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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number 333-11491
SIMON PROPERTY GROUP, L.P.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-1755769
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
115 West Washington Street
Indianapolis, Indiana 46204
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(Address of principal executive offices) (Zip Code)
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 Property Group, Inc.'s Proxy Statement in connection with its
Annual Meeting of Shareholders are incorporated by reference in Part III.
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SIMON PROPERTY GROUP, L.P.
Annual Report on Form 10-K
December 31, 1998
TABLE OF CONTENTS
Item No. Page No.
- -------- --------
Part I
1. Business.............................................................. 4
2. Properties............................................................ 9
3. Legal Proceedings..................................................... 34
4. Submission of Matters to a Vote of Security Holders................... 35
Part II
5. Market for the Registrant and Related Unitholders Matters............. 36
6. Selected Financial Data............................................... 37
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................. 38
7A. Quantitative and Qualitative Disclosure About Market Risk............. 50
8. Financial Statements and Supplementary Data........................... 50
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure............................................ 50
Part III
10. Directors and Executive Officers of the Registrant.................... 51
11. Executive Compensation................................................ 51
12. Security Ownership of Certain Beneficial Owners and Management........ 51
13. Certain Relationships and Related Transactions........................ 51
Part IV
14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K..... 52
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Part I
Item 1. Business
Background
Simon Property Group, L.P. (the "SPG Operating Partnership"), a Delaware
limited partnership, is a majority owned subsidiary of Simon Property Group Inc.
("SPG"), a Delaware corporation, formerly known as Simon DeBartolo Group, Inc.
SPG is a self-administered and self-managed real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). Each
share of common stock of SPG is paired with a beneficial interest in 1/100th of
a share of common stock of SPG Realty Consultants, Inc., also a Delaware
corporation. ("SRC" and together with SPG, the "Companies"). Units of
partnership interests ("Units") in the SPG Operating Partnership are paired with
a beneficial interest in 1/100th of a Unit in SPG Realty Consultants, L.P. (the
"SRC Operating Partnership" and together with the SPG Operating Partnership, the
"Operating Partnerships"). The SRC Operating Partnership is the primary
subsidiary of SRC.
The SPG 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, 1998, the SPG Operating Partnership owned or held an interest in
240 income-producing properties, which consist of 152 regional malls, 77
community shopping centers, three specialty retail centers, five office and
mixed-use properties and three value-oriented super-regional malls in 35 states
(the "Properties"). The SPG Operating Partnership also owned interests in one
regional mall, one value-oriented super-regional mall, one specialty center and
three community centers currently under construction and eleven parcels of land
held for future development (collectively, the "Development Properties", and
together with the Properties, the "Portfolio Properties"). At December 31, 1998
and 1997, the Companies' direct and indirect ownership interests in the
Operating Partnerships were 71.6% and 63.9%, respectively. The SPG Operating
Partnership also holds substantially all of the economic interest in M.S.
Management Associates, Inc. (the "Management Company"). The Management Company
manages Properties generally not wholly-owned by the SPG Operating Partnership
and certain other properties, and also engages in certain property development
activities. The SPG 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 CPI Merger
For financial reporting purposes, as of the close of business on September
24, 1998, pursuant to the Agreement and Plan of Merger dated February 18, 1998,
Simon DeBartolo Group, Inc. ("SDG"), Corporate Property Investors, Inc. ("CPI"),
and Corporate Realty Consultants, Inc ("CRC") combined their business operations
(the "CPI Merger"). Pursuant to the terms of the CPI Merger, SPG Merger Sub,
Inc., a substantially wholly-owned subsidiary of CPI, merged with and into SDG
with SDG continuing as the surviving company. SDG became a majority-owned
subsidiary of CPI. The outstanding shares of common stock of SDG were exchanged
for a like number of shares of CPI. Beneficial interests in CRC were acquired
for $14 million in order to pair the common stock of CPI with 1/100th of a share
of common stock of CRC, the paired share affiliate.
Immediately prior to the consummation of the CPI Merger, the holders of CPI
common stock were paid a merger dividend consisting of (i) $90 in cash, (ii)
1.0818 additional shares of CPI common stock and (iii) 0.19 shares of 6.50%
Series B convertible preferred stock of CPI per share of CPI common stock.
Immediately prior to the CPI Merger, there were 25,496,476 shares of CPI common
stock outstanding. The aggregate value associated with the completion of the CPI
Merger was approximately $5.9 billion including transaction costs and
liabilities assumed.
In connection with the CPI Merger, CPI was renamed "Simon Property Group,
Inc.". CRC was renamed "SPG Realty Consultants, Inc.". In addition SDG and SDG,
LP were renamed "SPG Properties, Inc.", and "Simon Property Group, L.P.",
respectively.
Upon completion of the CPI Merger, SPG transferred substantially all of the
CPI assets acquired, which consisted primarily of 23 regional malls, one
community center, two office buildings and one regional mall under construction
(other than one regional mall, Ocean County Mall, and certain net leased
properties valued at approximately $153 million) and
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liabilities assumed (except that SPG remains a co-obligor with respect to the
Merger Facility (see Note 9 to the financial statements)) of approximately $2.3
billion to the SPG Operating Partnership or one or more subsidiaries of the SPG
Operating Partnership in exchange for 47,790,550 Units and 5,053,580 preferred
Units in the SPG Operating Partnership. The preferred partnership interests
carry substantially the same economic terms and equal the number of preferred
shares issued and outstanding as a direct result of the CPI Merger.
For additional information concerning the CPI Merger, please see Note 3 to
the financial statements.
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, SPG issued a total of 37,873,965 shares of
common stock to the DRC shareholders. DRC became a 99.9% subsidiary of the SPG.
SPG 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 4 to
the financial statements.
General
As of December 31, 1998, the SPG Operating Partnership owned or held
interests in a diversified portfolio of 240 income-producing Properties,
including 152 regional malls, 77 community shopping centers, three specialty
retail centers, five office and mixed-use properties and three value-oriented
super-regional malls located in 35 states. Regional malls (including specialty
retail centers, and retail space in the mixed-use Properties), community centers
and the remaining portfolio comprised 90.3%, 6.0%, and 3.7%, respectively of
total consolidated rent revenues and tenant reimbursements in 1998. The value-
oriented super-regional malls are not included in consolidated rent revenues and
tenant reimbursements as they are all accounted for using the equity method of
accounting. The Properties contain an aggregate of approximately 164.9 million
square feet of GLA, of which 97.4 million square feet is owned by the SPG
Operating Partnership ("Owned GLA"). More than 4,400 different retailers occupy
more than 18,300 stores in the Properties. Total estimated retail sales at the
Properties exceeded $31 billion in 1998.
Operating Strategies
The SPG Operating Partnership's primary business objectives are to increase
per Unit cash generated from operations and the value of the Portfolio
Properties and operations. The SPG 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 SPG 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 a
geographically diverse portfolio nationally recognized as high quality
retail and mixed-use Properties, the SPG 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 directed towards
establishing and maintaining customer loyalty, and systematic planning and
monitoring of results.
Acquisitions. The SPG 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 SPG 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
allow it to evaluate and execute
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acquisitions competitively. Additionally, the SPG Operating Partnership may
be able to acquire properties on a tax- advantaged basis for the
transferors.
Development. The SPG Operating Partnership's focus is to selectively
develop new properties in major metropolitan areas that exhibit strong
population and economic growth. During 1998, the SPG Operating Partnership
opened two new community shopping centers. In March of 1998, the SPG
Operating Partnership opened the approximately $13.3 million Muncie Plaza
in Muncie, Indiana. The SPG Operating Partnership owns 100% of this 196,000
square-foot community center. In addition, phase I of the approximately
$34.0 million Lakeline Plaza opened in April 1998 in Austin, Texas. Phase
II of this 360,000 square-foot community center is scheduled to open in
1999. Each of these new community centers is adjacent to an existing
regional mall property. In addition, The Shops at Sunset Place, a
destination-oriented retail and entertainment project containing
approximately 510,000 square feet of GLA opened in January of 1999 in South
Miami, Florida. The SPG Operating Partnership owns a noncontrolling 37.5%
of this specialty retail center.
Construction also continues on the following projects, which have an
aggregate construction cost of approximately $620 million, the SPG Operating
Partnership's share of which is approximately $347 million:
o Concord Mills, a 37.5%-owned value-oriented super regional mall
project, containing approximately 1.4 million square feet of GLA, is
scheduled to open in September of 1999 in Concord (Charlotte), North
Carolina.
o The Mall of Georgia, an approximately 1.5 million square foot regional
mall project, is scheduled to open in August of 1999. Adjacent to the
regional mall, The Mall of Georgia Crossing is an approximately
444,000 square-foot community shopping center project, which is
scheduled to open in October of 1999. Simon Group has a noncontrolling
50% ownership interest in each of these development projects.
o In addition to Mall of Georgia Crossing, two other new community
center projects are under construction: The Shops at North East Plaza
and Waterford Lakes at a combined 1,243,000 square feet of GLA.
The SPG Operating Partnership also has direct or indirect interests in
eleven other parcels of land being held for future development in nine
states totaling approximately 904 acres. Management believes the SPG
Operating Partnership is well positioned to pursue future development
opportunities as conditions warrant.
Strategic Expansions and Renovations. A key objective of the SPG Operating
Partnership is to increase the profitability and market share of the
Properties through the completion of strategic renovations and expansions.
In 1998, the SPG Operating Partnership completed construction and opened
nine new expansion and/or renovation projects: Aventura Mall in Miami,
Florida; Castleton Square in Indianapolis, Indiana; Independence Center in
Independence, Missouri; Irving Mall in Irving, Texas; Prien Lake Mall in
Lake Charles, Louisiana; Richardson Square in Dallas, Texas; Tyrone Square
in St. Petersburg, Florida; Walt Whitman Mall in Huntington, New York; and
West Town Mall in Knoxville, Tennessee.
The SPG Operating Partnership has a number of renovation and/or expansion
projects currently under construction, or in preconstruction development.
The SPG Operating Partnership expects to commence construction on many of
these projects in the next 12 to 24 months.
Competition
The SPG 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) the mall marketing initiatives
of Simon Brand Ventures, which the SPG 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 SPG Operating Partnership to be
the leader in the industry.
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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 SPG Operating Partnership's ability to lease space and
on the level of rents the SPG Operating Partnership can obtain.
There are numerous commercial developers, real estate companies and other
owners of real estate that compete with the SPG 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 SPG 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). Nearly 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 SPG 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. The presence of such asbestos-containing
materials does not violate currently applicable laws. Asbestos-containing
materials will be removed by the SPG 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
other petroleum products primarily related to auto services center
establishments or emergency electrical generation equipment. All such tanks have
been or are being removed, upgraded or abandoned in place in accordance with
applicable environmental laws. Site assessments have revealed certain soil and
groundwater contamination associated with such tanks at some of these
Properties. Subsurface investigations (Phase II assessments) and remediation
activities are either ongoing or scheduled to be conducted at such Properties.
The cost 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 SPG Operating Partnership will conduct environmental
due diligence consistent with past practice.
Employees
The SPG Operating Partnership and its affiliates employ approximately,
6,300 persons at various centers and offices throughout the United States.
Approximately 935 of such employees are located at the SPG Operating
Partnership's headquarters in Indianapolis, Indiana, and approximately 1,075 of
all employees are part-time.
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Insurance
The SPG 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.
Corporate Headquarters
The SPG 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.
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Executive Officers of the Registrant
The following table sets forth certain information with respect to the
executive officers of SPG, which is the managing general partner of the SPG
Operating Partnership, as of December 31, 1998.
Name Age Position
---- --- --------
Melvin Simon (1) 72 Co-Chairman
Herbert Simon (1) 64 Co-Chairman
David Simon (1) 37 Chief Executive Officer
Hans C. Mautner 60 Vice Chairman
Richard S. Sokolov 49 President and Chief Operating Officer
Randolph L. Foxworthy 54 Executive Vice President - Corporate
Development
William J. Garvey 59 Executive Vice President - Property
Development
James A. Napoli 52 Executive Vice President - Leasing
John R. Neutzling 46 Executive Vice President -
Property Management
James M. Barkley 47 General Counsel; Secretary
Stephen E. Sterrett 43 Treasurer
John Rulli 42 Senior Vice President - Human Resources &
Corporate Operations
James R. Giuliano, III 41 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 SPG. The executive officers of SPG serve at the pleasure of the
Board of Directors and have served in such capacities since the formation of SPG
in 1993, with the exception of Mr. Mautner, who has held his office since the
CPI Merger and Mr. Sokolov and Mr. Giuliano who have held their offices since
the DRC Merger. For biographical information of Melvin Simon, Herbert Simon,
David Simon, Hans C. Mautner, and Richard Sokolov, see Item 10 of this report.
Mr. Foxworthy is the Executive Vice President - Corporate Development of
SPG. 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 SPG since its formation in 1993.
Mr. Garvey is the Executive Vice President - Property Development of SPG.
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 SPG. 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 SPG.
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 SPG'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 SPG'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.
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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 152 regional malls in the Properties range in
size from approximately 200,000 to 2.2 million square feet of GLA, with all but
three regional malls over 400,000 square feet. These regional malls contain in
the aggregate nearly 16,000 occupied stores, including over 600 anchors which
are mostly national retailers. As of December 31, 1998, regional malls
(including specialty retail centers, and retail space in the mixed-use
Properties) represented 85.0% of total GLA, 79.9% of Owned GLA and 85.8% of
total annualized base rent of the Properties.
Community shopping centers are generally unenclosed and smaller than
regional malls. Most of the 77 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, 1998, community
shopping centers represented 11.1% of total GLA, 13.7% of Owned GLA and 6.6% of
the total annualized base rent of the Properties.
The SPG Operating Partnership also has an interest in three specialty
retail centers, five office and mixed-use Properties and three value-oriented
super-regional malls. The specialty retail centers contain approximately 763,000
square feet of GLA and do not have anchors; instead, they feature retailers and
entertainment facilities in a distinctive shopping environment and location. The
five office and mixed-use Properties range in size from approximately 350,000 to
1,033,000 square feet of GLA. Two of these Properties are regional malls with
connected office buildings, two are located in mixed-use developments and
contain primarily office space and one is solely office space. The value-
oriented super-regional malls are each joint venture partnerships ranging in
size from approximately 1.2 million to 1.3 million 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, 1998, value-oriented super-regional malls
represented 2.3% of total GLA, 3.7% of Owned GLA and 4.1% of the total
annualized base rent of the Properties.
As of December 31, 1998, approximately 89.9% 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 98.2% of the Owned GLA in the
value-oriented super-regional malls was leased, and approximately 91.4% of Owned
GLA in the community shopping centers was leased.
Of the 240 Properties, 172 are owned 100% by the SPG Operating Partnership
and the remainder are held as joint venture interests. The SPG Operating
Partnership is the managing or co-managing general partner of all but eight of
the Properties held as joint venture interests.
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ADDITIONAL INFORMATION
The following table sets forth certain information, as of December 31,
1998, regarding the Properties:
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
1. Alton Square Fee 100.0 Acquired 1993 641,409 Famous Barr, JCPenney,
Alton, IL Sears
2. Amigoland Mall Fee 100.0 Built 1974 558,622 Beall's, Dillard's, JCPenney,
Brownsville, TX Montgomery Ward
3. Anderson Mall Fee 100.0 Built 1972 637,924 Gallant Belk, JCPenney,
Anderson, SC Sears, Uptons, United Artists
Theatre
4. Aurora Mall Ground Lease 100.0 Acquired 999,932 JCPenney, Foley's (3), Sears
Aurora, CO (2009) 1998
5. Aventura Mall (4) Fee 33.3 Built 1983 1,551,190 AMC Theatre, Bloomingdales,
Miami, FL Burdines (5), JCPenney, Lord
& Taylor, Macy's, Sears
6. Avenues, The Fee 25.0 Built 1990 1,112,206 Belk, Dillard's,
Jacksonville, FL Sears, Parisian, JCPenney
7. Barton Creek Square Fee 100.0 Built 1981 1,369,938 Dillard's (3), Foley's,
Austin, TX General Cinema, JCPenney,
Sears, Montgomery Ward
8. Battlefield Mall Fee and Ground 100.0 Built 1970 1,198,759 Dillard's, Famous Barr,
Springfield, MO Lease (2056) Montgomery Ward, Sears,
JCPenney
9. Bay Park Square Fee 100.0 Built 1980 642,639 Kohl's, Montgomery Ward,
Green Bay, WI Shopko, Elder-Beerman, Marcus
Cinema
10. Bergen Mall Fee and Ground 100.0 Acquired 922,432 Value City, Stern's,
Paramus, NJ Lease (6) (2061) 1987 Marshall's, Off 5th-Saks
Fifth Avenue Outlet
11. Biltmore Square Fee (7) 66.7 Built 1989 494,548 Belk, Dillard's, Proffitt's,
Asheville, NC Goody's
12. Boynton Beach Mall Fee 100.0 Built 1985 1,064,137 Burdines, Macy's, Sears,
Boynton Beach, FL Dillard's (3) (5), JCPenney
13. Brea Mall Fee 100.0 Acquired 1,302,126 JCPenney, Robinsons-May,
Brea, CA 1998 Nordstrom, Sears, Macy's
14. Broadway Square Fee 100.0 Acquired 1994 571,430 Dillard's, JCPenney, Sears
Tyler, TX
15. Brunswick Square Fee 100.0 Built 1973 734,639 Barnes & Noble (5), Brunswick
East Brunswick, NJ Square Movies,
Macy's, JCPenney
</TABLE>
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<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
16. Burlington Mall Ground Lease 100.0 Acquired 1,252,109 Lord & Taylor, Filene's,
Burlington, MA (2048) 1998 Macy's, Sears
17. Castleton Square Fee 100.0 Built 1972 1,390,085 Galyan's, LS Ayres,
Indianapolis, IN Lazarus, JCPenney, Sears,
Von Maur
18. Century III Mall Fee (8) 50.0 Built 1979 1,286,753 Lazarus, Kaufmann's,
Pittsburgh, PA JCPenney, Sears, T.J. Maxx,
Wickes Furniture
19. Charlottesville Fashion Ground Lease 100.0 Acquired 573,619 Belk (5), JCPenney, Sears
Square (2076) 1997
Charlottesville, VA
20. Chautauqua Mall Fee 100.0 Built 1971 435,790 The Bon Ton , Sears,
Jamestown, NY JCPenney, Office Max
21. Cheltenham Square Fee 100.0 Built 1981 633,073 Burlington Coat Factory,
Philadelphia, PA United Artists Theatre, Home
Depot, Value City, Seaman's
Furniture, Shop Rite
22. Chesapeake Square Fee and Ground (7) 75.0 Built 1989 704,511 Dillard's (3), JCPenney,
Chesapeake, VA Lease (2062) Sears, Montgomery Ward,
Hecht's (5)
23. Cielo Vista Mall Fee and Ground 100.0 Built 1974 1,192,002 Dillard's (3), JCPenney,
El Paso, TX Lease (9) (2027) Montgomery Ward,
Sears
24. Circle Centre Property Lease 14.7 Built 1995 800,929 Nordstrom, Parisian,
Indianapolis, IN (2097) United Artists Theatre,
Gameworks
25. College Mall Fee and Ground 100.0 Built 1965 708,151 JCPenney, Lazarus,
Bloomington, IN Lease (9) (2048) L.S. Ayres, Sears, Target
26. Columbia Center Fee 100.0 Acquired 1987 772,583 Barnes & Noble,
Kennewick, WA The Bon Marche, Eastgate
Theatre, Lamonts, JCPenney,
Sears
27. Coral Square Fee 50.0 Built 1984 944,466 Burdines (3), Dillard's,
Coral Springs, FL JCPenney, Sears
28. Cordova Mall Fee 100.0 Acquired 841,398 Montgomery Ward, Parisian,
Pensecola, FL 1998 Dillard's (3)
29. Cottonwood Mall Fee 100.0 Built 1996 1,044,369 Dillard's, Foley's,
Albuquerque, NM JCPenney, Mervyn's,
Montgomery Ward,
United Artists Theatre
30. Crossroads Mall Fee 100.0 Acquired 1994 871,764 Dillard's, Sears,
Omaha, NE Younkers, Barnes & Noble
31. Crystal Mall (4) Fee 50.0 Acquired 785,365 JCPenney, Filene's, Sears,
Waterford, CT 1998 Macy's
32. Crystal River Mall Fee 100.0 Built 1990 426,124 Belk, Kmart, JCPenney, Regal
Crystal River, FL Cinema, Sears
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
33. Dadeland Mall Fee 50.0 Acquired 1,405,693 Burdine's, Burdine's Home
Miami, FL 1997 Gallery, JCPenney, Limited,
Lord & Taylor, Saks Fifth
Avenue
34. DeSoto Square Fee 100.0 Built 1973 687,156 Burdines, JCPenney,
Bradenton, FL Sears, Dillard's, Regal Cinema
35. Eastern Hills Mall Fee 100.0 Built 1971 997,664 Sears, The Bon Ton,
Buffalo, NY JCPenney, Kaufmann's,
Burlington Coat Factory
36. Eastland Mall Fee 50.0 Acquired 911,838 JC Penney, De Jong's, Famous
Evansville, IN 1998 Barr, Lazarus
37. Eastland Mall Fee 100.0 Built 1986 706,617 Dillard's, Hollywood Cinema,
Tulsa, OK JCPenney, Mervyn's,
Service Merchandise
38. Edison Mall Fee 100.0 Acquired 1997 986,971 Burdines (3), Dillard's,
Fort Meyers, FL JCPenney, Sears
39. Empire Mall (4) Fee 50.0 Acquired 1,051,421 JCPenney, Younkers, Sears,
Sioux Falls, SD 1998 Daytons, (10)
40. Fashion Mall at Keystone Ground Lease (2067) 100.0 Acquired 1997 651,671 Jacobsons, Parisian
at the Crossing, The
Indianapolis, IN
41. Florida Mall, The Fee 50.0 Built 1986 1,119,813 Burdines (5), Dillard's,
Orlando, FL JCPenney, Parisian,
Saks Fifth Avenue, Sears
42. Forest Mall Fee 100.0 Built 1973 483,695 JCPenney, Kohl's,
Fond Du Lac, WI Younkers, Sears, Staples
43. Forest Village Park Mall Fee 100.0 Built 1980 418,354 JCPenney, Kmart
Forestville, MD
44. Fremont Mall Fee 100.0 Built 1966 199,710 1/2 Price Store, JCPenney
Fremont, NE
45. Golden Ring Mall Fee 100.0 Built 1974 719,733 Caldor (11), Hecht's,
Baltimore, MD Montgomery Ward,
United Artists
46. Granite Run Mall Fee 50.0 Acquired 1,034,479 Boscovs, AMC Theatre,
Media, PA 1998 JCPenney, Sears
47. Great Lakes Mall Fee 100.0 Built 1961 1,294,950 Dillard's (3), Regal Cinema,
Cleveland, OH Kaufmann's,
JCPenney, Sears
48. Greenwood Park Fee 100.0 Acquired 1979 1,278,298 JCPenney, JCPenney Home
Mall Store, Lazarus, L.S. Ayres,
Greenwood, IN Sears, Service Merchandise,
Von Maur
49. Gulf View Square Fee 100.0 Built 1980 802,938 Burdines, Dillard's,
Port Richey, FL Montgomery Ward,
JCPenney, Sears
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
50. Gwinnett Place Fee 50.0 Acquired 1,246,457 Parisian, Macy's, JCPenney,
Duluth, GA 1998 Rich's, Sears
51. Haywood Mall Fee 50.0 Acquired 1,243,472 Belk Simpson, JCPenney,
Greensville, SC 1998 Rich's, Sears, Dillard's
52. Heritage Park Mall Fee 100.0 Built 1978 637,356 Dillard's, Sears,
Midwest City, OK Montgomery Ward,
Service Merchandise
53. Highland Mall (4) Fee 50.0 Acquired 1,097,785 Dillard's (3), Foley's,
Austin, TX 1998 JCPenney
54. Hutchinson Mall Fee 100.0 Built 1985 525,661 Cinema 8, Dillard's, JCPenney,
Hutchinson, KS Sears, Hobby Lobby
55. Independence Center Fee 100.0 Acquired 1994 1,025,758 The Jones Store Co.,
Independence, MO Dillard's, Sears
56. Indian River Mall Fee 50.0 Built 1996 747,919 AMC Theatre, Burdines, Sears,
Vero Beach, FL JCPenney, Dillard's
57. Ingram Park Mall Fee 100.0 Built 1979 1,131,616 Dillard's (3), Foley's,
San Antonio, TX JCPenney, Sears, Beall's
58. Irving Mall Fee 100.0 Built 1971 1,098,560 Barnes & Noble, Dillard's,
Irving, TX Foley's, General Cinema,
JCPenney, Mervyn's, Sears,
59. Jefferson Valley Mall Fee 100.0 Built 1983 589,444 Macy's, Sears,
Yorktown Heights, NY Service Merchandise, United
Artist Theatre
60. Knoxville Center Fee 100.0 Built 1984 990,092 Dillard's, JCPenney,
Knoxville, TN Proffitt's, Regal Cinema,
Sears, Service Merchandise
61. La Plaza Fee and Ground 100.0 Built 1976 989,322 Dillard's, JCPenney, Beall's,
McAllen, TX Lease (6) (2040) Foley's, Sears,
Service Merchandise,
Joe Brand-Lady Brand
62. Lafayette Square Fee 100.0 Built 1968 1,226,227 JCPenney, LS Ayres, Sears,
Indianapolis, IN Lazarus, Waccamaw, Burlington
Coat Factory (5)
63. Laguna Hills Mall Fee 100.0 Acquired 1997 868,731 JCPenney,
Laguna Hills, CA Macy's, Sears
64. Lake Square Mall Fee 50.0 Acquired 560,671 AMC 6 Theatres, JCPenney,
Leesburg, FL 1998 Sears, Belk, Target
65. Lakeland Square Fee 50.0 Built 1988 899,350 Belk, Burdines,
Lakeland, FL Dillard's (3),
JCPenney, Sears
66. Lakeline Mall Fee (12) 85.0 Built 1995 1,102,847 Dillard's, Foley's, Sears,
N. Austin, TX JCPenney, Mervyn's, Regal
Cinema
67. Lenox Square Fee 100.0 Acquired 1,426,493 Neiman Marcus, Macy's,
Atlanta, GA 1998 Rich's, United Artists
Theatres
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
68. Lima Mall Fee 100.0 Built 1965 752,802 Elder-Beerman, Sears,
Lima, OH Lazarus, JCPenney
69. Lincolnwood Town Center Fee 100.0 Built 1990 441,131 Carson Pirie Scott,
Lincolnwood, IL JCPenney
70. Lindale Mall (4) Fee 50.0 Acquired 693,660 Younkers, Von Maur, Sears
Cedar Rapids, IA 1998
71. Livingston Mall Fee 100.0 Acuired 985,659 Macy's, Sears, Lord & Taylor
Livingston, NJ 1998
72. Longview Mall Fee 100.0 Built 1978 616,608 Dillard's (3), JCPenney,
Longview, TX Sears, Service Merchandise,
Beall's
73. Machesney Park Mall Fee 100.0 Built 1979 556,093 Bergners, JCPenney,
Rockford, IL Kerasotes Theatre, Kohl's,
Seventh Avenue Direct
74. Markland Mall Ground Lease 100.0 Built 1968 390,901 Lazarus, Sears,
Kokomo, IN (2041) Target
75. McCain Mall Ground Lease (13) 100.0 Built 1973 776,508 Dillard's, JCPenney,
N. Little Rock, AR (2032) M.M. Cohn, Sears
76. Melbourne Square Fee 100.0 Built 1982 737,526 Belk, Burdines,
Melbourne, FL Dillard's (3), JCPenney
77. Memorial Mall Fee 100.0 Built 1969 416,698 JCPenney, Kohl's,
Sheboygan, WI Sears
78. Menlo Park Mall Fee 100.0 Acquired 1997 1,299,492 Macy's, Nordstrom,
Edison, NJ (14) Cineplex Odeon
79. Mesa Mall (4) Fee 50.0 Acquired 850,571 Sears, Herberger's, JCPenney,
Grand Junction, CO 1998 Target, Mervyn's
80. Metrocenter (4) Fee 50.0 Acquired 1,303,516 Macy's, Dillard's,
Phoenix, AZ 1998 Robinsons-May, JCPenney, Sears
81. Miami Fee 60.0 Built 1982 972,340 Burdines (3), Sears,
International Mall Dillard's, JCPenney
Miami, FL
82. Midland Park Mall Fee 100.0 Built 1980 616,336 Dillard's (3), JCPenney,
Midland, TX Sears, Beall's
83. Miller Hill Mall Fee 100.0 Built 1973 800,808 JCPenney, Montgomery Ward,
Duluth, MN Sears, Younkers
84. Mission Viejo Mall Fee 100.0 Built 1979 818,315 Macy's,
Mission Viejo, CA Robinsons - May (3),
Nordstrom (5), Saks Fifth
Avenue (5)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
85. Mounds Mall Ground Lease 100.0 Built 1965 407,673 Elder-Beerman, JCPenney,
Anderson, IN (2033) Sears
86. Muncie Mall Fee 100.0 Built 1970 656,715 JCPenney, L.S. Ayres,
Muncie, IN Sears, Elder Beerman (3)
87. Nanuet Mall Fee 100.0 Acquired 913,844 Stern's, Macy's, Sears
Nanuet, NY 1998
88. North East Mall Fee 100.0 Built 1971 1,141,429 Dillard's (3), JCPenney,
Hurst, TX Montgomery Ward, Sears,
Nordstrom (5), Saks Fifth
Avenue (5)
89. North Towne Square Fee 100.0 Built 1980 751,605 Lion, Montgomery Ward, (10)
Toledo, OH
90. Northfield Square Fee (7) 31.6 Built 1990 558,737 Cinemark Movies 10, Carson
Bradley, IL Pirie Scott (3) (5),
JCPenney, Sears
91. Northgate Mall Fee 100.0 Acquired 1987 1,104,888 The Bon Marche, Lamonts,
Seattle, WA (15) Nordstrom, JCPenney
92. Northlake Mall Fee 100.0 Acquired 962,397 JCPenney, Parisian, Macy's,
Atlanta, GA 1998 Sears
93. Northwoods Mall Fee 100.0 Acquired 1983 667,561 Famous Barr, JCPenney,
Peoria, IL Sears
94. Northpark Mall Fee 50.0 Acquired 1,057,383 Von Maur, Younkers,
Davenport, IA 1998 Montgomery Ward, JCPenney,
Sears
95. Oak Court Mall Fee 100.0 Acquired 1997 842,406 Dillard's (3), Goldsmith's
Memphis, TN (16)
96. Orange Park Mall Fee 100.0 Acquired 1994 924,893 AMC 24 Theatre, Belk,
Jacksonville, FL Dillard's, JCPenney, Sears
97. Orland Square Fee 100.0 Acquired 1997 1,224,891 Carson Pirie Scott, JCPenney,
Orland Park, IL Marshall Field, Plitt
Theatres, Sears
98. Paddock Mall Fee 100.0 Built 1980 559,552 Belk, Burdines,
Ocala, FL JCPenney, Sears
99. Palm Beach Mall Fee 100.0 Built 1967 1,024,470 Dillard's (5), JCPenney,
West Palm Beach, FL Sears, Lord & Taylor, Burdines
100. Phipps Plaza Fee 100.0 Acquired 820,654 AMC Theatres, Lord & Taylor,
Atlanta, GA 1998 Parisian, Saks Fifth Avenue
101. Port Charlotte Ground Lease (7) 80.0 Built 1989 716,208 Burdines, Dillard's,
Town Center (2064) Montgomery Ward,
Port Charlotte, FL JCPenney, Regal Cinema (5),
Sears
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
102. Prien Lake Mall Fee and Ground 100.0 Built 1972 814,516 Dillards, JCPenney,
Lake Charles, LA Lease (6) (2025) Montgomery Ward,
Sears, The White House
103. Raleigh Springs Mall Fee and Ground 100.0 Built 1979 907,220 Dillard's, Goldsmith's,
Memphis, TN Lease (6) (2018) JCPenney, Sears
104. Randall Park Mall Fee 100.0 Built 1976 1,580,786 Dillard's, Kaufmann's,
Cleveland, OH Casa LaSalle, JCPenney, Magic
Johnson Theatres (5), Sears,
Burlington Coat Factory
105. Richardson Square Fee 100.0 Built 1977 746,569 Barnes & Noble, Dillard's,
Dallas, TX Ross Dress for Less, Sears,
Stein Mart, Montgomery Ward
106. Richmond Town Square Fee 100.0 Built 1966 1,004,897 JCPenney, Kaufmann's, Sears,
Cleveland, OH Sony Theatres (5)
107. Richmond Square Fee 100.0 Built 1966 385,326 Dillard's, JCPenney,
Richmond, IN Sears, Office Max
108. River Oaks Center Fee 100.0 Acquired 1997 1,336,138 Carson Pirie Scott,
Calumet City, IL (17) Cineplex Odeon, JCPenney,
Marshall Field, Sears
109. Rockaway Townsquare Fee 100.0 Acquired 1,238,788 Lord & Taylor, JCPenney,
Rockaway, NJ 1998 Macy's, Sears
110. Rolling Oaks Mall Fee 100.0 Built 1988 757,972 Dillard's, Foley's,
North San Antonio, TX Sears, Regal Cinema
111. Roosevelt Field Mall Fee 100.0 Acquired 2,176,161 Bloomingdale's, JCPenney,
Garden City, NY 1998 Nordstrom, Macy's, Stern's
112. Ross Park Mall Fee 100.0 Built 1986 1,275,231 Lazarus, JCPenney,
Pittsburgh, PA Kaufmann's, Sears,
Service Merchandise
113. Rushmore Mall (4) Fee 50.0 Acquired 836,409 JCPenney, Herberger's, Sears,
Rapid City, SD 1998 Target, (10)
114. Santa Rosa Plaza Fee 100.0 Acquired 698,363 Macy's, Mervyn's, Sears
Santa Rosa, CA 1998
115. St. Charles Towne Center Fee 100.0 Built 1990 1,053,318 Cineplex Odeon, Hecht's,
Waldorf, MD JCPenney,
Kohl's, Sears,
Montgomery Ward,
116. Seminole Towne Fee 45.0 Built 1995 1,153,793 Burdines, Dillard's,
Center JCPenney, Parisian, Sears
Sanford, FL United Artists
117. Smith Haven Mall Fee 25.0 Acquired 1995 1,343,321 Sterns, Macy's,
Lake Grove, NY Sears, JCPenney, Cineplex
Odeon
118. Source, The Fee 25.0 Built 1997 730,177 ABC Home, Circuit City,
Long Island, NY Fortunoff, Loehmann's,
Nordstrom Rack, Off 5th- Saks
Fifth Avenue, Old Navy,
Virgin Megastore
119. South Hills Village Fee 100.0 Acquired 1997 1,118,773 Carmike Cinemas, Kaufmann's,
Pittsburgh, PA Lazarus,
Sears
120. South Park Mall Fee 100.0 Built 1975 857,610 Burlington Coat Factory,
Shreveport, LA Dillard's, JCPenney,
Montgomery Ward,
Regal Cinema, Stage
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
121. South Shore Plaza Fee 100.0 Acquired 1,447,783 Macy's, Filene's, Lord &
Braintree, MA 1998 Taylor, Sears
122. Southern Hills Mall (4) Fee 50.0 Acquired 752,588 Carmike Cinemas, Younkers,
Sioux City, IA 1998 Sears, Target
123. Southern Park Mall Fee 100.0 Built 1970 1,209,407 Dillard's, Kaufmann's,
Youngstown, OH JCPenney, Sears, Tinseltown
USA
124. Southgate Mall Fee 100.0 Acquired 1988 321,417 Sears, Dillard's, JCPenney,
Yuma, AZ (10)
125. SouthPark Mall Fee 50.0 Acquired 1,034,182 JCPenney, Montgomery Ward,
Moline, IL 1998 Younkers, Sears, Von Maur
126. SouthRidge Mall (4) Fee 50.0 Acquired 998,176 Carmike Cinemas, Sears,
Des Moines, IA 1998 Younkers, JCPenney, Target,
Montgomery Ward
127. Summit Mall Fee 100.0 Built 1965 711,802 Dillard's (3), Kaufmann's
Akron, OH
128. Sunland Park Mall Fee 100.0 Built 1988 920,590 General Cinemas, JCPenney,
El Paso, TX Mervyn's, Sears, Dillard's,
Montgomery Ward
129. Tacoma Mall Fee 100.0 Acquired 1,285,895 The Bon Marche, Sears,
Tacoma, WA 1987 Nordstrom, JCPenney,
Mervyn's, Plitt Theatres
130. Tippecanoe Mall Fee 100.0 Built 1973 867,668 Kohl's, Lazarus, Sears,
Lafayette, IN L.S. Ayres, JCPenney
131. Town Center at Boca Raton Fee 100.0 Acquired 1,326,957 Lord & Taylor, Saks Fifth
Boca Raton, FL 1998 Avenue (5), Bloomingdale's,
Burdines, Sears
132. Town Center at Cobb Fee 50.0 Acquired 1,271,583 Parisian, Macy's, Sears,
Atlanta, GA 1998 JCPenney, Rich's
133. Towne East Square Fee 100.0 Built 1975 1,148,628 Dillard's, Hollywood Cinema,
Wichita, KS JCPenney,
Sears, Service Merchandise
134. Towne West Square Fee 100.0 Built 1980 964,774 Dillard's, Sears, JCPenney,
Wichita, KS Montgomery Ward,
Service Merchandise
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
135. Treasure Coast Square Fee 100.0 Built 1987 884,818 Burdines, Dillard's (3),
Jenson Beach, FL Sears,
JCPenney, United Artists
Theatre
136. Tyrone Square Fee 100.0 Built 1972 1,098,715 Borders (5), Burdines,
St. Petersburg, FL Dillard's, JCPenney, Sears,
AMC Theatre
137. University Mall Ground Lease (18) 100.0 Built 1967 565,331 JCPenney, M.M. Cohn,
Little Rock, AR (2026) Montgomery Ward
138. University Mall Fee 100.0 Acquired 1994 711,279 McRae's, JCPenney,
Pensacola, FL Sears, United Artists
139. University Park Mall Fee 60.0 Built 1979 942,289 LS Ayres, JCPenney, Sears,
South Bend, IN Marshall Fields
140. Upper Valley Mall Fee 100.0 Built 1971 751,233 Lazarus, JCPenney,
Springfield, OH Sears, Elder-Beerman,
Chakeres Theatres
141. Valle Vista Mall Fee 100.0 Built 1983 655,724 Dillard's, Mervyn's,
Harlingen, TX Sears, JCPenney, Marshalls,
Beall's
142. Valley Mall Fee 50.0 Acquired 482,341 JCPenney, Belk, Watsons,
Harrisonburg, VA 1998 Wal-Mart
143. Virginia Center Fee 100.0 Built 1991 791,099 Dillard's (3), Hecht's,
Commons JCPenney, Sears
Richmond, VA
144. Walt Whitman Mall Ground Rent 98.0 Acquired 920,519 Lord & Taylor, Macy's,
Huntington Station, NY (2012) 1998 Bloomingdale's, Saks Fifth
Avenue (5)
145. Washington Square Fee 100.0 Built 1974 1,010,542 L.S. Ayres, Lazarus,
Indianapolis, IN Target (5), JCPenney, Sears
146. West Ridge Mall Fee 100.0 Built 1988 1,040,372 Dillard's, JCPenney,
Topeka, KS (19) Jones, Sears, Montgomery Ward
147. West Town Mall Ground Lease 50.0 Acquired 1991 1,337,566 Dillard's, JCPenney,
Knoxville, TN (2042) Parisian, Proffitt's,
Regal Cinema, Sears
148. Westchester, The (20) Fee 50.0 Acquired 829,053 Neiman Marcus, Nordstrom
White Plains, NY 1997
149. Westminster Mall Fee 100.0 Acquired 1,091,488 Robinsons-May Home Store,
Westminster, CA 1998 JCPenney, Robinsons-May, Sears
150. White Oaks Mall Fee 77.0 Built 1977 902,880 Bergner's, Famous Barr,
Springfield, IL Montgomery Ward, Sears
151. Windsor Park Mall Fee 100.0 Built 1976 1,095,229 Dillard's (3), JCPenney,
San Antonio, TX Mervyn's, Beall's,
Montgomery Ward, Regal Cinema
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
152. Woodville Mall Fee 100.0 Built 1969 792,915 Andersons, Sears,
Toledo, OH Elder-Beerman, (10)
VALUE-ORIENTED REGIONAL MALLS
1. Arizona Mills (4) Fee 26.3 Built 1997 1,191,437 Burlington Coat Factory,
Tempe, AZ 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 (4) Fee 37.5 Built 1997 1,240,781 Books-A-Million,
Grapevine (Dallas/Ft. 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 (5)
3. Ontario Mills (4) Fee 25.0 Built 1996 1,345,096 AMC Theatres, JCPenney
Ontario, CA Outlet, 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 Megastore,
GameWorks,
Off 5th-Saks Fifth Avenue
Outlet
SPECIALTY RETAIL CENTERS
1. Forum Shops at Ground Lease (2050) (21) Built 1992 479,756 -
Caesars, The
Las Vegas, NV
2. Tower Shops, The Space Lease (2051) 50.0 Built 1996 59,082 -
Las Vegas, NV
3. Trolley Square Fee and Ground 90.0 Acquired 1986 224,260 -
Salt Lake City, UT Lease (22)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
OFFICE AND MIXED-USE PROPERTIES
1. Fashion Centre at Fee 21.0 Built 1989 988,786 Sony Theatres, Macy's,
Pentagon City, The (23) Nordstrom
Arlington, VA
2. Lenox Building, The Fee 100.0 Acquired 1998 348,152 -
Atlanta, GA
3. New Orleans Fee and Ground 100.0 Built 1988 1,032,755 Macy's,
Centre/CNG Tower Lease (2084) (24) Lord & Taylor
New Orleans, LA
4. O'Hare International Fee 100.0 Built 1988 511,305 -
Center (25)
Rosemont, IL
5. Riverway Fee 100.0 Acquired 816,770 -
Rosemont, IL 1991 (26)
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
COMMUNITY SHOPPING CENTERS
1. Arboretum, The Fee 90.0 Acquired 210,400 Barnes & Noble, The Arbor
Austin, TX 1998 Theater, The Pottery Barn
2. Arvada Plaza Fee 100.0 Built 1966 96,831 King Soopers
Arvada, CO
3. Aurora Plaza Ground Lease 100.0 Built 1965 150,209 King Soopers,
Aurora, CO (2058) MacFrugel's Bargains,
Super Saver Cinema
4. Bloomingdale Fee 100.0 Built 1987 598,531 Best Buy, T.J. Maxx N More,
Court Cineplex Odeon,
Bloomingdale, IL Frank's Nursery, Marshalls,
Office Max, Old Navy,
Service Merchandise,
Wal-Mart, Dress Barn
5. Boardman Plaza Fee 100.0 Built 1951 650,812 AMES, Burlington Coat
Youngstown, OH Factory, Dunham's Sporting
Goods, Giant Eagle,
Michael's, Stein Mart,
T.J. Maxx, Reyers Outlet
6. Bridgeview Court Fee 100.0 Built 1988 280,299 Dominick's (11)
Bridgeview, IL
7. Brightwood Plaza Fee 100.0 Built 1965 41,893
Indianapolis, IN
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
8. Buffalo Grove Towne Center Fee 100.0 Built 1988 134,144 Buffalo Grove Theatres
Buffalo Grove, IL Eagle Country Market
9. Celina Plaza Fee and Ground 100.0 Built 1978 32,622 General Cinema
El Paso, TX Lease (27) (2027)
10. Century Mall (28) Fee 100.0 Acquired 1982 415,245 Burlington Coat Factory,
Merrillville, IN Montgomery Ward
11. Charles Towne Square Fee 100.0 Built 1976 205,399 Montgomery Ward,
Charleston, SC (29) Regal Cinema
12. Chesapeake Center Fee 100.0 Built 1989 305,904 Movies 10, Phar Mor,
Chesapeake, VA K-Mart, Service Merchandise
13. Cobblestone Court Fee and Ground 35.0 Built 1993 265,603 Dick's Sporting Goods,
Victor, NY Lease (9) (2038) Kmart, Office Max
14. Cohoes Commons Fee and Ground 100.0 Built 1984 262,768 Bryant & Stratton
Rochester, NY Lease (6) (2032) Business Institute, (10),
(11)
15. Countryside Plaza Fee and Ground 100.0 Built 1977 435,532 Best Buy, Builders Square,
Countryside, IL Lease (9) (2058) Old Country Buffet,
K-Mart
16. Crystal Court Fee 35.0 Built 1989 284,743 Cub Foods, Wal-Mart,
Crystal Lake, IL Service Merchandise, (10)
17. Eastgate Consumer Mall Fee 100.0 Acquired 1981 464,294 Burlington Coat Factory,
Indianapolis, IN (28) General Cinema
18. Eastland Convenience Ground Lease 50.0 Acquired 173,069 Kid "R" Us, Marshalls,
Center (2075) 1998 Service Merchandise, Toys "R"
Evansville, IN Us
19. Eastland Plaza Fee 100.0 Built 1986 188,229 Marshalls, Target,
Tulsa, OK Toys "R" Us
20. Empire East (4) Fee 50.0 Acquired 271,351 Carmike Cinemas, Kohl's,
Sioux Falls, SD 1998 Target
21. Fairfax Court Ground Lease (2052) 26.3 Built 1992 249,306 Circuit City Superstore,
Fairfax, VA Montgomery Ward,
Today's Man
22. Forest Plaza Fee 100.0 Built 1985 413,889 Bed, Bath & Beyond, Kohl's,
Rockford, IL Marshalls, Media Play,
Michael's, Factory Card
Outlet, Office Max,
T.J. Maxx
23. Fox River Plaza Fee 100.0 Built 1985 324,905 Big Lots, Builders Square,
Elgin, IL Kmart, Service Merchandise,
(10)
24. Gaitway Plaza Fee 23.3 Built 1989 229,920 Books-A-Million,
Ocala, FL Montgomery Ward,
Office Depot, T.J. Maxx
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
25. Glen Burnie Mall (28) Fee 100.0 Built 1963 456,361 Montgomery Ward
Glen Burnie, MD
26. Great Lakes Plaza Fee 100.0 Built 1976 163,919 Best Buy, Circuit City, Cost
Cleveland, OH Plus, Home Place, Michael's
27. Great Northeast Fee 50.0 Acquired 1989 298,242 Sears, Phar Mor
Plaza
Philadelphia, PA
28. Greenwood Plus Fee 100.0 Built 1979 188,480 Best Buy, Cinema I-IV,
Greenwood, IN Kohl's
29. Griffith Park Plaza Ground Lease (2060) 100.0 Built 1979 274,230 Kmart, Service Merchandise
Griffith, IN
30. Grove at Lakeland Fee 100.0 Built 1988 215,591 Lakeland Square 10 Theatre,
Square, The Wal-Mart, Sports Authority
Lakeland, FL
31. Hammond Square Space Lease (2011) 100.0 Built 1974 87,705 Burlington Coat Factory,
Sandy Springs, GA Service Merchandise
32. Highland Lakes Fee 100.0 Built 1991 478,017 Bed, Bath & Beyond,
Center Goodings, Marshalls,
Orlando, FL Ross Dress for Less,
Michael's, Movies 12,
Service Merchandise,
Office Max, Target
33. Indian River Commons Fee 50.0 Built 1997 263,507 HomePlace, Lowe's,
Vero Beach, FL Office Max
Service Merchandise
34. Ingram Plaza Fee 100.0 Built 1980 111,518 _
San Antonio, TX
35. Keystone Shoppes Ground Lease (2067) 100.0 Acquired 29,140 _
Indianapolis, IN 1997
36. Knoxville Commons Fee 100.0 Built 1987 180,463 Circuit City, Office Max,
Knoxville, TN Silk Tree Factory
37. Lake Plaza Fee 100.0 Built 1986 218,208 Mega Mart
Waukegan, IL
38. Lake View Plaza Fee 100.0 Built 1986 388,355 Best Buy (30), Dominick's,
Orland Park, IL Ultra 3 (30),
Factory Card Outlet,
Linens-N-Things (30),
Marshalls,
Pet Care Plus (30),
Service Merchandise, (10)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
39. Lakeline Plaza Fee (12) 85.0 Built 1998 262,050 Best Buy, Cost Plus, Linens
Austin, TX `N Things, Office Max, Old
Navy, Petsmart, Ross Dress
for Less, T.J. Maxx,
Party City, Toys "R" Us, Ulta
3, (10)
40. Lima Center Fee 100.0 Built 1978 201,154 AMES, Regal Cinema,
Lima, OH Service Merchandise
41. Lincoln Crossing Fee 100.0 Built 1990 161,337 PetsMart, Wal-Mart
O'Fallon, IL
42. Mainland Crossing Fee (7) 80.0 Built 1991 390,987 Sam's Club, Wal-Mart,
Galveston, TX Hobby Lobby
43. Maplewood Square Fee 100.0 Built 1970 130,780 Bag `N Save, Big Lots
Omaha, NE
44. Markland Plaza Fee 100.0 Built 1974 108,296 Service Merchandise
Kokomo, IN
45. Martinsville Plaza Space Lease (2036) 100.0 Built 1967 102,162 Rose's
Martinsville, VA
46. Marwood Plaza Fee 100.0 Built 1962 105,785 Kroger
Indianapolis, IN
47. Matteson Plaza Fee 100.0 Built 1988 275,455 Dominick's, Michael's Arts &
Matteson, IL Crafts, Service Merchandise,
Value City
48. Memorial Plaza Fee 100.0 Built 1966 129,202 Marcus Theatre, Office Max,
Sheboygan, WI (10)
49. Mounds Mall Cinema Fee 100.0 Built 1974 7,500 Kerasotes Theater
Anderson, IN
50. Muncie Plaza Fee 100.0 Built 1998 172,651 Factory Card Outlet, Kohl's,
Muncie, IN OfficeMax, Shoe Carnival,
T.J. Maxx
51. New Castle Plaza Fee 100.0 Built 1966 91,648 Goody's
New Castle, IN
52. North Ridge Plaza Fee 100.0 Built 1985 323,672 Best Buy, Cub Foods, Hobby
Joliet, IL Lobby, Office Max,
Service Merchandise
53. North Riverside Park Plaza Fee 100.0 Built 1977 119,608 Dominick's
North Riverside, IL
54. Northland Plaza Fee and Ground 100.0 Built 1988 209,495 Marshalls, Phar-Mor,
Columbus, OH Lease (6) (2085) Service Merchandise
55. Northwood Plaza Fee 100.0 Built 1974 211,840 Cinema Grill, Target
Fort Wayne, IN
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
56. Park Plaza Fee and Ground 100.0 Built 1968 114,458 Big Lots
Hopkinsville, KY Lease (6) (2039)
57. Plaza at Buckland Fee 35.0 Built 1993 337,970 Toys "R" Us, Jo-Ann Etc.,
Hills, The Kids "R" Us,
Manchester, CT Service Merchandise,
Comp USA,
Linens-N-Thing's, Party City
Filene's Basement
58. Regency Plaza Fee 100.0 Built 1988 287,526 Sam's Wholesale,
St. Charles, MO Wal-Mart
59. Ridgewood Court Fee 35.0 Built 1993 240,844 Home Quarters, T.J. Maxx,
Jackson, MS Service Merchandise, (10)
60. Rockaway Convenience Fee 100.0 Acquired 135,283 ACME Food, American Multi
Center 1998 Cinema, Discovery Zone, Kids
Rockaway, NJ "R" Us
61. Royal Eagle Plaza Fee 35.0 Built 1989 199,118 Kmart,
Coral Springs, FL Stein Mart
62. St. Charles Towne Plaza Fee 100.0 Built 1987 434,964 Ames, Hechinger,
Waldorf, MD Jo Ann Fabrics,
CVS, T.J. Maxx,
Service Merchandise,
Shoppers Food Warehouse
63. Teal Plaza Fee and Ground Lease 100.0 Built 1962 101,087 Circuit City (5),
Lafayette, IN (2007) (6) Hobby-Lobby, The Pep Boys
64. Terrace at The Florida Fee 100.0 Built 1989 332,980 Marshalls, Service
Mall Merchandise, Target, Uptons,
Orlando, FL Waccamaw
65. Tippecanoe Plaza Fee 100.0 Built 1974 94,739 Barnes & Noble Bookseller,
Lafayette, IN Service Merchandise
66. University Center Fee 60.0 Built 1980 150,548 Best Buy, Michaels,
South Bend, IN Service Merchandise
67. Village Park Plaza Fee 35.0 Built 1990 503,113 Frank's Nursery, Galyan's,
Westfield, IN Kohl's, Marsh, Regal Cinemas,
Wal-Mart
68. Wabash Village Ground Lease (2063) 100.0 Built 1970 124,748 Kmart
West Lafayette, IN
69. Washington Plaza Fee (7) 100.0 Built 1976 50,107 Kids "R" Us
Indianapolis, IN
70. West Ridge Plaza Fee 100.0 Built 1988 237,653 Magic Forest, Target,
Topeka, KS TJ Maxx, Toys "R" Us
71. West Town Corners Fee 23.3 Built 1989 384,988 PetsMart, Wal-Mart,
Altamonte Springs, FL Service Merchandise,
Sports Authority, Winn Dixie,
(10)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
The SPG
Ownership Operating
Interest Partnership's
(Expiration if Percentage Year Built Total
Name/Location Lease) (1) Interest (2) or Acquired GLA Anchors/Specialty Anchors
------------- ---------- ------------ ----------- ----- -------------------------
REGIONAL MALLS
<S> <C> <C> <C> <C> <C>
72. Westland Park Plaza Fee 23.3 Built 1989 163,154 Burlington Coat Factory,
Orange Park, FL PetsMart, Sports Authority,
Sound Advice
73. White Oaks Plaza Fee 100.0 Built 1986 400,303 Cub Foods, Kids "R" Us,
Springfield, IL Kohl's, Office Max,
T.J. Maxx, Toys "R" Us
74. Wichita Mall (28) Ground Lease (2022) 100.0 Built 1969 379,461 Cinema III (11), Dickinson
Wichita, KS Cinema, Office Max,
Montgomery Ward
75. Willow Knolls Court Fee 35.0 Built 1990 383,377 Kohl's, Phar-Mor,
Peoria, IL Sam's Wholesale Club,
Willow Knolls Theaters 14
76. Wood Plaza Ground Lease (2045) 100.0 Built 1968 94,993 Country General
Fort Dodge, IA
77. Yards Plaza, The Fee 35.0 Built 1990 273,097 Burlington Coat Factory,
Chicago, IL Montgomery Ward
PROPERTIES UNDER CONSTRUCTION
1. Concord Mills Fee 37.5 (31) 1,421,018 Alabama Grill, AMC, Bass Pro,
Concord, NC Bed, Bath & Beyond,
Books-A-Million, Burlington
Coat Factory, Group USA,
Jillian's, T.J. Maxx, Embassy
Suites Hotel
2. Mall of Georgia Fee 50.0 (32) 1,346,314 Barnes & Noble, Bed, Bath &
Gwinnett County, GA Beyond, Dillard's, Galyan's,
Haverty's, JCPenney, Lord &
Taylor, Nordstrom
3. Mall of Georgia Crossing Fee 50.0 (33) 444,000 Best Buy, Nordstrom Rack,
Gwinnett County, GA Staples, Target, T.J. Maxx N
More, Upton's
4. Shops at Northeast Plaza, Fee 100.0 (34) 323,000 Bed, Bath, & Beyond, Office
The Max, Michael's, Nordstrom
Hurst, TX Rack, Pets Mart, T.J. Maxx,
Pary City
5. Shops at Sunset Place, The Fee 37.5 (35) 500,000 NIKETOWN, AMC Theatres Virgin
Miami, FL Megastore,
Z Gallerie, IMAX Theatre,
Barnes & Noble, Game Works,
FAO Schwarz
6. Waterford Lakes Town Fee 100.0 (36) 920,000 Barnes & Noble, Bed, Bath &
Center Beyond, Office Max,
Orlando, FL Party City, Regal 20-Plex,
Ross Dress for Less, Super
Target, T.J. Maxx, Waves Music
</TABLE>
25
<PAGE>
(1) The date listed is the expiration date of the last renewal option available
to the SPG 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 SPG 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 retailer operates two stores at this Property.
(4) This Property is managed by a third party.
(5) Indicates anchor is currently under construction.
(6) Indicates ground lease covers less than 15% of the acreage of this
Property.
(7) The SPG Operating Partnership receives substantially all of the economic
benefit of these Properties.
(8) Effective March 1, 1999, the SPG Operating Partnership acquired the
remaining 50% interest in Century III Mall.
(9) Indicates ground lease(s) cover(s) less than 50% of the acreage of the
Property.
(10) Includes an anchor space currently vacant.
(11) Indicates anchor has closed, but the SPG Operating Partnership still
collects rents and/or fees under an agreement
(12) Effective January 29, 1999, the SPG Operating Partnership acquired the
remaining 15% interest in Lakeline Mall and Lakeline Plaza.
(13) Indicates ground lease covers all of the Property except for parcels owned
in fee by anchors.
(14) Primarily retail space with approximately 59,174 square feet of office
space.
(15) Primarily retail space with approximately 69,876 square feet of office
space.
(16) Primarily retail space with approximately 119,964 square feet of office
space.
(17) Primarily retail space with approximately 77,371 square feet of office
space.
(18) Indicates one ground lease covers substantially all of the Property and a
second ground lease covers the remainder.
(19) Includes outlots in which the SPG Operating Partnership has an 85% interest
and which represent less than 3% of the GLA and total annualized base rent
for the Property.
(20) The SPG Operating Partnership purchased the management contract on this
Property during 1998.
(21) The SPG Operating Partnership owns 60% of the original phase of this
Property and 55% of phase II, which opened in August 1997.
(22) Indicates a ground lease covers a pedestrian walkway and steps at this
Property. The SPG Operating Partnership, as ground lessee, has the right to
successive five-year renewal options, subject to specified exceptions.
(23) Primarily retail space with approximately 167,150 square feet of office
space.
(24) Primarily retail space with 491,489 square feet of office space.
(25) Primarily office space with approximately 12,800 square feet of retail
space.
(26) Primarily office space with approximately 24,300 square feet of retail
space.
(27) Indicates ground lease covers outparcel.
(28) 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.
(29) The SPG 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.
(30) Subleased from TJX Companies.
(31) Scheduled to open during September 1999.
(32) Scheduled to open during August 1999.
(33) Scheduled to open during October 1999.
(34) Scheduled to open during November 1999.
(35) This Property opened in January 1999.
(36) Scheduled to open during November 1999.
26
<PAGE>
Land Held for Development
The SPG Operating Partnership has direct or indirect ownership interests in
eleven parcels of land being held for future development, containing an
aggregate of approximately 904 acres located in nine 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 SPG
Operating Partnership's significant base of commercially zoned land, together
with the SPG 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 being held
for future development in which the SPG Operating Partnership has an ownership
interest, as well as the ownership percentage of the SPG Operating Partnership's
direct or indirect interest in each parcel:
Ownership
Location Acreage Interest (1)
- ------------------ ------- ------------
Bowie, MD 93.7 100%
Duluth, MN 11.2 100%
Little Rock, AR 97.0 50%
Mt. Juliet, TN 109.3 100%
Crystal River, FL 204.5 100%
Sanford, FL 77.2 22.5%
Miami, FL 41.7 60%
Houston, TX 156.2 50%
Rockaway, NJ 40.4 100%
Garden City, NY 44.6 100%
Braintree, MA 28.5 100%
-----
Total 904.3
=====
(1) The SPG Operating Partnership has a direct ownership interest in each
parcel except Duluth, MN and Mt. Juliet, TN. The SPG Operating Partnership
has the option to acquire those parcels from the Management Company.
The Management Company has granted options to the SPG 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 without
providing certain notice and first purchase rights to the SPG 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 SPG 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.
27
<PAGE>
Joint Ventures
At certain of the Properties held as joint-ventures, the SPG 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 $706.0 million.
28
<PAGE>
MORTGAGE AND OTHER DEBT ON PORTFOLIO PROPERTIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Interest Face Amount Annual Debt Maturity
Property Name Rate at 12/31/98 Service Date
- ------------- ---- ----------- ------- ----
CONSOLIDATED INDEBTEDNESS:
SECURED INDEBTEDNESS
<S> <C> <C> <C> <C> <C>
Anderson Mall - 1 (1) 6.57% $ 19,000 $ 1,248 (2) 9/15/02
Anderson Mall - 2 (1) 7.01% 8,500 596 (2) 9/15/02
Arboretum 6.56% 34,000 2,232 (2) 12/1/03
Barton Creek Square 8.10% 62,064 5,867 12/30/99
Battlefield Mall - 1 7.50% 48,665 4,765 1/1/04
Battlefield Mall - 2 6.81% 45,000 3,230 1/1/04
Biltmore Square 7.15% 26,681 2,795 1/1/01
Bloomingdale Court (3) 8.75% 27,359 2,394 (2) 12/1/00
Chesapeake Center 8.44% 6,563 554 (2) 5/15/15
Chesapeake Square 7.28% 48,164 4,883 1/1/01
Cielo Vista Mall - 1 (4) 9.38% 55,185 5,639 5/1/07
Cielo Vista Mall - 2 8.13% 1,940 189 11/1/05
Cielo Vista Mall - 3 (4) 6.76% 39,000 3,039 5/1/07
CMBS Loan - Fixed Component (5) 7.27% 175,000 12,720 (2) 12/15/07
CMBS Loan - Variable Component (5) 6.16% 50,000 3,078 (2) 12/15/07
College Mall - 1 (6) 7.00% 42,360 3,736 1/1/09
College Mall - 2 (6) 6.76% 12,000 857 1/1/09
Columbia Center 7.62% 42,326 3,789 3/15/02
Crystal River 7.06% (7) 16,000 1,130 (2) 1/1/01
Eastgate Consumer Mall 6.00% (8) 22,929 1,376 (2) 3/31/00
Eastland Mall (9) 6.81% 15,000 1,022 (2) 9/15/02
Florida Mall, The 6.65% 90,000 5,985 (2) 2/28/00
Forest Mall - 1 (9) 6.57% 12,800 841 (2) 9/15/02
Forest Mall - 2 (9) 6.81% 2,750 187 (2) 9/15/02
Forest Plaza (3) 8.75% 16,904 1,479 (2) 12/1/00
Forest Village Park Mall - 1 (1) 6.57% 20,600 1,353 (2) 9/15/02
Forest Village Park Mall - 2 (1) 7.01% 1,250 88 (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 6.19% 44,385 2,747 (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 6.19% 40,614 2,514 (2) 5/15/04
Fox River Plaza (3) 8.75% 12,654 1,107 (2) 12/1/00
Golden Ring Mall (9) 6.57% 29,750 1,955 (2) 9/15/02
Great Lakes Mall - 1 6.74% 52,632 4,354 3/1/01
Great Lakes Mall - 2 7.07% 8,489 724 3/1/99
Greenwood Park Mall - 1 (6) 7.00% 35,478 3,105 1/1/09
Greenwood Park Mall - 2 (6) 6.76% 62,000 4,428 1/1/09
Grove at Lakeland Square, The 8.44% 3,750 317 (2) 5/15/15
Gulf View Square 8.25% 37,633 3,652 10/1/06
Highland Lakes Center 6.56% (10) 14,377 944 (2) 3/1/02
Hutchinson Mall - 1 (9) 8.44% 11,523 1,108 9/15/02
Hutchinson Mall - 2 (9) 6.81% 4,500 306 (2) 9/15/02
Ingram Park Mall - 1 8.10% 47,955 4,533 12/30/99
Ingram Park Mall - 2 9.63% 7,000 674 (2) 12/30/99
J.C. Penney/Net Leased (Chattanooga) 6.80% 847 274 5/31/02
Jefferson Valley Mall 5.61% (11) 50,000 2,807 (2) 1/12/00
Keystone at the Crossing 7.85% 64,194 5,085 7/1/27
La Plaza Mall 8.25% 49,475 4,677 12/30/99
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Interest Face Amount Annual Debt Maturity
Property Name Rate at 12/31/98 Service Date
- ------------- ---- ----------- ------- ----
<S> <C> <C> <C> <C>
Lake View Plaza (3) 8.75% 22,169 1,940(2) 12/1/00
Lima Mall - 1 7.12% 14,180 1,215 3/1/02
Lima Mall - 2 7.12% 4,723 405 3/1/02
Lincoln Crossing (3) 8.75% 997 87(2) 12/1/00
Longview Mall - 1 (1) 6.57% 22,100 1,452(2) 9/15/02
Longview Mall - 2 (1) 7.01% 5,500 386(2) 9/15/02
Mainland Crossing 6.56%(10) 2,226 146(2) 3/31/02
Markland Mall (9) 6.57% 10,000 657(2) 9/15/02
Matteson Plaza (3) 8.75% 11,159 976(2) 12/1/00
McCain Mall - 1 (4) 9.38% 25,768 2,721 5/1/07
McCain Mall - 2 (4) 6.76% 18,000 1,402 5/1/07
Melbourne Square 7.42% 39,404 3,374 2/1/05
Miami International Mall 6.91% 46,483 3,758 12/21/03
Midland Park Mall - 1 (9) 6.57% 22,500 1,478(2) 9/15/02
Midland Park Mall - 2 (9) 6.81% 5,500 375(2) 9/15/02
The Shops at Mission Viejo 6.11% 37,559 2,296(2) 9/14/03
North East Mall 10.00% 21,934 2,475 9/1/00
North Riverside Park Plaza - 1 9.38% 3,918 452 9/1/02
North Riverside Park Plaza - 2 10.00% 3,617 420 9/1/02
North Towne Square (9) 6.57% 23,500 1,544(2) 9/15/02
Northgate Shopping Center 7.62% 79,035 7,075 3/15/02
Northlake Mall 8.00% 1,053 263 12/1/02
Orland Square 7.74% 50,000 3,871(2) 9/1/01
Paddock Mall 8.25% 29,930 2,905 10/1/06
Palm Beach Mall 7.50% 50,471 4,803 12/15/02
Port Charlotte Town Center - 1 7.28% 45,583 3,857 1/1/01
Port Charlotte Town Center - 2 7.28% 7,148 591 1/1/01
Randall Park Mall - 2 7.33% 35,000 2,566(2) 6/18/08
Regency Plaza (3) 8.75% 1,878 164(2) 12/1/00
Richmond Towne Square 6.06% 14,526 881(2) 7/15/03
River Oaks Center 8.67% 32,500 2,818(2) 6/1/02
South Park Mall - 1 (1) 7.25% 19,799 1,717 9/15/02
South Park Mall - 2 (1) 7.01% 6,949 487(2) 9/15/02
South Shore 9.75% 82 66 4/1/00
St. Charles Towne Plaza (3) 8.75% 30,742 2,690(2) 12/1/00
Sunland Park Mall (12) 8.63% 39,506 3,773 1/1/26
Tacoma Mall 7.62% 92,474 8,278 3/15/02
Terrace at Florida Mall, The 8.44% 4,688 396(2) 5/15/15
Tippecanoe Mall - 1 (6) 8.45% 46,255 4,647 1/1/05
Tippecanoe Mall - 2 (6) 6.81% 16,000 1,149 1/1/05
Towne East Square - 1 (6) 7.00% 56,006 4,901 1/1/09
Towne East Square - 2 (6) 6.81% 25,000 1,795 1/1/09
Treasure Coast Square 7.42% 53,218 4,714 1/1/06
Trolley Square - 1 5.81% 19,000 1,104(2) 7/23/00(13)
Trolley Square - 2 6.56%(10) 4,641 305(2) 7/23/00(13)
Trolley Square - 3 6.56%(10) 3,500 230(2) 7/23/00(13)
University Park Mall 7.43% 59,500 4,421(2) 10/1/07
Valle Vista Mall - 1 (4) 9.38% 34,130 3,604 5/1/07
Valle Vista Mall - 2 (4) 6.81% 8,000 626 5/1/07
West Ridge Plaza (3) 8.75% 4,612 404(2) 12/1/00
White Oaks Mall 6.51% 16,500 1,074(2) 3/1/99
White Oaks Plaza (3) 8.75% 12,345 1,080(2) 12/1/00
Windsor Park Mall - 1 8.00% 5,771 544 6/1/00
Windsor Park Mall - 2 8.00% 8,865 811 5/1/12
-----
Total Secured Indebtedness $2,865,241
==========
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Interest Face Amount Annual Debt Maturity
Property Name Rate at 12/31/98 Service Date
- ------------- ---- ----------- ------- ----
UNSECURED INDEBTEDNESS
<S> <C> <C> <C> <C>
Medium Term Notes - 1 7.13% 100,000 7,125 (14) 6/24/05
Medium Term Notes - 2 7.13% 180,000 12,825 (14) 9/20/07
Putable Asset Trust Securities 6.75% 100,000 6,750 (14) 11/15/03
Unsecured Term Loan 5.71% (15) 70,000 4,000 (2) 1/31/00
Unsecured Term Loan 6.14% 63,000 3,868 (2) 1/31/00
Unsecured Notes - 1 6.88% 250,000 17,188 (14) 11/15/06
Unsecured Notes - 2A 6.75% 100,000 6,750 (14) 7/15/04
Unsecured Notes - 2B 7.00% 150,000 10,500 (14) 7/15/09
Unsecured Notes - 3 6.88% 150,000 10,313 (14) 10/27/05
Unsecured Notes - 4A 6.63% 375,000 24,844 (14) 6/15/03
Unsecured Notes - 4B 6.75% 300,000 20,250 (14) 6/15/05
Unsecured Notes - 4C 7.38% 200,000 14,750 (14) 6/15/18
Mandatory Par Put Remarketed Securities 7.00% 200,000 14,000 (14) 6/15/08
--------------
2,238,000
Shopping Center Associates:
Unsecured Notes - SCA 1 6.75% 150,000 10,125 (14) 1/15/04
Unsecured Notes - SCA 2 7.63% 110,000 8,388 (14) 5/15/05
--------------
260,000
The Retail Property Trust:
Unsecured Notes - CPI 1 9.00% 250,000 22,500 (14) 3/15/02
Unsecured Notes - CPI 2 7.05% 100,000 7,050 (14) 4/1/03
Unsecured Notes - CPI 3 7.75% 150,000 11,625 (14) 8/15/04
Unsecured Notes - CPI 4 7.18% 75,000 5,385 (14) 9/1/13
Unsecured Notes - CPI 5 7.88% 250,000 19,688 (14) 3/15/16
CPI Merger Facility - 1 (16) 5.71% 450,000 25,713 (2) 6/24/99
CPI Merger Facility - 2 (16) 5.71% 450,000 25,713 (2) 3/24/00
CPI Merger Facility - 3 (16) 5.71% 500,000 28,570 (2) 9/24/00
Unsecured Revolving Credit Facility (17) 5.71% 368,000 21,028 (2) 9/27/99
--------------
2,593,000
Total Unsecured Indebtedness
$5,091,000
--------------
Total Indebtedness at Face Amounts
$7,956,241
Net Premium on Indebtedness $ 16,140
--------------
Total Consolidated Indebtedness $7,972,381 (18)
==============
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Joint Venture Indebtedness (19):
- ------------------------------------------
<S> <C> <C> <C> <C>
Arizona Mills 6.36% (20) 140,984 8,972 (2) 2/1/02
Aventura Mall 1 6.55% 141,000 9,231 (2) 4/6/08
Aventura Mall 2 6.60% 25,400 1,675 (2) 4/6/08
Aventura Mall 3 6.89% 33,600 2,314 (2) 4/6/08
Avenues, The 8.36% 57,710 4,825 (2) 5/15/03
Century III Mall 6.78% 66,000 4,475 (2) 7/1/03
Circle Centre Mall 5.50% (21) 60,000 3,302 (2) 1/31/04
Cobblestone Court 7.22% (22) 6,180 446 (2) 11/30/05
Concord Mills 6.41% 24,250 1,555 (2) 12/2/03
Coral Square 7.40% 53,300 3,944 (2) 12/1/00
Crystal Court 7.22% (22) 3,570 258 (2) 11/30/05
Crystal Mall 8.66% 50,305 4,356 (2) 2/1/03
Dadeland Mall 5.76% (23) 140,000 8,070 (2) 12/10/00
Fairfax Court 7.22% (22) 10,320 745 (2) 11/30/05
Gaitway Plaza 7.22% (22) 7,350 531 (2) 11/30/05
Grapevine Mills 6.47% 155,000 10,029 (2) 10/1/08
Great Northeast Plaza 9.04% 17,671 2,110 6/1/06
Gwinnett Place 7.54% 39,866 3,412 4/1/07
Highland Mall - 1 9.75% 7,651 746 (2) 12/1/09
Highland Mall - 2 8.50% 306 26 (2) 10/1/01
Highland Mall - 3 9.50% 2,896 275 (2) 11/1/01
IBM CMBS Loan - Fixed Component (24) 7.40% 300,000 22,197 (2) 5/1/06
IBM CMBS Loan - Floating Component (24) 5.56% 185,000 10,290 (2) 5/1/03
Indian River Commons 7.58% 8,399 637 (25) 11/1/04
Indian River Mall 7.58% 46,602 3,532 (25) 11/1/04
Lakeland Square 7.26% 52,421 4,368 12/22/03
Lakeline Mall 7.65% 72,927 6,300 5/1/07
Lakeline Plaza - 1 5.44% (26) 30,500 1,659 (2) 6/6/02
Mall of Georgia 7.09% 135,000 9,572 (2) 7/1/10
Metrocenter 8.45% 31,181 2,635 (2) 2/28/08
Northfield Square 9.52% 24,055 2,575 4/1/00
Ontario Mills - 4 0.00% (27) 4,717 0 (27) 12/28/09
Ontario Mills - 5 6.75% 144,902 9,781 (2) 11/2/08
Plaza at Buckland Hills, The 7.22% (22) 17,680 1,276 (2) 11/30/05
Ridgewood Court 7.22% (22) 7,980 576 (2) 11/30/05
Royal Eagle Plaza 7.22% (22) 7,920 572 (2) 11/30/05
Seminole Towne Center 6.88% 70,500 4,850 (2) 1/1/06
Shops at Sunset Place, The 6.31% (28) 87,180 5,505 (2) 6/30/02
Smith Haven Mall 7.86% 115,000 9,039 (2) 6/1/06
Source, The 6.65% 124,000 8,246 (2) 11/6/08
Tower Shops, The 6.26% 13,500 846 (2) 3/13/99
Town Center at Cobb 7.54% 50,794 4,347 4/1/07
Village Park Plaza 7.22% (22) 8,960 647 (2) 11/30/05
West Town Corners 7.22% (22) 10,330 746 (2) 11/30/05
West Town Mall 6.90% 76,000 5,244 (2) 5/1/08
Westchester, The 8.74% 152,104 14,478 9/1/05
Westland Park Plaza 7.22% (22) 4,950 357 (2) 11/30/05
Willow Knolls Court 7.22% (22) 6,490 469 (2) 11/30/05
Yards Plaza, The 7.22% (22) 8,270 597 (2) 11/30/05
--------------
Total Joint Venture Indebtedness at Face
Amounts $2,840,721
Premium on Indebtedness 20,868
--------------
Total Joint Venture Indebtedness $2,861,589 (29)
==============
(Footnotes on following page)
</TABLE>
32
<PAGE>
(Footnotes for preceding pages)
(1) Loans secured by these four Properties are cross-collateralized and
cross-defaulted.
(2) Requires monthly payments of interest only.
(3) These ten Properties are cross-defaulted.
(4) These three Properties are cross-collateralized.
(5) 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). (6)
Loans secured by these four Properties are cross-collateralized and
cross-defaulted.
(7) LIBOR + 2.000%.
(8) LIBOR + 1.000%, with LIBOR Capped at 5.000%.
(9) Loans secured by these seven Properties are cross-collateralized and
cross-defaulted.
(10) LIBOR + 1.500%.
(11) LIBOR + 0.550%, with LIBOR Capped at 8.700% through maturity.
(12) Lender also participates in a percentage of gross revenues above a
specified base.
(13) July 23, 2000 is the earliest date on which the lender may call the bonds.
(14) Requires semi-annual payments of interest only.
(15) LIBOR + 0.650%.
(16) The Merger Facility bears interest at LIBOR + 0.65%. Interest rate swaps
currently exist on $500,000 of this facility, which fix the LIBOR component
at a weighted average rate of 5.06%. On February 4, 1999 the SPG Operating
Partnership completed the sale of $600,000 of senior unsecured notes. The
net proceeds of which were used primarily to paydown the first maturity of
the Merger Facility and the Credit Facility. (See Note 10 to the
accompanying financial statements.)
(17) $1,250,000 unsecured revolving credit facility. Currently, bears interest
at LIBOR + 0.65% and provides for different pricing based upon the SPG
Operating Partnership's investment grade rating. Two interest rate Caps
currently limit LIBOR on $90,000 and $50,000 of this indebtedness to 11.53%
and 16.77%, respectively. As of 12/31/98, $880,800 was available after
outstanding borrowings and letters of credit. The SPG Operating Partnership
has the option to extend this facility for an additional year. (18)
Includes minority interest partners' share of consolidated indebtedness of
($129,809).
(19) As defined in the accompanying consolidated financial statements, Joint
Venture Properties are those accounted for using the equity method of
accounting.
(20) LIBOR + 1.300%, with LIBOR Capped at 9.500%.
(21) LIBOR + 0.440%, with LIBOR Capped at 8.81% through maturity.
(22) The interest rate on this cross-collateralized mortgage is fixed at 7.22%
through November 1999 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.
(23) LIBOR + 0.700%.
(24) This $485 million Commercial Mortgages Notes is secured by
cross-collateralized mortgages encumbering thirteen Properties (Eastland
Mall, Empire East, Empire Mall, Granite Run Mall, Mesa Mall, Lake Square,
Lindale Mall, Northpark Mall, Southern Hills Mall, Southpark Mall,
Southridge Mall, Rushmore Mall, and Valley Mall). A weighted average rate
is used for each component. The floating component has an interest rate
protection agreement which Caps LIBOR at 11.67%.
(25) Loans require monthly interest payments only until they begin amortizing
November, 2000.
(26) LIBOR + 0.375%.
(27) Beginning January 2000, this note will bear Interest at 6.00%.
(28) LIBOR + 1.250%.
(29) Includes outside partners' share of indebtedness of ($1,634,545).
33
<PAGE>
Item 3. Legal Proceedings
Richard E. Jacobs, et al. v. Simon DeBartolo Group, L.P. On September 3,
1998, a complaint was filed in the Court of Common Pleas in Cuyahoga County,
Ohio, captioned Richard E. Jacobs, et al. v. Simon DeBartolo Group, L.P. The
plaintiffs are all principals or affiliates of The Richard E. Jacobs Group, Inc.
The plaintiffs allege in their complaint that the SPG Operating Partnership
engaged in malicious prosecution, abuse of process, defamation, libel, injurious
falsehood/unlawful disparagement, deceptive trade practices under Ohio law,
tortious interference and unfair competition in connection with the SPG
Operating Partnership's acquisition by tender offer of shares in RPT, a
Massachusetts business trust, and certain litigation instituted in September,
1997, by the SPG Operating Partnership against Jacobs in federal district court
in New York, wherein the SPG Operating Partnership alleged that Jacobs and other
parties had engaged, or were engaging in activity which violated Section 10(b)
of the Securities Exchange Act of 1934, as well as certain rules promulgated
thereunder. Plaintiffs in the Ohio action are seeking compensatory damages in
excess of $200 million, punitive damages and reimbursement for fees and
expenses. It is difficult to predict the ultimate outcome of this action and
there can be no assurance that the SPG Operating Partnership will receive a
favorable verdict. Based upon the information known at this time, in the opinion
of management, it is not expected that this action will have a material adverse
effect on the SPG Operating Partnership.
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., an indirect 99%-owned subsidiary
of SPG, and DPMI, and the plaintiffs are 27 former employees of the defendants.
In the complaint, the plaintiffs allege that they were recipients of deferred
stock grants under the DRC stock incentive plan (the "DRC Plan") and that these
grants immediately vested under the DRC Plan's "change in control" provision as
a result of the DRC Merger. Plaintiffs assert that the defendants' refusal to
issue them approximately 661,000 shares of DRC common stock, which is equivalent
to approximately 450,000 shares of common stock of SPG computed at the 0.68
Exchange Ratio used in the DRC Merger, constitutes a breach of contract and a
breach of the implied covenant of good faith and fair dealing under Ohio law.
Plaintiffs seek damages equal to such number of shares of DRC common stock, or
cash in lieu thereof, equal to all deferred stock ever granted to them under the
DRC Plan, dividends on such stock from the time of the grants, compensatory
damages for breach of the implied covenant of good faith and fair dealing, and
punitive damages. The complaint was served on the defendants on October 28,
1996. The plaintiffs and SPG each filed motions for summary judgment. On October
31, 1997, the Court entered a judgment in favor of SPG granting SPG's motion for
summary judgment. The plaintiffs have appealed this judgment and the matter is
pending. While it is difficult to predict the ultimate outcome of this action,
based on the information known to SPG to date, it is not expected that this
action will have a material adverse effect on SPG or the SPG Operating
Partnership.
Roel Vento et al v. Tom Taylor et al. An affiliate of the SPG 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
affiliate is seeking to overturn the award and has appealed the verdict. The
affiliate's appeal is pending. Although management 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 SPG 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 (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
34
<PAGE>
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. Since that date, the SPG Operating
Partnership's third party casualty insurer responded to the SPG Operating
Partnership's demand, has reimbursed the SPG Operating Partnership for its costs
expended to date, and has further agreed to defend and indemnify the SPG
Operating Partnership against any further loss, cost, or damage with respect to
this matter.
The SPG 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 SPG Operating Partnership's financial position or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
None.
35
<PAGE>
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
There is no established public trading market for the SPG Operating
Partnership's Units or preferred units (all of which are owned by SPG and
SPG Properties, Inc.). The following table sets forth for the periods
indicated, the distributions declared on the Units:
Declared
1997 Distribution
----------- ----------------
1st Quarter $0.4925
2nd Quarter $0.5050
3rd Quarter $0.5050
4th Quarter $0.5050
1998
-----------
1st Quarter $0.5050
2nd Quarter $0.5050
3rd Quarter $0.5050
4th Quarter $0.5050 (1)
(1) Includes a $0.4721 distribution declared in the third quarter of 1998,
but not payable until the fourth quarter of 1998, related to the CPI
Merger, designated to align the time periods of distribution payments
of the merged companies. The current annual distribution rate is $2.02
per Unit.
Holders
The number of holders of Units was 155 as of March 18, 1999.
Unregistered Sales of Equity Securities
The SPG 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 1998, except as follows: During 1998 the SPG
Operating Partnership issued 2,864,088 Units in connection with the acquisition
of additional ownership interests in four partnerships and the acquisition of
Cordova Mall. The foregoing transactions are exempt from registrations under the
Act in reliance on section 4(2).
36
<PAGE>
Item 6. Selected Financial Data
The following tables set forth selected financial data for the SPG
Operating Partnership. 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
SPG Operating Partnership's business is also included in the tables.
<TABLE>
<CAPTION>
As of or for the Year Ended December 3l,
-----------------------------------------------------------------------------------
1998(1) 1997(1) 1996(1) 1995 1994
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(in thousands, except per Unit data)
OPERATING DATA:
Total revenue $ 1,400,189 $ 1,054,167 $ 747,704 $ 553,657 $ 473,676
Income before extraordinary items 233,256 203,133 134,663 101,505 60,308
Net income available to Unitholders $ 198,931 $ 173,943 $ 118,448 $ 96,730 $ 42,328
BASIC EARNINGS PER UNIT:
Income before extraordinary items $ 1.01 $ 1.08 $ 1.02 $ 1.08 $ 0.71
Extraordinary items 0.04 -- (0.03) (0.04) (0.21)
---------------------------------
Net income $ 1.05 $ 1.08 $ 0.99 $ 1.04 $ 0.50
===================================================================================
Weighted average Units outstanding 189,082 161,023 120,182 92,666 84,510
DILUTED EARNINGS PER UNIT:
Income before extraordinary items $ 1.01 $ 1.08 $ 1.01 $ 1.08 $ 0.71
Extraordinary items 0.04 -- (0.03) (0.04) (0.21)
---------------------------------
Net income $ 1.05 $ 1.08 $ 0.98 $ 1.04 $ 0.50
===================================================================================
Diluted weighted average Units
outstanding 189,440 161,407 120,317 92,776 84,712
Distributions per Unit (2) $ 2.02 $ 2.01 $ 1.63 $ 1.97 $ 1.90
BALANCE SHEET DATA:
Cash and cash equivalents $ 124,466 $ 109,699 $ 64,309 $ 62,721 $ 105,139
Total assets 13,112,916 7,662,667 5,895,910 2,556,436 2,316,860
Mortgages and other indebtedness 7,972,381 5,077,990 3,681,984 1,980,759 1,938,091
Limited Partners' Interest (3) -- -- -- 908,764 909,306
Partners' equity (deficit) $ 4,587,801 $ 2,251,299 $1,945,174 $ (589,126) $ (807,613)
OTHER DATA:
Cash flow provided by (used in):
Operating activities $ 543,663 $ 370,907 $ 236,464 $ 194,336 $ 128,023
Investing activities (2,099,009) (1,243,804) (199,742) (222,679) (266,772)
Financing activities 1,570,113 918,287 (35,134) (14,075) 133,263
Ratio of Earnings to Fixed Charges 1.56x 1.68x 1.64x 1.67x 1.43x
====================================================================
Funds from Operations (FFO) (4) $ 540,609 $ 415,128 $ 281,495 $ 197,909 $ 167,761
===================================================================================
</TABLE>
Notes
(1) Notes 3, 4 and 7 to the accompanying financial statements describe the CPI
Merger and the DRC Merger, which occurred on September 24, 1998 and August
9, 1996, respectively, and other 1998, 1997 and 1996 real estate
acquisitions and development.
(2) Represents distributions declared per period, which, in 1996, includes a
distribution of $0.1515 per Unit 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.
(3) See Note 11 to the financial statements.
(4) Please refer to Management's Discussion and Analysis of Financial Condition
and Results of Operations for a definition of Funds from Operations.
37
<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 SPG 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; substantial indebtedness; conflicts of interests; maintenance of
REIT status; and environmental/safety requirements.
Overview
The SPG 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, 1998, the SPG Operating Partnership owns or holds an interest in
240 income-producing properties, which consist of 152 regional malls, 77
community shopping centers, three specialty retail centers, five office and
mixed-use properties and three value-oriented super-regional malls in 35 states
(the "Properties"). The SPG Operating Partnership also owns interests in one
regional mall, one value-oriented super-regional mall, one specialty retail
center and three community centers currently under construction and eleven
parcels of land held for future development (collectively, the "Development
Properties", and together with the Properties, the "Portfolio Properties"). The
SPG Operating Partnership also holds substantially all of the economic interest
in M.S. Management Associates, Inc. (the "Management Company"). See Note 8 to
the attached financial statements for a description of the activities of the
Management Company.
Operating results of the SPG Operating Partnership for the two years ended
December 31, 1998 and 1997, and their comparability to the respective prior
periods, have been significantly impacted by a number of Property acquisitions
and openings beginning in 1996. The greatest impact on results of operations has
come from the CPI Merger (see Liquidity and Capital Resources), which was
consummated as of the close of business on September 24, 1998, the merger with
DeBartolo Realty Corporation (the "DRC Merger") which was completed on August 9,
1996, and the acquisition of Shopping Center Associates (the "SCA Acquisition"),
which included a series of transactions from September 29, 1997 to June 1, 1998.
In addition, the SPG 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 April 11, 1996, the SPG
Operating Partnership acquired the remaining 50% economic ownership interest in
Ross Park Mall for approximately $101 million. On July 31, 1996, the SPG
Operating Partnership opened the approximately $75 million wholly-owned
Cottonwood Mall in Albuquerque, New Mexico. On August 29, 1997, the SPG
Operating Partnership opened the 55%-owned, $89 million phase II expansion of
The Forum Shops at Caesar's. On December 30, 1997, the SPG Operating Partnership
acquired 100% of The Fashion Mall at Keystone at the Crossing, along with an
adjacent community center, in Indianapolis, Indiana for $124.5 million. On
January 26, 1998, the SPG Operating Partnership acquired 100% of Cordova Mall in
Pensacola, Florida for approximately $87.3 million. On May 5, 1998, SPG acquired
the remaining 50.1% interest in Rolling Oaks Mall for 519,889 shares of SPG's
common stock, valued at approximately $17.2 million. SPG transferred the
interest to the SPG Operating Partnership in exchange for 519,889 Units. Please
refer to "Liquidity and Capital Resources" for additional information on 1998
activity.
Results of Operations
Year Ended December 31, 1998 vs. Year Ended December 31, 1997
Total revenue increased $346.0 million or 32.8% in 1998 as compared to
1997. This increase is primarily the result of the CPI Merger ($131.0 million),
the SCA Acquisition ($121.7 million), the Property Transactions ($48.2 million)
and approximately $12.9 million of consolidated revenues realized from marketing
initiatives throughout the portfolio from the SPG Operating Partnership's
strategic marketing division, Simon Brand Ventures ("SBV"). Excluding these
transactions, total revenues increased $32.3 million, primarily due to a $20.2
million increase in minimum rent, a $10.1 million increase in other
38
<PAGE>
income and a $3.8 million increase in tenant reimbursements. The 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
$4.3 million increase in rents from tenants operating under license agreements.
The increase in other income is primarily the result of increases in gains from
sales of peripheral properties ($3.4 million) and interest income ($2.8 million)
and a fee ($2.5 million) earned from CPI in connection with the sale of the
General Motors Building in New York, New York. The increase in tenant
reimbursements is offset by a $4.6 million increase in property operating
expenses for comparable properties.
Total operating expenses increased $183.0 million, or 31.7%, in 1998 as
compared to 1997. This increase is primarily the result of the CPI Merger ($70.7
million, including $26.0 million of depreciation and amortization), the SCA
Acquisition ($66.6 million, including $20.9 million of depreciation and
amortization) and the Property Transactions ($29.7 million, including $12.9
million of depreciation and amortization). Excluding these transactions,
operating expenses increased $16.1 million or 2.8%, primarily due to increases
in depreciation and amortization ($6.3 million), property operating expenses
($4.6 million) and advertising and promotion ($3.7 million). The increase in
depreciation and amortization is primarily due to an increase in depreciable
real estate realized through renovation and expansion activities. The increase
in property operating expenses is offset by a $3.8 million net increase in
tenant reimbursements.
Interest expense increased $132.5 million, or 46.0% in 1998 as compared to
1997. This increase is primarily as a result of the CPI Merger ($45.8 million),
the SCA Acquisition ($59.1 million) and the Property Transactions ($15.0
million) and incremental interest ($12.7 million) on borrowings under the Credit
Facility to acquire the IBM Properties (see Note 7 to the financial statements).
The $7.3 million loss on the sale of an asset in 1998 is the result of the
June 30, 1998 sale of Southtown Mall for $3.3 million.
Income from unconsolidated entities increased $9.0 million from $19.2
million in 1997 to $28.1 million in 1998, resulting from an increase in the SPG
Operating Partnership's share of income from partnerships and joint ventures
($13.6 million), partially offset by a decrease in the SPG Operating
Partnership's share of income from M.S. Management Associates Inc. (the
"Management Company") ($4.6 million). The increase in the SPG Operating
Partnership's share of income from partnerships and joint ventures is primarily
the result of the addition of the IBM Properties ($14.5 million) and the CPI
Merger ($6.8 million), partially offset by the increase in the amortization of
the excess of the SPG Operating Partnerships' investment over their share of the
equity in the underlying net assets of unconsolidated joint-venture Properties
($8.7 million). The decrease in Management Company includes a $6.0 million
decrease in development fee income.
The $7.1 million loss from extraordinary items in 1998 is the result of
prepayment penalties and write-offs of mortgage costs associated with early
extinguishments of debt.
Net income was $240.4 million in 1998, as compared to $203.2 million in
1997, reflecting an increase of $37.2 million, for the reasons discussed above,
and was allocated to the SPG Operating Partnership's based on their preferred
unit preferences and weighted average ownership interests in the SPG Operating
Partnership during the year.
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 SCA 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
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 SCA 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.
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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 SCA 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 from unconsolidated entities increased from $9.5 million in 1996 to
$19.2 million in 1997, resulting from an increase in the SPG Operating
Partnership's share of the Management Company's 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 SPG
Operating Partnership's share of the Management Company's gains on sales of
peripheral property ($1.9 million). The increase in the SPG Operating
Partnership's share of income from partnerships and joint ventures is primarily
the result of the DRC Merger ($4.9 million), the SCA 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 SPG 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 SPG Operating Partnership's based on their preferred
unit preferences and weighted average ownership interests in the SPG Operating
Partnership during the year.
Preferred distributions increased by $16.6 million to $29.2 million in 1997
as a result of SPG'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,
partially offset by a reduction in preferred distributions ($2.0 million)
resulting from the conversion of the $100 million 8 1/8% Series A convertible
preferred stock into 3,809,523 shares of common stock on November 11, 1997.
Liquidity and Capital Resources
As of December 31, 1998, the SPG Operating Partnership's balance of
unrestricted cash and cash equivalents was $124.5 million. In addition to its
cash balance, the SPG Operating Partnership has a $1.25 billion unsecured
revolving credit facility (the "Credit Facility") which had $880.8 million
available after outstanding borrowings and letters of credit at December 31,
1998. The Credit Facility bears interest at LIBOR plus 65 basis points and has
an initial maturity of September 1999, with a one-year extension available at
the SPG Operating Partnership's option. SPG and the SPG Operating Partnership
also has access to public equity and debt markets.
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 SPG Operating Partnership's future earnings, cash
flows and fair values relating to financial instruments are primarily dependent
upon prevalent market rates of interest, primarily LIBOR. Based upon
consolidated indebtedness and interest rates at December 31, 1998, a 1% increase
in the market rates of interest would decrease future earnings and cash flows by
approximately $15.5 million, and would decrease the fair value of debt by
approximately $800 million. A 1% decrease in the market rates of interest would
increase future earnings and cash flows by approximately $15.5 million, and
would increase the fair value of debt by approximately $1.1 billion.
Financing and Debt
At December 31, 1998, the SPG Operating Partnership had consolidated debt of
$7,972 million, of which $5,669 million is fixed-rate debt bearing interest at a
weighted average rate of 7.3% and $2,303 million is variable-rate debt bearing
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interest at a weighted average rate of 6.1%. As of December 31, 1998, the SPG
Operating Partnership had interest rate protection agreements related to $938
million of consolidated variable-rate debt. The SPG Operating Partnership's
hedging activity as a result of these interest rate protection agreements
resulted in net interest savings of $263 thousand for the year ended December
31, 1998. This did not materially impact the SPG Operating Partnership's
weighted average borrowing rates.
The SPG Operating Partnership's share of total scheduled principal payments
of mortgage and other indebtedness, including unconsolidated joint venture
indebtedness over the next five years is $4,728 million, with $4,315 million
thereafter. The SPG Operating Partnership's together with the SRC Operating
Partnership (See Note 1 to the financial statements) have a combined ratio of
consolidated debt-to-market capitalization of 51.7% and 46.0% at December 31,
1998 and 1997, respectively. The increase is primarily the result of a 12.8%
decrease in the estimated value of the Units.
The following summarizes significant financing and refinancing transactions
completed in 1998:
Financings related to the CPI Merger. The cost of the CPI Merger (see
below) included the issuance of 53,078,564 shares of common stock and 4,844,331
shares of 6.50% Series B Convertible Preferred Stock to the CPI shareholders.
Each share of Series B Convertible Preferred Stock is convertible into 2.586
paired shares of common stock of the Companies, subject to adjustment under
certain circumstances described in Note 11 of the financial statements. Also
resulting from the CPI Merger, SPG became the issuer of 209,249 shares of 6.50%
Series A Convertible Preferred Stock. Each share of which is convertible into
37.995 paired shares of the Companies' common stock, subject to adjustment under
the same circumstances as SPG's 6.50% Series B Convertible Preferred Stock
described above. On February 26, 1999, 150,000 of such shares were converted.
As described in Note 3 to the financial statements, SPG transferred
substantially all of the CPI assets acquired, which consisted primarily of 23
regional malls, one community center, two office buildings and one regional mall
under construction (other than one regional mall, Ocean County Mall, and certain
net leased properties valued at approximately $153,100) and liabilities assumed
(except that SPG remains a co-obligor with respect to the Merger Facility (see
below)) of approximately $2.3 billion to the SPG Operating Partnership or one or
more subsidiaries of the SPG Operating Partnership in exchange for 47,790,550
limited partnership interests and 5,053,580 preferred partnership interests in
the SPG Operating Partnership. The preferred partnership interests carry the
same rights and equal the number of preferred shares issued and outstanding as a
direct result of the CPI Merger.
To finance the cash portion of the CPI Merger, the SPG Operating
Partnership and SPG, as co-obligors, obtained a $1.4 billion unsecured bridge
loan (the "Merger Facility"). The Merger Facility bears interest at a base rate
of LIBOR plus 65 basis points and has stated maturities at the following
intervals (i) $450 million on June 24, 1999 (ii) $450 million on March 24, 2000
and (iii) $500 million on September 24, 2000. In February 1999 the initial $450
million maturity was retired with proceeds from an unsecured debt offering,
which is described below. The Merger Facility is subject to covenants and
conditions substantially identical to those of the Credit Facility. SPG and the
SPG Operating Partnership drew the entire $1.4 billion available on the Merger
Facility, along with $237 million on the Credit Facility, to pay for the cash
portion of the dividend declared in conjunction with the CPI Merger, as well as
closing costs associated with the CPI Merger. Financing costs of $9.5 million,
which were incurred to obtain the Merger Facility, are being amortized over 18
months.
Also in conjunction with the CPI Merger, the SPG Operating Partnership
transferred substantially all of the CPI assets and $825 million of unsecured
notes (the "CPI Notes") to Retail Property Trust ("RPT"), a 99.999% owned REIT
subsidiary of the SPG Operating Partnership. As a result, the CPI Notes are
structurally senior in right of payment to holders of other SPG Operating
Partnership unsecured notes to the extent of the assets of RPT only, with over
99.999% of the excess cash flow plus any capital event transactions available
for the other SPG Operating Partnership unsecured notes. The CPI Notes pay
interest semiannually, and bear interest ranging from 7.05% to 9.00% (weighted
average of 8.03%), and have various due dates through 2016 (average maturity of
9.1 years). The CPI Notes contain leverage ratios, annual real property
appraisal requirements, debt service coverage ratios and minimum net worth
ratios. Additionally, consolidated mortgages totaling $2.1 million, and a pro-
rata share of $143.5 million of nonconsolidated joint venture indebtedness was
assumed in the CPI Merger, and as a result of acquiring the remaining interest
in Palm Beach Mall, the SPG Operating Partnership began accounting for that
Property using the consolidated method of accounting, adding $50.7 million to
consolidated indebtedness. A net premium of $19.2 million was recorded in
accordance with the purchase method of accounting to adjust the CPI Notes and
mortgage indebtedness assumed in the CPI Merger to fair value, which is being
amortized over the remaining lives of the related indebtedness.
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Secured Indebtedness. During 1998, the SPG Operating Partnership refinanced
approximately $545 million of mortgage indebtedness on 19 of its Properties into
four separate cross-collateralized and cross-defaulted pools. These refinancings
included additional borrowings of approximately $270 million, which the SPG
Operating Partnership used primarily to paydown the Credit Facility and for
general working capital needs. The weighted average maturity of the indebtedness
increased from approximately 5.6 years to 7.1 years, while the weighted average
interest rates decreased from approximately 7.6% to 7.3%.
Credit Facility. The maximum and average amounts outstanding during 1998
under the Credit Facility were $992 million and $584 million, respectively.
Equity Financings. During 1998, SPG issued 2,957,335 shares of its common
stock in offerings generating aggregate net proceeds of approximately $91.4
million. The net proceeds were contributed to the SPG Operating Partnership in
exchange for a like number of Units. The SPG Operating Partnership used the net
proceeds for general working capital purposes. In addition, SPG issued 519,889
shares of common stock valued at $17.2 million to acquire the remaining 50.1%
interest in Rolling Oaks Mall, which was transferred to the SPG Operating
Partnership in exchange for 519,889 Units.
Unsecured Notes. On June 22, 1998, the SPG Operating Partnership completed
the sale of $1.075 billion of senior unsecured debt securities. The issuance
included three tranches of notes as follows (1) $375 million bearing interest at
6.625% and maturing on June 15, 2003 (2) $300 million bearing interest at 6.75%
and maturing on June 15, 2005 and (3) $200 million bearing interest at 7.375%
and maturing on June 15, 2018. This offering also included a fourth tranche of
$200 million of 7.00% Mandatory Par Put Remarketed Securities due June 15, 2028,
which are subject to redemption on June 16, 2008. The net proceeds of
approximately $1.062 billion were combined with $40 million of working capital
and used to retire and terminate a $300 million unsecured revolving credit
facility and to reduce the outstanding balance of the Credit Facility.
Additionally, on February 4, 1999, the SPG Operating Partnership completed
the sale of $600 million of senior unsecured notes. The notes include two $300
million tranches. The first tranche bears interest at 6.75% and matures on
February 4, 2004 and the second tranche bears interest at 7.125% and matures on
February 4, 2009. The SPG Operating Partnership used the net proceeds of
approximately $594 million to retire the $450 million initial tranche of the
Merger Facility and to pay $142 million on the outstanding balance of the Credit
Facility. Following this offering, the SPG Operating Partnership had remaining
$250 million on its debt shelf registration, under which debt securities may be
issued.
The CPI Merger
For financial reporting purposes, as of the close of business on September
24, 1998, pursuant to the Agreement and Plan of Merger dated February 18, 1998,
among Simon DeBartolo Group, Inc., Corporate Property Investors, Inc., and
Corporate Realty Consultants, Inc., the CPI Merger was consummated. As a result,
the consolidated results of operations include an additional 17 regional malls,
two office buildings and one community center, with an additional six regional
malls being accounted for using the equity method of accounting.
The total purchase price associated with the CPI Merger is approximately
$5.9 billion including transaction costs and liabilities assumed. This included
a per share dividend paid immediately prior to the CPI Merger to the holders of
CPI common stock of (i) $90 in cash, (ii) 1.0818 additional shares of common
stock and (iii) 0.19 shares of 6.50% Series B convertible preferred stock. The
dividend was paid on a total of 25,496,476 shares of CPI common stock.
See Note 3 to the financial statements for additional information about the
CPI Merger.
Acquisitions and Disposals
During 1998, in addition to the CPI Merger, the SPG Operating Partnership
acquired 100% of one Property and additional interests in a total of 21
Properties for approximately $657 million, including the assumption of $271
million of indebtedness and 2,864,088 Units valued at approximately $93 million,
with the remainder in cash financed primarily through the Credit Facility and
working capital. These transactions resulted in the addition of approximately
11.8 million square feet of GLA to the portfolio.
The SPG Operating Partnership and affiliates and several joint venture
partners have collectively acquired a 44 percent ownership position in Groupe
BEG, S.A. ("BEG"). BEG is a fully integrated European retail real estate
developer, lessor and manager. The SPG Operating Partnership and its affiliated
Management Company, have contributed $27.5 million of equity capital for a 22%
ownership interest and are committed to an additional investment of $28.7
million over the next 12
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months, subject to certain financial and other conditions, including the SPG
Operating Partnership's approval of development projects. The agreement with BEG
is structured to allow the SPG Operating Partnership and affiliates and its
joint venture partners to collectively acquire a controlling interest in BEG
over time.
Effective June 1, 1998, the SPG Operating Partnership sold The Promenade
for $33.5 million. No gain or loss was recognized on this transaction. Effective
June 30, 1998, the SPG Operating Partnership sold Southtown Mall for $3.3
million and recorded a $7.2 million loss on the transaction.
See Note 4 to the financial statements for 1997 and 1996 acquisition
activity.
On February 25, 1999, the SPG Operating Partnership entered into a
definitive agreement with New England Development Company ("NED") to acquire and
assume management responsibilities for NED's portfolio of up to 14 regional
malls aggregating approximately 10.6 million square feet of GLA. The purchase
price for the portfolio is approximately $1.725 billion. The SPG Operating
Partnership expects to form a joint venture to acquire the portfolio, with the
SPG Operating Partnership's ultimate ownership to be between 30% to 50%.
Management continues to actively review and evaluate a number of individual
property and portfolio acquisition opportunities. Management believes that funds
on hand and 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 SPG 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.
Portfolio Restructuring. As a continuing part of the SPG Operating
Partnership's long-term strategic plan, management is evaluating the potential
sale of non-retail holdings, along with a number of retail assets that are no
longer aligned with the SPG Operating Partnership's strategic criteria. If these
assets are sold, management expects the sale prices will not differ materially
from the carrying value of the related assets.
Development Activity
Development activities are an ongoing part of the SPG Operating
Partnership's business. During 1998, the SPG Operating Partnership opened two
new community shopping centers at a combined cost of approximately $47.3
million, adding 465,500 square-feet of GLA to the portfolio. Each of these new
community centers is adjacent to an existing regional mall in the SPG Operating
Partnership's portfolio. In addition, The Shops at Sunset Place, a destination-
oriented retail and entertainment project containing approximately 510,000
square feet of GLA, opened in January of 1999 in South Miami, Florida. The SPG
Operating Partnership owns a noncontrolling 37.5% of this specialty retail
center.
Construction also continues on the following projects, which have an
aggregate construction cost of approximately $620 million, the SPG Operating
Partnership's share of which is approximately $347 million:
o Concord Mills, a 37.5%-owned value-oriented super regional mall
project, containing approximately 1.4 million square feet of GLA, is
scheduled to open in September of 1999 in Concord (Charlotte), North
Carolina.
o The Mall of Georgia, an approximately 1.5 million square foot regional
mall project, is scheduled to open in August of 1999. Adjacent to the
regional mall, The Mall of Georgia Crossing is an approximately
444,000 square-foot community shopping center project, which is
scheduled to open in October of 1999. The SPG Operating Partnership is
funding 85% of the capital requirements of the project. The SPG
Operating Partnership has a noncontrolling 50% ownership interest in
each of these development projects after the return of its equity and
a 9% return thereon.
o In addition to Mall of Georgia Crossing, two other new community
center projects are under construction: The Shops at North East Plaza
and Waterford Lakes at a combined 1,243,000 square feet of GLA.
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Strategic Expansions and Renovations
A key objective of the SPG Operating Partnership is to increase the
profitability and market share of the Properties through the completion of
strategic renovations and expansions. In 1998, the SPG Operating Partnership
completed construction and opened nine new expansion and/or renovation projects:
Aventura Mall in Miami, Florida; Castleton Square in Indianapolis, Indiana;
Independence Center in Independence, Missouri; Irving Mall in Irving, Texas;
Prien Lake Mall in Lake Charles, Louisiana; Richardson Square in Dallas, Texas;
Tyrone Square in St. Petersburg, Florida; Walt Whitman Mall in Huntington, New
York; and West Town Mall in Knoxville, Tennessee.
The SPG Operating Partnership currently has five major expansion projects
under construction at an aggregate cost of approximately $465 million, the SPG
Operating Partnership's share of which is approximately $422 million:
o A $146 million renovation and expansion of The Shops at Mission Viejo
in Mission Viejo, California, including the additions of Nordstrom and
Saks Fifth Avenue with expansions of Macy's and Robinsons-May is
scheduled for completion in the winter of 1999. In addition, a new
food court is scheduled to open late in 2000. The SPG Operating
Partnership owns 100% of this mall.
o North East Mall will have an additional 308,000 square feet of GLA
including a 73,000 square foot small shop expansion, a new Nordstrom
and Saks Fifth Avenue when its $103 million renovation and expansion
project, which is scheduled to open in the fall of 2000, is complete.
The SPG Operating Partnership owns 100% of this regional mall.
o An approximately 200,000 square-foot small shop expansion of The
Florida Mall in Orlando, Florida, as well as the addition of Burdines,
is scheduled for completion in November of 1999. Expansions of
Dillard's, Parisian and JCPenney are also included in this $86 million
project. The SPG Operating Partnership has a noncontrolling 50%
ownership interest in this project.
o The $65 million expansion and renovation of Town Center at Boca Raton
in Boca Raton, Florida includes the addition of Nordstrom, a
relocation of Saks Fifth Avenue, a mall renovation and the expansions
of Lord & Taylor and Bloomingdale's, with more than 100,000 additional
square feet of small shops. This wholly-owned development project is
scheduled for completion in the summer of 2000.
o Richmond Town Square is in the middle of a $57 million renovation and
expansion project which includes a new Kaufmann's and a JCPenney
renovation that opened in November 1998, a Sears remodel and a new
food court scheduled to open in May of 1999 and a new Sony Cinema
scheduled to open early in 2000.
The SPG Operating Partnership has a number of smaller renovation and/or
expansion projects currently under construction aggregating approximately $200
million, nearly all of which relates to wholly-owned Properties. In addition,
preconstruction development continues on a number of project expansions,
renovations and anchor additions at additional properties. The SPG Operating
Partnership expects to commence construction on many of these projects in the
next 12 to 24 months.
It is anticipated that these projects will be financed principally with
access to debt and equity markets, existing corporate credit facilities and cash
flow from operations.
Capital Expenditures
Consolidated capital expenditures, excluding acquisitions, were $348
million, $332 million and $211 million for the periods ended December 31, 1998,
1997 and 1996, respectively.
1998 1997 1996
----- ----- -----
New Developments $ 22 $ 80 $ 80
Renovations and Expansions 250 197 86
Tenant Allowances--Retail 45 37 24
Tenant Allowances--Offices 1 1 6
Recoverable Capital Expenditures 18 13 11
Other 12 4 4
----- ----- -----
Total $ 348 $ 332 $ 211
===== ===== =====
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Distributions
The SPG Operating Partnership declared distributions in 1998 aggregating
$2.02 per Unit. On January 20, 1999, the SPG Operating Partnership declared a
distribution of $0.5050 per Unit payable on February 19, 1999. For federal
income tax purposes, 1% of the 1998 common stock distributions represented a
capital gain and 48% 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
In March 1998, the SPG Operating Partnership transferred its 50% ownership
interest in The Source, an approximately 730,000 square-foot regional mall, to a
newly formed limited partnership in which it has a 50% ownership interest, with
the result that the SPG Operating Partnership now owns an indirect
noncontrolling 25% ownership interest in The Source. In connection with this
transaction, the SPG Operating Partnership's partner in the newly formed limited
partnership is entitled to a preferred return of 8% on its initial capital
contribution, a portion of which was distributed to the SPG Operating
Partnership. The SPG Operating Partnership applied the distribution against its
investment in The Source.
In August 1998, the SPG Operating Partnership admitted an additional
partner into the partnership which owns The Shops at Sunset Place for $35
million, which was distributed to the SPG Operating Partnership. The SPG
Operating Partnership now holds a 37.5% noncontrolling interest in this
Property, which opened in January 1999. The SPG Operating Partnership applied
the distribution against its investment in the Property.
Cash used in investing activities for the year ended December 31, 1998 of
$2,099 million is primarily the result of the CPI Merger and other acquisitions
of $1,943 million, $345 million of capital expenditures and $22 million of
investments in and advances to the Management Company, partially offset by net
distributions from unconsolidated entities of $140 million, cash received from
acquired Properties of $17 million, net proceeds of $46 million from the sales
of Sherwood Gardens, The Promenade and Southtown Mall and an $8 million decrease
in restricted cash. In addition to the $1,659 million paid in connection with
the CPI Merger, acquisitions includes $240 million for the acquisition of the
IBM Properties, $41 million for the acquisition of Arboretum and $3 million for
the acquisition of Cordova Mall. Capital expenditures includes development costs
of $58 million, renovation and expansion costs of approximately $222 million and
tenant costs and other operational capital expenditures of approximately $65
million. Development costs include $39 million for the Shops at Sunset Place and
$14 million at Waterford Lakes. Net distributions from unconsolidated entities
primarily consists of $55 million from Florida Mall, $33 million from The Source
transactions described above, $30 million associated with The Shops at Sunset
Place transaction described above and $12 million from the IBM Properties.
Cash provided by financing activities for the year ended December 31, 1998
was $1,570 million and includes net borrowings of $1,914 million primarily used
to fund the CPI Merger and other acquisition and development activity and
contributions from SPG of the proceeds from the sales of its common stock of $93
million, partially offset by total distributions to minority interest partners
of consolidated Properties, and partners in the SPG Operating Partnership of
$437 million.
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
Management believes that there are several important factors that
contribute to the ability of the SPG Operating Partnership to increase rent and
improve profitability of its shopping centers, including aggregate tenant sales
volume, sales per square foot, occupancy levels and tenant costs. Each of these
factors has a significant effect on EBITDA. Management believes that EBITDA is
an effective measure of shopping center operating performance because: (i) it is
industry practice to evaluate real estate properties based on operating income
before interest, taxes, depreciation and amortization, which is generally
equivalent to EBITDA; and (ii) EBITDA is unaffected by the debt and equity
structure of the property owner. EBITDA: (i) does not represent cash flow from
operations as defined by generally accepted accounting principles; (ii) should
not be considered as an alternative to net income as a measure of operating
performance; (iii) is not indicative of cash flows from operating, investing and
financing activities; and (iv) is not an alternative to cash flows as a measure
of liquidity.
Total EBITDA for the Properties increased from $387 million in 1994 to
$1,358 million in 1998, representing a compound annual growth rate of 36.9%.
This growth is primarily the result of the CPI Merger ($109 million), the DRC
Merger ($418 million), the SCA Acquisition ($123 million), the IBM acquisition
($73 million), and other Properties developed or acquired during the comparative
periods ($214 million). The remaining growth in total EBITDA ($33 million)
reflects the addition of GLA to the Portfolio Properties through 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
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61.9% to 64.7%. 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:
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------------- -------------- ----------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
(in thousands)
EBITDA of consolidated Properties $ 906,987 $677,930 $ 467,292 $343,875 $290,243
EBITDA of unconsolidated Properties 450,568 262,098 148,030 93,673 96,592
------------------------------------------------------------------------------
Total EBITDA of Portfolio Properties $1,357,555 $940,028 $ 615,322 $437,548 $386,835
==============================================================================
EBITDA after minority interest (1) $1,064,157 $746,842 $ 497,215 $357,158 $307,372
==============================================================================
Increase in total EBITDA from prior
period 44.4% 52.8% 40.6% 13.1% 11.6%
Increase in EBITDA after minority
interest from prior period 42.5% 50.2% 39.2% 16.2% 20.0%
Operating profit margin of the Portfolio
Properties 64.7% 64.4% 62.5% (2) 63.1% 61.9%
</TABLE>
(1) EBITDA after minority interest represents the SPG Operating Partnership's
allocable portion of earnings before interest, taxes, depreciation and
amortization for all Properties based on its economic ownership in each
Property.
(2) The 1996 operating profit margin, excluding the $7.2 million merger
integration costs, is 63.2%.
Funds from Operations ("FFO")
FFO, as defined by NAREIT, means the consolidated net income of the SPG
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 SPG Operating Partnership's
economic 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 SPG Operating Partnership. The SPG Operating
Partnership's method of calculating FFO may be different from the methods used
by other companies. FFO: (i) does not represent cash flow from operations as
defined by generally accepted accounting principles; (ii) should not be
considered as an alternative to net income as a measure of operating performance
or to cash flows from operating, investing and financing activities; and (iii)
is not an alternative to cash flows as a measure of liquidity.
46
<PAGE>
The following summarizes FFO of the SPG Operating Partnership and
reconciles income before extraordinary items to FFO for the periods presented:
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C> <C>
(in thousands)
FFO of the SPG Operating Partnership $540,609 $415,128 $281,495
Increase in FFO from prior period 30.2% 47.5% 42.2%
============== ============== ==============
Reconciliation:
Income before extraordinary items $233,256 $203,133 $134,663
Plus:
Depreciation and amortization from consolidated
properties 266,525 200,084 135,226
The SPG Operating Partnership's share of
depreciation and amortization and extraordinary
items from unconsolidated affiliates 82,323 46,760 20,159
Merger integration costs -- -- 7,236
Loss on sale of real estate 7,283 -- --
Less:
Gain on the sale of real estate -- (20) (88)
Minority interest portion of depreciation, and
amortization and extraordinary items (7,307) (5,581) (3,007)
Preferred Unit requirement (41,471) (29,248) (12,694)
FFO of the SPG Operating Partnership $540,609 $415,128 $281,495
============== ============== ==============
</TABLE>
Portfolio Data
Operating statistics give effect to the CPI Merger for 1998 only and the
DRC Merger for all periods presented. Statistics include all Properties except
for the redevelopment area at Irving Mall, Charles Towne Square, Richmond Town
Square and The Shops at Mission Viejo, 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 1995 to 1998,
total reported retail sales at mall and freestanding GLA owned by the SPG
Operating Partnership ("Owned GLA") in the regional malls and all reporting
tenants at community shopping centers increased from $7,649 million to $14,504
million. Sales for 1998 includes $3,180 million, $977 million, and $1,041
million from the CPI Properties, the SCA Acquisition, and the IBM Properties,
respectively. Excluding these Properties, 1998 sales were $9,305 million, which
is a compound annual growth rate of 6.8%. Retail sales at Owned GLA affect
revenue and profitability levels because they determine the amount of minimum
rent that can be charged, the percentage rent realized, and the recoverable
expenses (common area maintenance, real estate taxes, etc.) the tenants can
afford to pay.
The following illustrates the total reported sales of tenants at Owned GLA:
Annual
Total Tenant Percentage
Year Ended December 31, Sales (in millions) Increase
- ------------------------ ----------------------- ------------------
1998 $14,504 52.0%
1997 9,539 20.4
1996 7,921 3.6
1995 7,649 --
Regional mall sales per square foot increased 9.0% in 1998 to $343 as
compared to $315 in 1997. In addition, sales per square foot of reporting
tenants operating for at least two consecutive years ("Comparable Sales")
increased from $318 to $346, or 8.8%, from 1997 to 1998. The SPG Operating
Partnership believes its strong sales growth in 1998 is the result of its
aggressive retenanting efforts and the redevelopment of many of the Properties.
Sales per square foot at the community
47
<PAGE>
shopping centers decreased in 1998 to $176 as compared to $179 in 1997. Sales
statistics for value-oriented super- regional malls are not provided as this
category is comprised of newly constructed malls with insufficient history to
provide meaningful comparisons.
Occupancy Levels. Occupancy levels for mall and freestanding Owned GLA at
the regional malls increased from 87.3% at December 31, 1997, to 89.9% at
December 31, 1998. Occupancy levels for all tenants at the value-oriented super-
regional malls increased from 93.8% at December 31, 1997, to 98.2% at December
31, 1998. Occupancy levels for all tenants at the community shopping centers
increased slightly, from 91.3% at December 31, 1997, to 91.4% at December 31,
1998. Owned GLA has increased 19.4 million square feet from December 31, 1997,
to December 31, 1998, primarily as a result of the IBM acquisition, the CPI
Merger, the acquisition of the Arboretum, and the 1998 Property openings.
Occupancy Levels
---------------------------------------------------
Value-Oriented Community
Regional Regional Shopping
December 31, Malls Malls Centers
- ------------ -------- -------------- ---------
1998 89.9% 98.2% 91.4%
1997 87.3 93.8 91.3
1996 84.7 N/A 91.6
1995 85.5 N/A 93.6
Tenant Occupancy Costs. Tenant occupancy costs as a percentage of sales
increased from 11.5% in 1997 to 12.2% in 1998 in the regional mall portfolio. 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 SPG 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 33.8%, from $19.18 in 1995 to
$25.67 in 1998. For all tenants at the community shopping centers, average base
rents of Owned GLA increased 5.3%, from $7.29 in 1995 to $7.68 in 1998.
The following highlights this trend:
<TABLE>
<CAPTION>
Average Base Rent per Square Foot
--------------------------------------------------------------------------------
Community
% Value-Oriented % Shopping %
Year Ended December 31, Regional Malls Change Regional Malls Change Centers Change
- ----------------------- -------------- ------ -------------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
1998 $25.67 8.5% $16.40 1.2% $7.68 3.2%
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
</TABLE>
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 SPG 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 SPG 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
48
<PAGE>
insurance, thereby reducing the SPG 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 SPG 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
The SPG Operating Partnership has undertaken a project to identify and
correct problems arising from the inability of information technology hardware
and software systems to process dates after December 31, 1999. This Year 2000
project consists of two primary components. The first component focuses on the
SPG Operating Partnership's key information technology systems (the "IT
Component") and the second component focuses on the information systems of key
tenants and key third party service providers as well as imbedded systems within
common areas of substantially all of the Properties (the "Non-IT Component").
Key tenants include the 20 largest base rent contributors and anchor tenants
with over 25,000 square feet of GLA. Key third party service providers are those
providers whose Year 2000 problems, if not addressed, would be likely to have a
material adverse effect on the SPG Operating Partnership's operations.
The IT Component of the Year 2000 project is being managed by the
information services department of the SPG Operating Partnership who have
actively involved other disciplines within the SPG Operating Partnership who are
directly impacted by an IT Component of the project. The Non-IT Component is
being managed by a steering committee of 25 employees, including senior
executives of a number of the SPG Operating Partnership's departments. In
addition, outside consultants have been engaged to assist in the Non-IT
Component.
Status of Project
IT Component. The SPG Operating Partnership's primary operating,
financial accounting and billing systems and the SPG Operating
Partnership's standard primary desktop software have been determined to be
Year 2000 ready. The SPG Operating Partnership's information services
department has also completed its assessment of other "mission critical"
applications within the SPG Operating Partnership and is currently
implementing solutions to those applications in order for them to be Year
2000 ready. It is expected that the implementation of these mission
critical solutions will be complete by September 30, 1999.
Non-IT Component. The Non-IT Component includes the following phases:
(1) an inventory of Year 2000 items which are determined to be material to
the SPG Operating Partnership's operations; (2) assigning priority to
identified items; (3) assessing Year 2000 compliance status as to all
critical items; (4) developing replacement or contingency plans based on
the information collected in the preceding phases; (5) implementing
replacement and contingency plans; and (6) testing and monitoring of plans,
as applicable.
Phase (1) and Phase (2) are complete and Phase (3) is in process. The
assessment of compliance status of key tenants is approximately 82%
complete, the assessment of compliance status of key third party service
providers is approximately 80% complete, the assessment of compliance
status of critical inventoried components at the Properties is
approximately 79% complete and the assessment of compliance status of non-
critical inventoried components at the Properties is approximately 75%
complete. The SPG Operating Partnership expects to complete Phase (3) by
April 30, 1999. The development of contingency or replacement plans (Phase
(4)) is scheduled to be completed by September 30, 1999. Development of
such plans is ongoing. Implementation of contingency and replacement plans
(Phase (5)) has commenced and will continue through 1999 to the extent Year
2000 issues are identified. Any required testing (Phase (6)) is to be
completed throughout the remainder of 1999.
Costs. The SPG Operating Partnership estimates that it will spend
approximately $1.5 million in incremental costs for its Year 2000 project. This
amount will be incurred over a period that commenced in January 1997 and is
expected to end in September 1999. Costs incurred through December 31, 1998 are
estimated at approximately $500 thousand. Such amounts are expensed as incurred.
These estimates do not include the costs expended by the SPG Operating
Partnership following its 1996 merger with DeBartolo Realty Corporation for
software, hardware and related costs necessary to upgrade its primary
49
<PAGE>
operating, financial accounting and billing systems, which allowed those systems
to, among other things, become Year 2000 compliant.
Risks. The most reasonably likely worst case scenario for the SPG Operating
Partnership with respect to the Year 2000 problems would be disruptions in
operations at the Properties. This could lead to reduced sales at the Properties
and claims by tenants which would in turn adversely affect the SPG Operating
Partnership's results of operations.
The SPG Operating Partnership has not yet completed all phases of its Year
2000 project and the SPG Operating Partnership is dependent upon key tenants and
key third party suppliers to make their information systems Year 2000 compliant.
In addition, disruptions in the economy generally resulting from Year 2000
problems could have an adverse effect on the SPG Operating Partnership's
operations.
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.
50
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
The managing general partner of the SPG Operating Partnership is SPG. The
information required by this item is incorporated herein by reference to SPG's
definitive Proxy Statements for their annual meeting of shareholders to be filed
with the Commission pursuant to Regulation 14A and is included under the caption
"EXECUTIVE OFFICERS OF THE REGISTRANT" in Part I thereof.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference
to SPG's definitive Proxy Statements for its annual meeting of shareholders to
be filed with the Commission pursuant to Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by reference
to SPG's definitive Proxy Statements for its annual meeting of shareholders to
be filed with the Commission pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by reference
to SPG's definitive Proxy Statements for its annual meeting of shareholders to
be filed with the Commission pursuant to Regulation 14A.
51
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a) (1) Financial Statements Page No.
-------------------- --------
Reports of Independent Public Accountants 53
Consolidated Balance Sheets as of December 31, 1998 and 1997 54
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 55
Consolidated Statements of Changes in Partner's Equity for
the years ended December 31, 1998, 1997 and 1996 56
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 57
Notes to Financial Statements 58
(2) Financial Statement Schedules
-----------------------------
Report of Independent Public Accountants 81
Simon Property Group, L.P. Schedule III -- Schedule of Real
Estate and Accumulated Depreciation 82
Notes to Schedule III 87
(3) Exhibits
--------
The Exhibit Index attached hereto is hereby incorporated by
reference to this Item. 88
(b) Reports on Form 8-K
-------------------
One Form 8-K was filed during the fourth quarter ended December 31,
1998.
On November 2, 1998 under Item 2 Acquisition or Disposition of Assets,
Simon Property Group, L.P. filed a Form 8-K to announce the
consummation of the merger by and among Simon DeBartolo Group, Inc.
(the accounting predecessor to Simon Property Group, Inc.), Corporate
Property Investors, Inc. and Corporate Realty Consultants, Inc. (the
predecessor to SPG Realty Consultants, Inc.). Also included in the
Form 8-K, under Item 7 Financial Statements and Exhibits, was pro
forma financial information through September 30, 1998.
52
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Simon Property Group, Inc.:
We have audited the accompanying consolidated balance sheets of Simon Property
Group, L.P. (a Delaware limited partnership) and subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of operations, partners'
equity and cash flows for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the SPG 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 Property
Group, L.P. and subsidiaries as of December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana
February 17, 1999.
53
<PAGE>
Balance Sheets
Simon Property Group, L.P. Consolidated
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS:
Investment properties, at cost $ 11,662,860 $ 6,867,354
Less -- accumulated depreciation 709,114 461,792
------------ ------------
10,953,746 6,405,562
Goodwill 58,134 --
Cash and cash equivalents 124,466 109,699
Restricted cash 867 8,553
Tenant receivables and accrued revenue, net 217,341 188,359
Notes and advances receivable from Management Company and affiliates 115,378 93,809
Note receivable from SRC (Interest at 6%, due 2013) 20,565 --
Investment in partnerships and joint ventures, at equity 1,303,251 612,140
Investment in Management Company and affiliates 10,037 3,192
Other investment 50,176 53,785
Deferred costs and other assets 226,817 164,413
Minority interest 32,138 23,155
------------ ------------
Total assets $ 13,112,916 $ 7,662,667
============ ============
LIABILITIES:
Mortgages and other indebtedness $ 7,972,381 $ 5,077,990
Notes payable to SRC (Interest at 8%, due 2008) 17,907 --
Accounts payable and accrued expenses 410,445 245,121
Cash distributions and losses in partnerships and joint ventures, at equity 29,139 20,563
Other liabilities 95,243 67,694
------------ ------------
Total liabilities 8,525,115 5,411,368
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 13)
PARTNERS' EQUITY:
Preferred units, 16,053,580 and 11,000,000 units outstanding, respectively 1,057,245 339,061
General Partners, 161,487,017 and 109,643,001 units oustanding, respectively 2,540,660 1,231,031
Limited Partners, 64,182,157 and 61,850,762 units outstanding, respectively 1,009,646 694,437
Unamortized restricted stock award (19,750) (13,230)
------------ ------------
Total partners' equity 4,587,801 2,251,299
------------ ------------
Total liabilities and partners' equity $ 13,112,916 $ 7,662,667
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
54
<PAGE>
Statements of Operations
Simon Property Group, L.P. Consolidated
(Dollars in thousands, except per unit amounts)
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE:
Minimum rent $ 847,198 $ 641,352 $ 438,089
Overage rent 49,441 38,810 30,810
Tenant reimbursements 427,921 322,416 233,974
Other income 75,629 51,589 44,831
----------- ----------- -----------
Total revenue 1,400,189 1,054,167 747,704
----------- ----------- -----------
EXPENSES:
Property operating 225,899 176,846 129,094
Depreciation and amortization 266,978 200,900 135,780
Real estate taxes 133,038 98,830 69,173
Repairs and maintenance 53,189 43,000 31,779
Advertising and promotion 50,521 32,891 24,756
Merger integration costs -- -- 7,236
Provision for credit losses 6,599 5,992 3,460
Other 23,956 18,678 14,914
----------- ----------- -----------
Total operating expenses 760,180 577,137 416,192
----------- ----------- -----------
OPERATING INCOME 640,009 477,030 331,512
INTEREST EXPENSE 420,280 287,823 202,182
----------- ----------- -----------
INCOME BEFORE MINORITY INTEREST 219,729 189,207 129,330
MINORITY INTEREST (7,335) (5,270) (4,300)
GAINS (LOSS) ON SALES OF ASSETS, NET (7,283) 20 88
----------- ----------- -----------
INCOME BEFORE UNCONSOLIDATED ENTITIES 205,111 183,957 125,118
INCOME FROM UNCONSOLIDATED ENTITIES 28,145 19,176 9,545
----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEMS 233,256 203,133 134,663
EXTRAORDINARY ITEMS 7,146 58 (3,521)
----------- ----------- -----------
NET INCOME 240,402 203,191 131,142
PREFERRED UNIT REQUIREMENT (41,471) (29,248) (12,694)
----------- ----------- -----------
NET INCOME AVAILABLE TO UNITHOLDERS 198,931 $ 173,943 $ 118,448
=========== =========== ===========
NET INCOME AVAILABLE TO UNITHOLDERS
ATTRIBUTABLE TO:
General Partner $ 130,752 $ 107,989 $ 72,561
Limited Partners 68,179 65,954 45,887
----------- ----------- -----------
Net income $ 198,931 $ 173,943 $ 118,448
=========== =========== ===========
BASIC EARNINGS PER UNIT:
Income before extraordinary items $ 1.01 $ 1.08 $ 1.02
Extraordinary items 0.04 -- (0.03)
----------- ----------- -----------
Net income $ 1.05 $ 1.08 $ 0.99
=========== =========== ===========
DILUTED EARNINGS PER UNIT:
Income before extraordinary items $ 1.01 $ 1.08 $ 1.01
Extraordinary items 0.04 -- (0.03)
----------- ----------- -----------
Net income $ 1.05 $ 1.08 $ 0.98
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
55
<PAGE>
Statements of Partners' Equity
Simon Property Group, L.P. Consolidated
(Dollars in thousands)
<TABLE>
<CAPTION>
Limited
Unamortized Total Partners'
Preferred General Limited Restricted Partners' Equity
Units Partners Partners Stock Award Equity Interest
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 99,923 $ (686,362) $ -- $ (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 --
==========
General Partner Contributions (442,225 units) 10,518 10,518
Units issued in connection with Merger
(37,877,965 and 23,219,012 units, respectively) 922,379 565,448 1,487,827
Other unit issuances (472,410 units) 275 275
Preferred units issued, net of issuance costs
(8,000,000 units) 192,989 192,989
Stock incentive program (200,030 units) 4,751 (4,751) --
Amortization of stock incentive 2,084 2,084
Adjustment to allocate net equity of
the Operating Partnership (14,382) 14,382
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
(6,311,273 units) 200,920 200,920
Units issued in connection with acquisitions
(2,193,037 and 876,712, respectively) 70,000 26,408 96,408
Stock incentive program (448,753 units) 14,016 (13,262) 754
Amortization of stock incentive 5,386 5,386
Preferred units issued, net of issuance 146,072 146,072
costs (3,000,000 units)
Conversion of 4,000,000 Series A preferred
units into 3,809,523 common units (99,923) 99,923 --
Adjustment to allocate net equity of
the Operating Partnership (82,869) 82,869 --
Unrealized gain on long-term investments 2,420 1,365 3,785
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
General Partner Contributions (2,957,335 units) 91,399 91,399
CPI Merger (Note 3):
Preferred Units (5,053,580) 717,916 717,916
Units (47,790,550) 1,605,638 1,605,638
Units issued in connection with acquisitions
(519,889 and 2,344,199 units, respectively) 17,176 76,263 93,439
Stock incentive program (495,131 units,
net of forfeitures) 15,983 (15,983) --
Amortization of stock incentive 9,463 9,463
Other (Accretion of Preferred Units,
81,111 general partner Units issued
and 12,804 limited partner Units redeemed) 268 2,500 (289) 2,479
Adjustment to allocate net equity of
the Operating Partnership (308,922) 308,922 --
Distributions (41,471) (242,603) (136,551) (420,625)
---------- ----------- ----------- ---------- -----------
Subtotal 1,015,774 2,412,202 942,782 (19,750) 4,351,008
Comprehensive Income:
Net income 41,471 130,752 68,179 240,402
Unrealized gain on long-term
investments (2,294) (1,315) (3,609)
---------- ----------- ----------- ---------- -----------
Total Comprehensive Income 41,471 128,458 66,864 -- 236,793
---------- ----------- ----------- ---------- -----------
Balance at December 31, 1998 $1,057,245 $ 2,540,660 $ 1,009,646 $ (19,750) $ 4,587,801
========== =========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
56
<PAGE>
Statements of Cash Flows
Simon Property Group, L.P. Consolidated
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 240,402 $ 203,191 $ 131,142
Adjustments to reconcile net income to net cash provided
by operating activities--
Depreciation and amortization 277,346 208,539 143,582
Extraordinary items (7,146) (58) 3,521
Loss (gains) on sales of assets, net 7,283 (20) (88)
Straight-line rent (9,261) (9,769) (3,502)
Minority interest 7,335 5,270 4,300
Equity in income of unconsolidated entities (28,145) (19,176) (9,545)
Changes in assets and liabilities--
Tenant receivables and accrued revenue (13,316) (23,284) (6,422)
Deferred costs and other assets (7,289) (30,203) (12,756)
Accounts payable, accrued expenses and other liabilities 76,454 36,417 (13,768)
----------- ----------- -----------
Net cash provided by operating activities 543,663 370,907 236,464
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (1,942,724) (980,427) (56,069)
Capital expenditures (345,026) (305,178) (195,833)
Cash from Mergers, acquisitions and consolidation of
joint ventures, net 16,563 19,744 37,053
Change in restricted cash 7,686 (2,443) 1,474
Proceeds from sale of assets 46,087 599 399
Investments in unconsolidated entities (55,523) (47,204) (62,096)
Distributions from unconsolidated entities 195,497 144,862 36,786
Investments in and advances (to)/from Management Company (21,569) (18,357) 38,544
Other investing activities -- (55,400) --
----------- ----------- -----------
Net cash used in investing activities (2,099,009) (1,243,804) (199,742)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Partnership contributions 92,570 344,438 201,704
Partnership distributions (417,164) (350,391) (257,403)
Minority interest distributions, net (19,694) (219) (5,115)
Mortgage and other note proceeds, net of transaction costs 3,782,314 2,976,222 1,293,582
Mortgage and other note principal payments (1,867,913) (2,030,763) (1,267,902)
Other refinancing transaction -- (21,000) --
----------- ----------- -----------
Net cash provided by (used in) financing activities 1,570,113 918,287 (35,134)
----------- ----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 14,767 45,390 1,588
CASH AND CASH EQUIVALENTS, beginning of period 109,699 64,309 62,721
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 124,466 $ 109,699 $ 64,309
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
57
<PAGE>
SIMON PROPERTY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands, except per unit amounts and where
indicated as in billions)
1. Organization
Simon Property Group, L.P. (the "SPG Operating Partnership"), a Delaware
limited partnership, formerly known as Simon DeBartolo Group, L.P. ("SDG, LP"),
is a majority owned subsidiary of Simon Property Group Inc. ("SPG"), a Delaware
corporation. SPG is a self-administered and self-managed real estate investment
trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").
Each share of common stock of SPG is paired with a beneficial interest in
1/100th of a share of common stock of SPG Realty Consultants, Inc., also a
Delaware corporation ("SRC" and together with SPG, the "Companies"). Units of
ownership interest ("Units") in the SPG Operating Partnership are paired with a
beneficial interest in 1/100th of a Unit in SPG Realty Consultants, L.P. (the
"SRC Operating Partnership" and together with the SPG Operating Partnership, the
"Operating Partnerships"). The SRC Operating Partnership is the primary
subsidiary of SRC.
The SPG 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, 1998, the SPG Operating Partnership owned or held an interest in
240 income-producing properties, which consisted of 152 regional malls, 77
community shopping centers, three specialty retail centers, five office and
mixed-use properties and three value-oriented super-regional malls in 35 states
(the "Properties"). The SPG Operating Partnership also owned interests in one
regional mall, one value-oriented super-regional mall, one specialty center and
three community centers currently under construction and eleven parcels of land
held for future development (collectively, the "Development Properties", and
together with the Properties, the "Portfolio Properties"). At December 31, 1998
and 1997, SPG's direct and indirect ownership interests in the SPG Operating
Partnership was 71.6% and 63.9%, respectively. The SPG Operating Partnership
also holds substantially all of the economic interest in M.S. Management
Associates, Inc. (the "Management Company"). See Note 8 for a description of the
activities of the Management Company.
The SPG 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 SPG Operating Partnership's regional malls and community
shopping centers rely heavily upon anchor tenants. As of December 31, 1998, 312
of the approximately 871 anchor stores in the Properties were occupied by three
retailers. An affiliate of one of these retailers is a limited partner in the
SPG Operating Partnership.
2. Basis of Presentation
The accompanying consolidated financial statements of the SPG Operating
Partnership include accounts of all entities owned or controlled by the SPG
Operating Partnership. All significant intercompany amounts have been
eliminated. The consolidated financial statements reflect the CPI Merger (see
Note 3) as of the close of business on September 24, 1998. Operating results
prior to the CPI Merger represent the operating results of SDG, LP.
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles, which requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reported period.
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 SPG 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. The deficit minority interest
balance in the accompanying 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. Investments in
partnerships and joint ventures which represent noncontrolling 14.7% to 85.0%
direct and indirect ownership interests ("Joint Venture Properties")
58
<PAGE>
and the investment in the Management Company (see Note 8) are accounted for
using the equity method of accounting. These investments are recorded initially
at cost and subsequently adjusted for net equity in income (loss) and cash
contributions and distributions.
Net operating results of the SPG Operating Partnership are allocated
after preferred distributions (see Note 11), based on its partners' weighted
average ownership interests during the period. SPG's weighted average direct and
indirect ownership interest in the SPG Operating Partnership during 1998, 1997
and 1996 were 66.2%, 62.1% and 61.2%, respectively. At December 31, 1998 and
1997, SPG's direct and indirect ownership interest was 71.6% and 63.9%,
respectively.
3. CPI Merger
For financial reporting purposes, as of the close of business on
September 24, 1998, the CPI Merger was consummated pursuant to the Agreement and
Plan of Merger dated February 18, 1998, among Simon DeBartolo Group, Inc.
("SDG"), Corporate Property Investors, Inc. ("CPI"), and Corporate Realty
Consultants, Inc. ("CRC").
Pursuant to the terms of the CPI Merger, SPG Merger Sub, Inc., a
substantially wholly-owned subsidiary of CPI, merged with and into SDG with SDG
continuing as the surviving company. SDG became a majority-owned subsidiary of
CPI. The outstanding shares of common stock of SDG were exchanged for a like
number of shares of CPI. Beneficial interests in CRC were acquired for $14,000
in order to pair the common stock of CPI with 1/100th of a share of common stock
of CRC, the paired share affiliate.
Immediately prior to the consummation of the CPI Merger, the holders of
CPI common stock were paid a merger dividend consisting of (i) $90 in cash, (ii)
1.0818 additional shares of CPI common stock and (iii) 0.19 shares of 6.50%
Series B convertible preferred stock of CPI per share of CPI common stock.
Immediately prior to the CPI Merger, there were 25,496,476 shares of CPI common
stock outstanding. The aggregate value associated with the completion of the CPI
Merger was approximately $5.9 billion including transaction costs and
liabilities assumed.
To finance the cash portion of the CPI Merger consideration, $1.4 billion
was borrowed under a new senior unsecured medium term bridge loan, which bears
interest at a base rate of LIBOR plus 65 basis points and matures in three
mandatory amortization payments (on June 22, 1999, March 24, 2000 and September
24, 2000). An additional $237,000 was also borrowed under the SPG Operating
Partnership's existing $1.25 billion credit facility (the "Credit Facility"). In
connection with the CPI Merger, CPI was renamed "Simon Property Group, Inc."
CPI's paired share affiliate, Corporate Realty Consultants, Inc., was renamed
"SPG Realty Consultants, Inc." In addition SDG and SDG, LP were renamed "SPG
Properties, Inc.", and "Simon Property Group, L.P.", respectively.
Upon completion of the CPI Merger, SPG transferred substantially all of
the CPI assets acquired, which consisted primarily of 23 regional malls, one
community center, two office buildings and one regional mall under construction
(other than one regional mall, Ocean County Mall, and certain net leased
properties valued at approximately $153,100) and liabilities assumed (except
that SPG remains a co-obligor with respect to the Merger Facility (see Note 9))
of approximately $2.3 billion to the SPG Operating Partnership or one or more
subsidiaries of the SPG Operating Partnership in exchange for 47,790,550 limited
partnership interests and 5,053,580 preferred partnership interests in the SPG
Operating Partnership. The preferred partnership interests carry the same rights
and equal the number of preferred shares issued and outstanding as a direct
result of the CPI Merger.
SPG accounted for the merger between SDG and the CPI merger subsidiary as
a reverse purchase in accordance with Accounting Principles Board Opinion No.
16. Although paired shares of the former CPI and CRC were issued to SDG common
stock holders and SDG became a substantially wholly owned subsidiary of CPI
following the CPI Merger, CPI is considered the business acquired for accounting
purposes. SDG is considered the acquiring company because the SDG common
stockholders hold a majority of the common stock of SPG, post-merger. The value
of the consideration paid by SDG has been allocated to the estimated fair value
of the CPI assets acquired and liabilities assumed which resulted in goodwill of
$58,134, as adjusted. Goodwill is being amortized over the estimated life of the
properties of 35 years. Purchase accounting will be finalized when the SPG
Operating Partnership completes and implements its combined operating plan,
which is expected to occur by the third quarter of 1999.
SDG, LP contributed $14,000 cash to CRC and $8,000 cash to the SRC
Operating Partnership on behalf of the SDG common stockholders and the limited
partners of SDG, LP to obtain the beneficial interests in common stock of CRC,
which were paired with the shares of common stock issued by SPG, and to obtain
Units in the SRC Operating Partnership so that the limited partners of the SDG
Operating Partnership would hold the same proportionate interest in the SRC
Operating Partnership that they hold in the SDG Operating Partnership. The cash
contributed to CRC and the SRC Operating Partnership on behalf of the partners
of SDG, LP was accounted for as a distribution to the partners.
59
<PAGE>
4. The DRC Merger and Other Real Estate Acquisitions, Disposals and Developments
The DRC Merger
On August 9, 1996, the national shopping center business of DeBartolo
Realty Corporation and subsidiaries ("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, SPG acquired all the
outstanding common stock of DRC (55,712,529 shares), at an exchange ratio of
0.68 shares of SPG's common stock for each share of DRC common stock. A total of
37,873,965 shares of SPG's common stock was issued by SPG, to the DRC
shareholders. DRC and the acquisition subsidiary merged. DRC became a 99.9%
subsidiary of SPG and changed its name to SD Property Group, Inc. The purchase
price was allocated to the fair value of the assets and liabilities using the
purchase method of accounting.
In connection with the DRC Merger, the general and limited partners of
Simon Property Group, LP ("Old SPG, LP"), which was SPG Properties, Inc.'s ("Old
SPG") initial operating partnership, contributed 49.5% (47,442,212 Units) of the
total outstanding Units in Old SPG, LP to the operating partnership of DRC,
DeBartolo Realty Partnership, L.P. ("DRP, LP") in exchange for 47,442,212 Units
in DRP, LP, whose name was changed to Simon DeBartolo Group, L.P. Old SPG
retained a 50.5% partnership interest (48,400,641 Units) in Old 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 Old SPG, LP to SDG,
LP. The limited partners of DRP, LP approved the contribution made by the
partners of Old 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 Old SPG 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 Old SPG 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 Old SPG's common stock on August 9, 1996 ($24.375). The
limited partners of Old 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
Old SPG, LP (37,282,628 Units) to SDG, LP. The interests transferred by the
partners of Old SPG, LP to DRP, LP have been appropriately reflected at
historical costs.
Upon completion of the DRC Merger, Old SPG 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 Old SPG, LP with 24.3%
(37,873,965 Units in Old SPG, LP) of the outstanding partnership Units in Old
SPG, LP. Old SPG remained the sole general partner of Old SPG, LP with 1% of the
outstanding partnership Units (958,429 Units) and 49.5% interest in the capital
of Old SPG, LP, and SDG, LP became a special limited partner in Old SPG, LP with
49.5% (47,442,212 Units) of the outstanding partnership Units in Old SPG, LP and
an additional 49.5% interest in the profits of Old SPG, LP. Old SPG, LP did not
acquire any interest in SDG, LP. Upon completion of the DRC Merger, Old SPG
directly and indirectly owned a controlling 61.2% (95,479,761 Units) partnership
interest in SDG, LP.
For financial reporting purposes, the completion of the DRC Merger
resulted in a reverse acquisition by Old SPG, 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 Old SPG was the accounting acquirer, the SPG Operating
Partnership (formerly SDG, LP, and before that, DRP, LP) became the primary
operating partnership through which the business of Old SPG was being conducted.
As a result of the DRC Merger, Old SPG, LP became a subsidiary of SDG, LP with
99% of the profits allocable to SDG, LP and 1% of the profits allocable to Old
SPG Cash flow allocable to Old SPG's 1% profit interest in SDG, LP was absorbed
by public company costs and related expenses incurred by Old SPG However,
because Old SPG was the accounting acquirer and, upon completion of the DRC
Merger, acquired majority control of SDG, LP; Old 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 Old SPG and for all pre-Merger comparative periods, the financial
statements of SDG, LP reflect the financial statements of Old SPG, LP as the
predecessor to SDG, LP for financial reporting purposes.
On December 31, 1997, Old SPG, LP merged into the SDG, LP.
60
<PAGE>
Acquisitions and Disposals
On January 26, 1998, the SPG Operating Partnership acquired Cordova Mall
in Pensacola, Florida for approximately $87,300, including the assumption of a
$28,935 mortgage, which was later retired, and the issuance of 1,713,016 Units,
valued at approximately $55,500. This 874,000 square-foot regional mall is
wholly-owned by the SPG Operating Partnership.
Effective May 5, 1998, in a series of transactions, the SPG Operating
Partnership acquired the remaining 50.1% interest in Rolling Oaks Mall for
519,889 shares of SPG's common stock, valued at approximately $17,176. The
interest was transferred to the SPG Operating Partnership in exchange for
519,889 Units.
Effective June 30, 1998, the SPG Operating Partnership sold Southtown
Mall for $3,250 and recorded a $7,219 loss on the transaction.
On December 7, 1998, a joint venture partnership, in which the SPG
Operating Partnership owns a controlling 90% interest, purchased The Arboretum,
a 209,000 square-foot community center in Austin, Texas. Concurrent with the
acquisition, the joint venture obtained a $34,000 mortgage on the Property
bearing interest at LIBOR plus 1.5%. The SPG Operating Partnership's share of
the $45,000 purchase price was $40,500, which was funded primarily with the net
proceeds of the mortgage, with the remainder being funded from working capital.
On September 29, 1997, the SPG Operating Partnership completed its cash
tender offer for all of the outstanding shares of beneficial interests of The
Retail Property Trust ("RPT"), a private REIT. 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 (the "SCA Properties"). During 1997, the SPG Operating
Partnership exchanged its 50% interests in two SCA Properties to a third party
for the remaining 50% interests in two other SCA Properties, acquired the
remaining 50% ownership interest in another of the SCA Properties and acquired
the remaining 1.2% interest in SCA. During 1998, the SPG Operating Partnership
sold the community center and a regional mall for $9,550 and $33,500,
respectively. These Property sales were accounted for as an adjustment to the
allocation of the purchase price. At the completion of these transactions (the
"SCA Acquisition"), the SPG Operating Partnership owns 100% of eight of the nine
SCA Properties, and a noncontrolling 50% ownership interest in the remaining
Property. The total cost for the acquisition of SCA and related transactions of
approximately $1,300,000 includes shares of common stock of SPG valued at
approximately $50,000, Units in the SPG Operating Partnership valued at
approximately $25,300, the assumption of $398,500 of consolidated indebtedness
and the SPG Operating Partnership's pro rata share of joint venture indebtedness
of $76,750, with the remainder comprising primarily of cash financed using the
Credit Facility. On September 15, 1998, RPT transferred its ownership interest
in SCA to the SPG Operating Partnership in exchange for 27,195,109 Units in the
SPG Operating Partnership.
Also in 1997, the SPG 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 in 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 SPG Operating Partnership paid an aggregate
purchase price of approximately $322,000 for these acquisitions, which included
Units in the SPG Operating Partnership valued at $21,100, and the assumption of
$64,772 of mortgage indebtedness, with the remainder paid in cash primarily
using proceeds from the Credit Facility, sales of equity securities and working
capital.
In 1996, the SPG Operating Partnership acquired the remaining 50%
ownership interest in two regional malls for 472,410 Units in the SPG Operating
Partnership, the assumption of $57,000 of mortgage indebtedness and $56,100 in
cash, primarily using proceeds from the Credit Facility and working capital.
See also Note 7 for Joint Venture Property acquisition and disposal
activity.
Development Activity
Development activities are an ongoing part of the SPG Operating
Partnership's strategy to gain a competitive advantage in the retail real estate
business. During 1998, 1997 and 1996, the SPG Operating Partnership invested
approximately $102,000, $230,000 and $169,000, respectively on new consolidated
and unconsolidated joint venture development projects adding approximately
577,000; 3,600,000; and 3,160,000 square feet of GLA to its portfolio. In
addition, The Shops at Sunset Place, a destination-oriented retail and
entertainment project containing approximately 510,000 square feet of GLA opened
in January of 1999 in South Miami, Florida. Construction also continues on
several other projects at an aggregate construction cost of approximately
$620,000, of which approximately $347,000 is the SPG Operating Partnership's
share. These developments are funded primarily with borrowings from the Credit
Facility, construction loans and working capital.
61
<PAGE>
In addition, the SPG Operating Partnership strives to increase
profitability and market share of the existing Properties through the completion
of strategic renovations and expansions. During 1998, 1997 and 1996, the SPG
Operating Partnership invested approximately $337,000, $229,000 and $93,000,
respectively on renovation and expansion of the Properties. These projects were
also funded primarily with borrowings from the Credit Facility, construction
loans and working capital.
Pro Forma
The following unaudited pro forma summary financial information excludes
any extraordinary items and reflects the consolidated results of operations of
the SPG Operating Partnership as if the CPI Merger and the SCA Acquisition had
occurred as of January 1, 1997, and were carried forward through December 31,
1998. Preparation of the pro forma summary information was based upon
assumptions deemed appropriate by management. The pro forma summary information
is not necessarily indicative of the results which actually would have occurred
if the CPI Merger and the SCA Acquisition had been consummated at January 1,
1997, nor does it purport to represent the results of operations for future
periods.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenue $ 1,695,204 $ 1,566,821
Net income (1) 273,088 300,256
Net income available to Unitholders (1) 191,312 225,808
Net income per Unit (1) $ 0.85 $ 1.07
Net income per Unit - assuming dilution $ 0.85 $ 1.07
============ ============
Weighted average number of Units 224,041,500 210,977,382
============ ============
Weighted average number of Units - assuming dilution 224,398,649 211,361,446
============ ============
</TABLE>
(1) Includes net gains on the sales of assets in 1998 and 1997 of $37,973 and
$123,689, respectively, or $0.17 and $0.59 on a basic earnings per Unit basis,
respectively.
5. 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.
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 during 1998, 1997 and 1996 was $10,567, $11,589 and $5,831,
respectively.
62
<PAGE>
Segment Disclosure
The SPG Operating Partnership is engaged in the business of owning,
operating, managing, leasing, expanding and developing retail real estate
properties. Although the SPG Operating Partnership's regional mall portfolio and
office and mixed-use Properties are looked at internally on a divisional basis,
the chief executive officer makes resource allocation and other operating
decisions based on an evaluation of the entire portfolio. The SPG Operating
Partnership's interests in its community centers and other assets have been
aggregated with the regional malls as they have similar economic and
environmental conditions, business processes, types of customers (i.e. tenants)
and services provided. Further, the community centers, offices and other assets
each represent less than 10% and in total represent less than 15% of the SPG
Operating Partnership's total assets, revenues and earnings before interest,
taxes, depreciation and amortization.
Other Investment
Investments in securities classified as available for sale are reflected
at market value with the changes in market value reflected in partners' equity.
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,
------------------------------
1998 1997
------------- ------------
Deferred financing costs $101,215 $ 72,348
Leasing costs and other 141,090 121,060
------------- ------------
242,305 193,408
Less-accumulated amortization 115,283 87,666
------------- ------------
Deferred costs, net $127,022 $105,742
============= ============
Interest expense in the accompanying Consolidated Statements of
Operations includes amortization of deferred financing costs of $11,835, $8,338
and $8,434, for 1998, 1997 and 1996, respectively, and has been reduced by
amortization of debt premiums and discounts of $1,465, $699 and $632 for 1998,
1997 and 1996, respectively.
Revenue Recognition
The SPG 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. Certain tenants
are also required to pay overage rents based on sales over a stated base amount
during the lease year. Overage rents are recognized as revenues based on
reported and estimated sales for each tenant through December 31, less the
applicable base sales amount. Differences between estimated and actual amounts
are recognized in the subsequent year.
Reimbursements from tenants for real estate taxes and other recoverable
operating expenses are recognized as revenue in the period the applicable
expenditures are incurred.
63
<PAGE>
Allowance for Credit Losses
A provision for credit losses is recorded based on management's judgment
of tenant creditworthiness. The activity in the allowance for credit losses
during 1998, 1997 and 1996 was as follows:
Balance at Provision Accounts Balance
Beginning for Credit Written at End
Year Ended of Year Losses Off of Year
----------- ----------- ----------- -----------
December 31, l998 $13,804 $ 6,599 $(5,927) $14,476
======= ======= ======= =======
December 31, l997 $ 7,918 $ 5,992 $ (106) $13,804
======= ======= ======= =======
December 31, l996 $ 5,485 $ 3,460 $(1,027) $ 7,918
======= ======= ======= =======
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 SPG Operating Partnership for the year ended
December 31, 1998, is estimated to be $281,000 and was $172,943 and $164,008 for
the years ended 1997 and 1996, 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
Effective January 1, 1998, the SPG Operating Partnership retroactively
adopted SFAS No. 128 (Earnings Per Share). Accordingly, basic earnings per Unit
is based on the weighted average number of Units outstanding during the period
and 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 weighted average number of Units used
in the computation for 1998, 1997 and 1996 was 189,082,385; 161,022,887; and
120,181,895, respectively. The diluted weighted average number of equivalent
Units used in the computation for 1998, 1997 and 1996 was 189,439,534;
161,406,951 and 120,317,426, respectively.
Preferred Units issued and outstanding during the comparative periods did
not have a dilutive effect on earnings per Unit. Units held by limited partners
in the SPG Operating Partnership may be exchanged for paired shares of common
stock of the Companies, on a one-for-one basis in certain circumstances. If
exchanged, the paired Units would not have a dilutive effect. The increase in
weighted average Units outstanding under the diluted method over the basic
method in every period presented for the SPG Operating Partnership is due
entirely to the effect of outstanding stock options, including 304,210
additional options issued in connection with the CPI Merger. Basic earnings and
diluted earnings were the same for all periods presented.
It is the SPG Operating Partnership's policy to accrue distributions when
they are declared. The SPG Operating Partnership declared distributions in 1998
and 1997 aggregating $2.02 and $2.01 per Unit, respectively. The current annual
distribution rate is $2.02 per Unit. The following is a summary of distributions
per Unit declared in 1998 and 1997:
For the Year Ended December 31,
----------------------------------
Distributions per Unit: 1998 1997
------------------------------- --------------- --------------
From book net income $1.05 $1.08
Representing return of capital 0.97 0.93
--------------- --------------
Total distributions $2.02 $2.01
=============== ==============
64
<PAGE>
On a federal income tax basis, 1% of the SPG Operating Partnership's 1998
distributions represented a capital gain and 48% represented a return of
capital. In 1997, none of the distributions represented a capital gain and 35%
represented a 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 $867 and $8,553 as of December 31, 1998 and 1997, respectively, to fund
certain future capital expenditures.
Cash paid for interest, net of any amounts capitalized, during 1998, 1997
and 1996 was $397,545; $270,912; and $191,965, respectively.
Noncash Transactions
Accrued and unpaid distributions were $3,428 at December 31, 1998 and
represented distributions payable on the SPG Operating Partnership's Series A
Preferred Units, which are paid semiannually on March 31 and September 30 of
each year. Please refer to Notes 3, 4, 7 and 11 for additional 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.
6. Investment Properties
Investment properties consist of the following:
December 31,
---------------------------
1998 1997
------------ -----------
Land $ 2,066,461 $1,253,953
Buildings and improvements 9,537,310 5,560,112
------------ -----------
Total land, buildings and improvements 11,603,771 6,814,065
Furniture, fixtures and equipment 59,089 53,289
------------ -----------
Investment properties at cost 11,662,860 6,867,354
Less--accumulated depreciation 709,114 461,792
------------ -----------
Investment properties at cost, net $10,953,746 $6,405,562
============ ===========
Investment properties includes $184,799 and $158,609 of construction in
progress at December 31, 1998 and 1997, respectively.
7. Investment in Partnerships and Joint Ventures
Joint Venture Property Acquisitions and Dispositions
On February 27, 1998, the SPG Operating Partnership, in a joint venture
partnership with The Macerich Company ("Macerich"), acquired a portfolio of
twelve regional malls and two community centers (the "IBM Properties")
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 SPG
Operating Partnership and Macerich, as noncontrolling 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 and one community center. The SPG
Operating Partnership funded its share of the
65
<PAGE>
cash portion of the purchase price using borrowings from an interim $300,000
unsecured revolving credit facility, which was subsequently retired using
borrowings from the Credit Facility.
In March 1998, the SPG Operating Partnership transferred its 50%
ownership interest in The Source, an approximately 730,000 square-foot regional
mall, to a newly formed limited partnership in which it has a 50% ownership
interest, with the result that the SPG Operating Partnership now owns an
indirect noncontrolling 25% ownership interest in The Source. In connection with
this transaction, the SPG Operating Partnership's partner in the newly formed
limited partnership is entitled to a preferred return of 8% on its initial
capital contribution, a portion of which was distributed to the SPG Operating
Partnership. The SPG Operating Partnership applied the distribution against its
investment in The Source.
In August 1998, the SPG Operating Partnership admitted an additional
partner into the partnership which owns The Shops at Sunset Place for $35,200,
which was distributed to the SPG Operating Partnership. The SPG Operating
Partnership now holds a 37.5% noncontrolling interest in this Property, which
opened in January 1999. The SPG Operating Partnership applied the distribution
against its investment in the Property.
66
<PAGE>
Joint Venture Property Summary Financial Information
Summary financial information of partnerships and joint ventures
accounted for using the equity method and a summary of the SPG Operating
Partnership's investment in and share of income from such partnerships and joint
ventures follows.
<TABLE>
<CAPTION>
December 31,
-----------------------
BALANCE SHEETS 1998 1997
---------- ----------
<S> <C> <C>
Assets:
Investment properties at cost, net $4,265,022 $2,734,686
Cash and cash equivalents 171,553 101,582
Tenant receivables 140,579 87,008
Other assets 126,112 71,873
---------- ----------
Total assets $4,703,266 $2,995,149
========== ==========
Liabilities and Partners' Equity:
Mortgages and other notes payable $2,861,589 $1,888,512
Accounts payable, accrued expenses and other liabilities 223,631 212,543
---------- ----------
Total liabilities 3,085,220 2,101,055
Partners' equity 1,618,046 894,094
---------- ----------
Total liabilities and partners' equity $4,703,266 $2,995,149
========== ==========
The SPG Operating Partnership's Share of:
Total assets $1,905,459 $1,009,691
========== ==========
Partners' equity $ 565,496 $ 227,458
Add: Excess Investment 708,616 364,119
The SPG Operating Partnership's net Investment in Joint
Ventures $1,274,112 $ 591,577
========== ==========
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------
STATEMENTS OF OPERATIONS 1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
Minimum rent $ 442,530 $ 256,100 $ 144,166
Overage rent 18,465 10,510 7,872
Tenant reimbursements 204,936 120,380 73,492
Other income 30,564 19,364 11,178
--------- --------- ---------
Total revenue 696,495 406,354 236,708
Operating Expenses:
Operating expenses and other 245,927 144,256 88,678
Depreciation and amortization 129,681 85,423 50,328
--------- --------- ---------
Total operating expenses 375,608 229,679 139,006
--------- --------- ---------
Operating Income 320,887 176,675 97,702
Interest Expense 176,669 96,675 48,918
Extraordinary Items- Debt Extinguishments (11,058) (1,925) (1,314)
--------- --------- ---------
Net Income $ 133,160 $ 78,075 $ 47,470
========= ========= =========
Third-Party Investors' Share of Net Income 88,242 55,507 38,283
--------- --------- ---------
The SPG Operating Partnership's Share of Net Income $ 44,918 $ 22,568 $ 9,187
Amortization of Excess Investment 22,625 13,878 5,127
--------- --------- ---------
Income from Unconsolidated Entities $ 22,293 $ 8,690 $ 4,060
========= ========= =========
</TABLE>
As of December 31, 1998 and 1997, the unamortized excess of the SPG
Operating Partnership's investment over its share of the equity in the
underlying net assets of the partnerships and joint ventures ("Excess
Investment") was $708,616 and $364,119, respectively. This Excess Investment,
which resulted primarily from the CPI Merger and the DRC Merger, is being
amortized generally over the life of the related Properties. Amortization
included in income from unconsolidated entities for the years ended December 31,
1998, 1997 and 1996 was $22,625, $13,878 and $5,127, respectively.
67
<PAGE>
The net income or net loss for each Joint Venture Property 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.
8. Investment in Management Company
The SPG Operating Partnership holds 80% of the outstanding common stock,
5% of the outstanding voting common stock, and all of the 8% cumulative
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. Because
the SPG 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. The Management
Company, including its consolidated subsidiaries, provides management, leasing,
development, project management, accounting, legal, marketing and management
information systems services and property damage and general liability insurance
coverage to certain Portfolio Properties. These services, excluding insurance
coverage, are also provided to Melvin Simon & Associates, Inc. ("MSA"), and
certain other nonowned properties for a fee. The SPG Operating Partnership
incurred costs of $145,655, $85,229 and $30,949, on consolidated Properties
related to services provided by the Management Company and its affiliates in
1998, 1997 and 1996, respectively. Fees for services provided by the Management
Company to MSA were $3,301, $3,073 and $4,000 for the years ended December 31,
1998, 1997 and 1996, respectively.
The SPG Operating Partnership manages substantially all Wholly-Owned
Properties and 26 Properties owned as joint venture interests, and, accordingly,
it reimburses a subsidiary of the Management Company for costs incurred relating
to such Properties, including management, leasing, development, accounting,
legal, marketing, and management information systems. Substantially all
employees of the SPG Operating Partnership (other than direct field personnel)
are employed by such Management Company subsidiary. The Management Company
records costs net of amounts reimbursed by the SPG Operating Partnership. Common
costs are allocated based on payroll and related costs using assumptions that
management believes are reasonable. The SPG Operating Partnership's share of
allocated common costs was $42,444, $35,341 and $29,262 for 1998, 1997 and 1996,
respectively.
At December 31, 1998 and 1997, total notes receivable and advances due
from the Management Company and its consolidated affiliates were $115,378 and
$93,809, respectively. Unpaid interest income receivable from the Management
Company at December 31, 1998 and 1997, was $722 and $485, respectively. Accrued
and unpaid preferred dividends due from the Management Company at December 31,
1998 and 1997 were $117 and $0, respectively. Amounts payable by the SPG
Operating Partnership under the cost-sharing arrangement and management
contracts were $4,968 and $1,725 at December 31, 1998 and 1997, respectively,
and are reflected in accounts payable and accrued expenses in the SPG Operating
Partnership's accompanying Consolidated Balance Sheets.
Summarized consolidated financial information of the Management Company
and a summary of the SPG Operating Partnership's investment in and share of
income from the Management Company follows.
December 31,
-----------------------
BALANCE SHEET DATA: 1998 1997
---------- ----------
Total assets $198,952 $137,750
Notes payable to the SPG Operating Partnership
at 11%, due 2008, and advances 115,378 93,809
Shareholders' equity 7,279 482
The SPG Operating Partnership's Share of:
Total assets $184,273 $128,596
---------- ----------
Shareholders' equity $ 10,037 $ 3,192
========== ==========
For the Year Ended December 31,
------------------------------
OPERATING DATA: 1998 1997 1996
-------- -------- --------
Total revenue $100,349 $ 85,542 $ 78,665
Operating Income 8,067 13,766 9,073
-------- -------- --------
Net Income Available for Common Shareholders $ 6,667 $ 12,366 $ 7,673
-------- -------- --------
The SPG Operating Partnership's Share of Net
Income after intercompany profit elimination $ 5,852 $ 10,486 $ 5,485
======== ======== ========
68
<PAGE>
9. Indebtedness
The SPG Operating Partnership's mortgages and other notes payable consist
of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1997
---------- ----------
Fixed-Rate Debt
- ---------------
<S> <C> <C>
Mortgages and other notes, including $1,917 and
$888 net premiums, respectively $2,290,902 $2,006,552
Unsecured public notes, including $7,278 net premium
and $4,453 net discount, respectively 2,617,277 905,547
Mandatory Par Put Remarketed Securities, including
$5,273 premium 205,273 --
Medium-term notes, net of $714 and $771 discounts,
respectively 279,286 279,229
Commercial mortgage pass-through certificates 175,000 175,000
6 3/4% Putable Asset Trust Securities, including $1,111 and
$1,297 premiums, respectively 101,111 101,297
---------- ----------
Total fixed-rate debt 5,668,849 3,467,625
Variable-Rate Debt
- ------------------
Mortgages and other notes, including $1,275 and $696 premiums,
respectively $ 352,532 $ 451,820
Credit Facility 368,000 952,000
Merger Facility 1,400,000 --
Unsecured term loans 133,000 133,000
Commercial mortgage pass-through certificates 50,000 50,000
Construction loan -- 23,545
---------- ----------
Total variable-rate debt 2,303,532 1,610,365
---------- ----------
Total mortgages and other notes payable, net $7,972,381 $5,077,990
========== ==========
</TABLE>
Fixed-Rate Debt
Mortgages and Other Notes. The fixed-rate mortgage loans bear interest
ranging from 6.57% to 10.00% (weighted average of 7.55% at December 31, 1998),
require monthly payments of principal and/or interest and have various due dates
through 2027 (average maturity of 5.9 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 $706,042. 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 and Mandatory Par Put Remarketed Securities . In
connection with the CPI Merger, RPT, a REIT and the 99.999% owned subsidiary of
the SPG Operating Partnership, took title to substantially all of the CPI assets
and assumed $825,000 of unsecured notes (the "CPI Notes"), as described in Note
3. The CPI Notes are structurally senior in right of payment to holders of other
SPG Operating Partnership unsecured notes to the extent of the assets and
related cash flow of RPT only, with over 99.999% of the excess cash flow plus
any capital event transactions available for the other SPG Operating Partnership
unsecured notes. The CPI Notes pay interest semiannually at rates ranging from
7.05% to 9.00% (weighted average of 8.03%), and have various due dates through
2016 (average maturity of 9.1 years). The CPI Notes contain leverage ratios,
annual real property appraisal requirements, debt service coverage ratios and
minimum net worth ratios.
The CPI Notes together with existing SPG Operating Partnership
nonconvertible investment-grade unsecured debt securities aggregate $2,617,277
(the "Notes"). In addition, the SPG Operating Partnership has outstanding
$205,273 of 7.00%
69
<PAGE>
Mandatory Par Put Remarketed Securities ("MOPPRS") at December 31, 1998. The
Notes pay interest semiannually at rates ranging from 6.63% to 9.0% (weighted
average of 7.25%), and have various due dates through 2018 (average maturity of
8.3 years). The MOPPRS are due June 15, 2028, and are subject to redemption on
June 16, 2008. The premium received relating to the MOPPRS of approximately
$5,302 is being amortized over the life of the debt securities. The MOPPRS and
certain of the Notes are guaranteed by the SPG Operating Partnership and contain
leverage ratios and minimum EBITDA and unencumbered EBITDA ratios.
Additionally, on February 4, 1999, the SPG Operating Partnership
completed the sale of another $600,000 of senior unsecured notes. These notes
include two $300,000 tranches. The first tranche bears interest at 6.75% and
matures on February 4, 2004 and the second tranche bears interest at 7.125% and
matures on February 4, 2009. The SPG Operating Partnership used the net proceeds
of approximately $594,000 to retire the $450,000 initial tranche of the Merger
Facility and to pay $142,000 on the outstanding balance of the Credit Facility.
Medium-Term Notes. On May 15, 1997, the SPG Operating Partnership
established a Medium-Term Note ("MTN") program. On June 24, 1997, the SPG
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 10, 1997, the SPG Operating Partnership issued the remaining
$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.
Commercial Mortgage Pass-Through Certificates. The SPG Operating
Partnership has outstanding a series of six classes of commercial mortgage pass-
through certificates cross-collateralized by seven 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%.
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. The net
discount relating to the PATS is being amortized over their remaining life.
Variable-Rate Debt
Mortgages and Other Notes. The variable-rate mortgage loans and other
notes bear interest ranging from 5.61% to 7.74% (weighted average of 6.39% at
December 31, 1998) and are due at various dates through 2004 (average maturity
of 3.3 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 Credit Facility is a $1,250,000 unsecured revolving
credit facility which initially matures in September of 1999, with a one-year
extension available at the SPG Operating Partnership's option. The Credit
Facility bears interest at LIBOR plus 65 basis points, with an additional 15
basis point facility fee on the entire $1,250,000. The maximum and average
amounts outstanding during 1998 under the Credit Facility were $992,000 and
$583,668, respectively. The Credit Facility is primarily used for funding
acquisition, renovation and expansion and predevelopment opportunities. At
December 31, 1998, the Credit Facility had an effective interest rate of 6.2%,
with $880,800 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.
The Merger Facility. In conjunction with the CPI Merger, the SPG
Operating Partnership and SPG, as co-borrowers, closed a $1,400,000 medium term
unsecured bridge loan (the "Merger Facility"). The Merger Facility bears
interest at a base rate of LIBOR plus 65 basis points and will mature at the
following intervals (i) $450,000 on June 24, 1999 (ii) $450,000 on March 24,
2000 and (iii) $500,000 on September 24, 2000. As described above, in February
1999 the initial $450,000 maturity on the Merger Facility was retired with
proceeds from a $600,000 unsecured debt offering. The Merger Facility is subject
to covenants and conditions substantially identical to those of the Credit
Facility. The SPG Operating Partnership drew the entire $1,400,000 available on
the Merger Facility along with $237,000 on the Credit Facility to pay for the
cash portion of the dividend declared in conjunction with the CPI Merger, as
well as certain other costs associated with the CPI Merger. Financing costs of
$9,456, which were incurred to obtain the Merger Facility, are being amortized
over 18 months.
70
<PAGE>
Unsecured Term Loans. The SPG Operating Partnership has two unsecured
term loans outstanding at December 31, 1998, totaling $133,000, which were
obtained to retire mortgage indebtedness. These term loans bear interest at
LIBOR plus 0.65% and mature on January 31, 2000. The SPG Operating Partnership
has an interest-rate protection agreement covering one of these term loans in
the amount of $63,000, which effectively fixes the interest rate at 6.14%.
Debt Maturity and Other
As of December 31, 1998, scheduled principal repayments on indebtedness
were as follows:
1999 $1,030,354
2000 1,464,646
2001 259,391
2002 835,067
2003 722,514
Thereafter 3,644,269
---------------
Total principal maturities 7,956,241
Net unamortized debt premiums 16,140
---------------
Total mortgages and other notes payable $7,972,381
===============
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.
Net extraordinary gains (losses) resulting from the early extinguishment,
refinancing or forgiveness of debt of $7,146, $58 and $(3,521) were incurred for
the years ended December 31, 1998, 1997 and 1996, respectively.
The Joint Venture Properties have $2,861,589 and $1,888,512 of mortgages
and other notes payable at December 31, 1998 and 1997, respectively. The SPG
Operating Partnership's share of this debt was $1,227,044 and $770,776 at
December 31, 1998 and 1997, respectively. This debt, including a premium of
$20,868 in 1998, becomes due in installments over various terms extending
through 2009, with interest rates ranging from 5.44% to 9.75% (weighted average
rate of 6.99% at December 31, 1998). The debt, excluding the $20,868 premium,
matures $17,270 in 1999; $220,961 in 2000; $9,622 in 2001; $265,603 in 2002;
$435,298 in 2003 and $1,891,967 thereafter.
Interest Rate Protection Agreements
The SPG 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. Swap
arrangements, which effectively fix the SPG Operating Partnership's interest
rate on the respective borrowings, have been entered into for $550,000 principal
amount of consolidated debt. Cap arrangements, which effectively limit the
amount by which variable interest rates may rise, have been entered into for
$387,999 principal amount of consolidated debt and cap LIBOR at rates ranging
from 5.49% to 16.765% through the related debt's maturity. Costs of the caps
($1,338) are amortized over the life of the agreements. The unamortized balance
of the cap arrangements was $429 and $2,006 as of December 31, 1998 and 1997,
respectively. The SPG Operating Partnership's hedging activity as a result of
interest swaps and caps resulted in net interest savings of $263, $1,586 and
$2,165 for the years ended December 31, 1998, 1997 and 1996, respectively. This
did not materially impact the SPG 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 $6,100,000 and $3,900,000 at December 31, 1998 and
1997, respectively. The fair value of the interest rate protection agreements at
December 31, 1998 and 1997, was ($7,213) and ($692), respectively. At December
31, 1998 and 1997, the estimated discount rates were 6.70% and 6.66%,
respectively.
71
<PAGE>
10. Rentals under Operating Leases
The SPG 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, 1998, are as
follows:
1999 $ 910,451
2000 819,907
2001 756,743
2002 696,153
2003 618,304
Thereafter 2,242,104
--------------
$6,043,662
==============
Approximately 2.8% of future minimum rents to be received are
attributable to leases with JCPenney Company, Inc., an affiliate of a limited
partner in the SPG Operating Partnership.
11. Partners Equity
Unit Issuances
During 1998, SPG issued 2,957,335 shares of its common stock in offerings
generating combined net proceeds of approximately $91,399. The net proceeds were
contributed to the SPG Operating Partnership in exchange for a like number of
Units. The SPG Operating Partnership used the net proceeds for general working
capital purposes.
On November 11, 1997, SPG issued 3,809,523 shares of its common stock
upon the conversion of all of the outstanding shares of SPG's 8.125% Series A
Preferred Stock, $.0001 par value per share.
On September 19, 1997, SPG issued 4,500,000 shares of its common stock in
a public offering. SPG contributed the net proceeds of approximately $146,800 to
the SPG Operating Partnership in exchange for an equal number of Units. The SPG
Operating Partnership used the net proceeds to retire a portion of the
outstanding balance on the Credit Facility.
As described in Note 4, in connection with the DRC Merger on August 9,
1996, the SPG Operating Partnership issued 37,877,965 Units to its non-managing
general partner and 23,219,012 Units to limited partners.
Preferred Units
Preferred Units in the SPG Operating Partnership include four separate
series, which pay preferred distributions with economic terms that are
substantially the same as four series of preferred stock of general partners of
the SPG Operating Partnership described below. The first two series of preferred
Units were issued to SPG Properties, Inc. prior to the CPI Merger, in exchange
for the net proceeds from the sales of two series of preferred stock in SPG
Properties, Inc. The latter two series of preferred Units described below result
from the CPI Merger, described in Note 3.
On July 9, 1997, SPG Properties, Inc. sold 3,000,000 shares of its 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. Management intends to redeem the
Series C Preferred Shares prior to October 1, 2012. The Series C Preferred
Shares are not redeemable prior to September 30, 2007. Beginning September 30,
2007, the Series C Preferred Shares may be redeemed at the option of SPG
Properties, Inc. in whole or in part, at a redemption price of $50.00 per share,
plus accrued and unpaid distributions, if any, thereon. The redemption price of
the Series C Preferred Shares may only be paid from the sale proceeds of other
capital stock of SPG Properties, Inc., which may include other classes or series
of preferred stock. Additionally, the Series C Preferred Shares have no stated
maturity and are not subject to any mandatory redemption provisions, nor are
they convertible into any other securities of SPG Properties, Inc. SPG
Properties, Inc. contributed the net proceeds of this offering of approximately
$146,000 to the SPG Operating Partnership in exchange for preferred Units, the
economic terms of which are substantially identical to the Series C Preferred
Shares.
On September 27, 1996, SPG Properties, Inc. completed a $200,000 public
offering of 8,000,000 shares of Series B cumulative redeemable preferred stock,
generating net proceeds of approximately $193,000. Dividends on the preferred
stock are paid quarterly in arrears at 8.75% per annum. SPG Properties, Inc. may
redeem the preferred stock any time on or after
72
<PAGE>
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 SPG Properties, Inc., which may include
other series of preferred shares. SPG Properties, Inc. contributed the proceeds
to the SPG Operating Partnership in exchange for preferred Units. The SPG
Operating Partnership pays a preferred distribution to SPG Properties, Inc.
equal to the dividends paid on the preferred stock.
SPG has 209,249 shares of 6.50% Series A Convertible Preferred Stock
outstanding. Each share of Series A Convertible Preferred Stock is convertible
into 37.995 paired shares of common stock of the Companies, subject to
adjustment under certain circumstances including (i) a subdivision or
combination of shares of common stock of the Companies, (ii) a declaration of a
distribution of additional shares of common stock of the Companies, issuances of
rights or warrants by the Companies and (iii) any consolidation or merger, which
the Companies are a part of or a sale or conveyance of all or substantially all
of the assets of the Companies to another person or any statutory exchange of
securities with another person. The Series A Convertible Preferred Stock is not
redeemable, except as needed to maintain or bring the direct or indirect
ownership of the capital stock of SPG into conformity with REIT requirements.
In addition, SPG has 4,844,331 shares of 6.50% Series B Convertible
Preferred Stock outstanding. Each share of Series B Convertible Preferred Stock
is convertible into 2.586 paired shares of common stock of the Companies,
subject to adjustment under circumstances identical to those of the Series A
Preferred Stock described above. The Companies may redeem the Series B Preferred
Stock on or after September 24, 2003 at a price beginning at 105% of the
liquidation preference plus accrued dividends and declining to 100% of the
liquidation preference plus accrued dividends any time on or after September 24,
2008.
Notes Receivable from Former CPI Shareholders
Notes receivable of $27,168 from former CPI shareholders, which result
from securities issued under CPI's executive compensation program and were
assumed in connection with the CPI Merger, are reflected as a deduction from
partners' equity in the accompanying consolidated financial statements. Certain
of such notes totaling $9,519 are interest bearing at rates ranging from 5.31%
to 6.00% and become due during the period 2000 to 2002. The remainder of the
notes do not bear interest and become due at the time the underlying shares are
sold.
The Simon Property Group 1998 Stock Incentive Plan
At the time of the CPI Merger, SPG and the SPG Operating Partnership
adopted 'The Simon Property Group 1998 Stock Incentive Plan' (the "1998 Plan").
The 1998 Plan provides for the grant of equity-based awards during the ten-year
period following its adoption, in the form of options to purchase paired shares
of the Companies' common stock ("Options"), stock appreciation rights ("SARs"),
restricted stock grants and performance unit awards (collectively, "Awards").
Options may be granted which are qualified as "incentive stock options" within
the meaning of Section 422 of the Code and Options which are not so qualified.
The primary purpose of the 1998 Plan is to attract and retain the best
available eligible officers, directors, key employees, advisors and consultants.
The Companies have reserved for issuance 6,300,000 paired shares of common stock
under the 1998 Plan, which includes 2,230,875 shares reserved for the exercise
of options granted and grants of restricted stock allocated under the previously
existing Stock Incentive Program and DRC Plan, which are described below. If
stock options granted in connection with the 1998 Plan are exercised at any time
or from time to time, the partnership agreement requires the Companies to sell
to the Operating Partnerships, at fair market value, paired shares of the
Companies' common stock sufficient to satisfy the exercised stock options. The
Companies are also obligated to purchase paired Units for cash in an amount
equal to the fair market value of the paired shares sold to the SPG Operating
Partnership.
Administration. The 1998 Plan is administered by SPG's Compensation
Committee (the "Committee"). The Committee, in its sole discretion, determines
which eligible individuals may participate and the type, extent and terms of the
Awards to be granted to them. In addition, the Committee interprets the 1998
Plan and makes all other determinations deemed advisable for the administration
of the 1998 Plan. Options granted to employees ("Employee Options") become
exercisable over the period determined by the Committee. The exercise price of
an Employee Option may not be less than the fair market value of the shares of
the common stock on the date of grant. Currently, Employee Options outstanding
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 Employee Options expire ten years from the date of grant.
Director Options. The 1998 Plan provides for automatic grants of Options
("Director Options") to directors of the Companies who are not also employees of
the SPG Operating Partnership or its "affiliates" ("Eligible Directors"). Under
the 1998 Plan, each Eligible Director is automatically granted Director Options
to purchase 5,000 shares of the Companies'
73
<PAGE>
common stock upon the director's initial election to the Board of Directors.
Eligible Directors will also receive Director Options to purchase 3,000 shares
of common stock multiplied by the number of calendar years that have elapsed
since such person's last election to the Board of Directors upon each reelection
of the Eligible Director to the Board of Directors. The exercise price of the
options is equal to 100% of the fair market value of the Companies' common stock
on the date of grant. Director Options become vested and exercisable on the
first anniversary of the date of grant or at such earlier time as a "change in
control" of the Companies (as defined in the 1998 Plan). Director Options will
terminate 30 days after the optionee ceases to be a member of the Board of
Directors.
Restricted Stock. In October 1994, under a previous stock incentive
program, the Compensation Committee approved a five-year stock incentive program
(the "Stock Incentive Program"), under which shares of restricted common stock
of SPG were granted to certain employees at no cost to those employees if SPG
attained certain growth targets established by the Compensation Committee from
time to time. In addition, in 1994, DRC 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 also based upon
growth targets established by their Compensation Committee. At the time of the
DRC Merger, SPG 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. Both the
Stock Incentive Program and the DRC Plan provided for a percentage of each of
these restricted stock grants to be earned and awarded each year. 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.
The terms and conditions concerning vesting of the restricted stock grant
to the Companies' President and Chief Operating Officer are different from those
established by the DRC Plan and are specifically set forth in the employment
contract with 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 1998,
1997 and 1996, a total of 495,131; 448,753 and 200,030 shares of common stock,
respectively, net of forfeitures, were deemed earned and awarded under the Stock
Incentive Program and the DRC Plan. Through December 31, 1998, a total of
1,287,225 shares of common stock, net of forfeitures, were deemed earned and
awarded under these programs. Approximately $9,463, $5,386 and $2,084 relating
to these programs were amortized in 1998, 1997 and 1996, respectively. The cost
of restricted stock grants, which is 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 SPG Operating
Partnership over the vesting period.
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
share as if the fair value method had been applied. SPG has elected to account
for stock-based compensation programs using the intrinsic value method
consistent with existing accounting policies. SPG granted 5,000 and 380,000
options during April 1998 and September 1998, respectively. The options vest
over a three-year period. The fair value at date of grant for options granted
during 1998 was $6.19 and $7.25 per option for the April and September grants,
respectively. The fair value at the date of grant for options granted during the
years ended December 31, 1997 and 1996 was $3.18 and $2.13 per option,
respectively. The impact on pro forma net income and earnings per share as a
result of applying the fair value method was not material.
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,
------------------------------------------------
1998 1997 1996
-------------- -------------- -------------
Expected Volatility 30.83 - 41.79% 17.63% 17.48%
Risk-Free Interest Rate 4.64 5.68% 6.82% 6.63%
Dividend Yield 6.24 - 6.52% 6.9% 7.5%
Expected Life 10 years 10 years 10 years
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<PAGE>
The weighted average remaining contract life for options outstanding as
of December 31, 1998 was 6.1 years.
Information relating to the Options from January 1, 1996 through December
31, 1998 is as follows:
<TABLE>
<CAPTION>
Director Options Employee Options
--------------------------- -----------------------------
Option Price Option Price
Options per Share Options per Share
-------- ---------------- ----------- --------------
<S> <C> <C> <C> <C>
Shares under option at December 31, 1995 55,000 $22.25 - 27.00 2,014,134 $22.25 - 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 December 31, 1996 85,080 $ 15 - 27.38 1,622,983 $22.25 - 25.25
-------- ---------------- ----------- --------------
Granted 9,000 29.31 -- 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 December 31, 1997 86,080 $ 15 - 27.38 1,247,597 $22.25 - 25.25
-------- ---------------- ----------- --------------
Granted -- N/A 385,000 30.40 (1)
CPI Options Acquired -- N/A 304,210 25.48 (1)
Exercised (8,000) 26.27 (1) (38,149) 23.71 (1)
Forfeited (3,000) 29.31 (4,750) 25.25
======== ================ =========== ==============
Shares under option at December 31, 1998 75,080 $ 24.11 (1) 1,893,908 $ 24.82 (1)
======== ================ =========== ==============
Options exercisable at December 31, 1998 75,080 $ 24.11 (1) 1,508,908 $ 23.39 (1)
======== ================ =========== ==============
</TABLE>
(1) Represents the weighted average price.
Exchange Rights
The former limited partners in Old 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 Old SPG on a one-for-one basis or cash, as selected by Old SPG's
Board of Directors. If Old SPG had selected to use cash, Old SPG would have
caused Old 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 Old SPG's common stock at that time. In the
periods when the SPG 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 SPG Operating Partnership
agreement was amended eliminating the exchange right provision. However, the
limited partners in Old SPG, LP exchanged their interest for Units in the SPG
Operating Partnership. The SPG Operating Partnership extended rights to its
limited partners similar to the rights previously held by the limited partners
of Old SPG, LP. However, on November 13, 1996, an agreement was reached between
Old SPG and the SPG Operating Partnership which restricted Old SPG's ability to
cause the SPG Operating Partnership to redeem for cash the limited partners'
Units without contributing cash to the SPG Operating Partnership as partners'
equity sufficient to effect the redemption. If sufficient cash is not
contributed, Old SPG will be deemed to have elected to acquire the limited
partners' Units for shares of Old SPG's common stock. In connection with the CPI
Merger, SPG became the successor to Old SPG in such agreement. As a result of
these arrangements, the limited partners' equity interest in the SPG Operating
Partnership has been included as partners' equity at historical carrying value.
Previous adjustments to exclude limited partners' equity interest from partners'
equity have been reversed.
The SPG Operating Partnership has the right to issue Units and Preferred
Units under certain circumstances. As of December 31, 1998, SPG has reserved
64,182,157 shares of common stock for issuance upon the exchange of Units.
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<PAGE>
12. Employee Benefit Plans
The SPG Operating Partnership maintains a tax-qualified retirement 401(k)
savings plan. Under the plan, eligible employees can participate in a cash or
deferred arrangement permitting them to defer up to a maximum of 12% of their
compensation, subject to certain limitations. Participants' salary deferrals are
matched at specified percentages, and the plan provides annual contributions of
3% of eligible employees' compensation. The SPG Operating Partnership
contributed $2,581, $2,727 and $2,350 to the plans in 1998, 1997 and 1996,
respectively.
Except for the 401(k) plan, the SPG Operating Partnership offers no other
postretirement or postemployment benefits to its employees.
13. Commitments and Contingencies
Litigation
Richard E. Jacobs, et al. v. Simon DeBartolo Group, L.P. On September 3,
1998, a complaint was filed in the Court of Common Pleas in Cuyahoga County,
Ohio, captioned Richard E. Jacobs, et al. v. Simon DeBartolo Group, L.P. The
plaintiffs are all principals or affiliates of The Richard E. Jacobs Group, Inc.
("Jacobs"). The plaintiffs allege in their complaint that the SPG Operating
Partnership engaged in malicious prosecution, abuse of process, defamation,
libel, injurious falsehood/unlawful disparagement, deceptive trade practices
under Ohio law, tortious interference and unfair competition in connection with
the SPG Operating Partnership's acquisition by tender offer of shares in RPT, a
Massachusetts business trust, and certain litigation instituted in September,
1997, by the SPG Operating Partnership against Jacobs in federal district court
in New York, wherein the SPG Operating Partnership alleged that Jacobs and other
parties had engaged, or were engaging in activity which violated Section 10(b)
of the Securities Exchange Act of 1934, as well as certain rules promulgated
thereunder. Plaintiffs in the Ohio action are seeking compensatory damages in
excess of $200,000, punitive damages and reimbursement for fees and expenses. It
is difficult to predict the ultimate outcome of this action and there can be no
assurance that the SPG Operating Partnership will receive a favorable verdict.
Based upon the information known at this time, in the opinion of management, it
is not expected that this action will have a material adverse effect on the SPG
Operating Partnership.
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 indirect 99%-owned subsidiary of
SPG, and DeBartolo Properties Management, Inc., a subsidiary of the Management
Company, 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 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 paired shares
of common stock of the Companies 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 SPG each filed motions for summary judgment. On October 31, 1997,
the Court entered a judgment in favor of SPG granting SPG's motion for summary
judgment. The plaintiffs have appealed this judgment and the matter is pending.
While it is difficult to predict the ultimate outcome of this action, based on
the information known to date, it is not expected that this action will have a
material adverse effect on SPG or the SPG Operating Partnership.
Roel Vento et al v. Tom Taylor et al. An affiliate of SPG 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, tortious 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. SPG is seeking to overturn the award and has
appealed the verdict. SPG's appeal is pending. Although management is optimistic
that SPG 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 SPG
or the SPG Operating Partnership.
The SPG 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,
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<PAGE>
management believes that these items will not have a material adverse impact on
the SPG Operating Partnership's financial position or results of operations.
Lease Commitments
As of December 31, 1998, a total of 37 of the Wholly-Owned and Minority
Interest Properties are subject to ground leases. The termination dates of these
ground leases range from 1999 to 2087. These ground leases generally require
payments by the SPG 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 SPG Operating Partnership for the years ended December
31, 1998, 1997 and 1996, was $13,618, $10,511 and $8,506, 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:
1999 $ 7,871
2000 7,934
2001 8,033
2002 8,313
2003 8,320
Thereafter 499,664
-------------
$540,135
=============
Environmental Matters
Nearly all of the Properties have been subjected to Phase I or similar
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 SPG 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.
14. Related Party Transactions
In preparation for the CPI Merger, on July 31, 1998, CPI, with assistance
from the SPG Operating Partnership, completed the sale of the General Motors
Building in New York, New York for approximately $800,000. The SPG Operating
Partnership and certain third parties each received a $2,500 fee from CPI in
connection with the sale.
15. New Accounting Pronouncement
On June 15, 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities.
The Statement establishes accounting and reporting standards requiring that
every derivative instrument (including certain derivative instruments embedded
in other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. The Statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting.
Statement 133 will be effective for the SPG Operating Partnership
beginning with the 1999 fiscal year and may not be applied retroactively.
Management does not expect the impact of Statement 133 to be material to the
financial statements. However, the Statement could increase volatility in
earnings and other comprehensive income.
On April 3, 1998 the Accounting Standards Executive Committee issued
Statement of Position 98-5 ("SOP 98-5"), Reporting on the Costs of Start-Up
Activities, which is effective for fiscal years beginning after December 15,
1998. SOP 98-5 states that costs of start-up activities, including organization
costs, should be expensed as incurred. Management does not expect the impact of
SOP 98-5 to be material to the financial statements.
77
<PAGE>
16. Quarterly Financial Data (Unaudited)
Summarized quarterly 1998 and 1997 data is as follows:
<TABLE>
<CAPTION>
First Second Third Fourth Annual
Quarter Quarter Quarter Quarter Amount
------------ ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
1998
- --------------------
Total revenue $ 300,257 $ 310,375 $ 321,987 $ 467,570 $ 1,400,189
Operating income 133,667 145,226 147,326 213,790 640,009
Income before extraordinary items 45,124 43,514 52,635 91,983 233,256
Net income available to Unitholders
37,790 43,204 44,539 73,398 198,931
Net income before extraordinary
items per Unit (2) $ 0.22 $ 0.21 $ 0.25 $ 0.32 $ 1.01
Net income per Unit (2) $ 0.22 $ 0.25 $ 0.25 $ 0.33 $ 1.05
Weighted Average Units Outstanding
173,084,147 176,098,843 180,987,067 225,670,566 189,082,385
Net income before extraordinary
items per Unit - assuming
dilution (2) $ 0.22 $ 0.21 $ 0.25 $ 0.32 $ 1.01
Net income per Unit - assuming
dilution (2) $ 0.22 $ 0.25 $ 0.25 $ 0.32 $ 1.05
Weighted Average Units Outstanding
- Assuming Dilution 173,471,370 176,489,839 181,312,399 225,972,148 189,439,534
1997
Total revenue $ 242,414 $ 245,055 $ 259,783 $ 306,915 $ 1,054,167
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 $ 0.25 0.45 0.28 $ 1.08
Weighted Average Units Outstanding
- Assuming Dilution 158,343,827 158,848,611 160,180,477 168,146,728 161,406,951
</TABLE>
(1) Primarily due to the cyclical nature of earnings available for Units and the
issuance of additional Units during the periods, the sum of the quarterly
earnings per Unit varies from the annual earnings per Unit.
17. Subsequent Events (Unaudited)
On February 25, 1999, the SPG Operating Partnership entered into a
definitive agreement with New England Development Company ("NED") to acquire and
assume management responsibilities for NED's portfolio of up to 14 regional
malls aggregating approximately 10.6 million square feet of GLA. The purchase
price for the portfolio is approximately $1.725 billion. The SPG Operating
Partnership expects to form a joint venture to acquire the portfolio, with the
SPG Operating Partnership's ultimate ownership to be between 30% to 50%.
On February 26, 1999, 150,000 shares of SPG's Series A Convertible
Preferred stock were converted into 5,699,250 paired shares of common stock of
the Companies, with 59,249 shares of Series A Convertible Preferred stock
remaining outstanding. Concurrently, 150,000 Series A preferred Units were
converted into 5,699,250 Units.
78
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIMON PROPERTY GROUP, L.P.
By: Simon Property Group, Inc.,
Managing General Partner
By /s/ David Simon
---------------
David Simon
Chief Executive Officer
March 18, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ David Simon Chief Executive Officer March 18, 1999
- ----------------------------- and Director (Principal Executive Officer)
David Simon Co-Chairman of the Board of Directors
/s/ Herbert Simon March 18, 1999
- -----------------------------
Herbert Simon
/s/ Melvin Simon Co-Chairman of the Board of Directors March 18, 1999
- -----------------------------
Melvin Simon
/s/ Hans C. Mautner Vice Chairman of the Board of Directors March 18, 1999
- -----------------------------
Hans C. Mautner
/s/ Richard Sokolov President, Chief Operating Officer March 18, 1999
- ----------------------------- and Director
Richard Sokolov
/s/ Robert E. Angelica Director March 18, 1999
- -----------------------------
Robert E. Angelica
/s/ Birch Bayh Director March 18, 1999
- -----------------------------
Birch Bayh
/s/ Pieter S. van den Berg Director March 18, 1999
- -----------------------------
Pieter S. van den Berg
/s/ G. William Miller Director March 18, 1999
- -----------------------------
G. William Miller
/s/ Fredrick W. Petri Director March 18, 1999
- -----------------------------
Fredrick W. Petri
/s/ J. Albert Smith Director March 18, 1999
- -----------------------------
J. Albert Smith
/s/ Philip J. Ward Director March 18, 1999
- -----------------------------
Philip J. Ward
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ M. Denise DeBartolo York Director March 18, 1999
- -----------------------------
M. Denise DeBartolo York
/s/ John Dahl Senior Vice President March 18, 1999
- ----------------------------- (Principal Accounting Officer)
John Dahl
Principal Financial Officers:
/s/ Stephen E. Sterrett Treasurer March 18, 1999
- -----------------------------
Stephen E. Sterrett
/s/ James R. Giuliano III Senior Vice President March 18, 1999
- -----------------------------
James R. Giuliano III
</TABLE>
80
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULE
To Simon Property Group, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of SIMON PROPERTY GROUP, L.P. included in this
Form 10-K and have issued our report thereon dated February 17, 1999. 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, 1998, is the responsibility of Simon Property
Group, L.P.'s management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. The schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
February 17, 1999
81
<PAGE>
SIMON PROPERTY GROUP, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
SCHEDULE III
(Dollars in thousands)
<TABLE>
<CAPTION>
Cost Capitalized
Initial Cost Subsequent to Acquisition
------------------------------- -----------------------------
Buildings and Buildings and
Name, Location Encumbrances Land Improvements Land Improvements
- ------------------------------------- ------------ ---- ------------- ---- -------------
<S> <C> <C> <C> <C> <C>
Regional Malls
Alton Square, Alton, IL $ 0 $ 154 $ 7,641 $ 0 $ 11,816
Amigoland Mall, Brownsville, TX 0 1,045 4,518 0 954
Anderson Mall, Anderson, SC 27,500 1,712 18,122 1,363 3,479
Aurora Mall, Aurora, CO 0 11,400 55,692 0 270
Barton Creek Square, Austin, TX 62,064 4,414 20,699 771 28,741
Battlefield Mall, Springfield, MO 93,665 4,039 29,769 3,225 35,518
Bay Park Square, Green Bay, WI 24,848 6,997 25,623 0 659
Bergen Mall, Paramus, NJ 0 11,020 92,541 0 5,730
Biltmore Square, Asheville, NC 26,681 10,908 19,315 0 1,059
Boynton Beach Mall, Boynton Beach, FL 0 33,758 67,710 0 3,203
Brea Mall, Brea, CA 0 39,500 209,202 0 144
Broadway Square, Tyler, TX 0 11,470 32,439 0 1,884
Brunswick Square, East Brunswick, NJ 0 8,436 55,838 0 3,764
Burlington Mall, Burlington, MA 0 46,600 303,618 0 14
Castleton Square, Indianapolis, IN 0 44,860 80,963 0 25,115
Charlottesville Fashion Square, 0
Charlottesville, VA 0 0 54,738 0 928
Chautauqua Mall, Jamestown, NY 0 3,257 9,641 0 12,033
Cheltenham Square, Philadelphia, PA 34,226 14,227 43,799 0 2,173
Chesapeake Square, Chesapeake, VA 48,164 11,534 70,461 0 832
Cielo Vista Mall, El Paso, TX 96,125 1,307 18,512 608 15,836
College Mall, Bloomington, IN 54,360 1,012 16,245 722 18,551
Columbia Center, Kennewick, WA 42,326 27,170 58,185 0 5,742
Cordova Mall, Pensacola, FL 0 18,800 75,880 (158) 267
Cottonwood Mall, Albuquerque, NM 0 13,667 69,173 0 (151)
Crossroads Mall, Omaha, NE 0 884 37,293 409 27,116
Crystal River Mall, Crystal River, FL 16,000 11,679 14,252 0 2,841
DeSoto Square, Bradenton, FL 38,880 9,380 52,716 0 2,984
Eastern Hills Mall, Buffalo, NY 0 15,444 47,604 12 2,382
Eastland Mall, Tulsa, OK 15,000 3,124 24,035 518 6,525
Edison Mall, Fort Myers, FL 0 13,618 107,381 0 962
Fashion Mall at Keystone at the
Crossing, Indianapolis, IN 64,194 0 120,579 0 106
Forest Mall, Fond Du Lac, WI 15,550 728 4,498 0 4,920
Forest Village Park, Forestville, MD 21,850 1,212 4,625 757 4,071
Fremont Mall, Fremont, NE 0 26 1,280 265 2,678
Golden Ring Mall, Baltimore, MD 29,750 1,130 8,955 572 8,591
Great Lakes Mall, Cleveland, OH 61,121 14,607 100,362 0 3,462
Greenwood Park Mall, Greenwood, IN 97,478 2,607 23,500 5,275 54,216
Gulf View Square, Port Richey, FL 37,633 13,690 39,997 0 5,160
Heritage Park, Midwest City, OK 0 598 6,213 0 2,240
Hutchinson Mall, Hutchison, KS 16,023 1,777 18,427 0 2,821
Independence Center,
Independence, MO 0 5,539 45,822 0 14,913
Ingram Park Mall, San Antonio, TX 54,955 820 17,163 169 14,018
Irving Mall, Irving, TX 0 6,737 17,479 2,533 22,491
Jefferson Valley Mall, Yorktown
Heights, NY 50,000 4,868 30,304 0 3,816
Knoxville Center, Knoxville, TN 0 5,006 22,965 3,712 33,220
La Plaza, McAllen, TX 49,475 2,194 9,828 0 4,050
</TABLE>
<TABLE>
<CAPTION>
Gross Amounts At
Which Carried
At Close of Period
-------------------------------
Buildings and Accumulated Date of
Name, Location Land Improvements Total Depreciation Construction
- ------------------------------------- ---- ------------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Regional Malls
Alton Square, Alton, IL $ 154 $ 19,457 $ 19,611 $2,248 1993 (Note 3)
Amigoland Mall, Brownsville, TX 1,045 5,472 6,517 1,532 1974
Anderson Mall, Anderson, SC 3,075 21,601 24,676 4,505 1972
Aurora Mall, Aurora, CO 11,400 55,962 67,362 403 1998 (Note 4)
Barton Creek Square, Austin, TX 5,185 49,440 54,625 7,694 1981
Battlefield Mall, Springfield, MO 7,264 65,287 72,551 11,831 1970
Bay Park Square, Green Bay, WI 6,997 26,282 33,279 1,818 1996 (Note 4)
Bergen Mall, Paramus, NJ 11,020 98,271 109,291 6,320 1996 (Note 4)
Biltmore Square, Asheville, NC 10,908 20,374 31,282 1,489 1996 (Note 4)
Boynton Beach Mall, Boynton Beach, FL 33,758 70,913 104,671 4,842 1996 (Note 4)
Brea Mall, Brea, CA 39,500 209,346 248,846 1,504 1998 (Note 4)
Broadway Square, Tyler, TX 11,470 34,323 45,793 4,238 1994 (Note 3)
Brunswick Square, East Brunswick, NJ 8,436 59,602 68,038 3,937 1996 (Note 4)
Burlington Mall, Burlington, MA 46,600 303,632 350,232 2,172 1998 (Note 4)
Castleton Square, Indianapolis, IN 44,860 106,078 150,938 5,886 1996 (Note 4)
Charlottesville Fashion Square,
Charlottesville, VA 0 55,666 55,666 2,018 1997 (Note 4)
Chautauqua Mall, Jamestown, NY 3,257 21,674 24,931 1,236 1996 (Note 4)
Cheltenham Square, Philadelphia, PA 14,227 45,972 60,199 3,307 1996 (Note 4)
Chesapeake Square, Chesapeake, VA 11,534 71,293 82,827 4,936 1996 (Note 4)
Cielo Vista Mall, El Paso, TX 1,915 34,348 36,263 8,834 1974
College Mall, Bloomington, IN 1,734 34,796 36,530 8,324 1965
Columbia Center, Kennewick, WA 27,170 63,927 91,097 4,315 1996 (Note 4)
Cordova Mall, Pensacola, FL 18,642 76,147 94,789 2,160 1998 (Note 4)
Cottonwood Mall, Albuquerque, NM 13,667 69,022 82,689 6,586 1996
Crossroads Mall, Omaha, NE 1,293 64,409 65,702 6,555 1994 (Note 3)
Crystal River Mall, Crystal River, FL 11,679 17,093 28,772 1,507 1996 (Note 4)
DeSoto Square, Bradenton, FL 9,380 55,700 65,080 3,875 1996 (Note 4)
Eastern Hills Mall, Buffalo, NY 15,456 49,986 65,442 3,377 1996 (Note 4)
Eastland Mall, Tulsa, OK 3,642 30,560 34,202 5,481 1986
Edison Mall, Fort Myers, FL 13,618 108,343 121,961 3,889 1997 (Note 4)
Fashion Mall at Keystone at the
Crossing, Indianapolis, IN 0 120,685 120,685 3,447 1997 (Note 4)
Forest Mall, Fond Du Lac, WI 728 9,418 10,146 1,823 1973
Forest Village Park, Forestville, MD 1,969 8,696 10,665 2,007 1980
Fremont Mall, Fremont, NE 291 3,958 4,249 577 1966
Golden Ring Mall, Baltimore, MD 1,702 17,546 19,248 4,569 1974 (Note 3)
Great Lakes Mall, Cleveland, OH 14,607 103,824 118,431 7,216 1996 (Note 4)
Greenwood Park Mall, Greenwood, IN 7,882 77,716 85,598 14,437 1979
Gulf View Square, Port Richey, FL 13,690 45,157 58,847 2,851 1996 (Note 4)
Heritage Park, Midwest City, OK 598 8,453 9,051 2,146 1978
Hutchinson Mall, Hutchison, KS 1,777 21,248 23,025 4,203 1985
Independence Center,
Independence, MO 5,539 60,735 66,274 5,888 1994 (Note 3)
Ingram Park Mall, San Antonio, TX 989 31,181 32,170 7,549 1979
Irving Mall, Irving, TX 9,270 39,970 49,240 8,410 1971
Jefferson Valley Mall, Yorktown
Heights, NY 4,868 34,120 38,988 7,124 1983
Knoxville Center, Knoxville, TN 8,718 56,185 64,903 6,526 1984
La Plaza, McAllen, TX 2,194 13,878 16,072 2,746 1976
</TABLE>
82
<PAGE>
SIMON PROPERTY GROUP, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
SCHEDULE III
(Dollars in thousands)
<TABLE>
<CAPTION>
Cost Capitalized
Initial Cost Subsequent to Acquisition
------------------------------- -----------------------------
Buildings and Buildings and
Name, Location Encumbrances Land Improvements Land Improvements
- ------------------------------------- ------------ ---- ------------- ---- -------------
<S> <C> <C> <C> <C> <C>
Lafayette Square, Indianapolis, IN 0 25,546 43,294 0 5,987
Laguna Hills Mall, Laguna Hills, CA 0 28,074 55,689 0 1,472
Lenox Square, Atlanta, GA 0 41,900 492,411 0 21
Lima Mall, Lima, OH 18,903 7,910 35,495 0 1,161
Lincolnwood Town Center,
Lincolnwood, IL 0 11,197 63,490 28 282
Livingston Mall, Livingston, NJ 30,200 105,250 0 8
Longview Mall, Longview, TX 27,600 270 3,602 124 6,586
Machesney Park Mall, Rockford, IL 0 614 7,438 120 4,043
Markland Mall, Kokomo, IN 10,000 0 7,568 0 1,531
Mc Cain Mall, N. Little Rock, AR 43,768 0 9,515 0 6,605
Melbourne Square, Melbourne, FL 39,404 20,552 51,110 0 3,700
Memorial Mall, Sheboygan, WI 0 175 4,881 0 758
Menlo Park Mall, Edison, NJ 0 65,684 223,252 0 2,928
Miami International Mall, Miami, FL 46,483 13,794 69,701 8,942 2,788
Midland Park Mall, Midland, TX 28,000 704 9,213 0 5,875
Miller Hill Mall, Duluth, MN 0 2,537 18,113 0 3,775
Mission Viejo Mall, Mission Viejo, CA 37,559 9,139 54,445 0 49,604
Mounds Mall, Anderson, IN 0 0 2,689 0 1,934
Muncie Mall, Muncie, IN 0 172 5,964 52 19,417
Nanuet Mall, Nanuet, NY 0 27,700 162,993 0 116
North East Mall, Hurst, TX 21,934 1,454 13,473 2,090 18,591
North Towne Square, Toledo, OH 23,500 579 8,382 0 2,049
Northgate Mall, Seattle, WA 79,035 89,991 57,873 0 17,717
Northlake Mall, Atlanta, GA 1,053 33,400 98,035 0 0
Northwoods Mall, Peoria, IL 0 1,203 12,779 1,449 25,552
Oak Court Mall, Memphis, TN 0 15,673 57,555 0 480
Orange Park Mall, Jacksonville, FL 0 13,345 65,173 0 13,329
Orland Square, Orland Park, IL 50,000 36,770 129,906 0 455
Paddock Mall, Ocala, FL 29,930 20,420 30,490 0 4,334
Palm Beach Mall, West Palm Beach, FL 50,471 12,549 112,741 0 634
Phipps Plaza, Atlanta, GA 0 19,200 210,783 0 1
Port Charlotte Town Center,
Port Charlotte, FL 52,731 5,561 59,381 0 6,674
Prien Lake Mall, Lake Charles, LA 0 1,926 2,829 3,080 35,714
Raleigh Springs Mall, Memphis, TN 0 9,137 28,604 0 1,130
Randall Park Mall, Cleveland, OH 35,000 4,421 52,456 0 6,525
Richardson Square, Dallas, TX 0 4,867 6,329 1,075 11,115
Richmond Towne Square, Cleveland, OH 14,526 2,666 12,112 0 19,511
Richmond Square, Richmond, IN 0 3,410 11,343 0 8,295
River Oaks Center, Calumet City, IL 32,500 30,884 101,224 0 11
Rockaway Townsquare, Rockaway, NJ 0 50,500 218,557 0 652
Rolling Oaks Mall, North San Antonio, TX 0 2,647 38,609 (70) 1,228
Roosevelt Field, Garden City, NY 0 165,500 704,112 0 1,674
Ross Park Mall, Pittsburgh, PA 0 14,557 50,995 9,617 46,778
Santa Rosa Plaza, Santa Rosa, CA 0 10,400 87,864 0 78
South Hills Village, Pittsburgh, PA 0 23,453 125,858 0 761
South Park Mall, Shreveport, LA 26,748 855 13,691 74 2,745
South Shore Plaza, Braintree, MA 82 101,200 301,495 0 179
Southern Park Mall, Youngstown, OH 0 16,982 77,774 97 13,081
</TABLE>
<TABLE>
<CAPTION>
Gross Amounts At
Which Carried
At Close of Period
-------------------------------
Buildings and Accumulated Date of
Name, Location Land Improvements Total Depreciation Construction
- ------------------------------------- ---- ------------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Lafayette Square, Indianapolis, IN 25,546 49,281 74,827 3,384 1996 (Note 4)
Laguna Hills Mall, Laguna Hills, CA 28,074 57,161 85,235 2,028 1997 (Note 4)
Lenox Square, Atlanta, GA 41,900 492,432 534,332 3,541 1998 (Note 4)
Lima Mall, Lima, OH 7,910 36,656 44,566 2,622 1996 (Note 4)
Lincolnwood Town Center,
Lincolnwood, IL 11,225 63,772 74,997 11,203 1990
Livingston Mall, Livingston, NJ 30,200 105,258 135,458 752 1998 (Note 4)
Longview Mall, Longview, TX 394 10,188 10,582 2,137 1978
Machesney Park Mall, Rockford, IL 734 11,481 12,215 3,082 1979
Markland Mall, Kokomo, IN 0 9,099 9,099 1,703 1968
Mc Cain Mall, N. Little Rock, AR 0 16,120 16,120 4,865 1973
Melbourne Square, Melbourne, FL 20,552 54,810 75,362 3,653 1996 (Note 4)
Memorial Mall, Sheboygan, WI 175 5,639 5,814 1,298 1969
Menlo Park Mall, Edison, NJ 65,684 226,180 291,864 8,138 1997 (Note 4)
Miami International Mall, Miami, FL 22,736 72,489 95,225 17,654 1996 (Note 4)
Midland Park Mall, Midland, TX 704 15,088 15,792 3,553 1980
Miller Hill Mall, Duluth, MN 2,537 21,888 24,425 4,346 1973
Mission Viejo Mall, Mission Viejo, CA 9,139 104,049 113,188 3,765 1996 (Note 4)
Mounds Mall, Anderson, IN 0 4,623 4,623 1,482 1965
Muncie Mall, Muncie, IN 224 25,381 25,605 3,246 1970
Nanuet Mall, Nanuet, NY 27,700 163,109 190,809 1,168 1998 (Note 4)
North East Mall, Hurst, TX 3,544 32,064 35,608 3,319 1996 (Note 4)
North Towne Square, Toledo, OH 579 10,431 11,010 3,743 1980
Northgate Mall, Seattle, WA 89,991 75,590 165,581 4,681 1996 (Note 4)
Northlake Mall, Atlanta, GA 33,400 98,035 131,435 704 1998 (Note 4)
Northwoods Mall, Peoria, IL 2,652 38,331 40,983 7,863 1983 (Note 3)
Oak Court Mall, Memphis, TN 15,673 58,035 73,708 2,134 1997 (Note 4)
Orange Park Mall, Jacksonville, FL 13,345 78,502 91,847 8,361 1994 (Note 3)
Orland Square, Orland Park, IL 36,770 130,361 167,131 4,451 1997 (Note 4)
Paddock Mall, Ocala, FL 20,420 34,824 55,244 2,296 1996 (Note 4)
Palm Beach Mall, West Palm Beach, FL 12,549 113,375 125,924 11,500 1998 (Note 4)
Phipps Plaza, Atlanta, GA 19,200 210,784 229,984 1,508 1998 (Note 4)
Port Charlotte Town Center,
Port Charlotte, FL 5,561 66,055 71,616 4,114 1996 (Note 4)
Prien Lake Mall, Lake Charles, LA 5,006 38,543 43,549 2,000 1972
Raleigh Springs Mall, Memphis, TN 9,137 29,734 38,871 2,085 1996 (Note 4)
Randall Park Mall, Cleveland, OH 4,421 58,981 63,402 3,892 1996 (Note 4)
Richardson Square, Dallas, TX 5,942 17,444 23,386 1,736 1996 (Note 4)
Richmond Towne Square, Cleveland, OH 2,666 31,623 34,289 908 1996 (Note 4)
Richmond Square, Richmond, IN 3,410 19,638 23,048 1,262 1996 (Note 4)
River Oaks Center, Calumet City, IL 30,884 101,235 132,119 3,412 1997 (Note 4)
Rockaway Townsquare, Rockaway, NJ 50,500 219,209 269,709 1,569 1998 (Note 4)
Rolling Oaks Mall, North San Antonio, TX 2,577 39,837 42,414 8,802 1998 (Note 4)
Roosevelt Field, Garden City, NY 165,500 705,786 871,286 5,064 1998 (Note 4)
Ross Park Mall, Pittsburgh, PA 24,174 97,773 121,947 9,543 1996 (Note 4)
Santa Rosa Plaza, Santa Rosa, CA 10,400 87,942 98,342 631 1998 (Note 4)
South Hills Village, Pittsburgh, PA 23,453 126,619 150,072 3,955 1997 (Note 4)
South Park Mall, Shreveport, LA 929 16,436 17,365 4,454 1975
South Shore Plaza, Braintree, MA 101,200 301,674 402,874 2,158 1998 (Note 4)
Southern Park Mall, Youngstown, OH 17,079 90,855 107,934 6,234 1996 (Note 4)
</TABLE>
83
<PAGE>
SIMON PROPERTY GROUP, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
SCHEDULE III
(Dollars in thousands)
<TABLE>
<CAPTION>
Cost Capitalized
Initial Cost Subsequent to Acquisition
------------------------------- -----------------------------
Buildings and Buildings and
Name, Location Encumbrances Land Improvements Land Improvements
- ------------------------------------- ------------ ---- ------------- ---- -------------
<S> <C> <C> <C> <C> <C>
Southgate Mall, Yuma, AZ 0 1,817 7,974 0 3,310
St Charles Towne Center
Waldorf, MD 0 9,329 52,974 1,180 9,667
Summit Mall, Akron, OH 0 24,814 45,036 0 11,106
Sunland Park Mall, El Paso, TX 39,506 2,896 28,900 0 3,073
Tacoma Mall, Tacoma, WA 92,474 39,504 125,826 0 4,413
Tippecanoe Mall, Lafayette, IN 62,255 4,187 8,474 5,517 32,494
Town Center at Boca Raton
Boca Raton, FL 0 64,200 307,511 0 831
Towne East Square, Wichita, KS 81,006 9,495 18,479 2,042 9,177
Towne West Square, Wichita, KS 0 988 21,203 76 6,987
Treasure Coast Square, Jenson Beach, FL 53,218 11,124 73,108 0 3,308
Tyrone Square, St. Petersburg, FL 0 15,638 120,962 0 9,840
University Mall, Little Rock, AR 0 123 17,411 0 815
University Mall, Pensacola, FL 0 4,741 26,657 0 2,939
University Park Mall, South Bend, IN 59,500 15,105 61,466 0 7,902
Upper Valley Mall, Springfield, OH 30,940 8,421 38,745 0 1,305
Valle Vista Mall, Harlingen, TX 42,130 1,398 17,266 372 7,978
Virginia Center Commons, Richmond, VA 0 9,764 50,757 4,149 2,909
Walt Whitman Mall, Huntington Station, NY 0 51,700 111,170 3,579 20,660
Washington Square, Indianapolis, IN 33,541 20,146 41,248 0 2,747
West Ridge Mall, Topeka, KS 44,288 5,775 34,132 197 3,811
Westminster Mall, Westminster, CA 0 45,200 84,709 0 132
White Oaks Mall, Springfield, IL 16,500 3,024 35,692 1,153 13,980
Windsor Park Mall, San Antonio, TX 14,636 1,194 16,940 130 3,253
Woodville Mall, Toledo, OH 0 1,831 4,454 0 665
Community Shopping Centers
Arboretum, The, Austin, TX 34,000 7,640 36,778 0 6
Arvada Plaza, Arvada, CO 0 70 342 608 699
Aurora Plaza, Aurora, CO 0 35 5,754 0 982
Bloomingdale Court, Bloomingdale, IL 27,359 8,764 26,184 0 1,617
Boardman Plaza, Youngstown, OH 18,277 8,189 26,355 0 1,694
Bridgeview Court, Bridgeview, IL 0 302 3,638 0 703
Brightwood Plaza, Indianapolis, IN 0 65 128 0 252
Buffalo Grove Towne Center, Buffalo
Grove, IL 0 1,387 6,602 126 256
Celina Plaza, El Paso, TX 0 138 815 0 47
Century Mall, Merrillville, IN 0 2,190 9,589 0 1,376
Charles Towne Square, Charleston, SC 0 446 1,768 425 10,917
Chesapeake Center, Chesapeake, VA 6,563 5,352 12,279 0 74
Cohoes Commons, Rochester, NY 0 1,698 8,426 0 (72)
Countryside Plaza, Countryside, IL 0 1,243 8,507 0 473
Eastgate Consumer Mall, Indianapolis, IN 22,929 424 4,722 187 2,880
Eastland Plaza, Tulsa, OK 0 908 3,709 0 (26)
Forest Plaza, Rockford, IL 16,904 4,187 16,818 453 552
Fox River Plaza, Elgin, IL 12,654 2,908 9,453 0 45
Glen Burnie Mall, Glen Burnie, MD 0 7,422 22,778 0 2,424
Great Lakes Plaza, Cleveland, OH 0 1,028 2,025 0 3,138
Greenwood Plus, Greenwood, IN 0 1,350 1,792 0 3,680
Griffith Park Plaza, Griffith, IN 0 0 2,412 0 111
Grove at Lakeland Square, The,
Lakeland, FL 3,750 5,237 6,016 0 921
</TABLE>
<TABLE>
<CAPTION>
Gross Amounts At
Which Carried
At Close of Period
------------------------------
Buildings and Accumulated Date of
Name, Location Land Improvements Total Depreciation Construction
- ------------------------------------- ---- ------------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Southgate Mall, Yuma, AZ 1,817 11,284 13,101 2,213 1988 (Note 3)
St Charles Towne Center
Waldorf, MD 10,509 62,641 73,150 12,805 1990
Summit Mall, Akron, OH 24,814 56,142 80,956 4,048 1996 (Note 4)
Sunland Park Mall, El Paso, TX 2,896 31,973 34,869 7,687 1988
Tacoma Mall, Tacoma, WA 39,504 130,239 169,743 8,978 1996 (Note 4)
Tippecanoe Mall, Lafayette, IN 9,704 40,968 50,672 9,214 1973
Town Center at Boca Raton
Boca Raton, FL 64,200 308,342 372,542 2,078 1998 (Note 4)
Towne East Square, Wichita, KS 11,537 27,656 39,193 7,361 1975
Towne West Square, Wichita, KS 1,064 28,190 29,254 6,774 1980
Treasure Coast Square, Jenson Beach, FL 11,124 76,416 87,540 5,135 1996 (Note 4)
Tyrone Square, St. Petersburg, FL 15,638 130,802 146,440 8,540 1996 (Note 4)
University Mall, Little Rock, AR 123 18,226 18,349 4,659 1967
University Mall, Pensacola, FL 4,741 29,596 34,337 3,585 1994 (Note 3)
University Park Mall, South Bend, IN 15,105 69,368 84,473 24,542 1996 (Note 4)
Upper Valley Mall, Springfield, OH 8,421 40,050 48,471 2,790 1996 (Note 4)
Valle Vista Mall, Harlingen, TX 1,770 25,244 27,014 5,280 1983
Virginia Center Commons, Richmond, VA 13,913 53,666 67,579 2,950 1996 (Note 4)
Walt Whitman Mall, Huntington Station, NY 55,279 131,830 187,109 1,259 1998 (Note 4)
Washington Square, Indianapolis, IN 20,146 43,995 64,141 2,938 1996 (Note 4)
West Ridge Mall, Topeka, KS 5,972 37,943 43,915 7,322 1988
Westminster Mall, Westminster, CA 45,200 84,841 130,041 616 1998 (Note 4)
White Oaks Mall, Springfield, IL 4,177 49,672 53,849 6,802 1977
Windsor Park Mall, San Antonio, TX 1,324 20,193 21,517 4,866 1976
Woodville Mall, Toledo, OH 1,831 5,119 6,950 415 1996 (Note 4)
Community Shopping Centers
Arboretum, The, Austin, TX 7,640 36,784 44,424 87 1998 (Note 4)
Arvada Plaza, Arvada, CO 678 1,041 1,719 302 1966
Aurora Plaza, Aurora, CO 35 6,736 6,771 1,722 1966
Bloomingdale Court, Bloomingdale, IL 8,764 27,801 36,565 4,063 1987
Boardman Plaza, Youngstown, OH 8,189 28,049 36,238 1,890 1996 (Note 4)
Bridgeview Court, Bridgeview, IL 302 4,341 4,643 817 1988
Brightwood Plaza, Indianapolis, IN 65 380 445 118 1965
Buffalo Grove Towne Center, Buffalo
Grove, IL 1,513 6,858 8,371 586 1988
Celina Plaza, El Paso, TX 138 862 1,000 180 1978
Century Mall, Merrillville, IN 2,190 10,965 13,155 3,417 1992 (Note 3)
Charles Towne Square, Charleston, SC 871 12,685 13,556 0 1976
Chesapeake Center, Chesapeake, VA 5,352 12,353 17,705 855 1996 (Note 4)
Cohoes Commons, Rochester, NY 1,698 8,354 10,052 2,024 1984
Countryside Plaza, Countryside, IL 1,243 8,980 10,223 2,075 1977
Eastgate Consumer Mall, Indianapolis, IN 611 7,602 8,213 3,190 1991 (Note 3)
Eastland Plaza, Tulsa, OK 908 3,683 4,591 595 1986
Forest Plaza, Rockford, IL 4,640 17,370 22,010 2,346 1985
Fox River Plaza, Elgin, IL 2,908 9,498 12,406 1,297 1985
Glen Burnie Mall, Glen Burnie, MD 7,422 25,202 32,624 1,718 1996 (Note 4)
Great Lakes Plaza, Cleveland, OH 1,028 5,163 6,191 440 1996 (Note 4)
Greenwood Plus, Greenwood, IN 1,350 5,472 6,822 729 1979 (Note 3)
Griffith Park Plaza, Griffith, IN 0 2,523 2,523 667 1979
Grove at Lakeland Square, The, 5,237 6,937 12,174 543 1996 (Note 4)
Lakeland, FL
</TABLE>
84
<PAGE>
SIMON PROPERTY GROUP, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
SCHEDULE III
(Dollars in thousands)
<TABLE>
<CAPTION>
Cost Capitalized
Initial Cost Subsequent to Acquisition
------------------------------- -----------------------------
Buildings and Buildings and
Name, Location Encumbrances Land Improvements Land Improvements
- ------------------------------------- ------------ ---- ------------- ---- -------------
<S> <C> <C> <C> <C> <C>
Hammond Square, Sandy Springs, GA 0 0 27 0 1
Highland Lakes Center, Orlando, FL 14,377 13,951 18,490 0 340
Ingram Plaza, San Antonio, TX 0 421 1,802 4 21
Keystone Shoppes, Indianapolis, IN 0 0 4,232 0 0
Knoxville Commons, Knoxville, TN 0 3,731 5,345 0 1,623
Lake Plaza, Waukegan, IL 0 2,868 6,420 0 340
Lake View Plaza, Orland Park, IL 22,169 4,775 17,586 0 554
Lima Center, Lima, OH 0 1,808 5,151 0 85
Lincoln Crossing, O'Fallon, IL 997 1,079 2,692 0 158
Mainland Crossing, Galveston, TX 2,226 1,850 1,737 0 138
Maplewood Square, Omaha, NE 0 466 1,249 0 577
Markland Plaza, Kokomo, IN 0 210 1,258 0 453
Martinsville Plaza, Martinsville, VA 0 0 584 0 45
Marwood Plaza, Indianapolis, IN 0 52 3,597 0 107
Matteson Plaza, Matteson, IL 11,159 1,830 9,737 0 1,683
Memorial Plaza, Sheboygan, WI 0 250 436 0 857
Mounds Mall Cinema, Anderson, IN 0 88 158 0 1
Muncie Plaza, Muncie, IN 626 10,626 (397) 177
New Castle Plaza, New Castle, IN 0 128 1,621 0 641
North Ridge Plaza, Joliet, IL 0 2,831 7,699 0 438
North Riverside Park Plaza,
N. Riverside, IL 7,535 1,062 2,490 0 429
Northland Plaza, Columbus, OH 0 4,490 8,893 0 1,035
Northwood Plaza, Fort Wayne, IN 0 302 2,922 0 566
Park Plaza, Hopkinsville, KY 0 300 1,572 0 89
Regency Plaza, St. Charles, MO 1,878 616 4,963 0 165
Rockaway Convenience Center
Rockaway, NJ 2,900 12,500 0 0
St. Charles Towne Plaza, Waldorf, MD 30,742 8,779 18,993 0 141
Teal Plaza, Lafayette, IN 0 99 878 0 2,957
Terrace at The Florida Mall, Orlando, FL 4,688 5,647 4,126 0 981
Tippecanoe Plaza, Lafayette, IN 0 265 440 305 4,842
University Center, South Bend, IN 0 2,388 5,214 0 71
Wabash Village, West Lafayette, IN 0 0 976 0 204
Washington Plaza, Indianapolis, IN 0 941 1,697 0 13
West Ridge Plaza, Topeka, KS 4,612 1,491 4,620 0 551
White Oaks Plaza, Springfield, IL 12,345 3,265 14,267 0 193
Wichita Mall, Wichita, KS 0 0 4,535 0 1,710
Wood Plaza, Fort Dodge, IA 0 45 380 0 756
Specialty Retail Centers
The Forum Shops at Caesars,
Las Vegas, NV 175,000 0 72,866 0 58,458
Trolley Square, Salt Lake City, UT 27,141 4,899 27,539 363 7,750
Office ,Mixed-Use Properties and Other
The Charles Hotel 0 23,500 0 0 0
Lenox Building, Atlanta, GA 0 57,778 0 1
Net Lease Properties 847 10,975 0 0 0
New Orleans Centre/CNG Tower,
New Orleans, LA 0 3,679 41,231 0 3,164
O Hare International Center, 0
</TABLE>
<TABLE>
<CAPTION>
Gross Amounts At
Which Carried
At Close of Period
------------------------------
Buildings and Accumulated Date of
Name, Location Land Improvements Total Depreciation Construction
- ------------------------------------- ---- ------------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Hammond Square, Sandy Springs, GA 0 28 28 7 1974
Highland Lakes Center, Orlando, FL 13,951 18,830 32,781 1,344 1996 (Note 4)
Ingram Plaza, San Antonio, TX 425 1,823 2,248 560 1980
Keystone Shoppes, Indianapolis, IN 0 4,232 4,232 128 1997 (Note 4)
Knoxville Commons, Knoxville, TN 3,731 6,968 10,699 1,107 1987
Lake Plaza, Waukegan, IL 2,868 6,760 9,628 871 1986
Lake View Plaza, Orland Park, IL 4,775 18,140 22,915 2,422 1986
Lima Center, Lima, OH 1,808 5,236 7,044 355 1996 (Note 4)
Lincoln Crossing, O'Fallon, IL 1,079 2,850 3,929 347 1990
Mainland Crossing, Galveston, TX 1,850 1,875 3,725 147 1996 (Note 4)
Maplewood Square, Omaha, NE 466 1,826 2,292 396 1970
Markland Plaza, Kokomo, IN 210 1,711 1,921 469 1974
Martinsville Plaza, Martinsville, VA 0 629 629 332 1967
Marwood Plaza, Indianapolis, IN 52 3,704 3,756 700 1962
Matteson Plaza, Matteson, IL 1,830 11,420 13,250 1,609 1988
Memorial Plaza, Sheboygan, WI 250 1,293 1,543 306 1966
Mounds Mall Cinema, Anderson, IN 88 159 247 50 1974
Muncie Plaza, Muncie, IN 229 10,803 11,032 295 1998
New Castle Plaza, New Castle, IN 128 2,262 2,390 591 1966
North Ridge Plaza, Joliet, IL 2,831 8,137 10,968 1,237 1985
North Riverside Park Plaza,
N. Riverside, IL 1,062 2,919 3,981 782 1977
Northland Plaza, Columbus, OH 4,490 9,928 14,418 1,235 1988
Northwood Plaza, Fort Wayne, IN 302 3,488 3,790 832 1974
Park Plaza, Hopkinsville, KY 300 1,661 1,961 377 1968
Regency Plaza, St. Charles, MO 616 5,128 5,744 645 1988
Rockaway Convenience Center
Rockaway, NJ 2,900 12,500 15,400 89 1998 (Note 4)
St. Charles Towne Plaza, Waldorf, MD 8,779 19,134 27,913 2,733 1987
Teal Plaza, Lafayette, IN 99 3,835 3,934 266 1962
Terrace at The Florida Mall, Orlando, FL 5,647 5,107 10,754 489 1996 (Note 4)
Tippecanoe Plaza, Lafayette, IN 570 5,282 5,852 873 1974
University Center, South Bend, IN 2,388 5,285 7,673 3,639 1996 (Note 4)
Wabash Village, West Lafayette, IN 0 1,180 1,180 286 1970
Washington Plaza, Indianapolis, IN 941 1,710 2,651 713 1996 (Note 4)
West Ridge Plaza, Topeka, KS 1,491 5,171 6,662 685 1988
White Oaks Plaza, Springfield, IL 3,265 14,460 17,725 1,886 1986
Wichita Mall, Wichita, KS 0 6,245 6,245 1,598 1969
Wood Plaza, Fort Dodge, IA 45 1,136 1,181 272 1968
Specialty Retail Centers
The Forum Shops at Caesars,
Las Vegas, NV 0 131,324 131,324 19,008 1992
Trolley Square, Salt Lake City, UT 5,262 35,289 40,551 6,565 1986 (Note 3)
Office ,Mixed-Use Properties and Other
The Charles Hotel 23,500 0 23,500 0
Lenox Building, Atlanta, GA 0 57,779 57,779 417 1998 (Note 4)
Net Lease Properties 10,975 0 10,975 0
New Orleans Centre/CNG Tower,
New Orleans, LA 3,679 44,395 48,074 2,893 1996 (Note 4)
O Hare International Center,
</TABLE>
85
<PAGE>
SIMON PROPERTY GROUP, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
SCHEDULE III
(Dollars in thousands)
<TABLE>
<CAPTION>
Cost Capitalized
Initial Cost Subsequent to Acquisition
------------------------------- -----------------------------
Buildings and Buildings and
Name, Location Encumbrances Land Improvements Land Improvements
- ------------------------------------- ------------ ---- ------------- ---- -------------
<S> <C> <C> <C> <C> <C>
Rosemont, IL 0 125 60,287 1 9,128
Riverway, Rosemont, IL 0 8,739 129,175 16 6,282
Three Dag Hammarskjold (Land) 0 8,625 0 0 0
Development Projects
Bowie Town Center, Bowie, MD 6,000 570 0 317
Indian River Peripheral, Vero 0 0 0 0
Beach, FL 790 57 0 0
Shops at North East Plaza, The,
Hurst, TX 8,988 2,198 4,376 1,429
Victoria Ward, Honolulu, HI 0 0 1,400 0 475
Waterford Lakes, Orlando, FL 0 0 1,114 11,944 2,096
Other 0 0 314 0 326
Corporate 0 0 500 280 3,799
---------- ---------- ---------- ------- ----------
$2,775,241 $1,981,944 $8,465,064 $84,517 $1,072,246
========== ========== ========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
Gross Amounts At
Which Carried
At Close of Period
------------------------------
Buildings and Accumulated Date of
Name, Location Land Improvements Total Depreciation Construction
- ------------------------------------- ---- ------------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Rosemont, IL 126 69,415 69,541 17,793 1988
Riverway, Rosemont, IL 8,755 135,457 144,212 33,972 1991
Three Dag Hammarskjold (Land) 8,625 0 8,625 0 1998 (Note 4)
Development Projects
Bowie Town Center, Bowie, MD 6,000 887 6,887 0
Indian River Peripheral, Vero 0 0 0 0
Beach, FL 790 57 847 0 1996 (Note 4)
Shops at North East Plaza, The,
Hurst, TX 13,364 3,627 16,991 0
Victoria Ward, Honolulu, HI 0 1,875 1,875 0
Waterford Lakes, Orlando, FL 11,944 3,210 15,154 0
Other 0 640 640 0
Corporate 280 4,299 4,579 779
---------- ---------- ----------- --------
$2,066,461 $9,537,310 $11,603,771 $688,955
========== ========== =========== ========
</TABLE>
86
<PAGE>
SIMON PROPERTY GROUP, L.P.
NOTES TO SCHEDULE III AS OF DECEMBER 31, 1998
(Dollars in thousands)
(1) Reconciliation of Real Estate Properties:
The changes in real estate assets for the years ended December 31, 1998,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ---------- ----------
<S> <C> <C> <C>
Balance, beginning of year $ 6,814,065 $5,273,465 $2,143,925
Acquisitions 4,676,634 1,238,909 2,843,287
Improvements 356,829 312,558 224,605
Disposals (126,454) (10,867) (19,579)
Consolidation/Deconsolidation (117,303) -- 81,227
----------- ---------- ----------
Balance, close of year $11,603,771 $6,814,065 $5,273,465
=========== ========== ==========
</TABLE>
The aggregate net book value for federal income tax purposes as of December
31, 1998 was $6,306,234.
(2) Reconciliation of Accumulated Depreciation:
The changes in accumulated depreciation and amortization for the years
ended December 31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Balance, beginning of year $448,353 $270,637 $147,341
Acquisitions 25,839 -- --
Carryover of minority
partners' interest in
accumulated depreciation
of DeBartolo Properties -- -- 13,505
Depreciation expense 246,934 183,357 120,565
Disposals (32,171) (5,641) (10,774)
-------- -------- --------
Balance, close of year $688,955 $448,353 $270,637
======== ======== ========
</TABLE>
Depreciation of the SPG 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 SPG Operating Partnership or the Simons. The
date of construction represents acquisition date.
87
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibits Page
----
<S> <C> <C>
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 SPG Operating
Partnership on September 12, 1997).
2.3 Agreement and Plan of Merger among SDG, CPI and CRC (incorporated by
reference to Exhibit 10.1 in the Form 8-K filed by SDG on February 24,
1998).
3.1 Sixth Amended and Restated Limited Partnership Agreement of the SPG
Operating Partnership (incorporated by reference to Exhibit 4.1 of the
Form 8-K filed by the Companies on October 9, 1998).
4.1 Indenture, dated as of November 26, 1996, by and among the SPG
Operating Partnership and The Chase Manhattan Bank, as trustee
(incorporated by reference to the form of this document filed as
Exhibit 4.1 to the Registration Statement on Form S-3 (Reg. No.
333-11491)).
4.2 Supplemental Indenture, dated as of June 22, 1998, by and among the SPG
Operating Partnership and The Chase Manhattan Bank, as trustee,
relating to the Securities (incorporated by reference as Exhibit 4.2 to
the Registration Statement of Simon DeBartolo Group, L.P. on Form S-4
(Reg. No. 333-63645)).
10.1 Credit Agreement dated as of September 24, 1998 among the Simon
Operating Partnership, SPG and The Chase Manhattan Bank as
Administrative Agent. (incorporated by to Exhibit 4.1 of the Form 10-Q
filed by the Companies for the period ended September 30, 1998)
10.2 Second Amended and Restated Credit Agreement dated as of December 22,
1997 among the SPG Operating Partnership and Morgan Guaranty Trust
Company of New York, Union Bank of Switzerland and Chase Manhattan Bank
as Lead Agents (incorporated by reference to Exhibit 4.3 of SDG's 1997
Form 10-K).
10.3 Limited Partnership Agreement of SPG Realty Consultants, L.P.
(incorporated by reference to Exhibit 4.21 of the Form 8-K filed by the
Companies on October 9, 1998).
10.4(a) The SPG Operating Partnership 1998 Stock Incentive Plan (incorporated
by reference to Exhibit 10.5 of the Form S-4 filed by CPI on August 13,
1998 (Reg. No. 333-61399)).
10.5(a) Form of Employment Agreement between Hans C. Mautner and the Companies
(incorporated by reference to Exhibit 10.63 of the Form S-4 filed by
CPI on August 13, 1998 (Reg. No. 333-61399)).
10.6(a) Form of Employment Agreement between Mark S. Ticotin and the Companies
(incorporated by reference to Exhibit 10.64 of the Form S-4 filed by
CPI on August 13, 1998 (Reg. No. 333-61399)).
10.7(a) Form of Incentive Stock Option Agreement between the Companies and
Hans C. Mautner pursuant to the SPG Operating Partnership 1998 Stock
Incentive Plan (incorporated by reference to Exhibit 10.59 of the Form
S-4 filed by CPI on August 13, 1998 (Reg. No. 333-61399)).
10.8(a) Form of Incentive Stock Option Agreement between the Companies and
Mark S. Ticotin pursuant to the SPG Operating Partnership 1998 Stock
Incentive Plan (incorporated by reference to Exhibit 10.60 of the Form
S-4 filed by CPI on August 13, 1998 (Reg. No. 333-61399)).
10.9(a) Form of Nonqualified Stock Option Agreement between the Companies and
Hans C. Mautner pursuant to the SPG Operating Partnership 1998 Stock
Incentive Plan (incorporated by reference to Exhibit 10.61 of the Form
S-4 filed by CPI on August 13, 1998 (Reg. No. 333-61399)).
10.10(a) Form of Nonqualified Stock Option Agreement between the Companies and
Mark S. Ticotin pursuant to the SPG Operating Partnership 1998 Stock
Incentive Plan (incorporated by reference to Exhibit 10.62 of the Form
S-4 filed by CPI on August 13, 1998 (Reg. No. 333-61399)).
</TABLE>
88
<PAGE>
<TABLE>
<S> <C> <C>
10.11(a) CPI Executive Severance Policy, as amended and restated effective as of
August 11, 1998 (incorporated by reference to Exhibit 10.65 of the Form
S-4 filed by CPI on August 13, 1998 (Reg. No. 333-61399)).
10.12(b) Option Agreement to acquire the Excluded Retail Properties. (Previously
filed as Exhibit 10.10.)
10.13(b) Option Agreement to acquire the Excluded PropertiesLand. (Previously
filed as Exhibit 10.11.)
10.14(b) Option Agreements dated as of December 1, 1993 between the Management
Company and The SPG Operating Partnership (Previously filed as Exhibit
10.20.)
10.15(b) Option Agreement dated as of December 1, 1993 to acquire Development
Land. (Previously filed as Exhibit 10.22.)
10.16(b) Option Agreement dated December 1, 1993 between the Management Company
and The SPG Operating Partnership (Previously filed as Exhibit 10.25.)
10.17(b) Lock-Up Agreement dated December 20, 1993 between MSA and The SPG
Operating Partnership (Previously filed as Exhibit 10.27.)
10.18 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).)
10.19 Office Lease between the SPG Operating Partnership and an affiliate of
EJDC (Southwoods Executive Center)
10.20 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).)
10.21 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).)
10.22 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).)
10.23 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).)
10.24 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).)
10.25 Fourth Amendment to Purchase Option Agreement, dated as of July 15,
1996, between JCP Realty, Inc., and DRP, LP (incorporated by reference
to Exhibit 10.61 of SPG's 1996 Form 10-K).
10.26 Limited Partnership Agreement of SDG Macerich Properties, L.P. 90
21.1 List of Subsidiaries of the SPG Operating Partnership. 91
23.1 Consent of Arthur Andersen LLP.
(a) Represents a management contract, or compensatory plan,
contract or arrangement required to be filed pursuant to
Regulation S-K.
(b) Incorporated by reference to the exhibit indicated of Old
SPG's 1993 Form 10-K.
</TABLE>
89
<PAGE>
Exhibit 10.19
LEASE
Between
7655 CORPORATION
and
SIMON PROPERTY GROUP, L.P.
<PAGE>
INDEX OF LEASE
Between
7655 CORPORATION
and
SIMON PROPERTY GROUP, L.P.
Article/Heading Page
- --------------- ----
ARTICLE I - Basic Lease Information 1
ARTICLE II - Definition of Terms 2
ARTICLE III - Premises 3
ARTICLE IV - Term of Lease 3
ARTICLE V - Minimum Rent 3
ARTICLE VI - Condition of Premises 4
ARTICLE VII - Use of Premises 4
ARTICLE VIII - Alterations 7
ARTICLE IX - Maintenance of Premises, Indemnification and Insurance 7
ARTICLE X - Common Areas 11
ARTICLE XI - Mechanic's Lien or Claims 12
ARTICLE XII - Destruction and Restoration 12
ARTICLE XIII - Property in Premises 13
ARTICLE XIV - Access to Premises 13
ARTICLE XV - Surrender of Premises 13
ARTICLE XVI - Utilities 14
ARTICLE XVII - Assignment and Subletting 14
ARTICLE XVIII - Eminent Domain 15
ARTICLE XIX - Default by Tenant 16
ARTICLE XX - Default by Landlord 20
ARTICLE XXI - Estoppel Certificate, Attornment and Subordination 20
ARTICLE XXII - Holding Over 21
-i-
<PAGE>
ARTICLE XXIII - Quiet Enjoyment 22
ARTICLE XXIV - Reimbursement 22
ARTICLE XXV - Changes and Additions to Landlord's Parcel 22
ARTICLE XXVI - Notices 23
ARTICLE XXVII - Brokerage 23
ARTICLE XXVIII - General Provisions 23
ARTICLE XXIX - Warranty and Authority 24
ARTICLE XXX.- Master Lease Termination Agreement 24
ARTICLE XXXI - Complete Agreement 25
-ii-
<PAGE>
LEASE
THIS LEASE, made and entered into by and between 7655 Corporation, ("Landlord"),
and Simon Property Group, L.P., ("Tenant"), as of the 1st day of January, 1999
("Effective Date").
WITNESSETH:
IN CONSIDERATION of the payments of rents and other charges provided for herein
and the covenants and conditions hereinafter set forth, Landlord and Tenant
hereby covenant and agree as follows:
ARTICLE I Basic Lease Information
1.1. This Article I is an integral part of this Lease and all of the terms
hereof are incorporated into this Lease in all respects. In addition to the
other provisions which are elsewhere defined in this Lease, the following,
whenever used in this Lease, shall have the meanings set forth in this Section
1.1:
1.1.1. Building: Southwoods Executive Centre, 100 DeBartolo Place,
situated in the Township of Boardman, County of Mahoning,
State of Ohio .
1.1.2. Premises: Approximately seven thousand ninety-two (7,092)
square feet of Floor Area (irregular in shape) on the ground
floor and approximately thirty- three thousand six hundred
eighteen (33,618) square feet of Floor Area (irregular in
shape) on the first floor of the Building, located
approximately as delineated in red on Exhibit "A" hereto
(Article III).
1.1.3. Office Space: A portion of the Premises consisting of
approximately three thousand six hundred sixty-seven (3,667)
square feet of Floor Area (irregular in shape) on the ground
floor and approximately thirty-three thousand (33,000) square
feet of Floor Area (irregular in shape) on the first floor of
the Building, located approximately as delineated in yellow on
Exhibit "A" hereto (Article III).
1.1.4. Storage Space: A portion of the Premises consisting of
approximately three thousand four hundred twenty-five (3,425)
square feet of Floor Area (irregular in shape) on the ground
floor, located approximately as delineated in green on Exhibit
"A" hereto (Article III).
1.1.5. Initial Term: Three (3) Lease Years following the Effective
Date (Article IV).
1.1.6. Renewal Terms: Two (2) consecutive periods of two (2) Lease
Years each (Article IV).
1.1.7. Term: The Initial Term, together with the Option Term(s), if
exercised (Article IV).
1.1.8. Minimum Rent:
--------------------------------------------------------------
Term Annual Minimum Rent
--------------------------------------------------------------
Initial Term Eleven and 50/100 Dollars ($11.50) per square
foot of Floor Area within the Office Space and
Five and no/100 Dollars ($5.00) per square
foot of Floor Area within the Storage Space
--------------------------------------------------------------
-1-
<PAGE>
- --------------------------------------------------------------------------------
--------------------------------------------------------------
First Renewal Term Twelve and 50/100 Dollars ($12.50) per
square foot of Floor Area and Five and
no/100 Dollars ($5.00) per square foot
of Floor Area within the Storage Space
--------------------------------------------------------------
(Article V).
1.1.9. Permitted Use: The Premises shall be occupied and used for the
purpose of general office purposes and for no other purpose
(Article VIII).
1.1.10. Notice Address:
(i) Landlord: 7620 Market Street, Post Office Box 9128,
Youngstown, Ohio 44513-9128;
(ii) Tenant: 115 West Washington Street, Indianapolis IN
46204 (Article XXVII).
1.2. Reference to Articles and Exhibits appearing in Section 1.1 are
intended to designate some of the other places in this Lease where additional
provisions applicable to the particular Lease provision appear. These references
are for convenience only and shall not be deemed all inclusive. Each reference
in this Lease to any of the Lease provisions contained in Section 1.1 shall be
construed to incorporate all of the terms provided for under such provisions and
such provisions shall be read in conjunction with all other provisions of this
Lease applicable thereto. If there is any conflict between any of the Lease
provisions set forth in Section 1.1 and any other provisions of this Lease, the
latter shall control.
ARTICLE II Definition of Terms
2.1. "Lease Year" shall mean each twelve (12) month period beginning with
the Effective Date, and each anniversary thereof. "Partial Lease Year" shall
mean any period of less than twelve (12) full calendar months.
2.2. "Floor Area" shall mean the "usable area" as such term is defined in
the American National Standard Method for Measuring Floor Area in Office
Buildings, ANSI Z65.1 -- 1989, approved June 21, 1989, by American National
Standards Institute, Inc. and commonly known as the "BOMA Standard."
2.3. "Landlord's Parcel" shall mean that portion (or portions) of the land
delineated in red on Exhibit "B-1" hereto and more particularly described in
Exhibit "B-2" hereto and the buildings and other improvements thereon which at
any time in question Landlord owns or which Landlord leases as tenant under a
sale leaseback or under a ground lease or sublease.
2.4. "Common Areas" shall mean all areas, facilities and improvements
provided from time to time for the general common use or benefit of the tenants
and other occupants, their officers, agents, employees, invitees and customers,
including, without limitation, all parking areas, roadways, pedestrian
sidewalks, truckways, access roads, driveways, ramps, loading docks, delivery
areas, parking lots and garages, courts, service corridors, hallways, roofs,
concourses, landscaped and vacant areas, elevators and escalators and stairs not
contained in leased areas, retaining walls, drinking fountains, public restrooms
and comfort stations, lounges, first aid stations, directory equipment,
information facilities, public meeting rooms, auditoriums, maintenance rooms,
Building management office rooms, lighting facilities, storm and sanitary sewer
systems, utility lines, and water filtration and treatment facilities,
including, but not limited to, disposal plants and lift stations and retention
ponds or basins, located within Landlord's Parcel.
-2-
<PAGE>
ARTICLE III Premises
Landlord hereby leases to Tenant and Tenant hereby rents from Landlord the
Premises. The Premises consist of both the Office Space and the Storage Space.
Nothing herein shall be deemed to distinguish the rights and obligations of
Landlord and Tenant between the Office Space and the Storage Space, the sole
reason for the distinction between such portions of the Premises being the
difference in applicable rate of Minimum Rent as provided in Section 5.2. The
Premises shall be deemed not to include either the land lying thereunder or the
exterior walls or roof of the Building.
ARTICLE IV Term of Lease
4.1. TO HAVE AND TO HOLD for a term to commence as of the Effective Date
and ending after the expiration of three (3) Lease Years set forth in Article I,
unless extended as provided in Section 4.2 hereof, or sooner terminated as
herein provided. Upon the request of either party, the parties hereto shall join
in the execution of an agreement stipulating the expiration date of the Initial
Term.
4.2. Provided no Event of Default has occurred with respect to Tenant and
is then continuing, Tenant may extend the Term for one (1) consecutive term (the
"First Renewal Term")of two (2) Lease Years by giving notice of its intention to
do so to Landlord. Provided no Event of Default has occurred with respect to
Tenant and is then continuing, and Tenant elects to extend the Term for the
First Renewal Term as aforesaid, then Tenant may further extend the Term for one
(1) further consecutive term (the "Second Renewal Term")of two (2) Lease Years
by giving an additional notice of its intention to do so to Landlord. Any such
notice of extension must be given by Tenant and received by Landlord at least
one (1) year prior to the expiration of the Initial Term, and, if Tenant elects
to extend the Term as aforesaid, at least one (1) year prior to the expiration
of this Lease as extended, the timeliness of such receipt being the essence of
this Article. Said renewal(s) shall be upon all the terms and provisions of this
Lease except that no further renewals or options shall be included, and the
Minimum Rent for the Renewal Period(s) shall be as provided in Section 5.2.
ARTICLE V Minimum Rent
5.1. Tenant shall pay to Landlord from and after the Effective Date the
Minimum Rent in equal monthly installments, all in advance, on the first day of
every calendar month during the Term. If the Effective Date should occur on a
day other than the first day of the month or if the Term ends on a day other
than the last day of the month, Tenant shall pay Minimum Rent and all items of
additional rent prorated based upon the number of rental days in such fractional
month over the number of days contained in such month.
5.2. During the Initial Term and the First Renewal Term, Tenant shall pay
Minimum Rent at the annual minimum rent rates set forth in Section 1.1, as
provided in Section 5.1. If Tenant elects to extend the Term for the Second
Renewal Term, Tenant shall pay Minimum Rent during the Second Renewal Term equal
to the Market Rent. The term "Market Rent" means the amount of rent that would
be charged for comparable premises with comparable levels of finish in a
suburban location in the Youngstown, Ohio metropolitan area, assuming a lease
containing terms and conditions (other than Minimum Rent) comparable to this
Lease. Promptly after delivery of Tenant's notice, Landlord and Tenant shall
seek to agree upon the Market Rent. If Landlord and Tenant are unable to reach
agreement upon the Market Rent within sixty (60) days after delivery of Tenant's
notice, either Landlord or Tenant may institute the appraisal procedure set
forth herein by notice to the other party. In the event the parties are unable
to mutually agree upon the Market Rent within thirty (30) days of the date the
appraisal procedure of this Section 5.2 is instituted as provided in this
Agreement, they shall each select one (1) appraiser to determine the Market
Rent. Each appraiser so selected shall furnish Landlord and Tenant with a
written appraisal within thirty (30) days of his or her selection, setting forth
his or her determination of Market Rent. If only one appraisal is submitted
within the requisite time period, the determination of the Market Rent pursuant
to such appraisal shall be final and binding on Landlord and Tenant. If both
appraisals are submitted within such time period, and if the two appraisals so
submitted differ by less than ten percent (10%) of the lower of the two, the
average of the two (2) shall be the determination of fair
-3-
<PAGE>
market value and shall be final and binding on Landlord and Tenant. If the two
appraisals differ by more than ten percent (10%) of the lower of the two (2),
then the two (2) appraisers shall immediately select a third appraiser who shall
within thirty (30) days after his or her selection make a determination of the
Market Rent and submit such determination to Landlord and Tenant. The third
appraisal will then be averaged with the closer of the two (2) previous
appraisals and the result shall be the determination of fair market value and
shall be final and binding on Landlord and Tenant, unless the first two (2)
appraisals differ from the third appraisal by the same amount, in which case the
first two (2) appraisals shall be disregarded and the determination of the fair
market value pursuant to the third appraisal shall be final and binding on
Landlord and Tenant. All appraisers appointed pursuant to this Section 5.2 shall
be professional commercial real estate appraisers, experienced in the appraisal
of office properties in the northeast Ohio region. The cost of each appraiser
shall be borne by equally by Landlord and Tenant.
5.3. At any time during the Initial Term, either Landlord or Tenant may
elect to cause a licensed engineering or architectural firm measure and
calculate the Floor Area contained within the Premises, the Office Space and the
Storage Space. Such engineering or architectural firm shall certify its
measurements and calculations to Landlord and Tenant. Unless and until such
determination is made, the Floor Area of the Premises shall be deemed to be
forty thousand (40,000) square feet, the Floor Area of the Office Space shall be
deemed to be thirty-six thousand six hundred sixty-seven (36,667) square feet,
and the Floor Area of the Storage Space shall be deemed to be three thousand
four hundred twenty-five (3,425) square feet.
5.4. If Tenant shall fail to pay any installment of Minimum Rent or any
item of additional rent within ten (10) days after the date the same become due
and payable, then Tenant shall pay to Landlord a late payment service charge
("Late Charge") covering administrative and overhead expenses equal to the
greater of (a) Two Hundred Fifty and 00/100 Dollars ($250.00), or (b) five cents
(5) per each dollar so overdue. The provision herein for the payment of the Late
Charge shall not be construed to extend the date for payment of any sums
required to be paid by Tenant hereunder or to relieve Tenant of its obligation
to pay all such sums at the time or times herein stipulated.
5.5. All sums, other than Minimum Rent, payable under any provisions of
this Lease shall be deemed additional rent, and upon failure of Tenant to pay
any such sum, Landlord shall be entitled to exercise any and all rights and
remedies contained herein or at law for the failure to pay Minimum Rent.
ARTICLE VI Condition of Premises
Tenant has inspected the Premises prior to executing this Lease and accepts
the Premises on an "as is," "where is" basis and with all faults, and Tenant
expressly acknowledges that, in consideration of the agreements of Landlord
herein, except as otherwise specified herein, Landlord makes no warranty or
representation, express or implied, or arising by operation of law, including,
but not limited to, any warranty of condition, habitability, merchantability,
tenantability or fitness for a particular purpose, in respect of the Premises,
the Building or Landlord's Parcel. Tenant waives and releases any claim that
Tenant or any of its successors, assigns, or tenants may have against Landlord
now or in the future arising from or relating to any condition, including any
environmental condition, within the Premises or Building or on Landlord's
Parcel.
ARTICLE VII Use of Premises
7.1. Tenant represents, warrants and covenants as follows:
7.1.1. The Premises shall be occupied and used only for the
Permitted Use.
7.1.2. Throughout the Term, Tenant shall operate its business at
the Premises in a respectable, reputable, tasteful,
competent and dignified manner in a manner consistent with
Tenant's prior conduct.
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7.1.3. Landlord is executing this Lease in reliance upon the
covenants contained in this Section 7.1 and such covenants
are a material element of the consideration inducing
Landlord to enter into and execute this Lease.
Nothing in this Lease shall be construed as creating an obligation for Tenant to
continuously occupy all or any portion of the Premises. If Tenant ceases
occupying any material portion of the Premises, Tenant shall notify Landlord and
shall secure such portion against intrusion by unauthorized personnel.
7.2. Tenant shall abide by all reasonable rules and regulations
established by Landlord, from time to time, with respect to the use and care of
the Premises and Landlord's Parcel, including the Building and all Common Areas,
and shall:
7.2.1. Conduct no auction, fire or bankruptcy sales or similar
practices.
7.2.2. Not in any way obstruct the hallways within or sidewalks
adjacent to the Building and store all trash and refuse in
appropriate containers within the Premises. Tenant shall not
burn any trash or rubbish in or about the Premises or
anywhere else within the confines of the Landlord's Parcel.
7.2.3. Load or unload all supplies, fixtures, equipment and
furniture only through the entrances designated by Landlord
for such activities. Tenant shall not permit trailers or
trucks servicing the Premises to remain parked on Landlord's
Parcel beyond those periods necessary to service Tenant's
operations.
7.2.4. Not permit any rubbish or refuse of any nature emanating
from the Premises to accumulate; and not permit the plumbing
facilities within or servicing the Premises to be used for
any purposes other than that for which they were
constructed, and no foreign substances of any kind shall be
thrown therein.
7.2.5. Not solicit business in Common Areas or distribute any
handbills or other advertising matter in the Common Areas.
7.2.6. Prevent the Premises from being used in any way which may be
a nuisance, annoyance, inconvenience or damage to the other
tenants or occupants of the Building, including, without
limiting the generality of the foregoing, the operation of
any instrument or apparatus or equipment or the emission of
an odor discernible outside of the Premises and which may be
deemed offensive in nature or noise by the playing of any
musical instrument or radio or television or the use of a
microphone, loudspeaker, electrical equipment or other
equipment which may be heard outside of the Premises.
Landlord acknowledges that (i) odors from coffee makers and
occasional cooking odors from the operation of the limited
kitchen facility Tenant has constructed within the Premises;
and (ii) customary ammonia odors from the normal operation
of the blueprint machines installed by Tenant shall not be
deemed to be a violation of the preceding provision.
7.2.7. Not use, occupy, suffer or permit the Premises or any part
thereof to be used or occupied for any purpose which may be
contrary to law or to the rules or regulations of any public
authority or which may be prohibited by or violate any of
Landlord's insurance policies or the rules or regulations of
the Fire Insurance Rating Organization having jurisdiction
or any similar body of which Tenant has actual knowledge, or
which will increase any insurance rates and premiums on the
Premises, the Building or any other buildings or
improvements on Landlord's Parcel.
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7.2.8. Promptly comply with all present and future laws,
regulations or rules of any county, state, federal and other
governmental authority and any bureau and department
thereof, and of the National Board of Fire Underwriters or
any other body exercising similar function which may be
applicable to the Premises and Tenant's specific use
thereof, subject to the supervision of Landlord, excluding
the making of any required changes to structural and other
components of the Building which are Landlord's obligation
to maintain hereunder. If Tenant shall install any
electrical equipment that overloads the lines in the
Premises, Tenant shall make whatever changes are necessary
to comply with the requirements of the insurance
underwriters and governmental authorities having
jurisdiction thereover.
7.2.9. Not specify or use or permit its architect, contractors,
subcontractors or any parties performing any work on behalf
of Tenant to specify or use any materials known, at the time
of such work, to contain any hazardous substance or
explosive, carcinogenic or otherwise environmentally
impacting materials, other than those that are usual and
customary in connection with the construction of any
alterations, improvements or additions, the plans and
specifications of which have been approved by Landlord
(which approval shall be not unreasonably withheld or
delayed) and provided, that the use, storage,
transportation, handling and disposal of such substances
shall at all times be in accordance with all applicable
federal, state, and local laws, statutes, ordinances, rules
and regulations. Upon completion of such work, Tenant, its
architect, contractor, subcontractor or other performing
party, as the case may be, shall deliver to Landlord or
Landlord's designee a certification stating that no,
hazardous substance or explosive, carcinogenic or otherwise
environmentally impacting materials have been specified or
used in such work except as permitted herein. Tenant shall
obligate its architect, contractor, subcontractor or other
performing party to provide such certification.
7.2.10. Not store, handle, use, sell, generate or release either
directly or indirectly on the Premises or elsewhere on
Landlord's Parcel, any hazardous substances. The term
"hazardous substances" shall mean any hazardous or toxic
substances, materials or wastes regulated under any federal,
state or local statute, ordinance, rule, regulation or other
law now or hereafter in effect pertaining to environmental
protection, contamination, remediation or worker safety,
including, without limitation, any substance, waste or
material, which now or hereafter (i) is listed by the United
States Department of Transportation or by the Environmental
Protection Agency as a "hazardous substance"; (ii) is
designated as a "hazardous substance" under or pursuant to
the Federal Water Pollution Control Act, as amended; (iii)
is defined as a "hazardous waste" under or pursuant to the
Resource Conservation and Recovery Act, as amended; (iv) is
defined as a "hazardous substance" under or pursuant to the
Comprehensive Environmental Response, Compensation and
Liability Act, as amended; or (v) is similarly designated or
defined under or pursuant to the Superfund Amendments and
Reauthorization Act and all other federal, state and local
laws relating in any way to the protection of the
environment. Upon notice to Tenant, Landlord may conduct an
environmental audit or similar related procedure of the
Premises. Notwithstanding the foregoing provisions, Tenant
will be using lubricants and cleaners, as well as other
items which are usual and customary in Tenant's type of
business, but not in any quantity greater than that which
would be found in a similar type business, which may be
deemed hazardous substances under the above definition.
Landlord consents to the presence and use of the same on the
Premises; provided, however, that the use, storage,
transportation, handling and disposal of such substances by
Tenant shall at all
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times be in accordance with all applicable federal, state,
and local laws, statutes, ordinances, rules and regulations.
Landlord acknowledges that, as of the Effective Date and to the actual
knowledge of Landlord, Tenant's occupancy of the Premises for the Permitted Use
does not violate the provisions of this Article VII.
7.3. If Tenant fails to keep or perform any covenant or term included in
Section 7.3 or violates any such covenant or term, and if Tenant fails to cure
such failure or violation promptly upon receipt of notice from Landlord and with
all due diligence, Landlord may, in addition to any and all other remedies
Landlord may have under this Lease or at law or in equity, cure or prosecute the
curing of such failure or violation and all third party expenses in connection
with such cure or prosecution of such cure of such failure or violation,
including without limitation legal fees, shall be paid by Tenant with the next
installment of Minimum Rent due under this Lease.
ARTICLE VIII Alterations
Tenant shall not make any alterations, improvements or additions of any
kind or nature to the Premises or any part thereof which affect the structural
components, mechanical, electrical or HVAC components or the roof of the
Building except with the prior approval of Landlord, which approval shall be in
Landlord's sole discretion. Tenant may make material alterations, improvements
or additions to the Premises or any part thereof which do not affect the
structural components, mechanical, electrical or HVAC components or the roof of
the Building, provided Tenant has received the prior approval of Landlord, which
approval shall not be unreasonably withheld, conditioned or delayed. Tenant may
make alterations, improvements or additions to the Premises or any part thereof
which are not material and do not affect the structural components, mechanical,
electrical or HVAC components or the roof of the Building, without prior
approval of Landlord. All alterations, improvements and additions to the
Premises shall be made in accordance with the plans and specifications prepared
by Tenant and approved by Landlord and in accordance with all applicable
building codes. The approval by Landlord of the plans and specifications shall
not constitute the assumption of any liability on the part of Landlord for their
compliance or conformity with applicable building codes and the requirements of
this Lease or for their accuracy, and Tenant shall be solely responsible for
such plans and specifications. Such alterations, improvements and additions to
the Premises shall be done in a good workmanlike manner using first-quality
materials and shall at once when made or installed be deemed to have attached to
the fee and to have become the property of Landlord (excluding all of Tenant's
furniture, fixtures and equipment, regardless of the method of installation in
the Premises) and shall remain for the benefit of Landlord at the end of the
Term, or other expiration of this Lease, in as good order and condition as they
were when installed, reasonable wear and tear excepted. Tenant shall require its
contractor and subcontractors to furnish Landlord Certificates of Insurance
evidencing insurance coverages with the limits as specified and referenced in
Exhibit "C".
ARTICLE IX Maintenance of Premises, Indemnification and Insurance
9.1. Provided no Event of Default has occurred and is continuing, Landlord
shall furnish Tenant with the services listed below during business hours.
9.1.1. Elevator and escalator service.
9.1.2. Electric facilities for lighting and small standard business
machines as currently available in the Premises. Landlord
will furnish the original installation of lamps or bulbs.
Replacement of lamps or bulbs, ballasts and starters shall
be at Tenant's expense.
9.1.3. Heating, ventilating and air conditioning, electric, water,
and sewer services as currently available in the Premises.
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9.1.4. Cleaning, janitorial and window washing services standard
for the Premises and Building's Common Areas, Monday through
Friday, inclusive but excluding New Years Day, Memorial Day,
the Fourth of July, Labor Day, Thanksgiving Day, and
Christmas Day.
The term "business hours" as used herein shall mean Monday through Friday,
inclusive, from 8:00 A.M. to 6:00 P.M. and from 9:00 A.M. to 2:00 P.M. on
Saturday, but excluding New Years Day, Memorial Day, the Fourth of July, Labor
Day, Thanksgiving Day, and Christmas Day. Tenant shall have access to the
Premises on all days of the year and all hours per day. If Tenant chooses to
operate areas of the Premises, other than its computer area, beyond the stated
business hours, Tenant may notify Landlord at least twenty-four (24) hours in
advance and Landlord shall provide the aforesaid services to such areas of the
Premises and Tenant will pay monthly, as billed, the sum of One Hundred Dollars
($100.00) per hour for such services. Provision of services at other times shall
be at Landlord's option and when so provided shall never be deemed a continuing
obligation of Landlord. Any new or additional electrical, plumbing or other
facilities required to service equipment installed by Tenant and all changes in
existing electrical, plumbing, mechanical and other facilities required by
Tenant (if permitted) shall be installed, furnished or made at Tenant's expense
in accordance with Article VIII. Landlord, while not warranting that any of the
above services will be free from interruptions or suspensions caused by repairs,
renewals, improvements, alterations, strikes, lockouts, accidents, inability of
Landlord to procure such service or to obtain fuel or supplies, or for other
cause or causes beyond Landlord's reasonable control, will nevertheless
diligently attempt to make such repairs or renewals to Building distribution
lines and facilities as may be required to restore any such service so
interrupted or suspended, and shall do so in a manner calculated to minimize, to
the extent commercially practicable, any interference with or interruption in
Tenant's use and occupancy of the Premises in accordance with this Lease. An
interruption or suspension of, or fluctuation in, any service resulting
aforesaid cause or causes shall not be construed as an eviction or disturbance
of possession or as an election by Landlord to terminate this Lease, nor shall
Landlord be in any way responsible or liable for damages, nor shall Tenant be
relieved from the performance of Tenant's obligations under this Lease.
Notwithstanding the foregoing, if an interruption or suspension of, or
fluctuation in, any service resulting from the aforesaid cause or causes shall
render the Premises untenantable for a period of forty-eight (48) hours the
Minimum Rent hereunder shall be abated until such service is resumed.
9.2. Except for those items which Landlord is expressly obligated to
maintain or repair hereunder, Tenant shall keep and maintain in good order,
condition and repair the Premises and every part thereof and the fixtures and
improvements therein. If Tenant refuses or neglects to commence or complete any
of the obligations above set forth promptly and with reasonable diligence
following receipt of notice from Landlord describing the nature of such failure,
Landlord may, but shall not be required to, make or complete said maintenance or
repairs and Tenant shall pay the reasonable cost thereof to Landlord upon demand
as additional rent.
9.3. Tenant represents, warrants and covenants as follows:
9.3.1. Tenant shall protect, defend, indemnify, save and hold
harmless Landlord and any fee owner or ground or underlying
landlords of Landlord's Parcel, or of the Building, against
and from any and all claims, liabilities, demands, fines,
suits, actions, proceedings, orders, decrees and judgments
of any kind or nature by, or in favor of, anyone whomsoever,
and against and from any and all costs, damages and
expenses, including reasonable attorneys' fees, resulting
from, or in connection with, loss of life, bodily or
personal injury or property damage arising, directly or
indirectly, out of, or from, or on account of: (i) any
accident or other occurrence in, upon, at or from the
Premises, or occasioned in whole or in part through the use
and occupancy of the Premises or any improvements therein or
appurtenances thereto, including, without limitation, the
negligence of Landlord (but excluding the gross negligence
or willful misconduct of Landlord), or by any act or
omission of Tenant or any subtenant, concessionaire or
licensee of Tenant, or their respective employees, agents,
contractors or
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invitees in, upon, at or from the Premises or its
appurtenances or any Common Areas; or (ii) any action of
Landlord or Landlord's agents or employees which is taken in
reliance upon any act, omission or statement of Tenant or
any subtenant, concessionaire or licensee of Tenant, or
their respective employees, agents or contractors.
9.3.2. Tenant, and all those claiming by, through and under Tenant,
shall store their property in and shall occupy and use the
Premises and any improvements therein and appurtenances
thereto, and all other portions of the Landlord's Parcel,
solely at their own risk, and except as set forth in Section
9.7 below, Tenant, and all those claiming by, through or
under Tenant, hereby release Landlord, to the full extent
permitted by law, from all claims of every kind, including
loss of life, personal or bodily injury, damage to
merchandise, equipment, fixtures or other property, or
damage to business or for business interruption, arising,
directly or indirectly, out of, or from, or on account of,
such occupancy and use, including, without limitation, the
negligence of Landlord, or resulting from any present or
future condition or state of repair thereof. The foregoing
sentence shall not be construed to exculpate Landlord from
liability for the failure to perform its contractual
obligations under this Lease.
9.3.3. Landlord shall not be responsible or liable at any time to
Tenant, or to those claiming by, through or under Tenant,
for any loss of life, bodily or personal injury, or damage
to property or business, or for business interruption, that
may be occasioned by any failure by any tenants or occupants
of Landlord's Parcel to comply with any of the terms of
their leases or agreements or that may be occasioned by or
through the acts, omissions or negligence of any other
persons, or any other tenants or occupants of Landlord's
Parcel; and Tenant hereby expressly waives any claim for
such damages against Landlord.
9.3.4. Landlord shall not be responsible or liable at any time for
any defects, latent or otherwise, in any buildings or
improvements in Landlord's Parcel or any of the equipment,
machinery, utilities, appliances or apparatus therein, nor
shall Landlord be responsible or liable at any time for loss
of life, or injury or damage to any person or to any
property or business of Tenant, or those claiming by,
through or under Tenant, caused by, or resulting from, the
bursting, breaking, leaking, running, seeping, overflowing
or backing up of water, steam, gas, sewage, snow or ice in
any part of the Premises or caused by, or resulting from,
acts of God or the element, or resulting from any defect or
negligence in the occupancy, construction, operation or use
of any buildings or improvements in Landlord's Parcel,
including the Premises, or any of the equipment, fixtures,
machinery, appliances or apparatus therein. The foregoing
sentence shall not be construed to exculpate Landlord from
liability for the failure to perform its contractual
obligations under this Lease.
9.3.5. Tenant shall give prompt notice to Landlord in case of fire
or other casualty or accidents in the Premises, or in the
building of which the Premises forms a part, or of any
defects therein or in any of Landlord's fixtures, machinery
or equipment.
9.4. Landlord shall procure and continue in force from and after the
earlier to occur of the date Landlord delivers possession of the Premises to
Tenant, or the date Tenant enters upon the Premises, and throughout the Term:
(a) Workers Compensation coverage as required by the state of Ohio and Employers
Liability coverage with a limit of not less than One Million Dollars
($1,000,000) per accident and per employee; (b) Commercial General Liability
Insurance on an Occurrence form including Products/Completed Operations,
Personal/Advertising Injury and Fire Damage Liability coverages, with a
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limit of not less than One Million Dollars ($1,000,000) per occurrence; (c)
Umbrella or Excess insurance in an amount of not less than Five Million Dollars
($5,000,000); (d) Property insurance with Special Causes of Loss (All Risk) form
in an amount to cover the full replacement value of the Building; and (e)
property insurance with Special Causes of Loss (All Risk) form in an amount to
cover the full replacement value of the fixtures, furnishings, wallcoverings,
carpeting, drapes, equipment and all other items of personal property of
Landlord located on or within the Landlord's Parcel and the Building. The
policies required under the preceding clauses (b) and (c) shall name Tenant as
an additional insured. All such insurance policies shall contain the following
endorsements: (a) that such insurance may not be canceled or amended with
respect to Tenant except upon thirty (30) days prior notice from the insurance
company to Tenant; (b) that Landlord shall be solely responsible for the payment
of all premiums under such policy and that Tenant shall have no obligation for
the payment thereof; and (c) a waiver of subrogation as required in Section
12.4.
9.5. Tenant shall procure and continue in force from and after the earlier
to occur of the date Landlord delivers possession of the Premises to Tenant, or
the date Tenant enters upon the Premises, and throughout the Term: (a) Workers
Compensation coverage as required by the state in which the Premises is located
and Employers Liability coverage with a limit of not less than One Million
Dollars ($1,000,000) per accident and per employee; (b) Commercial General
Liability Insurance on an Occurrence form including Products/Completed
Operations, Personal/Advertising Injury and Fire Damage Liability coverages,
with a limit of not less than One Million Dollars ($1,000,000) per occurrence;
(c) Umbrella or Excess insurance in an amount of not less than Five Million
Dollars ($5,000,000); (d) Property insurance with Special Causes of Loss (All
Risk) form in an amount to cover the full replacement value of all improvements
provided by Tenant and the full replacement value of Tenant's trade fixtures,
furnishings, wallcoverings, carpeting, drapes, equipment and all other items of
personal property of Tenant located on or within the Premises.
9.6. All insurance policies required under (i) clause (a) of Section 9.5,
as it relates to Employers Liability insurance, (ii) clauses (b) and (c) of
Section 9.5 and (iii) Exhibit "C" shall name Landlord, Landlord's property
manager and Landlord's designee(s) as additional insureds, and shall be
considered primary insurance applying without the contribution of any other
insurance which may be available to Landlord, Landlord's property manager or
Landlord's designee(s). All insurance policies required under clauses (d) and
(e) of Section 9.5 shall be issued in the names and for the benefit of Landlord,
Landlord's property manager, Landlord's designee(s) and Tenant. All insurance
policies shall be issued by one or more insurance companies rated A VI or better
by the A.M. Best Co. and licensed to do business in the state of Ohio. At
Tenant's option, such insurance may be carried under a blanket policy covering
the Premises and any other of Tenant's properties provided the provisions of
such blanket policy comply with the terms of this Lease and coverage with
respect to the Premises is as provided in Section 9.5. The Commercial General
liability insurance shall specifically insure Tenant's liability under Section
9.3 hereof. All insurance policies required under Section 9.5 shall contain the
following endorsements: (a) that such insurance may not be canceled or amended
with respect to Landlord, Landlord's property manager and Landlord's designee(s)
except upon thirty (30) days prior notice from the insurance company to
Landlord; (b) that Tenant shall be solely responsible for the payment of all
premiums under such policy and that Landlord shall have no obligation for the
payment thereof; and (c) a waiver of subrogation as required in Section 12.4. In
the event of payment of any loss covered by any property damage policy, Landlord
shall be paid first by the insurance company for its loss. Tenant shall deliver
to Landlord, original Certificates of Insurance evidencing insurance policies
required under Section 9.5 and endorsements required by Section 9.6 within ten
(10) days of the inception of such policies and endorsements. At least ten (10)
days prior to the expiration of any such policies and endorsements, Tenant shall
deliver to Landlord original Certificates of Insurance evidencing the renewal of
such policies and endorsements. The minimum limits of any insurance coverage to
be maintained by Tenant hereunder shall not limit Tenant's liability under
Section 9.3 or elsewhere in this Lease.
9.7. Landlord shall protect, defend, indemnify, save and hold harmless
Tenant against and from any and all claims, liabilities, demands, fines, suits,
actions, proceedings, orders, decrees and judgments of any kind or nature by, or
in favor of, anyone whomsoever, and against and from any and all costs, damages
and expenses, including reasonable attorneys' fees, resulting from, or in
connection with,
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loss of life, bodily or personal injury or property damage arising, directly or
indirectly, out of, or from, or on account of: (i) any accident or other
occurrence in, upon, at or from the Landlord's Parcel or the Building, excluding
the Premises, or occasioned in whole or in part through the use and occupancy of
the Landlord's Parcel or the Building, excluding the Premises or any
improvements therein or appurtenances thereto, including, without limitation,
the negligence of Tenant (but excluding the gross negligence or willful
misconduct of Tenant), or by any act or omission of Landlord, or Landlord's
employees, agents, contractors or invitees in, upon, at or from the Landlord's
Parcel or the Building, excluding the Premises; or (ii) any action of Tenant or
Tenant's agents or employees which is taken in reliance upon any act, omission
or statement of Landlord or Landlord's employees, agents or contractors.
ARTICLE X Common Areas
10.1. Landlord hereby grants to Tenant, its employees, invitees and
permitted sublessees and assigns, during the Term, the nonexclusive right to
use, in common with all others so entitled, the Common Areas for pedestrian and
vehicular traffic. The Common Areas shall be subject to the exclusive control
and management of Landlord and to such reasonable rules and regulations as
Landlord may, from time to time, adopt and Landlord reserves the right to change
the areas, locations and arrangement of parking areas and other Common Areas; to
enter into, modify and terminate easements and other agreements pertaining to
the maintenance and use of the parking areas and other Common Areas; to close
any or all portions of the Common Areas to such extent and for such time as may,
in the sole discretion of Landlord's counsel, be legally necessary to prevent a
dedication thereof or the accrual of any rights to any person or to the public
therein; to close temporarily, if necessary, any part of the Common Areas in
order to discourage noncustomer parking; and to make changes, additions,
deletions, alterations or improvements in and to such Common Areas, including
methods of ingress to and egress from such Common Areas, provided that there
shall be no material obstruction of Tenant's right of ingress to or egress from
the Premises, nor shall there be any change in the location of the primary
entrances to the Building, or in the configuration of the interior Common Areas
providing access and ingress and egress to and from the Premises, or in the
configuration of the parking areas set aside for Tenant's use as provided in
Section 10.3. Landlord shall enforce any rules and regulations adopted in a
nondiscriminatory manner.
10.2. Subject to the express provisions and limitations of this Lease,
Landlord shall operate, maintain and repair all Common Areas and all major
Building components, including structural, mechanical, electrical and heating,
ventilating and air conditioning systems, in a manner consistent with the
standards of operation, maintenance and repair employed by Tenant during its
occupancy under that certain lease agreement captioned "Lease" between Landlord
and Tenant, dated June 1, 1995, as amended
10.3. Tenant shall cause it and its employees to park only in the areas of
the parking lot as provided and designated from time to time by Landlord for
employee parking. Tenant shall have the exclusive right to use those spaces in
the southeast parking lot numbered 1, 2, 3, 4, 5, 8, 9, 23, 24, 25, 26, 27, 28,
29, 40, 41, 42 and 43 and the handicapped space marked "Stone" (provided it is
used only by a disabled employee) on Exhibit "B-3" for parking of its vehicles
and those of its employees. Within ten (10) days after a request by Landlord,
Tenant shall deliver to Landlord a list of Tenant's and its employees'
automobiles, which such list shall set forth the description of and the license
numbers assigned to such automobiles and their state of issue. Thereafter,
Tenant shall promptly advise Landlord of any changes, additions or deletions in
such list. If any automobile appearing on said list is parked in any area of the
Landlord's Parcel other than the area designated by Landlord at any time after
Landlord has given notice to Tenant that the same automobile has previously been
parked in violation of this provision, then Tenant shall pay to Landlord the sum
of Ten Dollars ($10) per day for each such automobile for each day (or part
thereof) it is parked in violation of this provision. Tenant shall pay such sum
to Landlord within ten (10) days after receipt of notice from Landlord. In
addition to the foregoing, Tenant hereby authorizes Landlord in such event to
attach violation stickers or notices to any of Tenant's automobiles, or
automobiles belonging to Tenant's employees parked in violation of the foregoing
covenant and to remove from the Landlord's Parcel at Tenant's cost and expense
any such automobiles that are parked in parking spaces designated by Landlord as
"Visitor" spaces or for the exclusive use of
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other tenants of the Building. Tenant hereby waives and releases Landlord and
hereby indemnifies and holds Landlord harmless from all claims, liabilities,
costs and expenses which may arise therefrom.
ARTICLE XI Mechanic's Lien or Claims
Tenant shall not permit to be created nor to remain undischarged any lien,
encumbrance or charge arising out of any work of any contractor, mechanic,
laborer or materialman which might be or become a lien or encumbrance or charge
upon the Premises or Landlord's Parcel or the income therefrom and Tenant shall
not suffer any other matter or thing whereby the estate, right and interest of
Landlord in the Premises or in Landlord's Parcel might be impaired. Landlord's
Parcel shall be subject to attachment. Tenant shall include in all contracts and
subcontracts for work to be performed on Tenant's behalf at the Premises
provisions wherein such contractor or subcontractor acknowledges that Landlord
has no liability under such contracts and subcontracts and that such contractor
or subcontractor waives, to the fullest extent permitted by law, any right it
may have to lien or attach Landlord's Parcel. If any lien or notice of lien on
account of an alleged debt of Tenant or any notice of contract by a party
engaged by Tenant or Tenant's contractor to work in the Premises shall be filed
against the Premises or Landlord's Parcel, Tenant shall, within twenty (20) days
after notice of the filing thereof, cause the same to be discharged of record by
payment, deposit, bond, order of a court of competent jurisdiction or otherwise.
If Tenant shall fail to cause such lien or notice of lien to be discharged
within the period provided, then Landlord, in addition to any other rights or
remedies, may, but shall not be obligated to, discharge the same by either
paying the amounts claimed to be due or by procuring the discharge of such lien
by deposit or by bonding proceedings; and in any such event, Landlord shall be
entitled, if Landlord so elects, to defend any prosecution of an action for
foreclosure of such lien by the lienor or to compel the prosecution of an action
for foreclosure of such lien by the lienor and to pay the amount of the judgment
in favor of the lienor with interest, costs and allowances. Any amount paid by
Landlord and all costs and expenses, including attorneys' fees, incurred by
Landlord in connection therewith shall be paid by Tenant to Landlord on demand.
Nothing in this Lease shall be construed as in any way constituting a consent or
request by Landlord, expressed or implied, by inference or otherwise, to any
contractor, subcontractor, laborer or materialman for the performance of any
labor or the furnishing of any materials for any specific or general
improvement, alteration or repair of or to the Premises or to any part thereof.
ARTICLE XII Destruction and Restoration
12.1. If the Premises or the Building shall be damaged to the extent of
twenty- five percent (25%) or more of the cost of replacement thereof by any
insured casualty, or damaged by any uninsured casualty, Landlord and Tenant each
shall have the option to terminate this Lease to be exercised by notice to the
other party given not more than three (3) months from the later to occur of the
date of such damage or, if an insured loss, the date Landlord receives its final
insurance adjustment. If neither party elects to rebuild, Landlord shall, at its
expense, proceed to restore the Premises to substantially the state in which it
existed prior to the Effective Date, except that Landlord shall not be obligated
to restore any component that was demolished or replaced by Tenant. All repairs
and restorations of the Premises not so included shall be performed by Tenant in
conformance with Article VII and Exhibit "C". The parties shall promptly
commence and diligently proceed with their restoration obligations hereunder.
12.2. If the Premises shall be damaged to the extent of less than
twenty-five percent (25%) of the cost of replacement by fire or other casualty
covered by Landlord's All Risk Property coverage during the Term, except for the
last year of this Lease, then Landlord shall, at its expense, proceed to restore
the Premises to substantially the state in which it existed prior to the
Effective Date, except that Landlord shall not be obligated to restore any
component that was demolished or replaced by Tenant. All repairs and
restorations of the Premises not so included shall be performed by Tenant in
conformance with Article VII and Exhibit "C". The parties shall promptly
commence and diligently proceed with their restoration obligations hereunder. If
such an event occurs during the last year of this Lease, then Landlord shall
have the option to rebuild or terminate this Lease to be exercised by notice to
Tenant given not more than thirty (30) days from the later to occur of the date
of such damage or the date Landlord receives its final insurance adjustment.
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12.3. In the event of total destruction of the Premises, Tenant's rent
shall completely abate from the date of such destruction. If Landlord elects to
rebuild as aforesaid, Tenant's rent shall completely abate from the date of such
destruction until thirty (30) days after the date when Landlord notifies Tenant
that Landlord's work in the Premises is complete, or upon the date when Tenant
completes its restoration of the Premises, whichever event shall first occur. In
the event of a partial destruction or damage whereby Tenant shall be deprived of
the occupancy and use of only a portion of the Premises, then Minimum Rent shall
be equitably apportioned according to the Floor Area of the Premises which is
unusable by Tenant, until such time as the Premises are repaired or restored as
provided herein.
12.4. Each party hereto ("Releasing Party") hereby releases the other
("Released Party") from any liability which the Released Party would, but for
this Section 12.4, have had to the Releasing Party arising out of or in
connection with any accident or occurrence or casualty (a) which is or would be
covered by an All Risk Property coverage policy, including Sprinkler Leakage
Legal Liability coverage policy, in the state in which the Premises is located
regardless of whether or not such coverage is being carried by the Releasing
Party, and (b) to the extent of recovery under any other casualty or property
damage insurance being carried by the Releasing Party at the time of such
accident or occurrence or casualty, which accident or occurrence or casualty may
have resulted in whole or in part from any act or neglect of the Released Party,
its officers, agents or employees; provided, however, the release hereinabove
set forth shall become inoperative and null and void if the Releasing Party
contracts for the insurance required to be carried under the terms of this Lease
with an insurance company which (a) takes the position that the existence of
such release vitiates or would adversely affect any policy so insuring the
Releasing Party in a substantial manner and notice thereof is given to the
Released Party, or (b) requires the payment of a higher premium by reason of the
existence of such release, unless in the latter case the Released Party, within
ten (10) days after notice thereof from the Releasing Party, pays such increase
in premium.
ARTICLE XIII Property in Premises
13.1. All leasehold improvements done by or on behalf of Tenant, including
the items constructed or installed by Tenant (but excluding Tenant's
furnishings, fixtures, equipment and other personal property), shall when
installed attach to the fee and become and remain the property of Landlord. Such
property shall not be removed unless replaced with like property. Tenant shall
not seek or pursue so-called "industrial revenue bond" financing with respect to
the Premises without the consent of Landlord, which consent shall be given or
withheld in Landlord's sole discretion.
13.2. Tenant shall pay before delinquency any and all taxes assessed
against Tenant's fixtures, furnishings, leasehold improvements, equipment and
stock-in- trade placed in or on the Premises. Any such taxes included in
Landlord's tax bills and paid by Landlord shall be due and payable within ten
(10) days after billings therefor are rendered to Tenant.
ARTICLE XIV Access to Premises
Tenant shall permit Landlord or Landlord's agents to inspect or examine the
Premises at any reasonable time and during the last Lease Year of the Term to
show the Premises to prospective tenants. Tenant shall permit Landlord to make
such repairs, alterations, improvements or additions in the Premises or to the
building of which the Premises is a part, that Landlord may deem desirable or
necessary or which Tenant has covenanted herein to do and has failed so to do
after notice from Landlord, without the same being construed as an eviction of
Tenant in whole or in part and Minimum Rent and all items of additional rent
shall in no manner abate while such repairs, alterations, improvements or
additions are being made by reason of loss or interruption of the business of
Tenant because of the prosecution of such work.
ARTICLE XV Surrender of Premises
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15.1. Tenant shall deliver and surrender to Landlord possession of the
Premises upon expiration of this Lease, or its earlier termination as herein
provided, broom clean, and in good condition and repair, ordinary wear and tear
and damage by fire or the elements beyond Tenant's control excepted.
15.2. Tenant shall remove all property of Tenant, repair all damage to the
Premises caused by such removal and restore the Premises to the condition in
which they were prior to the installation of the articles so removed. Any
property not so removed at the expiration of the Term shall be deemed to have
been abandoned by Tenant, and may be retained or disposed of by Landlord, as
Landlord shall desire.
ARTICLE XVI Utilities
16.1. Landlord shall contract and pay for all utility services rendered or
furnished to the Premises, including heat, air-conditioning, water, gas,
electricity, fire protection, sewer rental, sewage treatment facilities and the
like, together with all taxes levied or other charges on such utilities.
Landlord may, with reasonable prior notice to Tenant, or without notice in the
case of an emergency, cut off and discontinue gas, water, electricity and any or
all other utilities whenever such discontinuance is necessary in order to make
repairs or alterations. Landlord shall use commercially reasonable efforts to
minimize any discontinuance of service. No such action by Landlord shall be
construed as an eviction or disturbance of possession or as an election by
Landlord to terminate this Lease, nor shall Landlord be in any way responsible
or liable under such action. Notwithstanding the foregoing, if an interruption
or suspension of, or fluctuation in, any utility service shall render the
Premises untenantable for a period of forty-eight (48) consecutive hours the
Minimum Rent hereunder shall be abated until such utility service is resumed.
16.2. Tenant shall cooperate with Landlord's reasonable directives to
reduce energy consumption. In the event any governmental authority shall order
mandatory energy conservation then Tenant shall comply with such requirements.
Tenant's compliance with such requirements shall not entitle Tenant to any
abatement of rent or damages for any injury or inconvenience occasioned thereby,
nor shall it be construed as an eviction or disturbance of possession.
ARTICLE XVII Assignment and Subletting
17.1. Except as provided below, Tenant shall not assign this Lease nor
sublet the Premises in whole or in part without the Landlord's prior written
consent. The transfer or transfers aggregating fifty percent (50%) or more of
the capital stock of Tenant (if Tenant is a non-public corporation) or the
partnership or other ownership interests of Tenant (if Tenant is a partnership,
joint venture, limited liability company or proprietorship) shall be deemed an
assignment of this Lease within the meaning of this Article. Notwithstanding the
provisions of this Article XVII to the contrary, Tenant may (i) assign this
Lease or sublet all or any portion of the Premises to any entity in which a
majority of the economic interests are owned, directly or indirectly, by any one
or more of Simon Property Group, Inc., Simon Property Group, L.P., Melvin Simon
& Associates, Inc., Melvin Simon, Herbert Simon or David Simon or any successor
by merger to Simon Property Group, Inc. or Simon Property Group, L.P.
(collectively or separately being referred to herein as "Tenant's Affiliate"),
or (ii) sublet up to fifty percent (50%) of the leasable area within the
Premises to one or more proposed sublessees at any time during the Term hereof
or any renewal period without Landlord's prior written consent, provide that
notwithstanding any such subletting as provided in (ii) above, Tenant shall
remain primarily liable for the performance of all of Tenant's obligations under
this Lease. Tenant shall in no event be relieved of any liability under the
Lease as a result of any such assignment or subletting.
17.2. Other than an assignment or subletting that does not require
Landlord's approval pursuant to Section 7.1 hereof, Tenant may assign this Lease
or sublet more than fifty percent (50%) of the Premises at any time during the
Term hereof (as the same may be extended) only after Landlord's prior written
approval, which shall not be reasonably withheld, delayed or conditioned and
shall be granted if Tenant notifies Landlord of the proposed assignment or
subletting, setting forth in such notification the basic terms and conditions
(including any tenant inducements) applicable to such assignment or sublease,
and the following conditions are met:
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(a) The proposed assignee or sublessee intends to use the Premises
only for uses and purposes compatible with those of then existing occupants
of the Building; and
(b) Tenant shall in no event be relieved of any liability under the
Lease as a result of any such assignment or subletting; provided, however,
if Tenant proposes an assignment of all its rights and interest under the
Lease and Tenant requests to be relieved of such liability the proposed
assignee or any proposed guarantor of all obligations of such proposed
assignee shall possess the necessary financial resources (as may be
reasonably determined by the Landlord), including without limitation, a net
worth of not less than Ten Million Dollars ($10,000,000), to perform all of
Tenant's obligations under this Lease, in which event Tenant shall be
relieved of liability hereunder accruing from and after the date of such
assignment provided assignee deliveries the written instrument described in
Section 17.3 below.
17.3. In the event of any such assignment in which Tenant is relieved of
liability hereunder, the assignee shall agree, in writing, to assume and be
bound by all the terms, covenants and conditions of this Lease accruing from and
after the date of such assignment.
17.4. If Tenant notifies Landlord of Tenant's intention to assign this
Lease or sublet the Premises at any time during the Term hereof (as the same may
be extended) and Landlord's approval is required pursuant to Section 17.2
hereof, Landlord shall have the option to recapture all of the Premises covered
by this Lease in the case of an assignment or the portion of the Premises
covered by the proposed sublease, in the case of any sublease. Landlord may
exercise said option by giving Tenant written notice thereof within twenty (20)
days after receipt by Landlord of Tenant's notice of proposed assignment or
sublease. In the event Landlord exercises said option, Tenant shall surrender
possession of the proposed recaptured space to Landlord on the proposed
effective date of the assignment or sublease or such other date as Landlord and
Tenant shall mutually agree (the "Proposed Commencement Date") and neither party
hereto shall have any further rights or liabilities to the other with respect to
the recaptured space accruing or occurring from and after the Proposed
Commencement Date. In the event Landlord recaptures less than the entire
Premises, effective as of the Proposed Commencement Date, the Minimum Rent
(using the applicable amounts for Office Space and/or Storage Space) shall be
reduced in the same proportion as the number of square feet of Floor Area
contained in the Premises prior to such exclusion, and Landlord and Tenant shall
sign a modification agreement of this Lease reflecting such changes. If Landlord
exercises its recapture right, it shall be solely responsible for the payment of
any tenant inducements (including, without limitation, any leasing commissions)
payable with respect to such assignment or sublease.
ARTICLE XVIII Eminent Domain
18.1. In the event the Premises or any part thereof shall be permanently
taken or condemned or transferred by agreement in lieu of condemnation for any
public or quasi-public use or purpose by any competent authority, whether or not
this Lease shall be terminated, the entire compensation award therefor, both
leasehold and reversion, shall belong to Landlord without any deduction
therefrom for any present or future estate of Tenant and Tenant hereby assigns
to Landlord all its right, title and interest to any such award. Tenant shall
execute all documents required to evidence such result. Tenant shall, however,
be entitled to claim, prove and receive in such condemnation proceedings such
award as may be allowed for trade fixtures and other equipment installed by it,
but only if or to the extent such award shall be in addition to the award for
the land and the building and other improvements (or portions thereof)
containing the Premises and only if or to the extent such award does not
diminish any award to Landlord.
18.2. If more than twenty-five percent (25%) of the Premises or the
Building shall be taken, condemned or transferred as aforesaid, Landlord and
Tenant each shall have the option to terminate this Lease to be exercised by
notice to the other party given not more than three (3) months from the later to
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occur of the date of taking, condemnation or transfer. If neither party elects
to rebuild, Landlord shall, at its expense, proceed to restore the remainder of
the Premises to substantially the state in which it existed prior to the
Effective Date, except that Landlord shall not be obligated to restore any
component that was demolished or replaced by Tenant. All repairs and
restorations of the Premises not so included shall be performed by Tenant in
conformance with Article VII and Exhibit "C". The parties shall promptly
commence and diligently proceed with their restoration obligations hereunder.
18.3. If less than twenty-five percent (25%) of the Building or the
Premises shall be taken, condemned or transferred as aforesaid, except for the
last year of this Lease, then Landlord shall, at its expense, proceed to restore
the Premises to substantially the state in which it existed prior to the
Effective Date, except that Landlord shall not be obligated to restore any
component that was demolished or replaced by Tenant. All repairs and
restorations of the Premises not so included shall be performed by Tenant in
conformance with Article VII and Exhibit "C". The parties shall promptly
commence and diligently proceed with their restoration obligations hereunder. If
such an event occurs during the last year of this Lease, then Landlord shall
have the option to rebuild or terminate this Lease to be exercised by notice to
Tenant given not more than three (3) months from the date of such taking,
condemnation or transfer.
ARTICLE XIX Default by Tenant
19.1. Tenant expressly agrees as follows:
19.1.1. In the event of any failure of Tenant to pay any installment
of Minimum Rent or additional rent or any other payment
required to be made by Tenant within ten (10) days after it
is due hereunder, or if this Lease or any portion of
Tenant's interest hereunder be assigned or the Premises or
any portion thereof be sublet, either voluntarily or by
operation of law, except as herein provided, or if Tenant
defaults in performing any of the other terms, conditions or
covenants of this Lease to be observed or performed by
Tenant for more than thirty (30) days after notice of such
other default shall have been given to Tenant [or if the
default is of such nature as cannot be cured within such
thirty (30) day period, such additional times (not to exceed
ninety (90) days) as shall be reasonably required so long as
Tenant commences to cure such default within said thirty
(30) day period and diligently and in good faith pursues the
same to completion], or if Tenant's interest in this Lease
shall be taken under any writ of execution, then, and in any
one or more of such events (herein sometimes referred to as
an "Event of Default"), Landlord shall have the immediate
right to reenter the Premises, either by summary
proceedings, by force or otherwise, and to dispossess Tenant
and all other occupants therefrom and remove and dispose of
all property therein or, at Landlord's election, to store
such property in a public warehouse or elsewhere at the cost
of, and for the account of, Tenant, all without service of
any notice of intention to reenter and with or without
resort to legal process and without Landlord being deemed
guilty of trespass or becoming liable for any loss or damage
which may be occasioned thereby. Upon the occurrence of any
such Event of Default, Landlord shall also have the right,
at its option, in addition to and not in limitation of any
other right or remedy, to terminate this Lease by giving
Tenant notice of cancellation and upon mailing of said
notice, this Lease and the Term shall end and expire as
fully and completely as if the date of said notice were the
date herein definitely fixed for the end and expiration of
this Lease and the Term and thereupon, unless Landlord shall
have theretofore elected to reenter the Premises, Landlord
shall have the immediate right of reentry, in the manner
aforesaid, and Tenant and all other occupants shall quit and
surrender the Premises to Landlord, but Tenant shall remain
liable as hereinafter provided; provided, however, that if
Tenant shall default (i) in the timely payment of any
Minimum Rent or any item of additional rent payable
hereunder and any such default
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shall continue or be repeated for two (2) consecutive
months, or for a total of four (4) months in any period of
twelve (12) months, or (ii) in the performance of any other
covenants of this Lease more than six (6) times, in the
aggregate, in any period of twelve (12) months, then,
notwithstanding that such defaults shall have been cured
within the period after notice as above provided, any
further similar default shall be deemed to be deliberate and
Landlord thereafter may serve said notice of cancellation
without affording to Tenant an opportunity to cure such
further default.
19.1.2. If by reason of the occurrence of any such Event of Default,
the Term shall end before the date therefore originally
fixed herein, or Landlord shall reenter the Premises, or
Tenant shall be ejected, dispossessed, or removed therefrom
by summary proceedings or in any other manner, Landlord at
any time thereafter may relet the Premises, or any part or
parts thereof, either in the name of Landlord or as agent
for Tenant, for a term or terms which, at Landlord's option,
may be less than or exceed the period of the remainder of
the Term or which otherwise would have constituted the
balance of the Term and grant concessions or free rent.
Landlord shall receive the rents from such reletting and
shall apply the same, first, to the payment of any
indebtedness other than Minimum Rent or any item of
additional rent due hereunder from Tenant to Landlord;
second, to the payment of such third party expenses as
Landlord may have incurred in connection with reentering,
ejecting, removing, dispossessing, reletting, altering,
repairing, redecorating, subdividing, or otherwise preparing
the Premises for reletting, including brokerage and
attorneys' fees; and the residue, if any, Landlord shall
apply to the fulfillment of the terms, conditions and
covenants of Tenant hereunder and Tenant hereby waives all
claims to the surplus, if any. Tenant shall be liable for
and shall pay Landlord any deficiency between the Minimum
Rent and all items of additional rent reserved herein and
the net avails as aforesaid, of reletting, if any, for each
month of the period which otherwise would have constituted
the balance of the Term. Tenant shall pay such deficiency on
an accelerated basis as provided under Section 19.1.4 below
(including the discount provided therein) or, at Landlord's
sole option, in monthly installments on the rent days
specified in this Lease, and any suit or proceeding brought
to collect the deficiency for any month, either during the
Term or after any termination thereof, shall not prejudice
or preclude in any way the rights of Landlord to collect the
deficiency for any subsequent month by a similar suit or
proceeding. Landlord shall in no event be liable in any way
whatsoever for the failure to relet the Premises or, in the
event of such reletting, for failure to collect the rents
reserved thereunder. Landlord is hereby authorized and
empowered to make such repairs, alterations, decorations,
subdivisions or other preparations for the reletting of the
Premises as Landlord shall deem fit, advisable and
necessary, without in any way releasing Tenant from any
liability hereunder, as aforesaid.
19.1.3. No such reentry or taking possession of the Premises by
Landlord shall be construed as an election on its part to
terminate this Lease unless notice of such intention be
given to Tenant or unless the termination thereof shall
result as a matter of law or be decreed by a court of
competent jurisdiction. Notwithstanding any such reletting
without termination, Landlord may at any time thereafter
elect to terminate this Lease for such previous breach.
19.1.4. In the event this Lease is terminated pursuant to the
provisions of 19.1, or terminates pursuant to the provisions
of Section 19.2 hereof, Landlord may recover from Tenant all
damages it may sustain by reason of Tenant's default,
including the third party cost of recovering the Premises
and attorneys' fees, and, upon so electing and in lieu of
the damages that may be recoverable
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under subsection (b) above, Landlord shall be entitled to
recover from Tenant, as and for Landlord's damages, an
amount equal to the difference between the Minimum Rent and
all items of additional rents reserved hereunder for the
period which otherwise would have constituted the balance of
Term and the then present rental value of the Premises for
such period, both discounted in accordance with accepted
financial practice to the then present worth, at the average
rate established and announced for United States Treasury
Bills, with a maturity of thirteen (13) weeks at the four
(4) weekly auctions held immediately prior to the date of
such termination [the four (4) week average bill rate], all
of which shall immediately be due and payable by Tenant to
Landlord. In determining the rental value of the Premises,
the rental realized by any reletting, if such reletting be
accomplished by Landlord within a reasonable time after the
termination of this Lease, shall be deemed prima facie to be
the rental value, but if Landlord shall not undertake to
relet or having undertaken to relet, has not accomplished
reletting, then it will be conclusively presumed that the
Minimum Rent and all items of additional rent reserved under
this Lease represent the rental value of the Premises for
the purposes hereof (in which event Landlord may recover
from Tenant, the full total of all Minimum Rent and all
items of additional rent due hereunder, discounted to
present value as hereinbefore provided). Landlord shall be
obliged, however, to account to Tenant for the Minimum Rent
and additional rents received from persons using or
occupying the Premises during the period representing that
which would have constituted the balance of the Term, but
only at the end of said period, and only if Tenant shall
have paid to Landlord its damages as provided herein, and
only to the extent of sums recovered from Tenant as
Landlord's damages, Tenant waiving any claim to any surplus.
Nothing herein contained, however, shall limit or prejudice
the right of Landlord to prove and obtain as damages by
reason of such termination, an amount equal to the maximum
allowed by any statute or rule of law in effect at the time
when, and governing the proceedings in which, such damages
are to be proved, whether or not such amount be greater,
equal to, or less than the amounts referred to in Section
19.1.2 or Section 19.1.4.
19.1.5. In the event Landlord commences any action or proceeding
under this Lease, including, but not limited to, actions for
recovery of Minimum Rent and items of additional rent and
actions for recovery of possession, Tenant shall not
interpose any counterclaim of any nature or description in
any such action or proceeding (other than a compulsory
counterclaim under Ohio Rule of Civil Procedure 13 or any
comparable rule of civil procedure). The foregoing, however,
shall not be construed as a waiver of Tenant's right to
assert such claim in a separate action or proceeding
instituted by Tenant.
19.1.6. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws,
in the event Tenant shall be evicted or dispossessed from
the Premises for any cause, or Landlord reenters the
Premises following the occurrence of any Event of Default
hereunder, or this Lease is terminated before the expiration
date thereof originally fixed herein.
19.1.7. No waiver of any covenant or condition or of the breach of
any covenant or condition of this Lease shall be taken to
constitute a waiver of any subsequent breach of such
covenant or condition nor to justify or authorize the
nonobservance on any other occasion of the same or of any
other covenant or condition hereof, nor shall the acceptance
of Minimum Rent or any item of additional rent by Landlord
at any time when Tenant is in default under any covenant or
condition hereof, be construed as a waiver of such default
or of Landlord's right to terminate this Lease on account of
such default, nor shall
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any waiver or indulgence granted by Landlord to Tenant be
taken as an estoppel against Landlord, it being expressly
understood that if at any time Tenant shall be in default in
any of its covenants or conditions hereunder, an acceptance
by Landlord of Minimum Rent or any item of additional rent
during the continuance of such default or the failure on the
part of Landlord promptly to avail itself of such other
rights or remedies as Landlord may have, shall not be
construed as a waiver of such default, but Landlord may at
any time thereafter, if such default continues, terminate
this Lease on account of such default in the manner herein
provided.
19.1.8. In the event of any breach or threatened breach by Tenant of
any of the terms and provisions of this Lease, Landlord
shall have the right to seek injunctive relief as if no
other remedies were provided herein for such breach.
19.1.9. The rights and remedies herein reserved by, or granted to,
Landlord are distinct, separate and cumulative, and the
exercise of any one of them shall not be deemed to preclude,
waive or prejudice Landlord's right to exercise any or all
others.
19.1.10. If an Event of Default shall occur hereunder prior to the
date fixed as the commencement of any renewal or extension
of this Lease, whether by a renewal option herein contained
or by a separate agreement, Landlord may, prior to the
commence of the Renewal Term, cancel such option or
agreement for renewal or extension of this Lease, upon two
(2) days' notice to Tenant.
19.1.11. Wherever in this Lease Landlord has reserved or is granted
the right of "reentry" into the Premises, the use of such
word is not intended, nor shall it be construed, to be
limited to its technical legal meaning.
19.1.12. In addition to any other remedies Landlord may have at law
or in equity or under this Lease, Tenant shall pay upon
demand all Landlord's third party costs, charges and
expenses, including fees of counsel, agents and others
retained by Landlord, incurred in connection with the
recovery of sums due under this Lease, or because of the
breach of any covenant under this Lease or for any other
relief against Tenant.
19.1.13. Any action, suit or proceeding relating to, arising out of
or in connection with the terms, conditions and covenants of
this Lease may be brought by Landlord against Tenant in the
Court of Common Pleas of Mahoning County, Ohio. Tenant
hereby waives any objection to jurisdiction or venue in any
proceeding before said Court. Nothing contained herein shall
affect the right of Landlord to bring any action, suit or
proceeding against Tenant in the courts of any other
jurisdictions.
19.2. If at any time after the execution of this Lease, an order for relief
is entered in any bankruptcy, insolvency or similar proceeding commenced by or
against Tenant or any Surety of this Lease, or if Tenant or any Surety of this
Lease becomes insolvent or is unable or admits in writing its inability to pay
its debts as they become due, or makes an assignment for the benefit of
creditors or petitions for or enters into an arrangement with its creditors or a
custodian is appointed or takes possession of Tenant's or any such Surety's
property, whether or not a judicial proceeding is instituted in connection with
such arrangement or in connection with the appointment of such custodian, then
Landlord, besides other rights or remedies it may have, shall have the immediate
right to terminate this Lease or reenter without terminating this Lease and to
dispossess Tenant and all other occupants therefrom and remove and dispose of
all property therein or, at Landlord's election, to store such property in a
public warehouse or elsewhere at the cost of, and for the account of, Tenant,
all without service of any notice of intention to reenter and with or without
resort to legal process (which Tenant hereby
-19-
<PAGE>
expressly waives) and without being deemed guilty of trespass, or becoming
liable for any loss or damage which may be occasioned thereby. In any such
event, Landlord may retain as partial damages, and not as a penalty, any prepaid
rents and Landlord shall also be entitled to exercise such rights and remedies
to recover from Tenant as damages such amounts as are specified in Section 19.1
hereof, unless any statute or rule of law governing the proceedings in which
such damages are to be proved shall lawfully limit the amount of such claims
capable of being so proved, in which case Landlord shall be entitled to recover,
as and for liquidated damages, the maximum amount which may be allowed under any
such statute or rule of law.
ARTICLE XX Default by Landlord
20.1. It shall be a default under and breach of this Lease if Landlord
shall fail to perform or observe any term, condition, covenant or obligation
required to be performed or observed by it under this Lease for a period of
thirty (30) days after notice thereof to Landlord from Tenant, or any period
less than thirty (30) days if an emergency exists that poses an immediate threat
to life or Tenant's property or would have a material adverse affect on Tenant's
operations ("Tenant Emergency"); provided, however, that if the term, condition,
covenant or obligation to be performed by Landlord is not a Tenant Emergency and
is of such nature that the same cannot reasonably be performed within such
thirty (30) day period, such default shall be deemed to have been cured if
Landlord commences such performance within said thirty (30) day period and
thereafter diligently and continuously pursues and completes the same within
ninety (90) days of Tenant's original notice. Upon the occurrence and during the
continuance of any such default by Landlord, following Tenant's notice and the
applicable cure period, Tenant may effect a cure on behalf of the Landlord and
deduct the actual and reasonable costs of such cure from any Minimum Rent
thereafter coming due from Tenant under the Lease. Upon request from Landlord,
Tenant shall provide Landlord with satisfactory evidence detailing Tenant's
actual costs of cure.
20.2. If the holder of record of any mortgage(s) covering all or any
portion of Landlord's Parcel shall have given prior notice to Tenant that it is
the holder thereof and such notice includes the address at which notices to such
mortgagee(s) are to be sent, then Tenant shall give to said holder notice
simultaneously with any notice given to Landlord to correct any default of
Landlord as hereinabove provided. The holder of record of such mortgage(s) shall
have the right, but not the obligation, within thirty (30) days after receipt of
said notice, to correct or remedy such default before Tenant may take any action
under this Lease by reason of such default; provided, however, that if such
default cannot by its nature be cured within said thirty (30) days, then Tenant
shall not take any action under this Lease by reason of such default provided
the correction or remedy of such default commences within said thirty (30) days
and is diligently prosecuted thereafter. Any notice of default given Landlord
shall be null and void unless simultaneous notice has been given to said
mortgagee(s).
ARTICLE XXI Estoppel Certificate, Attornment and Subordination
21.1. Within ten (10) days after the request by Landlord, Tenant shall
deliver to Landlord a written and acknowledged statement in favor of Landlord or
any prospective purchaser or mortgagee of Landlord's Parcel or any other part
thereof certifying (a) that Tenant is the tenant under this Lease; (b) that
Landlord has completed construction of the Premises (or if Landlord has not
completed construction of the Premises, then stating the construction items to
be completed by Landlord); (c) that all contributions, if any, required by
Landlord for improvements to the Premises have been paid in full to Tenant (or
if such contributions, if any, have not been paid in full to Tenant, then
stating the amount of contribution remaining to be paid to Tenant); (d) that
Tenant has accepted possession of and, if true, now occupies the Premises; (e)
the date on which the Term commenced, the date on which the Effective Date
occurred and the date on which the Term expires; (f) that no defaults exist
under this Lease on the part of Tenant, or, to the knowledge of Tenant, on the
part of Landlord (or if defaults exist, then specifically stating such
defaults); (g) that this Lease is unmodified and in full force and effect (or if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications); (h) that Tenant's interest under this
Lease has not been assigned or encumbered, and the Premises have not been sublet
(or if there have been assignments or encumbrances or the Premises have been
sublet, then stating such assignments, encumbrances or subleases and providing
copies of all documents relevant
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thereto); (i) the amount of Minimum Rent and all items of additional rent
payable under this Lease and the dates to which any Minimum Rent and all items
of additional rent payable under this Lease have been paid; (j) that Tenant is
not entitled to any credit, offset or deduction against any Minimum Rent and any
item of additional rent due under this Lease (or if Tenant is entitled to a
credit, offset or deduction, then stating the amount of such credit, offset or
deduction and the basis therefor); (k) that Tenant does not have any options or
rights to renew or cancel this Lease (or if Tenant shall have options or rights
to renew or cancel this Lease, then stating such options or rights); (l) that
there are no actions, whether voluntary or otherwise, pending against Tenant
under the bankruptcy or insolvency laws of the United States or any state
thereof (or if there are actions pending against Tenant under bankruptcy or
insolvency laws of the United States or any state thereof, then stating such
actions); and (m) such other matters or information as Landlord may reasonably
require, it being intended that any such statement delivered pursuant to this
Article may be relied upon by Landlord or any prospective purchaser or mortgagee
of Landlord's Parcel, any part thereof or any interest therein, direct or
indirect.
21.2. Tenant shall, in the event any proceedings are brought for the
foreclosure of, or in the event of exercise of the power of sale under any
mortgage made by Landlord covering the Premises, attorn to the purchaser upon
any such foreclosure or sale and recognize such purchaser as Landlord under this
Lease, whether this Lease is subordinate to said mortgage or said mortgage is
subordinate to this Lease. In such event, the purchaser shall not be liable for
any previous act or omission by Landlord under this Lease or bound by any
previous prepayments of Minimum Rent or items of additional rent for a period
greater than thirty (30) days.
21.3. Tenant shall promptly execute and deliver such instrument that
Landlord or the holder of any Superior Lease (as hereinafter defined) or
Superior Mortgage (as hereinafter defined) requests to evidence that this Lease
and all rights of Tenant hereunder are subject and subordinate in all respects
to (a) all present and future ground leases of the Landlord's Parcel, or any
portion thereof of which the Premises is a part and all renewals, modifications,
replacements, supplements, substitutions and extensions thereof, hereinafter
collectively referred to as "Superior Lease" and (b) all mortgages or other
methods of financing which may now or hereafter encumber Landlord's interest in
the Landlord's Parcel or any portion thereof of which the Premises is a part and
all renewals, modifications, replacements, supplements, substitutions and
extensions thereof and all advances made or to be made thereunder hereinafter
collectively referred to as "Superior Mortgage". The foregoing provisions shall
be self-operative and no further instrument of subordination shall be required.
However, in confirmation of such subordination. Notwithstanding anything
contained in Section 21.3 of the Lease to the contrary, Tenant's obligation to
subordinate the Lease and its rights hereunder to the lien and rights of any
Superior Mortgage or Superior Lease is subject to such mortgage holder or lessor
agreeing, in writing, in form and content reasonably satisfactory to Tenant, not
to disturb Tenant and its possession of the Premises so long as there is no
uncured Event of Default by Tenant under the Lease. Landlord will obtain, within
thirty (30) days after the date hereof, a nondisturbance agreement from the
holder of any current Superior Mortgage, and the lessor under any current
Superior Lease, the form or forms of which shall be furnished by Tenant and
shall be reasonably satisfactory to the holder of any such Superior Mortgage or
Superior Lease. Notwithstanding the foregoing provisions, Landlord's lender
shall have the right to subordinate or cause to be subordinated the lien of any
mortgage or mortgages, or the lien resulting from any other method of financing
or refinancing, now or hereafter in force against Landlord's Parcel, or any
portion thereof of which the Premises is a part, or against any buildings
hereafter placed upon Landlord's Parcel of which the Premises is a part, to this
Lease, hereinafter referred to as "Subordinate Mortgage". In such event, this
Lease shall not be subordinate to the lien of any other mortgage or mortgages,
or the lien resulting from any other method of financing or refinancing so long
as said Subordinate Mortgage is a lien.
21.4. This Lease shall not be recorded without the prior consent of
Landlord and if Tenant records this Lease without Landlord's consent, then
Tenant shall be deemed in default of this Lease. Upon the request of Landlord,
Tenant shall execute a short form of this Lease which may be recorded in
Landlord's sole discretion.
ARTICLE XXII Holding Over
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If Tenant or any party claiming under Tenant shall remain in possession of
all or any part of the Premises after the expiration of the Term, no tenancy or
interest in the Premises shall result therefrom but such holding over shall be
an unlawful detainer and all such parties shall be subject to immediate eviction
and removal, and Tenant shall pay upon demand to Landlord during any period
which Tenant shall hold the Premises after the Term has expired, as rent for
said period, a sum equal to all items of additional rent provided for in this
Lease plus an amount computed at the rate of one hundred fifty percent (150%) of
the Minimum Rent for such period.
ARTICLE XXIII Quiet Enjoyment
Landlord agrees that if Tenant pays the Minimum Rent and all items of
additional rent herein provided and shall perform all of the covenants and
agreements herein stipulated to be performed on Tenant's part, Tenant shall, at
all times during said term, have the peaceable and quiet enjoyment and
possession of the Premises, subject to the terms, conditions and covenants of
this Lease and any mortgages or ground leases superior to this Lease, without
any manner of hindrance from Landlord or any persons lawfully claiming through
Landlord.
ARTICLE XXIV Reimbursement
All terms, covenants and conditions herein contained, to be performed by
Tenant, shall be performed at its sole cost and expense. If Landlord shall pay
any sum of money or do any act which requires the payment of money, by reason of
the failure, neglect or refusal of Tenant to perform such term, covenant or
condition, the sum of money so paid by Landlord shall be payable by Tenant to
Landlord with the next succeeding installment of rent. If Tenant shall fail to
pay Landlord any sums when due under this Lease or if Landlord shall pay any sum
of money or do any act which requires the payment of money as aforesaid, such
sums shall bear interest from the due date or from the respective dates of
Landlord's making of the payment, as the case may be, at the lesser of (a) the
interest rate reported publicly by the Wall Street Journal in its "Money Rates"
column from time to time as its prime or base rate plus two percent (2%), or (b)
the maximum rate permitted by law. All sums payable by Tenant to Landlord under
this Lease shall be paid in legal tender of the United States of America without
any prior demand or notice therefor and without any deduction or setoff
whatsoever and shall be payable at the place designated for the delivery of
notices to Landlord at the time of payment unless otherwise designated by
Landlord.
ARTICLE XXV Changes and Additions to Landlord's Parcel
25.1. Subject to the express limitations set forth in this Lease (which
shall be applicable to all of the rights and limitations set forth in this
Article XXV), Landlord shall have the exclusive right to use all or any part of
the roof over the Premises and exterior walls of the Premises for any purpose;
to erect in connection with the construction thereof, temporary scaffolds and
other aids to construction on the exterior of the Premises, provided that access
to the Premises shall not be denied; and to install, maintain, use, repair and
replace pipes, ducts, conduits and wires leading through the Premises and
serving other parts of Landlord's Parcel in locations which will not materially
interfere with Tenant's use thereof. In addition to the foregoing, Landlord may
make any use it desires of the side and rear walls of the Premises, provided
that there shall be no encroachment upon the interior of the Premises. Landlord
hereby reserves the right at any time to make alterations or additions to, and
to build additional stories on, the building in which the Premises are contained
and to build adjoining the same. Landlord also reserves the right to construct
other buildings or improvements in Landlord's Parcel from time to time and to
make alterations thereof or additions thereto and to build additional stories on
such building or buildings and to construct deck or elevated parking facilities
in Landlord's Parcel and to change the methods of ingress to and egress from the
Building and the Premises and to incorporate additional land into Landlord's
Parcel and build thereon.
25.2. In the event Landlord exercises any rights reserved under this
Article or granted by any other provisions of this Lease and makes any use of,
or alterations, modifications, improvements or
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<PAGE>
additions to, Landlord's Parcel or the Premises, Landlord shall in no way be
responsible or liable for any effect on Tenant's business of any nature
whatsoever, either during or after such use, alterations, modifications,
improvements or additions.
ARTICLE XXVI Notices
Any notice, request, demand, approval, consent or other communication
herein required or permitted to be given shall be in writing and may be
personally served, telecopied, or sent by nationally-recognized courier service
(e.g., Federal Express, Airborne Courier, DHL or U.S. Postal Service Express
Mail) or United States mail (registered or certified, with return receipt
requested) addressed to the Notice Address, or to the Premises if such
communication is to Tenant, or to such other Notice Address as either party
shall have designated by notice to the other. Any such notice, request, demand,
approval, consent or other communication so sent and addressed shall be deemed
to have been given when delivered in person or by courier service, upon sending
of a telecopy (as evidenced by electronic confirmation), or three (3) Business
Days after deposit in the United States mail (registered or certified, return
receipt requested).
ARTICLE XXVII Brokerage
Tenant covenants, warrants and represents to Landlord that there was no
broker instrumental in consummating this Lease and that no conversation or prior
negotiations were had by Tenant with any broker concerning the renting of the
Premises. Tenant shall protect, indemnify, save and hold harmless Landlord
against and from all liabilities, claims, losses, costs, damages and expenses,
including attorneys' fees, arising out of, resulting from or in connection with
a breach of the foregoing covenants, warranties and representations.
ARTICLE XXVIII General Provisions
28.1. "Landlord", so far as covenants or obligations on the part of
Landlord are concerned, shall be limited to mean and include only the owner (or
tenant of the ground or underlying lease of which this Lease is a sublease) for
the time being of Landlord's Parcel. If Landlord's Parcel, or the ground or
underlying lease, be sold or transferred, the seller (or assignor of the ground
or underlying lease of which this Lease is a sublease) shall be automatically
and entirely released of all covenants and obligations under this Lease arising
from and after the date of such conveyance or transfer, provided the purchaser
of such sale (or the subtenant or assignee of the ground or underlying lease as
aforesaid) has assumed and agreed to carry out all covenants and obligations of
Landlord hereunder from and after the date thereof, it being intended hereby
that the covenants and obligations contained in this Lease to be performed on
the part of Landlord shall be binding upon Landlord, its successors and assigns,
only during their respective successive periods of ownership. The covenants and
undertakings herein made and entered into by Landlord are solely for the purpose
of binding Landlord to the extent specifically of Landlord's interest in
Landlord's Parcel only, and it is expressly agreed by Landlord and Tenant and by
all persons claiming by, through or under Tenant that no personal liability is
assumed by or shall at any time arise or be asserted or enforced against
Landlord, or against any general or limited partner of Landlord, or any of their
respective agents, employees, officers, partners, successors or assigns, on
account of this Lease or on account of the covenants herein contained, either
express or implied, all such liability, if any, being expressly waived and
released by Tenant and by any persons claiming by, through or under Tenant, and
that recourse hereunder, if any, by Tenant, its successors or assigns, shall be
limited specifically and exclusively to Landlord's interest in Landlord's
Parcel.
28.2. Tenant's obligations with respect to (a) the payment of Minimum Rent
and all items of additional rent; (b) any provisions of this Lease with respect
to indemnities given to Landlord, including, without limitation, the provisions
of Section 9.3; and (c) the removal of all property of Tenant and the repair of
all damage to the Premises caused by such removal at the expiration or
termination of this Lease, shall survive the expiration or termination of this
Lease.
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<PAGE>
28.3. If any term or provision of this Lease or the application thereof to
any person or circumstance shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of such term or provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
28.4. Except as herein otherwise expressly provided, the terms and
provisions hereof shall be binding upon and shall inure to the benefit of the
heirs, executors, administrators, successors and permitted assigns,
respectively, of Landlord and Tenant. Each term and each provision of this Lease
to be performed by Tenant shall be construed to be both an independent covenant
and a condition. The reference contained to successors and assigns of Tenant is
not intended to constitute a consent to assignment by Tenant, but has reference
only to those instances in which Landlord may have given consent to a particular
assignment.
28.5. Nothing contained in this Lease shall be deemed or construed by the
parties hereto or by any third party to create the relationship of principal and
agent or of partnership or of joint venture or of any association whatsoever
between Landlord and Tenant, it being expressly understood and agreed that
neither the computation of rent nor any other provisions contained in this Lease
nor any act or acts of the parties hereto shall be deemed to create any
relationship between Landlord and Tenant other than the relationship of landlord
and tenant.
28.6. The titles of the articles throughout this Lease are for convenience
and reference only, and the words contained therein shall in no way be held to
explain, modify, amplify or aid in the interpretation, construction or meaning
of the provisions of this instrument.
28.7. As used in this indenture of Lease and when required by the context,
each number (singular or plural) shall include all numbers, and each gender
shall include all genders; and, unless the context otherwise requires, the word
"person" shall include "corporation, firm or association".
ARTICLE XXIX Warranty and Authority
Tenant hereby represents and warrants that (a) there are no proceedings
pending or so far as Tenant knows threatened before any court or administrative
agency that would materially adversely affect the financial condition of Tenant,
the ability of Tenant to enter into this Lease or the validity or enforceability
of this Lease; (b) there is no provision of any existing mortgage, indenture,
contract or agreement binding on Tenant which would conflict with or in any way
prevent the execution, delivery or performance of the terms of this Lease; and
(c) there has been no material adverse change in the financial condition of
Tenant since the date of Tenant's most recently published financial statement
and to the knowledge of Tenant, no such material adverse changes are pending or
threatened. Tenant acknowledges that Landlord is executing this Lease in
reliance upon the foregoing representation and warranty and that such
representation and warranty is a material element of the consideration inducing
Landlord to enter into and execute this Lease. This Lease has been authorized
and approved by all necessary partnership action and by the Board of Directors
of the managing general partners of Tenant at a duly held meeting of the Board
of Directors (or pursuant to a valid unanimous vote of the Board of Directors)
and copies of the applicable partnership actions and the resolutions of such
Board of Directors approving this Lease shall be certified and delivered to
Landlord within five (5) days after request.
ARTICLE XXX Master Lease Termination Agreement
30.1. The effectiveness of this Lease is expressly conditioned upon the
execution and delivery of an agreement between Landlord and Tenant terminating
that certain lease dated as of June 1, 1995 under which Landlord hired, leased
and let unto Tenant the Building, as the same may have been amended from time to
time (the "Master Lease Termination Agreement"). If the Master Lease Termination
Agreement has not been executed and delivered as of the Effective Date, this
Lease shall have no force or effect.
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<PAGE>
30.2. Tenant shall comply with all obligations under the Master Lease
Termination Agreement and a default thereunder shall be an Event of Default
hereunder.
ARTICLE XXXI Complete Agreement
This writing contains the entire agreement between the parties hereto, and
no agent, representative, salesman or officer of Landlord hereto has authority
to make, or has made, any statement, agreement or representation, either oral or
written, in connection herewith, modifying, adding or changing the terms and
conditions herein set forth. FURTHER, TENANT ACKNOWLEDGES AND AGREES THAT
NEITHER LANDLORD NOR ANY AGENT OR REPRESENTATIVE OF LANDLORD, INCLUDING ANY
LEASING AGENT ACTING ON BEHALF OF LANDLORD, HAS MADE, AND TENANT HAS NOT RELIED
UPON, ANY REPRESENTATIONS OR ASSURANCES. No modification of this Lease shall be
binding unless such modification shall be in writing and signed by the parties
hereto. Tenant hereby further recognizes and agrees that the submission of this
Lease for examination by Tenant does not constitute an offer or an option to
lease the Premises, nor is it intended as a reservation of the Premises for the
benefit of Tenant, nor shall this Lease have any force or validity until and
unless a copy of it is returned to Tenant duly executed by Landlord.
SIGNATURE PAGES FOLLOW
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<PAGE>
IN TESTIMONY WHEREOF, Landlord and Tenant have caused this Lease to be
signed as of the Effective Date.
Signed in the presence of: LANDLORD
7655 CORPORATION, an Ohio corporation
By
- ------------------------------- -----------------------------------
Name:
-------------------------------
Title:
- ------------------------------- -------------------------------
TENANT
SIMON PROPERTY GROUP, L.P.,
a Delaware limited partnership
BY Simon Property Group, Inc.,
a Delaware corporation,
Managing General Partner
By
- ------------------------------- -----------------------------------
Name:
-------------------------------
Title:
- ------------------------------- -------------------------------
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<PAGE>
STATE OF OHIO )
)
COUNTY OF MAHONING )SS.
Personally appeared before me, the undersigned, a Notary Public in and for
said County and State, _______________________ and _______________________,
known to me to be the __________________ and, _________________________,
respectively, of 7655 Corporation, who acknowledged that they did sign and seal
the foregoing instrument for, and on behalf of said Corporation, being thereunto
duly authorized by its Board of Directors and that the same is their free act
and deed as such officers and the free act and deed of said Corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Youngstown, Ohio, this ________ day of _____________________________, 19_______.
_________________________________
Notary Public
STATE OF INDIANA )
)
COUNTY OF MARION )SS.
Personally appeared before me, the undersigned, a Notary Public in and for
said County and State, ________________________________________________________,
personally known by me or has produced ___________________________________ as
identification and has proved to my satisfaction to be the person described in
and who executed the foregoing instrument as of _______________________________,
who acknowledged that he did sign and seal the foregoing instrument for, and on
behalf of said Corporation, in its capacity as General Partner of said Limited
Partnership, being thereunto duly authorized by its Board of Directors, and that
the same is his free act and deed as such officer and the free act and deed of
said Corporation and said Limited Partnership.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
___________________________, ___________________________, this ________ day of
_____________________________, 19_______.
__________________________________
Notary Public
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<PAGE>
EXHIBIT 21.1
List of Subsidiaries of the Registrant
Subsidiary Jurisdiction
- ---------- ------------
The Retail Property Trust Massachusetts
Simon Property Group (Illinois), L.P. Illinois
Simon Property Group (Texas), L.P. Texas
Shopping Center Associates New York
DeBartolo Capital Partnership Delaware
Simon Capital Limited Partnership Delaware
SDG Macerich Properties, L.P. Delaware
M.S. Management Associates, Inc. Delaware
DeBartolo Properties Management, Inc. Ohio
Omits names of subsidiaries which as of December 31, 1998 were not, in
the aggregate, a "significant subsidiary".
90
<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 Property Group, L.P.'s (formerly
Simon DeBartolo Group, L.P.) previously filed Registration Statement File No.
333-33545-01.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
March 26, 1999
91
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001022344
<NAME> SIMON PROPERTY GROUP, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 124,466
<SECURITIES> 0
<RECEIVABLES> 231,817
<ALLOWANCES> 14,476
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 11,662,860
<DEPRECIATION> 709,114
<TOTAL-ASSETS> 13,112,916
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 7,972,381
0
1,057,245
<COMMON> 3,550,306
<OTHER-SE> (19,750)
<TOTAL-LIABILITY-AND-EQUITY> 13,112,916
<SALES> 0
<TOTAL-REVENUES> 1,400,189
<CGS> 0
<TOTAL-COSTS> 753,581
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,599
<INTEREST-EXPENSE> 420,280
<INCOME-PRETAX> 233,256
<INCOME-TAX> 233,256
<INCOME-CONTINUING> 233,256
<DISCONTINUED> 0
<EXTRAORDINARY> 7,146
<CHANGES> 0
<NET-INCOME> 240,402
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.05
<FN>
<F1>The SPG Operating Partnership does not report using a classified balance
sheet.
</FN>
</TABLE>
