a dividend per share
consisting of $90 in cash, 1.0818 shares of CPI Common Stock and 0.19
shares of Series B Convertible Preferred Stock of CPI. The aggregate
purchase price is estimated by SDG to be approximately $5.9 billion.
CPI is a self-administered and self-managed privately held REIT which
invests in income-producing properties. At June 30, 1998, CPI owned or
held interests in 30 properties, 23 shopping centers and seven commercial
properties. CRC is engaged in the ownership, operation, acquisition and
development of income producing properties directly or through interests
in joint ventures and other non-REIT qualifying activities.
SPG will account for the Merger between SDG and the CPI merger
subsidiary as a reverse acquisition in accordance with Accounting
Principles Board Opinion No. 16. Although SPG Equity Stock will be issued
to SDG stockholders and SDG will become a substantially wholly owned
subsidiary of SPG following the Merger, CPI is considered the business
acquired for accounting purposes. SDG is the acquiring company because the
SDG stockholders will represent in excess of a majority of the
stockholders of SPG. The fair market value of the consideration given by
the acquiring company will be used as the valuation basis for the
combination of SDG and CPI. The assets and liabilities of CPI will be
revalued by SDG to their respective fair market values at the Effective
Time. In connection with the merger, SPG will transfer substantially all
the assets and liabilities of CPI other than assets valued at $153.1
million including Ocean County Mall valued at $145.8 million, to the
Operating Partnership or one or more of its subsidiaries in exchange for
Operating Partnership Units. The assets and liabilities transferred will
be reflected by the Operating Partnership at fair market value. The
Operating Partnership will also change its name from Simon DeBartolo
Group, LP to Simon Property Group, LP (SPG,LP).
Further in connection with the merger the Operating Partnership will
contribute cash to CRC and the newly formed SRC Operating Partnership on
behalf of the SDG stockholders and the limited partners of the Operating
Partnership to obtain the beneficial interests in CRC which will be paired
with the shares to be issued by SPG and to obtain units in the SRC
Operating Partnership so that the limited partners of the SDG Operating
Partnership will hold the same proportionate interest in the SRC Operating
Partnership as they hold in the Operating Partnership at the Effective
Time of the Merger. The cash contributed on behalf of its partners by the
Operating Partnership to CRC and the CRC Operating Partnership is being
reflected by the Operating Partnership as a distribution.
In addition to the Merger and related transactions, the following
transactions (the "Other Property Transactions") have been reflected in
the accompanying unaudited pro forma financial statements using the
purchase method of accounting. Investments in non-controlled joint
ventures are reflected using the equity method. Controlled properties have
been consolidated.
* On September 29, 1997, SDG completed its cash tender offer for all of
the outstanding shares of beneficial interests of The Retail Property
Trust ("RPT"). In connection therewith RPT, became a subsidiary of
the Operating Partnership. RPT owned 98.8% of Shopping Center
Associates ("SCA"), which owned or had interests in twelve regional
malls and one community shopping center. Following the completion of
the tender offer, the SCA portfolio was restructured. SDG exchanged
its 50% interest in two SCA properties with a third party for similar
interests in two other SCA properties, in which SDG had 50% interests,
with the result that SCA now owns interest in a total of eleven
properties. Effective November 30, 1997, SDG also acquired the
remaining interest in another of the SCA properties. In addition, SDG
acquired the remaining 1.2% interest in SCA. At the completion of
these transactions, SDG held a 100% interest in ten of the eleven
properties, and a noncontrolling 50% ownership interest in the
remaining property. The total cost for the acquisition of RPT and
related transactions was approximately $1,300,000, which includes SDG
common stock issued valued at approximately $50,000, units of the
Operating Partnership valued at approximately $25,300, and the
assumption of consolidated debt and SDG's pro rata share of joint
venture indebtedness of approximately $475,300. The balance of the
transaction costs was borrowed under the Operating Partnership's
credit facility.
==========================================================================
<PAGE> F-16
* On December 29, 1997, the Operating Partnership completed the
acquisition of the Fashion Mall at Keystone at the Crossing, a
regional mall located in Indianapolis, Indiana, for $124,500. The
purchase price was financed by additional borrowings under the
Operating Partnership's credit facility of approximately $59,700 and
the assumption of approximately $64,800 in mortgage debt. The
mortgage debt bears interest at 7.85%.
* In January 1998, CPI acquired Phipps Plaza, a super regional mall
located in Atlanta, Georgia, for approximately $198,800. The
transaction was financed with cash of $158,800 and debt of $40,000.
* In January 1998, CPI sold one of its shopping centers (Burnsville
Mall) for $80,672 cash. The selling price exceeded Burnsville Mall's
historical net assets of $37,581 at December 31, 1997, by $43,091. A
portion ($40,000) of the proceeds received in the Burnsville
transaction was used to repay the amount borrowed in connection with
the acquisition of Phipps Plaza.
* In January 1998, the Operating Partnership acquired Cordova Mall, a
regional mall in Pensacola, Florida, for $94,000. This acquisition was
financed by issuing units of the Operating Partnership valued at
$55,523, the assumption of mortgage debt of $28,935 and other
liabilities of $6,842 and cash of $2,700. The mortgage debt, which
bore interest at 12.125%, has been refinanced through the Operating
Partnership's credit facility.
* In February 1998, the Operating Partnership, through a joint venture
with another REIT, acquired an interest in a portfolio of twelve
regional malls comprising approximately 10.7 million square feet of
GLA. The Operating Partnership's non-controlling 50% share of the
total purchase price of $487,250 was financed with a $242,000
unsecured loan which bears interest at 6.4% per annum, accrued
payables of $2,750 and the assumption of $242,500 of mortgage debt.
The weighted average interest rate on the mortgage debt assumed was
6.94%.
* In July 1998, CPI sold the General Motors Building for $800,000. The
net proceeds of $798,000 were used to pay off certain liabilities
($4,000) and the building's mortgage balance ($10,706) with the
remainder available to partially finance a portion of the CPI Merger
Dividends.
The accompanying pro forma combined condensed Balance Sheet of the
Operating Partnership was prepared by management as if the Merger and
related transactions and the Other Property Transactions described above
which occurred subsequent to June 30, 1998, had occurred as of June 30,
1998. The accompanying pro forma combined condensed Statements of
Operation were prepared by management as if the Merger and the Other
Property Transactions previously described had occurred on January 1,
1997. Certain reclassifications have been made in CPI's historical
financial statements to conform them to the Operating Partnership's
historical presentation and certain reclassifications have been made in
each entities' historical financial statements to conform them to the
condensed combined pro forma presentation.
These pro forma financial statements should be read in conjunction
with the historical financial statements and notes thereto of the
Operating Partnership, and CPI. In the opinion of management, all
adjustments necessary to reflect the effects of the Merger and related
transactions and the Other Property Transactions previously described have
been made. Certain adjustments have been estimated by management based on
information currently available. Final adjustments are not expected by
management to materially impact the pro forma results reported.
The pro forma financial statements are not necessarily indicative of
the actual financial position at June 30, 1998, or what the actual results
of operations would have been assuming the Merger and the Other Property
Transactions had been completed as of January 1, 1997, nor are they
indicative of the results of operations for future periods.
2. Pro Forma Adjustments to the Pro Forma Combined Condensed Balance
Sheet
(A) Certain reclassifications have been made to the Operating Partnership
and CPI historical balance sheets to conform to the pro forma combined
condensed balance sheet presentation.
(B) Adjustments to reflect the sale of the General Motors Building for
$800,000, and $2,000 of transaction costs, resulting in net proceeds
of $798,000. The historical carrying value of the building and
improvements was $586,000 at June 30, 1998. A portion of the net
proceeds of $798,000 was used to pay off certain liabilities ($4,000)
and the building's mortgage balance ($10,708) yielding net cash of
$783,292 as of June 30, 1998.
==========================================================================
<PAGE> F-17
(C) Determination of the Purchase Price of CPI:
As described in the Merger agreement the stockholders of CPI will
receive consideration in the Merger aggregating approximately $179
for each share of CPI common stock. The $179 consideration includes a
$90 cash dividend, approximately $70 of value of SPG common stock and
approximately $19 of value of SPG 6.5% Series B Preferred Stock. The
common stock component of the Merger consideration is based upon a
fixed exchange ratio using SDG'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 SDG's common stock determined on the fifth trading
day prior to closing. In the event SDG's stock price is outside the
collar, an adjustment will be made in the cash dividend component of
CPI Merger Dividends which will be increased or reduced by an amount
equal to 2.0818 times the amount the SDG stock price at the
measurement date falls outside the collar. As of June 30, 1998, there
were 25,330,409 shares of CPI common stock outstanding. As of June
30, 1998, there were approximately 807,000 exercisable options. The
following recap of the Merger consideration assumes the options are
exercised, therefore, 26,137,409 shares are assumed to be outstanding
as if the Merger occurred on June 30, 1998. CPI has invited the
option holders to exchange their options for cash equal to the
difference between the fair market value of the merger consideration
and the exercise price of the options. To the extent this exchange
occurs, it would not have a material impact on the accompanying
combined condensed pro forma financial information. The Series A
Convertible Preferred Stock will remain outstanding after the
completion of the Merger. The 209,249 shares of Series A Convertible
Preferred Stock was convertible into 1,505,000 shares of CPI common
stock pre-Merger. In connection with the Merger, they have been
valued by multiplying the per-share Merger consideration of $179 by
the number of shares of common stock issuable upon conversion. At the
Effective Time, the Series A Convertible Preferred Stock will be
convertible into 7,950,492 shares of SPG Common Stock. Upon the
transfer of substantially all of the assets and liabilities of CPI to
the Operating Partnership, regular and preferred units will be
issued. The preferred units will carry provisions which mirror the
Series A and B preferred stock.
As of
June 30, 1998
Merger Consideration distributed to CPI stockholders
(assuming 26,137,409 shares outstanding)
Cash Dividend $2,352,367
Common Stock (54,412,858 shares) 1,829,619
Series B Preferred Stock (4,966,038 shares issued) 496,611
Fair Value of Series A Preferred Stock 269,329
Fair Value of mortgages and other indebtedness 883,946
Other liabilities 211,419
SDG Merger costs (see below) 24,000
Less:
$90 cash portion of the Merger Consideration retained
as an offset to proceeds due upon exercise of option
shares (72,630)
Notes receivable issued by CPI in connection with the
exercise of 807,000 options at an average exercise price of
$127.40 per share less $90 cash portion of the Merger
Consideration (30,182)
Permanent restrictions to notes receivable
from former CPI stockholders (19,000)
Other (737)
Total Purchase Price $5,944,742
Estimated fees and expenses of the Merger are as
follows: Of these expenses,$11,573 have been incurred
by CPI during the period ended June 30, 1998.
Advisory fees $ 27,000
Legal and accounting 12,600
Severance, transfer taxes and related costs 53,000
92,600
Less: CPI expenses (68,600)
SDG Merger costs $ 24,000
==========================================================================
<PAGE> F-18
(D) Allocation of the Purchase Price of CPI:
The following pro forma adjustments are necessary as of June 30, 1998, in
the opinion of management to reflect the assets and liabilities of CPI at fair
value. The purchase price has been allocated utilizing the purchase method of
accounting.
<TABLE>
As of June 30, 1998
Less CPI
Historical,
Fair Value as Adjusted Merger and
Allocation of CPI Adjusted for the Sale Related
of Assets not Purchase of the Transactions
Purchase Transferred Price GM Building Pro Forma
Price (Da) to SPG, LP Allocation (B) Adjustment
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment in
properties,
partnership and joint
ventures, net $4,917,453 $(153,100) $4,764,353 $2,038,844 $2,725,509
Goodwill 78,866 -- 78,866 -- 78,866
Cash and cash
equivalents and
short-term
investments 849,427 -- 849,427 859,158 (9,731) (Db)
Receivables, net 29,861 -- 29,861 66,786 (36,925) (Dc)
Receivables from
affiliate 20,565 -- 20,565 -- 20,565 (Dg)
Other assets 48,570 -- 48,570 46,460 2,110 (Dd)
Total assets $5,944,742 $(153,100) $5,791,642 $3,011,248 $2,780,394
LIABILITIES:
Mortgages and other
indebtedness $3,162,946 $ -- $3,162,946 $ 845,511 $2,317,435 (De)
Accounts payable,
accrued expenses
and other liabilities 235,419 -- 235,419 133,827 101,592 (Dg)
(Df)
Total liabilities 3,398,365 -- 3,398,365 979,338 2,419,027
NET ASSETS 2,546,377 (153,100) 2,393,277 2,031,910 361,367
Total liabilities and
net assets $5,944,742 $(153,100) $5,791,642 $3,011,248 $2,780,394
OPERATING PARTNERSHIP UNITS EXCHANGES FOR CPI NET ASSETS:
PARTNERS' EQUITY
Preferred Units $ 765,940 $ -- $ 765,940
General Partner Units 1,627,337 -- 1,627,337
Limited Partner Units --
Net Assets -- (2,031,910) (2,031,910)
Partner Equity $2,393,277 $(2,031,910) $ 361,367
(Da) The purchase price has been allocated based on the estimated fair market
value of the assets and liabilities of CPI
using information currently available.
</TABLE>
==========================================================================
<PAGE> F-19
June 30, 1998
(Db) To reflect the decrease in cash and cash equivalents
related to the CPI Merger
Dividends and the Merger:
Proceeds of indebtedness incurred in conjunction
with the Merger $ 1,499,000
Cash proceeds from the sale of GM Building used to
finance a portion of the CPI Merger
Dividends 780,000
Debt issuance costs (8,994)
Cash portion of CPI Merger Dividends (2,352,367)
Proceeds from exercise of CPI stock options 72,630
$ (9,731)
Less: Cash used to pay portion of CPI Merger
Dividends(De) (780,000)
$ (789,731)
(DC) To reflect the adjustment by management to
eliminate CPI's deferred asset related to the
straight-lining of rent related to leases $ (36,925)
(Dd) Adjustments to other assets:
To eliminate historical unamortized deferred financing
costs of CPI $ (6,884)
To record deferred financing cost related to
$1,499,000 assumed borrowed to finance the cash
portion of the Merger consideration 8,994
$ 2,110
(De) Adjustments to mortgages and other indebtedness:
To record a premium required to adjust CPI mortgage
and other indebtedness to fair value using an estimated
discount rate available to SDG on an instrument by instrument
basis $ 38,435
To record the debt required to finance the cash portion
of the CPI Merger
Dividends consisting of:
Binding commitment from a lender, two-year term
loan,interest at LIBOR plus 80 basis points 1,400,000
Borrowing under SDG's credit facility, interest at
LIBOR plus 65 basis points 99,000
Net cash proceeds from the sale of the General
Motors Building see Item 2 (B) 780,000
2,279,000
$ 2,317,435
Less: Net cash used to pay portion of CPI Merger
Dividends from the sale of the
GM Building (780,000)
$ 1,537,435
(Df) To accrue Merger expenses and severance costs related
to the Merger $ 81,027
(Dg) Amounts due from CRC of $20,565 as of June 30, 1998,
are included in other liabilities; accordingly the
following reclassification adjustment is required:
Receivable from affiliate $20,565
Other Liabilities 20,565
(E) Adjustment required to reflect $22,000 cash contributed by the Operating
Partnership on behalf of the SDG stockholders ($14,000) and the limited
partners of the Operating Partnership ($8,000) to obtain beneficial interests
in CRC to be paired with shares of common stock issued by SPG and to obtain
units in the CRC Operating Partnership whereby the limited partners of the
Operating Partnership will hold the same proportionate interest in the CRC
Operating Partnership as they hold in the Operating Partnership. The amount of
cash is based on a preliminary estimate of the fair value of the net assets of
CRC. At the Effective Time, the Board of Directors of CRC will make a
==========================================================================
<PAGE> F-20
determination of the fair market value of CRC's net assets based upon
information then available. Management does not expect that the final amount
will differ materially from the preliminary estimates. The cash contributed
by the Operating Partnership has been reflected as a distribution.
June 30, 1998
Cash and Cash Equivalents $(22,000)
General Partners' Equity (14,000)
Limited Partners' Equity (8,000)
(F) Adjustment required to allocate net equity of the Operating Partnership
between the General and Limited Partners (before preferred
units) to reflect the Merger and related transactions and Other Property
Transactions:
At June 30, 1998
General Limited
Total Partners Partners
Operating Partnership Equity
before preferred units and
unamortized restricted stock
award-historical $2,035,571
Operating Partnership units
issued in connection with the
Merger (other than preferred
units) 1,627,337
Other Merger related transactions (22,000)
Total Operating Partnership
equity excluding preferred units
and unamortized restricted stock
award $3,640,908
Pro Forma Partners Ownership
percentages 100% 71.8% 28.2%
Allocated pro forma Operating
Partnership Equity excluding
Preferred units and unamortized
restricted stock award $3,640,908 $2,614,175 $1,026,733
Operating Partnership Equity
before preferred units and
Unamortized restricted stock
award-historical (2,035,571) (1,301,017) (734,554)
Operating Partnership units
issued in connection with the
Merger (other than preferred
units) (1,627,337) (1,627,337)
Distribution (other merger
related transactions) 22,000 14,000 8,000
Required Pro Forma adjustment $ -0- $(300,179) $300,179
Analysis of
Partnership Units:
Total
General Limited General and
Preferred Partner Partner Limited
Units Units Units Units
Historical units
outstanding 11,000,000 113,678,134 64,182,681 177,860,815
Units issued in
connection with the
Merger and related
transactions 5,175,287 49,859,698 -- 49,859,698
Total pro forma units 16,175,287 163,537,832 64,182,681 227,720,513
Pro Forma ownership
percentage 71.8% 28.2% 100%
==========================================================================
<PAGE> F-21
<TABLE>
SIMON PROPERTY GROUP, LP
Pro Forma Combined Condensed Statement of Operations
For the Six Months Ended June 30, 1998
(unaudited, in thousands except unit and per unit amounts)
Pro Forma
---------------------------------------------------------------------------
Merger and
CPI Sale of GM Related Other
SDG, LP CPI (Historical) Not Building Transactions Property
(Historical) (Historical) Transferred (A) (Historical) Adjustments Transactions(G) Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Minimum rent $370,934 $170,201 $(4,974) $(39,571) $1,500(B) $(248) $497,842
Overage rent 20,483 3,058 (11) -- 33 23,563
Tenant reimbursements 181,971 75,423 (2,125) (6,259) (616) 248,394
Other income 37,244 5,964 (486) (343) (400)(C) (71) 41,908
Total revenue 610,632 254,646 (7,596) (46,173) 1,100 (902) 811,707
EXPENSES
Property & other
expenses 215,121 114,436 (2,480) (19,430)(11,573)(J) (613) 295,461
Depreciation and
amortization 116,618 41,762 (914) (3,346) 23,500(D) 216 177,836
Total expenses 331,739 156,198 (3,394) (22,776) 11,927 (397) 473,297
INCOME BEFORE
ITEMS BELOW 278,893 98,448 (4,202) (23,397) (10,827) (505) 338,410
INTEREST EXPENSE 184,420 32,799 -- (269) 43,876(E) 2,827 263,653
INCOME BEFORE
MINORITY INTEREST 94,473 65,649 (4,202) (23,128) (54,703) (3,332) 74,757
MINORITY PARTNERS'
INTEREST (3,596) -- -- -- -- -- (3,596)
(LOSS) GAIN ON SALES
OF ASSETS (7,219) 45,294 -- -- -- -- 38,075
INCOME BEFORE
UNCONSOLIDATED ENTITIES 83,658 110,943 (4,202) (23,128) (54,703) (3,332) 109,236
INCOME FROM
UNCONSOLIDATED ENTITIES 4,980 10,661 -- -- -- 1,879 17,520
INCOME OF THE
OPERATING PARTNERSHIPS
BEFORE EXTRAORDINARY ITEMS 88,638 121,604 (4,202) (23,128) (54,703) (1,453) 126,756
PREFERRED UNIT
REQUIREMENT 14,668 6,856 -- -- 16,140(F) -- 37,664
NET INCOME AVAILABLE
TO UNITHOLDERS $73,970 $114,748 $ (4,202) $(23,128) $ (70,843) $(1,453) $89,092
NET INCOME AVAILABLE
TO UNITHOLDERS ATTRIBUTABLE TO:
GENERAL PARTNERS $46,956 $63,701 (H)
LIMITED PARTNERS 27,014 25,391 (H)
$73,970 $89,092
NET INCOME PER UNITHOLDERS-
BASIC AND DILUTED $0.42 $ 0.40
WEIGHTED AVERAGE
UNITS OUTSTANDING 174,599,824 224,667,734 (I)
The accompanying notes and management's assumptions are an integral part of this
statement.
</TABLE>
==========================================================================
<PAGE> F-22
<TABLE>
SIMON PROPERTY GROUP, LP
Pro Forma Combined Condensed Statement of Operations
For the Year Ended December 31, 1997
(in thousands except unit and per unit amounts)
Pro Forma
--------------------------------------------------------------------------------------------
Merger and
CPI Sale of GM Related Other
SDG, LP CPI (Historical) Not Building Transactions Property
(Historical) (Historical) Transferred(A) (Historical) Adjustments Transactions(G) Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Minimum rent $ 641,352 $319,862 $(10,085) $(77,707) $3,000(B) $ 88,305 $964,727
Overage rent 38,810 10,489 (167) (536) -- 5,119 53,715
Tenant reimbursements 322,416 138,579 (3,934) (12,297) -- 49,251 494,015
Other income 51,589 24,858 (546) (962) (800)(C) 4,463 78,602
Total revenue 1,054,167 493,788 (14,732) (91,502) 2,200 147,138 1,591,059
EXPENSES
Property & other
expenses 376,237 199,503 (4,368) (40,420) -(J) 53,779 584,731
Depreciation and
amortization 200,900 91,312 (1,784) (17,764) 35,400(D) 28,866 336,930
Total expenses 577,137 290,815 (6,152) (58,184) 35,400 82,645 921,661
INCOME BEFORE ITEMS BELOW 477,030 202,973 (8,580) (33,318) (33,200) 64,493 669,398
INTERST EXPENSE 287,823 69,562 -- (716) 87,668(E) 82,870 527,207
INCOME BEFORE MINORITY
INTEREST 189,207 133,411 (8,580) (32,602) (120,868) (18,377) 142,191
MINORITY PARTNERS' INTEREST (5,270) -- -- -- -- -- (5,270)
GAIN ON SALE OF ASSETS 20 122,410 -- -- -- -- 122,430
INCOME BEFORE
UNCONSOLIDATED
ENTITIES 183,957 255,821 (8,580) (32,602) (120,868) (18,377) 259,351
INCOME FROM
UNCONSOLIDATED ENTITIES 19,176 21,390 -- -- -- 8,770 49,336
INCOME OF THE OPERATING
PARTNERSHIPS BEFORE
EXTRAORDINARY ITEMS 203,133 277,211 (8,580) (32,602) (120,868) (9,607) 308,687
PREFERRED UNIT REQUIREMENT 29,248 13,712 -- -- 32,284(F) -- 75,244
NET INCOME AVAILABLE
TO UNITHOLDERS $ 173,885 $ 263,499 $ (8,580) $ (32,602) $ (153,152) $ (9,607) $ 233,443
NET INCOME AVAILABLE TO UNITHOLDERS ATTRIBUTABLE TO:
GENERAL PARTNERS $107,931 164,344 (H)
LIMITED PARTNERS 65,954 69,099 (H)
$173,885 $233,443
BASIC NET INCOME
PER UNIT AND DILUTED $1.08 $1.09
WEIGHTED AVERAGE
UNITS OUTSTANDING 161,022,887 214,766,720 (I)
The accompanying notes and management's assumptions are an integral part of this
statement.
</TABLE>
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<PAGE> F-23
3. Pro forma Adjustments to Unaudited Pro Forma Combined Condensed Statements
of Operations
In connection with the Merger, CPI will incur $68,600 of expenses
which have not been included in the Pro Forma Combined
Condensed Statement of Operations. Further, the estimated gain of $212,000,
respectively, related to the probable sale of the General
Motors Building has been excluded from the unaudited Pro Forma Combined
Condensed Statements of Operations.
For the For the
Six Months year Ended
Ended June December
30, 1998 31, 1997
(A) Reflects the historical operating results
of CPI assets not being transferred to the
Operating Partnership primarily Ocean County
Mall
(B) To recognize revenue from straight-lining
rent related to leases which will be reset in
connection with the Merger $ 1,500 $ 3,000
(C) To reflect a reduction in interest income
due to forgiveness of Notes Receivable from CPI
employees ($13,200 multiplied by 6%)
$ (400) $ (800)
(D) To reflect the increase in depreciation and
amortization as a result of recording the
investment properties at acquisition value,
allocating 20% of the premium to land, versus
historical cost and utilizing an estimated
useful life of 35 years for investment
properties and goodwill $23,500 $35,400
(E) To reflect the following adjustments to
interest expense:
(1) To reflect the elimination of amortization
of deferred financing costs related to CPI
written off in connection with the Merger $(393) $ (868)
(2) To reflect the amortization of the
estimated costs incurred to finance the cash
portion of the Merger consideration 450 899
(3) To reflect the amortization of the premium
required to adjust mortgages and other notes
payable to fair value (4,450) (8,900)
(4) To reflect interest expense for debt
borrowed to finance the CPI Merger Dividends:
45,150 90,300
Term loan commitment $1,400,000 at LIBOR
plus 80 basis points--6.45% 3,119 6,237
Revolving credit facility $99,000 at 48,269 96,537
LIBOR plus 65 basis points--6.30%
$43,876 $87,668
(A 1/8% change in the LIBOR rate would
change the annual pro forma adjustment
to interest expense by $1,875.)
(F) To reflect annual dividends on 6.5%
Series B Preferred Units issued in
connection with the Merger $16,140 $32,284
(G) Other Property Transactions represent the historical operating results of
the properties for the appropriate period to reflect a full year of
activities in the unaudited pro forma statements of operations. The pro
forma adjustments give effect when applicable to:
(1) An increase in depreciation expense as a result of recording
the properties estimated fair value
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<PAGE> F-24
(2) An increase in interest expense primarily resulting from debt
incurred to finance the transactions
(3) The elimination of expenses included in the historical results
incurred by the seller directly related to the transaction
(4) The elimination of the historical results to reflect the sale of
Burnsville Mall
The Other Property Transactions include:
(1) The acquisition of Phipps Plaza in January 1998
(2) The sale of Burnsville Mall in January 1998
(3) The acquisition of Cordova Mall January 1998
(4) The acquisition of a 50% interest in a portfolio of twelve
properties in February 1998
For the For the
Six Months year ended
Ended December
June 30, 1998 31, 1997
(H) To reflect the allocation of the Limited
Partners' interest in the net income
of the Operating Partnerships,
after consideration of the preferred unit
distributions.
The Limited Partners' weighted average
pro forma ownership interest in the
Operating Partnerships for the six months
ended June 30, 1998 and for year
ended December 31, 1997, is 28.5% and 29.6%,
respectively
(I) The pro forma weighted average shares
outstanding is computed as follows:
Historical Weighted Average Units
Outstanding 174,599,824 161,022,887
Pro forma adjustments:
Units issued related to the acquisition of
Cordova Mall 208,212 1,713,016
Units issued related to RPT transaction -- 2,163,945
Units issued related to the Merger 49,859,698 49,866,872
Pro forma weighted average units
Outstanding 224,667,734 214,766,720
(J) To eliminate Merger expenses incurred by
CPI during the period $ (11,573) $ --
